Transformational Change

1. Transformational Change

2. Overview of Module Organisational Change Management Transformational Change The Nature of Change/Role of CM Strategic Change: Planned or Emergent? Psychological Contract Managing Reactions to Change Organisational Culture Leadership & Change Communication and Participation Organisational Development The Learning Organisation

3. Transformational Change Content Incremental v. transformational change Punctuated equilibrium Types of organisational change Models of transformational change Read Hayes (2007) Chapters 1 and 7

4. Transformational Change By the end of this lecture you should be able to: Distinguish between incremental and transformational change Define transformational change Explain the meaning of punctuated equilibrium Identify four key types of organisational change Critically examine various models of transformational change

5. The Nature of Change Two key types of change Transformational Incremental • INCREMENTAL CHANGE is associated with those periods when the industry is relatively stable (in equilibrium) and the focus for change is ‘doing things better’. • TRANSFORMATIONAL CHANGE occurs when the industry is unstable (in disequilibrium). It involves a break with the past and the focus for change is ‘doing things differently’ or ‘doing different things’. Source: Hayes (2007)

6. The Nature of Change Two key types of change Incremental: • Industry in equilibrium • Focus on ‘doing things better’ • Modification, building on previous achievements • Continuous improvement Transformational: • Industry in disequilibrium • Break with the past • Substitution/replacement • Focus on ‘doing things differently‘ or ‘doing different things’.

7. Transformational Change Alternative definitions of transformational change • … A change in our fundamental ways of perceiving, understanding and valuing the world about us • … A wider, deeper or longer-term than incremental change (Tosey and Robinson, 2002)

8. Transformational Change Alternative definitions of transformational change • This kind of change involves a paradigm shift and completely new behaviours…This calls for the principles, assumptions and values that underpin the implicit and explicit rules that guide behaviour to be revised. • It involves a change in the organisation’s culture. It also calls for a change in the organisation’s mission and strategy, and for managers…to provide a lead and to behave in ways that clarify the new strategy and encourage others to act in ways that will support it’ (Hayes, 2002, p.85).

9. The Nature of Change Punctuated Equilibrium Theory: A Recurring Pattern of Incremental and Transformational Change Contrast with Gradualism which suggests that organisations can accommodate small changes only Intensity of change Dropouts Dropouts Dropouts Time Source: Hayes (2007)

10. The Nature of Change Punctuated Equilibrium • Across industries, organisations go through relatively long periods of stability (equilibrium) and incremental change punctuated by short periods of instability and transformational change (Gersick, 1991; see also Nadler and Tushman, 1995). Source: Hayes (2007) • The gap between periods of transformational change is decreasing and occurring more frequently.

11. The Nature of Change Punctuated Equilibrium: Empirical Evidence • Support for the theory of punctuated equilibrium – e.g. Pettigrew (1987) study of change at ICI: found that periods of transformational change were interspersed with periods of incremental adjustment. • Romanelli and Tushman (1994) studied the life histories of 25 mini-computer producers: found that organisational transformations were rapid and discontinuous and were triggered by environmental changes.

12. The Nature of Change What do you think of the proposition that ... all organisations have to go through periods of transformational change?

13. Transformational Change The need for transformational change stems from: • Unpredictable environmental changes • Inertia – failure to respond to these environmental changes • Most importantly, the need to stem strategic drift in order to survive, grow and provide added value for all stakeholders (see Nutt and Backoff, 1997). A

14. The Nature of Change Some authors argue that not all organisations have to always experience transformational change and provide evidence supporting the theory of incremental change A • Brown and Eisenhardt (1997) identified three characteristics of companies that successfully managed change as a continuous process of adjustment: • Flexible, semi-structures that facilitate improvisation. • Commitment to learning in order to continuously explore a range of possible futures. • Sequenced steps for managing projects and preventing inertia which often trigger transformational change.

