Chapter 18: Managing Change 1

18 MANAGING CHANGE

CHAPTER SCAN

Organizations have to keep pace with current issues related to quality, technology, diversity,
globalization, and ethics. This requires managing both change and resistance to change. All
organizations experience external and internal forces for change. There are numerous
organization development interventions available to managers. Diagnosis and needs analysis
are essential first steps in any change management effort.

LEARNING OBJECTIVES

After reading this chapter, you should be able to do the following:

1. Identify the major external and internal forces for change in organizations.
2. Define the terms incremental change, strategic change, transformational change, and
change agent.
3. Describe the major reasons individuals resist change, and discuss methods organizations
can use to manage resistance.
4. Apply force field analysis to a problem.
5. Explain Lewin's organizational change model.
6. Describe the use of organizational diagnosis and needs analysis as a first step in
organizational development.
7. Discuss the major organization development interventions.
8. Identify the ethical issues that must be considered in organization development efforts.

KEY TERMS

Chapter 18 introduces the following key terms:

moving
planned change refreezing
unplanned change organization development (OD)
incremental change survey feedback
strategic change management by objectives (MBO)
transformational change quality program
change agent team building
disengagement process consultation
disidentification skills training
disenchantment sensitivity training
disorientation management development
unfreezing role negotiation
job redesign
THE CHAPTER SUMMARIZED

I. THINKING AHEAD: Changing with the Times

II. FORCES FOR CHANGE IN ORGANIZATIONS

The forces for change are everywhere in todays highly competitive environment. Adaptiveness, flexibility,
and responsiveness are terms used to describe the organizations that will succeed in meeting the competitive
challenges faced by businesses. Planned change results from deliberate decisions to alter an organization.
Unplanned change is imposed on the organization and is often unforeseen.

A. External Forces

The four themes of this text (i.e., globalization, workforce diversity, technological change, and
managing ethical behavior) are the major external drivers of change in organizations. Two examples of
planned change are the European Union (EU) and the North American Free Trade Agreement
(NAFTA). Regardless of the degree of planning involved in these ventures, numerous unplanned
circumstances still arise.

1. Globalization

Multinational and transnational organizations are heavily involved in global changes. Many of
these organizations are pursuing joint ventures with firms from other countries.

2. Workforce Diversity

The workforce continues to see increased participation of females, persons with physical
challenges, and persons from many different cultures, as well as a rise in the mean age of
workers. All of these trends are expected to continue well into the next decade.

3. Technological Change

Technological changes alter the way in which we perform work, structure work and
organizations, and interact with each other. Examples include advances in communication
technology and information systems that allow for virtual teams, and radio frequency
identification tags that are significantly faster, more flexible, reusable, and carry more
information than bar codes.

4. Managing Ethical Behavior

Society expects organizations to behave in an ethical manner in all of their activities, both
internal and external. Ethical dilemmas are sometimes highly visible, public issues, but more
often they are issues that arise in the everyday lives of employees. Success in this area requires
that organizations establish a pervasive culture of ethical behavior that all employees embrace.

B. Internal Forces

Internal forces for change include things like declining effectiveness, crises (e.g., strikes, resignations,
or major accidents), changes in employee expectations, and changes in the work climate.
III. CHANGE IS INEVITABLE

A. The Scope of Change

Change may take one of three forms. Incremental change is relatively small in scope, and as such,
results in small improvements. Strategic change is a larger scale approach that is similar in magnitude
to a restructuring effort. Transformational change moves the organization toward a radically
different, and sometimes, unknown, future state.

B. The Change Agents Role

A change agent is an individual or group that undertakes the task of introducing and managing a
change in an organization. Change agents can be either internal or external, and both have advantages
and disadvantages. Internal change agents know the past history of the organization, its political
system, and its culture, but may be too close to be objective or may not have the trust of coworkers.
External change agents may have a greater ability to be objective and impartial, but possess limited
information about the organization and may be view with suspicion.

IV. THE PROCESS OF CHANGE IN ORGANIZATIONS

A. Resistance to Change

Individuals often resist change because they feel that their freedom is threatened.

