Organization Transformation:Sharing the Vision, Three kinds of Interventions

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Organization Development MGMT 628

Lesson # 43

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

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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:

Organization Development MGMT 628

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 decision-

making 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.

Organization Development MGMT 628

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 dy-

namic 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

Organization Development MGMT 628

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

Artifacts

Norms

Values

Basic

Assumptions

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.

Organization Development MGMT 628

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.

· Support. 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

Individual is source of

Truth is discovered through

good ideas

debate and testing

Every person must

We are one family

think for himself

who will take care

or herself and

of each other

"do the right thing"

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.

Organization Development MGMT 628

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

Organization Development MGMT 628

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.

Individualism

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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