Organization Development

<<< Previous Organization Transformation:Sharing the Vision, Three kinds of Interventions Next >>>
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
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
Organization Development ­ MGMT 628
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
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
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
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
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
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
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.
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.
Table of Contents:
  1. The Challenge for Organizations:The Growth and Relevance of OD
  2. OD: A Unique Change Strategy:OD consultants utilize a behavioral science base
  3. What an “ideal” effective, healthy organization would look like?:
  4. The Evolution of OD:Laboratory Training, Likert Scale, Scoring and analysis,
  5. The Evolution of OD:Participative Management, Quality of Work Life, Strategic Change
  6. The Organization Culture:Adjustment to Cultural Norms, Psychological Contracts
  7. The Nature of Planned Change:Lewin’s Change Model, Case Example: British Airways
  8. Action Research Model:Termination of the OD Effort, Phases not Steps
  9. General Model of Planned Change:Entering and Contracting, Magnitude of Change
  10. The Organization Development Practitioner:External and Internal Practitioners
  11. Creating a Climate for Change:The Stabilizer Style, The Analyzer Style
  12. OD Practitioner Skills and Activities:Consultant’s Abilities, Marginality
  13. Professional Values:Professional Ethics, Ethical Dilemmas, Technical Ineptness
  14. Entering and Contracting:Clarifying the Organizational Issue, Selecting an OD Practitioner
  15. Diagnosing Organizations:The Process, The Performance Gap, The Interview Data
  16. Organization as Open Systems:Equifinality, Diagnosing Organizational Systems
  17. Diagnosing Organizations:Outputs, Alignment, Analysis
  18. Diagnosing Groups and Jobs:Design Components, Outputs
  19. Diagnosing Groups and Jobs:Design Components, Fits
  20. Collecting and Analyzing Diagnostic information:Methods for Collecting Data, Observations
  21. Collecting and Analyzing Diagnostic information:Sampling, The Analysis of Data
  22. Designing Interventions:Readiness for Change, Techno-structural Interventions
  23. Leading and Managing Change:Motivating Change, The Life Cycle of Resistance to Change
  24. Leading and managing change:Describing the Core Ideology, Commitment Planning
  25. Evaluating and Institutionalizing Organization Development Interventions:Measurement
  26. Evaluating and Institutionalizing Organization Development Interventions:Research Design
  27. Evaluating and Institutionalizing Organization Development Interventions
  28. Interpersonal and Group Process Approaches:Group Process
  29. Interpersonal and Group Process Approaches:Leadership and Authority, Group Interventions
  30. Interpersonal and Group Process Approaches:Third-Party Interventions
  31. Interpersonal and Group Process Approaches:Team Building, Team Building Process
  32. Interpersonal and Group Process Approaches:Team Management Styles
  33. Organization Process Approaches:Application Stages, Microcosm Groups
  34. Restructuring Organizations:Structural Design, Process-Based Structures
  35. Restructuring Organizations:Downsizing, Application Stages, Reengineering
  36. Employee Involvement:Parallel Structures, Multiple-level committees
  37. Employee Involvement:Quality Circles, Total Quality Management
  38. Work Design:The Engineering Approach, Individual Differences, Vertical Loading
  39. Performance Management:Goal Setting, Management by Objectives, Criticism of MBO
  40. Developing and Assisting Members:Career Stages, Career Planning, Job Pathing
  41. Developing and Assisting Members:Culture and Values, Employee Assistance Programs
  42. Organization and Environment Relationships:Environmental Dimensions, Administrative Responses
  43. Organization Transformation:Sharing the Vision, Three kinds of Interventions
  44. The Behavioral Approach:The Deep Assumptions Approach
  45. Seven Practices of Successful Organizations:Training, Sharing Information