1. Fear of the Unknown

All change brings some uncertainty and creates resistance because it introduces ambiguity to
what was a comfortable environment. Communication helps reduce fear of the unknown.

2. Fear of Loss

Employees often fear losing their jobs or their status as a result of change.

3. Fear of Failure

Employees may experience anxiety as they anticipate increased workloads or task difficulty, an
increase in performance expectations, or they may fear that the change itself will not occur.

4. Disruption of Interpersonal Relationships

Change sometimes limits meaningful interpersonal relationships at work that are important to
employees, which can create additional anxiety.
5. Personality Conflicts

Conflict can occur because of the seemingly insensitive personality of the change agent.

6. Politics

Organizational change often involves shifting the balance of power. Threatened loss of power
can generate strong resistance to change.

7. Cultural Assumptions and Values

Employees in cultures with high uncertainty avoidance may not be as receptive to

change as those in cultures with low uncertainty avoidance. Also, some
individuals tolerate ambiguity more readily than do others.
 B. Managing Resistance to Change

Communication, participation, and empathy and support are key strategies for effectively managing
resistance to change.

C. Behavioral Reactions to Change

Disengagement is psychological withdrawal from change. Disidentification is the feeling that one's
identity is being threatened by a change. Disenchantment is a negative feeling or anger toward a
change. Disorientation involves feelings of loss and confusion due to a change.

D. Lewin's Change Model

The Lewin change model asserts that behavior is the product of two opposing forces, one force
pushing to preserve the status quo, and the other pushing for change. The model includes three steps:
unfreezing, moving, and refreezing. Unfreezing involves encouraging individuals to discard old
behaviors by shaking up the equilibrium state that maintains the status quo. In the moving step, new
attitudes, values, and behaviors are substituted for old ones. Finally, refreezing establishes the new
attitudes, values, and behaviors as the new status quo.

V. ORGANIZATION DEVELOPMENT INTERVENTIONS

Organizational development (OD) is a systematic approach to organizational improvement that applies

behavioral science theory and research in order to increase individual and organizational well-being and
effectiveness.

A. Diagnosis and Needs Analysis

Organizational development begins with the essential first step of diagnosis. Diagnosis should include
examinations of the organizations purpose, structure, reward system, support system, relationships,
and leadership. Needs analysis involves careful investigation into the skills and competencies
employees must have in order to change successfully.

B. Organization- and Group-Focused Techniques

1. Survey Feedback

Survey feedback is a widely used method of intervention method whereby employee attitudes
are solicited using a questionnaire. Individual responses should be confidential and
anonymous, feedback should be report on the group level, employees should feel confident
that they will suffer no repercussions from their responses, and they should be informed of the
purpose of the survey.

2. Management by Objectives

Management by objectives (MBO) is an organization-wide intervention technique that

involves joint goal setting between employees and managers. It clarifies what is expected of
employees, provides knowledge of results, and provides an opportunity for coaching and
counseling by the manager. However, the MBO process can be extremely time-consuming
when done correctly.

3. Product and Service Quality Programs

 Quality programs embed product and service quality excellence in the organizational culture.
Success or failure of an organization is directly linked not only to the quality of its product,
but also to the quality of its customer service.

4. Team Building

Team building is an intervention designed to improve the effectiveness of a work group.

Although very popular as an intervention, team building is a relatively new OD technique, and
the assessment of its effectiveness remains incomplete.

5. Large Group Interventions

Large group interventions bring all of the key members of a group together in one room for an
extended period of time as a means of creating a critical mass of people within the
organization to support a change.

6. Process Consultation

Process consultation is an OD method that helps managers and employees improve the
processes that are used in organizations. In most instances, an external organization consultant
is used.

C. Individual-Focused Techniques

1. Skills Training

Skills training increases the job knowledge, skills, and abilities that are necessary to do a job
effectively. It can be accomplished in the classroom, on the job, or through computer-based-
training (CBT).