15. Fine Tuning Re-orientation Nestle – 1980s Adaptation Re-creation Asda – 1990s Transformational Change Types of Organisational change Incremental Transformational Doing different things Doing things Better Proactive Reactive Doing things differently Source: Nadler et al. In Hayes (2007)

16. Transformational Change Fine Tuning Re-orientation Adaptation Re-creation • Fine-tuning: no immediate requirement to transformational change. Involves seeking better ways to do things – e.g. redesigning processes to reduce cost. • Adaptation: response to a pressing external demand for change – e.g. responding to competitor move. • Re-orientation: re-definition of enterprise in anticipation of future opportunities or problems – e.g. Nestlé – 1980s – initiated a review to decide which businesses it should be in to improve profit margins. • Re-creation: Changing all the basic elements of the organisation - e.g. Asda – 1990s – New low-price strategy involving change of culture, structure and leadership style.

17. Transformational Change The Role of Models in Transformational Change Change models are primarily used to: • Diagnose strategic fit – the alignment between the organisation and the environment in which it operates. • Diagnose internal alignment – focusing on internal relationships.

18. Transformational Change Focus on external alignment • PEST • Political factors • Economic factors • Socio-cultural factors • Technical factors • SWOT • Strength • Weaknesses • Opportunities • Threats

19. Transformational Change Weisbord’s (1978) Six-Box Model Focus on internal alignment Purpose What business are we in? Relationships How do we manage conflict among people? How do we manage relationships with our technologies? Leadership Is someone keeping the six boxes in balance? Structure How do we divide up the work? Helpful mechanisms Have we adequate co-ordination technologies? Rewards Do all needed tasks have incentives? Source: Hayes (2007) External Environment

20. Transformationprocess Informal organisation Environment, Resources, History Task Formal organisation Strategy Individual Organisation, Group, Individual Transformational Change Focus on both internal and external alignment Nadler and Tushman’s (1980) Congruence Model Input Output INPUTS OUTPUTS FEEDBACK Source: Hayes (2007)

21. External Environment Mission & strategy Management Practices Systems (policies and procedures) Structure Work unit climate Motivation Tasks and individual roles Individual needs and values Individual and Organisational performance Transformational Change The Burke-Litwin (1992) Model Focus on both internal and external alignment Transformational Change involves a change in an organisation’s culture, leadership and strategy Leadership Organisational culture

22. Example of Best Practice Model Change Management • Linear view of change • Prescriptive • Practice oriented • Unitarist: Assumption of shared interests 1.Determining the need or Desire for change 7. Implementing the change 2.Preparing tentative plans 6. Communicating the change 3.Analyzing probable reactions 5. Establishing a timetable 4. Making a final decision A Manager’s Model for Change Source: (Kirkpatrick, 2001)

23. Change Management Example of Open-System Model • Systemic view of change • Sensitive to context • Unity between theory and practice • Multiple perspectives • Pluralist: recognition of multiple interests Resources Structures Social System Organisational Processes Technology Politics Context Kotter’s (1980) Integrative model of organisational dynamics [Modified] Source: Hayes (2007, p.47)

24. Change Management Change Modelling Lewin's (1951) model of change: the most often-quoted change model Unfreezing Moving Refreezing Creating conditions for change Organising and mobilising resources for change Embedding new way of working into the organisation Remember what Hendry (1996) said about Lewin’s model

25. Transformational Change Reminder What are the key characteristics of a good model

26. Transformational Change A good model: • Is relevant to particular issues under consideration • Includes key elements that offer a good representation of an organisation within its context • Helps organisations recognise cause and effect relationships between these elements • Provides a clear indication of inputs, transformation processes and outputs • Enables organisations to focus on elements that they can influence A

27. Key Learning Points Transformational change involves a change in an organisation’s culture, leadership, mission and strategy. According to Punctuated Equilibrium, organisations go through relatively long periods of stability punctuated by short periods of transformational change. A good change model offers a clear representation of an organisation within its context and can effectively facilitate the process of transformational change.

28. Key References Nutt, P. and Backoff, R. (1997) ‘Facilitating transformational change’, The Journal of Applied Behavioural Science, December. Gersick, C.J.G. (1991) ‘Revolutionary change stories: a multilevel exploration of the punctuated equilibrium paradigm’, Academy of Management Review, vol.16, no.1, pp.10-36. Kirkpatrick, D.L. ((2001) Managing Change Effectively: Approaches, Methods and Case Examples,Boston: Butterworth-Heinemann. Tosey, P. and Robinson, G. (2002) ‘When change is no longer enough: what do we mean by ‘transformation’ in organisational change work?’, The TQM Magazine, vol.14, no.2, pp.100-109.