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Organization Transformation

Organization Transformation

The distinguishing features of the revolutionary change efforts are:
Change is Triggered by Environmental and Internal Disruptions
Change is Systemic and Revolutionary
Change Demands a New Organizing Paradigm
Change is Driven by Senior Executives and Line Management.
Continuous Learning and Change. Organization transformations can occur in response to or in anticipation of major changes in the organization's environment or technology. In addition, these changes often are associated with significant alterations in the firm's business strategy, which, in turn, may require modifying corporate culture as well as internal structures and processes to support the new direction. Such fundamental change entails a new paradigm for organizing and managing organizations. It involves qualitatively different ways of perceiving, thinking, and behaving in organizations. Movement toward this new way of operating requires top managers to take an active leadership role. The change process is characterized by considerable innovation and learning and continues almost indefinitely as organization members discover new ways of improving the organization and adapting it to changing conditions. Organization transformation is a recent advance in organization development, and there is some confusion about its meaning and definition.
Characteristics of Transformational Change

In the past decade, a large number of organizations radically altered how they operate and relate to their environments. Increased foreign competition forced many industries to downsize and become leaner, more efficient, and flexible. Deregulation pushed organizations in the financial services, telecommunications, and airline industries to rethink business strategies and reshape how they operate. Public demand for less government and lowered deficits forced public sector agencies to streamline operations and to deliver more for less. Rapid changes in technologies rendered many organizational practices obsolete, pushing firms to be continually innovative and nimble. Organization transformation implies radical changes in how members perceive, think, and behave at work. These changes go far beyond making the existing organization better or fine-tuning the status quo. They are concerned with fundamentally altering the organizational assumptions about its functioning and how it relates to the environment. Changing these assumptions entails significant shifts in corporate philosophy and values and in the numerous structures and organizational arrangements that shape members' behaviors. Not only is the magnitude of change greater, but the change fundamentally alters the qualitative nature of the organization. Examination of the rapidly growing literature on the topic suggests, however, the following distinguishing features of these revolutionary change efforts.

Change is Triggered by Environmental and Internal Disruptions

Organizations are unlikely to undertake transformational change unless significant reasons to do so emerge. Power, and expertise are vested in the existing organizational arrangements, and when faced with problems, members are more likely to fine-tune those structures than to alter them drastically. Thus, in most cases, organizations must experience or anticipate a severe threat to survival before they will be motivated to undertake transformational change. Such threats arise when environmental and internal changes render existing organizational strategies and designs obsolete. The changes threaten the very existence of the organization as it presently is constituted. Transformational change occurs in response to at least three kinds of disruption:

1. Industry discontinuities

—sharp changes in legal, political, economic, and technological conditions that shift the basis for competition within industries

2. Product life cycle shifts

—changes in product life cycle that require different business strategies

3. Internal company dynamics

—changes in size, corporate portfolio strategy, executive turnover, and the like. These disruptions severely jolt organizations and push them to alter business strategy and, in turn, their mission, values, structure, systems, and procedures.

Change is Systemic and Revolutionary

Transformational change involves reshaping the organization's culture and design elements. These changes can be characterized as systemic and revolutionary because the entire nature of the organization is altered fundamentally. Typically driven by senior executives, change may occur rapidly so that it does not get mired in politics, individual resistance, and other forms of organizational inertia. This is particularly pertinent to changing the different features of the organization, such as structure, information systems, human resources practices, and work design. These features tend to reinforce one another, thus making it difficult to change them in a piecemeal manner. They need to be changed together and in a coordinated fashion so that they can mutually support each other and the new cultural values and assumptions. Transformational change, however, is distinguished from other types of strategic change by its attention to the people side of the organization. For a change to be labeled transformational, a majority of individuals in an organization must change their behavior. Long-term studies of organizational evolution underscore the revolutionary nature of transformational change. They suggest that organizations typically move through relatively long periods of smooth growth and operation. These periods of convergence or evolution are characterized by incremental changes. At times, however, most organizations experience severe external or internal disruptions that render existing organizational arrangements ineffective. Successful firms respond to these threats to survival by transforming themselves to fit the new conditions. These periods of total system and quantum changes represent abrupt shifts in the organization's structure, culture, and processes. If successful, the shifts enable the organization to experience another long period of smooth functioning until the next disruption signals the need for drastic change. These studies of organization evolution and revolution point to the benefits of implementing transformational change as rapidly as possible. The faster the organization can respond to disruptions, the quicker it can attain the benefits of operating in a new way. Rapid change enables the organization to reach a period of smooth growth and functioning sooner, thus providing it with a competitive advantage over those firms that change more slowly.