2. Sensitivity Training

Sensitivity training is an intervention designed to help individuals understand how their

behavior affects others. Also known as T-groups, sensitivity training seeks to change behavior
through unstructured group interaction. The focus is on enhancing interpersonal skills.

3. Management Development Training

Management development encompasses many techniques designed to enhance managers

skills in an organization. It focuses on verbal information, intellectual skills, attitudes, and
development.

4. Role Negotiation

Role negotiation is a simple technique whereby individuals meet and clarify their
psychological contract.

5. Job Redesign

Job redesign is an OD intervention method that alters jobs to improve the fit between
individual skills and the demands of the job. Students may enjoy an impromptu job redesign
for positions like tollbooth operators, computer input operators, or traffic directors. They
quickly discover that the task is not as easy as it appears.

6. Health Promotion Programs

 Companies are increasingly recognizing the importance of health promotion programs for
reducing their health care costs. The goal is to help employees manage stress before it
becomes a problem.
7. Career Planning

Career planning benefits both the organization and the individual. Employees identify skills and
skill deficiencies. The organization plans training and development efforts based on that
information. Also, the career planning process facilitates the identification and nurturing of
talented employees for future promotions.

VI. ETHICAL CONSIDERATIONS IN ORGANIZATION DEVELOPMENT

OD methods must be chosen in accordance with the problem as diagnosed, the organizations culture, and the
employees involved. Individuals should not be forced to participate, and confidentiality for those who do
participate is of the utmost concern. Finally, participants should be given complete knowledge of the rationale
for change, what to expect from the change process, and the details of the intervention technique and process.

VII. ARE ORGANIZATION DEVELOPMENT EFFORTS EFFECTIVE?

The success of any OD intervention depends on many factors, and no one OD method will be effective in all
cases. Research indicates that OD programs have positive effects on productivity when properly applied and
managed.

VIII. MANAGERIAL IMPLICATIONS: MANAGING CHANGE

IX. LOOKING BACK: Did the Change Process at Harley-Davidson Get Results?
CHAPTER SUMMARY

Organizations face many pressures to change. Some forces are external, including globalization,
workforce diversity, technological innovation, and ethics. Other forces are internal, such as declining
effectiveness, crises, changing employee expectations, and a changing work climate.
Organizations face both planned and unplanned change. Change can be of an incremental, strategic, or
transformational nature. The individual who directs the change, known as a change agent, can be
internal or external to the organization.
Individuals resist change for many reasons, and many of these reasons are rooted in fear.
Organizations can help manage resistance by educating workers and openly communicating the
change, encouraging worker participation in the change efforts, and providing empathy and support to
those who have difficulty dealing with change.
Reactions to change may be manifested in behaviors reflecting disengagement, disidentification,
disenchantment, and disorientation. Managers can use separate interventions targeted toward each
reaction.
Force field analysis states that when the forces for change are balanced by the forces restraining
change, an equilibrium state exists. For change to occur, the forces for change must increase, or the
restraining forces must decrease.
Lewin's change model proposes three stages of change: unfreezing, moving, and refreezing.
A thorough diagnosis and needs analysis is a critical first step in any organization development (OD)
intervention.
OD interventions targeted toward organizations and groups include survey feedback, management by
objectives, product and service quality programs, team building, and process consultation.
OD interventions that focus on individuals include skills training, sensitivity training, management
development training, role negotiation, job redesign, stress management programs, and career
planning.
OD efforts should be managed ethically and should preserve individual freedom of choice and privacy.
When properly conducted, organization development can have positive effects on performance.
REVIEW QUESTIONS: SUGGESTED ANSWERS

1. What are the major external and internal forces for change in organizations?

The four major themes of the text are the four external forces: globalization, workforce diversity,
technological change, and managing ethical behavior. Internal forces are things like a crisis, declining
effectiveness, changes in employee expectations, and changes in the work climate.

2. Contrast incremental, strategic, and transformational change.

Incremental change is small in scope resulting in only small improvements. Strategic changes occur on a large
scale, such as organizational restructuring. Transformational changes move the organization to a radical, and
sometimes unknown, future state.

