Understanding and Managing Organizational Change

Prof. Sandeep Bhanot

As managers contemplate future of their organizations in the 21^st century, they cannot escape the inevitability of change. Change is certainly among the most frequently used words in the business pages of every newspaper in the world. The combinations of global competition, computer-assisted manufacturing methods and instant communications have implications more far-reaching than anything since the beginning of the Industrial Revolution. Effective managers must view managing change as an integral responsibility, rather than as a peripheral one. It is not merely the technological environment that is changing; the economic, political, market, social, legal and labor environments are also changing. A manager often finds that changes need to be initiated at various levels within the organizational system. In other words, the manager has to ensure that individuals and groups in organizations, and structures, processes and behaviors of sub-systems adapt to the changing external and internal environments.

The forces for change can be classified conveniently into two groups: environmental and internal. Environmental forces are beyond management’s control. Internal forces operate inside the firm and are generally within the control of management. Organizations seldom undertake significant change without a strong shock from their environment. The external environment includes many economic, technological and social/political forces that can trigger change process. The manager of a business has always been concerned with reacting to economic forces. Competitors introduce several new things like introduce new products, increase advertising, reduce prices or augment customer service. In each case, a response is required unless the manager is content to permit the erosion of the profit and market share. At the same time, changes occur in customer tastes and income. The firm’s products may no longer have customer appeal; customers may be able to purchase less expensive, higher quality forms of the same products. The second source of environmental change forces is technology. The knowledge explosion has introduced new technology for nearly every business function. Computer technology and automation have affected not only the technical conditions of work, but the social conditions as well. New occupations have been created and others eliminated. Slowness to adopt new technology that reduces cost and improves quality will show up in the financial statements sooner or later. The third source of environmental change forces is social and political. Sophisticated mass communications and international markets create great potential for business, but they are also great threats to managers who cannot understand what is going on. Finally, the relationship between government and business becomes much closer as regulations are imposed and relaxed.

Internal forces for change, which occur within the organization, can usually be traced to process and behavioral problems. The process problems include breakdowns in decision making and communications. Decisions aren’t being made, are made too late or are of poor quality. Tasks are not undertaken or completed because the person(s) responsible did not get the word. Because of inadequate or non-existent communications, a customer order is not filled, a grievance is not processed or an invoice is not filed and the supplier is not paid. Interpersonal and interdepartmental conflicts reflect breakdowns in organizational processes. Low levels of morale and high levels of absenteeism and turnover are symptoms of behavioral problems that must be diagnosed. A strike or a walkout may be the most tangible sign of a problem; yet such tactics are usually employed because they rouse management to action.

Introducing a change in one subsystem might have certain unintended adverse consequences for the organization because of the unanticipated impact of the same on other subsystems. For example, a change in the layout of the production department to improve its operating effectiveness might pose additional routing time for the raw materials to reach the first point of entry into the production department. This might annoy the people in the materials department, whether or not it increases their operating costs. Or , if flexible work hours are introduced in the accounts department because the individuals working there do not come into contact with the public and get things done more effectively by working flexible hours, another department, which has more married women employed therein, might ask for the same privileges and feel upset if they are not acceded to. Thus, by introducing a change to solve the problems of one subsystem, other problems might unintentionally be created elsewhere in the organization. The manager, as a change agent, should be aware of this and be particularly sensitive to the interdependence among the units that are likely to be directly affected by the change.

When employees realize that changes will benefit them, they welcome the changes. However, most of us are generally uncomfortable with changes that are not perceived as directly beneficial to us or if we are uncertain about they will affect us personally. The ambiguity of the unknown compared to the comfort of living with the known procedures and systems of the present is difficult for many of us to look forward to. Certain types of changes that elicit resistance can be overcome through knowledge of the unavoidable necessity for change. There have been instances where employees have accepted cuts in pay without much resistance because they have known that this is the only way the company can survive and they can hold on to their jobs. However, there is another kind of change which would elicit emotional resistance because of psychological fear, suspicion, insecurity and extreme levels of anxiety. If these fears cannot easily be reduced by facts or logic, either because the facts are not readily available for dissemination, or if available and disseminated, are not accepted by the employees as ‘true’, the change will be resisted. The effort to bring in computers to computerize the routine transactions of our banking industry is a case in point. Though in the minds of the management, the computer would only be used for simple and routine payroll type of work to reduce monotonous labor and clerical errors, to the bank employees the computer meant a loss of jobs and less job opportunities for the future in a country which already has a high unemployment rate.

Changes must be planned and actively managed if organizations are to survive and grow. Where large scale changes are involved, special structures such as a high-level steering committee or advisory group may be necessary to manage the transition. Effective change masters need to combine their vision with a willingness to be flexible as they travel the path to reach their goals. Managing change thus becomes an important part of the managerial job. Constantly assessing where we are and where we want to be alerts managers to the changes that are needed to be embedded in the system. A planned change has then to be carefully worked out to fill the gap. Thereafter, depending on the situational context in which change has to be embedded, an appropriate strategy to implement the change has to be decided.  When Indian organizations are in the process of undergoing major transformation in all areas of activities, we need more of change managers than mere administrative managers in Indian corporate.

By Prof Sandeep Bhanot,
Member of faculty at
SIES College of Management Studies,
Navi Mumbai.
He can be contacted at sandeep@siescoms.edu.