Change Demands a New Organizing Paradigm

Organizations undertaking transformational change are, by definition, involved in second-order or gamma types of change. Gamma change involves discontinuous shifts in mental or organizational frameworks. Creative metaphors, such as "organization learning" or "continuous improvement," often are used to help members visualize the new paradigm. During the 1980s, increases in technological change, concern for quality, and worker participation led to at least one shift in organizing paradigm. Characterized as the transition from a "control-based" to a "commitment-based" organization, the features of the new paradigm included leaner, more flexible structures; information and decision making pushed down to the lowest levels; decentralized teams and business units accountable for specific products, services, or customers; and participative management and teamwork. This new organizing paradigm is well suited to changing conditions.

Change is Driven by Senior Executives and Line Management

A key feature of organization transformation is the active role of senior executives and line managers in all phases of the change process. They are responsible for the strategic direction and operation of the organization and actively lead the transformation. They decide when to initiate transformational change, what the change should be, how it should be implemented, and who should be responsible for directing it. Because existing executives may lack the talent, energy, and commitment to undertake these tasks, they may be replaced by outsiders who are recruited to lead the change. Research on transformational change suggests that externally recruited executives are three times more likely to initiate such change than are existing executive teams. The critical role of executive leadership in transformational change is clearly emerging. Three key roles for executive leadership of such change are:

1. Envisioning.

Executives must articulate a clear and credible vision of the new strategic orientation. They also must set new and difficult standards for performance, and generate pride in past accomplishments and enthusiasm for the new strategy. Executives must: articulate a clear and credible vision of the new strategic orientation, set new and difficult standards for performance, generate pride in past accomplishments, and enthusiasm for the new strategy.
Sharing the Vision

The development of a vision is an important element in organizational and cultural change. Many management theorists feel that vision is the very essence of leadership. Any attempt at changing a culture should begin with a clear vision of the new strategy and what it will take to make it work. Organizations are driven by a vision, not by directives from the chain of command. Vision is “a mental image of a possible and desirable future of the organization… that articulates a view of a realistic, credible, attractive future for the organization. An effective vision should be challenging, inspiring, and aimed at empowering people at all levels. The fact of the matter is that the fast food employee flipping burgers and waiting on the customer is the one who ultimately carries out the vision, not the owner and management team at the headquarters. Developing a shared vision involves several stages:

Share the vision.

People will buy into a clear challenging vision that has meaning for them and will improve society.

Empower the individual.

People need to feel they have a stake in the outcome and have participated in defining the vision. The idea is to have individual purposes congruent with the organization’s vision.

Develop Trust.

An effective vision must set goals for challenging performance, but must allow people to “buy in” to the vision and provide feedback on performance.

Reward performance

. High performers need to be recognized. This element also includes support for taking risk, providing the freedom to fail, and pushing decisionmaking information downward to the lower levels.

Figure 55 2. Energizing.

Executives must demonstrate personal excitement for the changes and model the behaviors that are expected of others. They must communicate examples of early success to mobilize energy for change.