3. What is a change agent? Who plays this role?

The term change agent comes from Rosabeth Moss Kanter and refers to individuals or groups who undertake
the task of introducing and managing change in organizations. Change agents may be outside consultants or
organizational development experts, or they may be internal employees who have the necessary skills to
perform in such a role.

4. What are the major reasons individuals resist change? How can organizations deal with resistance?

Individuals resist change because of fear of the unknown, fear of loss, fear of failure, disruption of
interpersonal relationships, personality conflicts, politics, and cultural assumptions and values. Organizations
can manage resistance to change through communication, participation, and empathy and support.

5. Name the four behavioral reactions to change. Describe the behavioral signs of each reaction, and
identify an organizational strategy for dealing with each reaction.

Disengagement is psychological withdrawal from change and is evident in withdrawal behaviors. Managers
should confront disengaged employees to draw them out. Sadness or worry typifies disidentification.
Managers should encourage these employees to explore their feelings and to transfer their positive feelings
into the new situation. Disenchantment is displayed in angry behavior. The anger of these employees must be
neutralized. Disorientation is apparent when individuals show confusion. Managers should explain the change
to disoriented individuals in a way that reduces the ambiguity of the situation.
6. Describe force field analysis and its relationship to Lewin's change model.

This process categorizes events in terms of forces that push for the status quo, versus those that push for
change. For change to take place, the factors pushing for change must outweigh the factors pushing against
change. In Lewin's change model, the unfreezing step requires that individuals be convinced to give up their
old behaviors (forces for change must overcome forces against change) in favor of a new set of behaviors.

7. What is organization development? Why is it undertaken by organizations?

Organizational development is the systematic approach to organizational improvement that applies behavioral
science theory and research in order to increase individual and organizational well-being and effectiveness.
OD is needed to guide employees through significant change in the organization.

8. Name six areas to be critically examined in any comprehensive organizational diagnosis.

The organization's purpose, structure, reward system, support systems, relationships, and leadership must be
examined.

9. What are the major organization-focused and group-focused OD intervention methods? The major
individual-focused methods?

Organization-focused and group-focused interventions include survey feedback, management by objectives,

product and service quality programs, team building, and process consultation. Individual-focused methods
include skills training, sensitivity training, management development training, role negotiation, job redesign,
stress management programs, and career planning.

10. Which OD intervention is most effective?

No single method of OD is effective in every instance. It is typically best to use multiple-method OD

approaches.
DISCUSSION AND COMMUNICATION QUESTIONS: SUGGESTED ANSWERS

1. What are the major external forces for change in todays organizations?

Students may include competition as one of the forces, along with globalization, technology, ethics, and
workplace diversity.

2. What are the advantages of using an external change agent? An internal change agent?

External consultants can be more objective and are not suspected of having political loyalties. On the other
hand, they may not fully understand the organization and culture as well as an internal agent. Internal agents
have better knowledge of the organization, its history, its culture, and its political processes, but may
experience difficulty in being objective, and may lack the necessary expertise to handle the change effectively.

3. Review Challenge 18.1. What can you learn from this challenge about how individuals tolerance for
ambiguity can lead to resistance?

Students own experiences of dealing with change will be instructive here. They might also consider others
they have observed dealing with change and make some assumptions about the relationship between those
individuals tolerance for ambiguity and their resistance to change.

4. Can organizations prevent resistance to change? If so, how?

There are many techniques, including the utilization of professionals (OD specialists) to assist with resistance
to change. Communication is an essential aspect of helping employees adjust effectively. Research
substantiates the need for participation from those who will be involved in the change. Emotional support is
also critical to acceptance of change. It is probably unrealistic to think that organizations can prevent all
resistance to change.

5. What organization development techniques are the easiest to implement? What techniques are the most
difficult to implement? Why?

Survey feedback is non-threatening and allows for anonymity. There is little investment on the employees
part. Management by objectives is a high investment technique that requires training and involves a lengthy
process. Quality programs are certainly in vogue, yet a number of companies have been disappointed with the
time required and the slowness of change.

6. Suppose your organization experiences a dramatic increase in turnover rates. How would you diagnose
the underlying problem?

Students could mention any of the techniques that have been listed for organizational analysis. A thorough
process of information gathering should be emphasized.

7. Downsizing has played a major role in changing U.S. organizations. Analyze the internal and external
forces for change regarding downsizing an organization.

Students may tend to focus on the external forces that lead to downsizing. Be sure they are aware that
internal factors may also serve as forces for downsizing.

8. If you were in charge of designing the ideal management development program, what topics would you
include? Why?

Students may select trendy topics rather than topics based on theories. Be sure they provide justification
for their responses.
9. Find an article that describes an organization that has gone through change and managed it well.
Develop an Organizational Reality feature of your own about the example you find using the format
in the book. Prepare a brief oral presentation of your Organizational Reality for your class.

Following the class presentations, discuss the similarities and differences that exist in how the companies
managed change. Students should consider why different approaches to change were effective and
identify any commonalties that they see in managing change effectively.

10. Think of a change you would like to make in your life. Using Figure 18.1 as a guide, prepare your
own force field analysis for that change. How will you overcome the forces for the status quo? How will
you make sure to refreeze following the change? Summarize your analysis in an action plan.

Students should be very specific in the action plan. You may also want students to consider a plan for
evaluating their effectiveness at implementing the change.

ETHICS QUESTIONS: SUGGESTED ANSWERS

1. What constitutes abuse of a change agent's power? How can organizations prevent this?

Unlike some professions, OD specialists do not have to pass an exam to qualify for practice, although
reputations are critical. When change agents attempt to insert their own values into the process, they are
manipulating the process. Violating confidentiality is also an abuse of power.

2. Is it ethical for an organization to coerce individuals to change?

Coercion implies manipulation through power. Students might want to review the chapter on power.

3. You are leading a management development seminar, and the supervisor of one of the participants asks
how his employee is performing in the seminar. Should you reveal this information?

It would probably depend on the type of seminar being conducted. If it is a sensitivity training workshop the
information is absolutely confidential. However, if it is training for new computer applications, it becomes a
factual question rather than a behavioral attitude question.

4. Suppose you are a consultant, and an organization asks you to deliver a team-building intervention. You
know a little about team building, but not a lot. You do know that a competitor will probably get the job if
you do not do it. What should you do?

This is extremely dangerous and risky for you and those involved with the process. It is better to let the
competitor have the program if you are not trained for the intervention. There is a good chance your lack of
knowledge will backfire on you if you proceed.

5. Suppose you are a consultant, and a company asks you to assist in rewriting its policies and procedures
manual to help eliminate the companys excessive absenteeism. From your limited knowledge about the
company, you suspect that the problem lies elsewhere, and that changing the manual will not solve the
problem. What should you do?

Go through the logical steps for needs analysis and outline those issues with the individuals who are
encouraging the project.

CHALLENGES

18.1 TOLERANCE FOR AMBIGUITY

This scale will give students a sense of their comfort level with change. This challenge might be a good lead-
in to a class discussion of the reasons individuals resist change and how organizations can better manage the
change process, given that everyone does not tolerate ambiguity to the same degree.

18.2 APPLYING FORCE FIELD ANALYSIS

This challenge can be tied to Discussion and Communication Question #10 that asks students to prepare a
force field analysis of a change they desire to make in their lives. Prior to students completing this analysis,
select an example and walk the students, as a class, through a force field analysis so that they understand
better how to apply this type of analysis to their own experience.
EXPERIENTIAL EXERCISES

18.1 ORGANIZATIONAL DIAGNOSIS OF THE UNIVERSITY

Instructor's Notes:

This exercise is intended to give students experience in organizational diagnosis with an environment in which
they are familiar. It is useful to point out that they may not know enough about all aspects of the university to
proceed through the diagnosis. You might want to query them on how they would gather significant
information on the areas where they are least comfortable. It is also interesting to ask them if they believe
they are too biased in any of the areas because of personal experiences that may not be true for the majority
of students. Finally, would they be better change agents than an outside consultant?