3. Enabling.

Executives must provide the resources necessary for undertaking significant change and use rewards to reinforce new behaviors. Leaders also must build an effective top-management team to manage the new organization and develop management practices to support the change process. If the system rewards the old culture, old practices, then it won’t make sense for people to change. This, of course, includes pay and promotion, but other incentives as well. For example, a TV manufacturing company rewards top performers by putting them on an “elite badge” project team. At a computer company, awards & recognition were used to gain employee involvement, and people were willing to work extra hours to bring out products. They wore T-shirts with mottos that celebrated their dedication, like “working ninety hours a week and loving it.” Leaders also must build an effective top-management team to manage the new organization and develop management practices to support the change process.

Continuous Learning and Change

Transformational change requires considerable innovation and learning. Organizational members must learn how to enact the new behaviors required to implement new strategic directions. This typically is a continuous learning process of trying new behaviors, assessing their consequences, and modifying them if necessary. Because members usually must learn qualitatively different ways of perceiving, thinking, and behaving, the learning process is likely to be substantial and to involve much unlearning. It is directed by a vision of the future organization and by the values and norms needed to support it. Learning occurs at all levels of the organization, from senior executives to lower-level employees. Because the environment itself is likely to be changing during the change process, transformational change rarely has a delimited timeframe but is likely to persist as long as the firm needs to adapt to change. Learning how to manage change in a continuous manner can help the organization keep pace with a dynamic environment. It can provide the built-in capacity to fit the organization continually to its environment.

Three kinds of Interventions

1. Culture change 2. Self-design 3. Organization learning and knowledge management. It describes activities directed at changing the basic character or culture of the organization.

Culture Change Figure 56

Despite the increased attention and research devoted to corporate culture, there is still some confusion about what the term culture really means when applied to organizations. Examination of the different definitions suggests that organization culture is the pattern of basic assumptions, values, norms, and artifacts shared by organization members. These shared meanings help members make sense out of everyday life in the organization. The meanings signal how work is to be done and evaluated, and how employees are to relate to each other and to significant others, such as customers, suppliers, and government agencies.

Levels of Organizational Culture

As shown below, organization culture includes four major elements existing at different levels of awareness: 1. Artifacts. 2. Norms 3. Values 4. Basic Assumptions

Figure 57 Case: The Action Company

The “Action Company” is a rapidly growing high high-technology manufacturing concern with low turnover and intense history. A visitor to the Company would note the open landscape architecture; a high degree of informality; frenetic activity all around; an obvious lack of status symbol, such as parking spaces or executive dinning rooms; and a sense of high energy and emotional evolvement of people staying late and expressing excitement about the importance of their work. If one asks about the various norms, one is told that the company is in a rapidly growing high-technology field where hard work, innovation, and rapid solutions to things are important and where it is essential for everyone to contribute at their maximum capacity. New employees are carefully screened; and when an employee fails, he or she is simply assigned to another task, not fired or punished in any personal way. The next-deeper level of awareness includes values about what ought to be in organizations. Values tell members what is important in the organization and what deserves their attention. Values Basic Assumptions Norms Artifacts

An organization’s culture may be described by a set of core values that include:

Individual autonomy

. The degree of responsibility, independence, and opportunities for exercising initiative for members of the organization.

Sensitivity to the needs of customers and employees

. The degree of responsiveness to changing needs.


. The degree of assistance provided by managers.

Interest in having employees initiate new ideas

. The degree to which employees are encouraged and empowered to come up with better quality and productivity suggestions.

Openness of available communication channel

. The degree of freedom of communication between members and teams and levels.

Risk behavior

. The degree to which members are encouraged to be aggressive, innovative, and risk-taking. By combining these values a composite picture of the organization’s culture is formed. The culture becomes the basis for the shared understanding that members have about the organization, how things are done, and the way they are supposed to behave. The company operates on several critical and coordinated basic assumptions: (a) Individuals are assumed to be the source of all innovation and productivity. (b) It is assumed that truth can only be determined by pitting fully involved individuals against each other to debate ideas until only one idea survives; and it is further assumed that ideas will not be implemented unless everyone involved in implementation has been convinced through the debate of the validity of the idea; (c) Paradoxically, it is also assumed that every individual must think for himself or herself and “do the right thing” even if that means disobeying one’s boss or violating a policy. (d) What makes it possible for people to live in this high conflict environment is the assumption that the company members are one big family who will take care of each other and protect each other even if some members make mistakes or have bad ideas.