18.2 TEAM BUILDING FOR TEAM EFFECTIVENESS

Instructor's Notes:

This exercise is a team building effort that stresses change. This is a good closure exercise for the end of
the semester. If you use peer evaluation or group grading this might be a good follow-up to the
evaluation. Most students have a tendency to paint a better picture of their group than where they actually
performed because they believe we expect them to be positive. Emphasize that if their group was a
disaster, it is useful to analyze why this happened, and how they could have prevented the outcome
knowing what they know at the end of the semester.

ALTERNATIVE EXPERIENTIAL EXERCISE

CRUSTY RUSTY
Adapted from Ken Kozar, The University of Colorado, Boulder

This exercise points out the difficulties for individuals in dealing with change. Students are divided into
groups of three or four, with one person as Crusty Rusty, the curmudgeon opposing the computer change,
and Jesse, the young junior accountant sent to convince Rusty that a change is needed. In addition, there is
an observer that records the interactions. I ask the Jesses to leave the room with me, and have the Rustys
spread out across the room and the observers select a group to observe. The Jesses are instructed to
approach the Rustys as if they are actually in their office, beginning with hello.

Students enjoy this exercise. Try to assign students to roles that they would least likely be in.

CRUSTY RUSTY

ROLE FOR JESSE BECKER, JUNIOR ACCOUNTANT

You are a junior accountant for the National Quik Service Company (QSC) out of Dallas. You have been
working at this job for six months, this being your first "real" job since graduating from the University. You
have just completed a computerized statistical analysis system for payroll that was well received by the
terminal managers. It provided more relevant and current information than they have ever had before. Both
you and the managers are enthusiastic about the success of the system and the potential of other
computerization for the company. Suddenly, your opportunities have expanded throughout the organization.
This afternoon you have a meeting with Rusty Griffen, the specialist in the division concerning dispatching,
which is the next project the managers have jokingly said "couldn't be undertaken before Rusty retires." At
the present time, dispatching is determined manually, resulting in numerous errors and requiring a great deal
of memory for one individual. The major problem is that often two trucks would be dispatched to pick up the
same loads at different times. You feel that a computerized inventory system similar to ones used by other
transportation industries could be used as a model.

You have tried to work with Griffen in the past. You feel all of your ideas have been bucked at every
opportunity, particularly regarding anything remotely involving change. You feel Griffen's idea of automation
is to get a larger piece of paper divided into more columns and a copier that could reproduce this master to
the same size in color.

Rusty does not trust the computer ever since there was a deduction taken out of a paycheck in 1982. Rusty
will retire in 8 years and it seems to you that any change now will threaten the security that this position has
built over the years. With Rustys attitude toward change, you feel the trucking industry would still be in the
pony express days. You sincerely believe the proposed system could improve and set your organization apart
in the freight hauling industry.

Well, time to head up to Rustys office for that chat.

 CRUSTY RUSTY

ROLE FOR RUSTY GRIFFIN, SENIOR DISPATCHER

You are the dispatcher in charge of 400+ trucks. In another 8 years you will be retiring from the company
with 30 years service. Prior to the dispatcher job, you worked as an independent operator and were noticed
by your supervisors for your meticulous and accurate reporting of your trips, and consequently, you were
promoted to the dispatcher position. You have the task of summarizing the day to day activities and
projecting future loading points. You have quite a system worked out with west coast trucks indicated in
blue, inbound noted by red, unloaded and ready for the trip back, another color, etc.

This afternoon you are to meet with Jesse Becker, the new computer whiz. Your supervisor heard about a
computer system used to manage another company at a recent conference. You feel the afternoon will be
wasted since you have many trucks to record and update since a fluid was not pure that was pumped into 15
outgoing trucks. You feel these computer kids don't understand the first principles of the trucking industry. If
they did, they would not have all these fancy and costly ideas. Anyhow, you feel that if you put the data in the
computer, you would never really be sure it's there, just like the time your paycheck got mixed up and then
those computer people couldn't correct it.

Well, it is time for the meeting. You hope the kid, whose total years of age don't even come close to your
years of experience, doesn't try to tell you how to do your job.
 CRUSTY RUSTY

QUESTIONS FOR ROLE PLAY OBSERVERS

Did Jesse introduce himself/herself?

Were the objectives for the interview clear to Rusty?

Who talked the most?

Was there any small talk?

Were there any non-verbal indicators expressed by either person?

Was more time spent on obtaining information or obtaining acceptance?

What change strategy did Jesse take?

What conflict style did Jesse and Rusty adopt?

What type of power do each of the individuals have?

Other comments?

MBTI EXERCISE:

Exercise Learning Objectives:

a. Students will understand that managing change is not the same for everyone.
b. Students will understand that "change" is defined differently by various groups.
c. Students will comprehend that to affect an organizational change, managers must be attuned to the
different ways change affects people.

Exercise Overview:
1. Students will form teams of like functional pairs (ST, SF, NF, and NT). The instructor should ensure that
no more than six students are in a particular group. If necessary, make two groups of the same functional
pair.

2. Students will construct a "Force Field Analysis" chart concerning managing change.

3. Students will report out their results and the instructor will summarize the exercise.

4. The instructor should know how to construct and interpret a force field analysis. We recommend that the
students use Experiential Exercise 18.2 before this exercise.

Exercise Description:

a. Individually and silently, students will develop two lists. The first list is entitled, "reasons that I welcome
change" and the second list is titled, "reasons that I resist change." Each list should take about five minutes.
It is important that silence be enforced. Remember that those people who prefer introversion need time to
reflect. This gives them that time and allows them to better participate in the exercise.

b. Students form teams of like functional pairs (ST, SF, NF, and NT).

c. On flip chart paper, students will first list the reasons they welcome change. The students should report in
some sequential order until everyone states every item on his or her list.

d. Students do the same thing for the reasons that they resist change.

e. Using one piece of flip chart paper, students will draw a vertical line in the center and title the left side of
the paper "change welcomers" and on the right side the title is "change resistors."

f. Students will review their consolidated lists and pick out 10 items to write on each appropriate half of the
paper. The instructor should encourage students to list the strongest "welcomers" and the strongest
"resistors."

g. Students should now spend 10 minutes (5 minutes per side) talking about why these "welcomers" and
"resistors" are so important to them.

h. Students report out.

g. Instructor summarizes the lesson.

What the instructor should expect:

a. "ST" groups may list in the resistor column such concepts/ideas as: goals are unclear, my job will change,
I'll have to physically move, our organizational structure will change, I've never seen this before, it costs too
much, and too much uncertainty.

b. "SF" groups may list in the resistor column such concepts/ideas as: I won't be working near or with my
friends, I don't know anyone in that department, the boss is real hard to get along with, I don't know enough
details, managers always keep us in the dark about these things, and it won't be fun any more.

c. "NF" groups may list in the resistor column such concepts/ideas as: our organizational structure will
change, they never take into account the "human costs" of change, we won't know our role and place in the
new organization, I don't understand how this will help the organization perform better, and the change will
disrupt all of my work relationships.
d. "NT" groups may list in the resistor column such concepts/ideas as: were changing just for the sake of
changing, no thought was added to this process, we could have fixed the existing structure easier if someone
had just asked us, I don't understand the reason for the change, this change doesn't fit the other things we're
doing, and our energies are directed away from system improvement--we'll have to start all over again.

e. The "welcomers" side of the chart should list opposite ideas and concepts.

Instructors Summary:

We can see from the discussion that the ST and SF groups have several things in common. These
groups want to know the details concerning why we must move. Neither of these groups embraces change
unless you can prove to them in "black and white" that this change is necessary. The "STs" will want a logical
explanation and the "SFs" will want you to show them how this change will enhance the working
relationships of the employees.
We can see from the NF and NT groups that they also have a lot in common. Both of these groups want to
know how this change will affect the internal and external relationships of the organization. The "NFs" wish
to also ensure that any anticipated move clearly addresses the human engineering aspects. The "NTs" want to
make sure that the change is logically planned and executed.