Figure 58 Cultural Context

Researchers have proposed that applying OD in different countries requires a "context-based" approach to planned change. This involves fitting the change process to the organization's cultural context, including the values held by members in the particular country or region. These beliefs inform people about which behaviors are important and acceptable in their culture. Cultural values play a major role in shaping the customs and practices that occur within organizations as well, influencing how members react to phenomena having to do with power, conflict, ambiguity, time, and change. Individual is source of good ideas Truth is discovered through debate and testing We are one family who will take care of each other Every person must think for himself or herself and “do the right thing”

There is a growing body of knowledge about cultural diversity and its effect on organizational and management practices. Researchers have identified five key values that describe national cultures and influence organizational customs: context orientation, power distance, uncertainty avoidance, achievement orientation, and individualism (Table 24).

Context Orientation

This value describes how information is conveyed and time is valued in a culture. In low-context cultures, such as Scandinavia and the United States, information is communicated in words and phrases. By using more specific words, more meaning is expressed. In addition, time is viewed as discrete and linear—as something that can be spent, used, saved, or wasted. In high-context cultures, on the other hand, the communication "medium reflects the message more than the words, and time is a fluid and flexible concept. For example, social cues in Japan and Venezuela provide as much, if not more, information about a particular situation than do words alone. Organizations in high-context cultures emphasize ceremony and ritual. How one behaves is an important signal of support and compliance with the way things are done. Structures are less formal in high-context cultures; there are few written policies and procedures to guide behavior. Because high-context cultures view time as fluid, punctuality for appointments is less a priority than is maintaining relationships.

Table 24 Power Distance

This value concerns the way people view authority, status differences, and influence patterns. People in high power distance regions, such as Latin America and Eastern Europe, tend to favor unequal distributions of power and influence, and consequently autocratic and paternalistic decision-making practices are accepted. Organizations in high power distance cultures tend to be highly centralized with several hierarchical levels and a large proportion of supervisory personnel. Subordinates in these organizations represent a lower social class. They expect to be supervised closely and believe that power holders are entitled to special privileges. Such practices would be inappropriate in low power distance regions, such as Scandinavia, where participative decision making and egalitarian methods prevail.

Uncertainty Avoidance

This value reflects a preference for conservative practices and familiar and predictable situations. People in high uncertainty avoidance regions, such as Asia, prefer stable routines, resist change, and act to maintain

the status quo. They do not like conflict and believe that company rules should not be broken. In regions where uncertainty avoidance is low, such as in many European countries, ambiguity is less threatening. Organizations in these cultures tend to favor fewer rules, higher levels of participation in decision making, more organic structures, and more risk taking.

Achievement Orientation

This value concerns the extent to which the culture favors the acquisition of power and resources. Employees from achievement-oriented cultures, such as Asia and Latin America, place a high value on career advancement, freedom, and salary growth. Organizations in these cultures pursue aggressive goals and have high levels of stress and conflict. Organizational success is measured in terms of size, growth, and speed. On the other hand, workers in cultures where achievement is less of a driving value, such as those in Scandinavia, prize the social aspects of work including working conditions and supervision, and typically favor opportunities to learn and grow at work.


This value is concerned with looking out for oneself as opposed to one's group or organization. In high individualism cultures, such as the United States and Canada, personal initiative and competitiveness are valued strongly. Organizations in individualistic cultures often have high turnover rates and individual rather than group decision-making processes. Employee empowerment is supported when members believe that it improves the probability of personal gain. These cultures encourage personal initiative, competitiveness, and individual autonomy. Conversely, in low individualism countries, such as Taiwan, Japan, and Peru, allegiance to one's group is paramount. Organizations operating in these cultures tend to favor cooperation among employees and loyalty to the company.

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