Remember that all organizations are composed of people who possess these MBTI functional pairings. In
order to properly affect change, a manager needs to make sure that the concepts and ideas of the three pairs
he or she does not prefer are taken into account.

EXTRA EXPERIENTIAL EXERCISES

Marcic, Dorothy, Seltzer, Joseph, & Vaill, Peter. Organizational Behavior: Experiences and Cases, 6th Ed.
South Western College Publishing Company, 2001.

An Ancient Tale. p. 225-226. Time: 40 minutes.

Purpose: To analyze issues of organization, boundary, membership, and responsibility
for change.

Fandt, Patricia M. Management Skills: Practice and Experience. West Publishing Company, 1994.

In Basket Exercise 1: Working with New, Changing and Ambiguous Situations. p. 44.

Exercise 1: Planning for Change. p. 461.

CASE QUESTIONS: SUGGESTED ANSWERS

ORGANIZATIONAL CHANGE AT ENRON

1. Describe the external forces for change that seem to be affecting Enron.

The following external forces have affected, or are affecting, Enron:

Declining energy prices at the beginning of the 1990s.

Deregulation of the power industry in some countries.
The energy sector changed from being a mature and slow-growth sector to one that has
exploded into high-demand energy sources with integrated production, distribution, and
supply.
Opportunities exist in other industries that need a more efficient way to deliver
commodities and manage risk, such as metals, forest products, and bandwidth capacity and
steel.
Development of the Internet.
The potential impact of energy usage on global climate change.
Dynegy Corporations initial interest in merging with Enron and its subsequent withdrawal
from the merger agreement.
Dynegys lawsuit against Enron.

2. Describe the internal forces for change that seem to be affecting Enron.

The following internal forces have affected, or are affecting, Enron:

A corporate culture that emphasizes fast movement, flexibility, efficiency, innovation, and
environmental awareness.
A commitment to innovation.
Use of the Internet to expand to more product categories.
Internal pressure for and interest in a merger with Dynegy Corporation.
Questionable accounting practices and financial dealings on the part of Enron.

3. Explain Enrons development from the perspectives of incremental change, strategic change, and
transformational change.

Incremental change involves making small improvements in the organization or fine-tuning the
organization. Strategic change involves moving the organization from an old state to a known new state
during a controlled period of time. Transformational change occurs when the organization moves to a
radically different, and sometimes unknown, future state.

No substantive evidence exists regarding incremental change. Several instances of strategic and/or
transformational change exist in this case. All of the following could be considered examples of strategic
change:

Enron becoming Americas largest trader of natural gas and electricity.

Enron making markets in other industries that need a more efficient way to deliver
commodities and manage risk, such as metals, forest products, and bandwidth capacity and
steel.
Enron developing a partnership with Blockbuster Inc., to deliver movies to consumers
over a high-speed communications network.
Enrons use of the Web to expand far beyond its traditional businesses.
Enrons proposed merger with Dynegy Corporation.
Enrons financial collapse.
 One might also argue that Enrons use of the Web to expand far beyond its traditional businesses is a
transformational change. The proposed then aborted merger with Dynegy Corporation. might be
considered to be a transformational change as well.

4. How could Enron have used force field analysis as an aid to understanding and managing the changes
that are necessary for a successful merger of the two companies?
Students can adapt Challenge 18.2: Applying Force Field Analysis in discussing this question. Students
can begin developing an answer to this question by drawing on the discussion of questions (1) and (2).
Nearly all of the items mentioned in the suggested responses to these two questions were are forces
driving change. However, the size and complexity of the two merged companies may be forces that
restrain change. The dominant forces that restrained change were Enrons questionable accounting
practices and financial dealings.

Students should be encouraged to speculate a bit and go beyond the case facts. They could brainstorm on
the forces restraining change and the forces driving change in the global energy industry in general and in
the other commodities (e.g., as metals, forest products, bandwidth capacity, and steel) in which the
combined company makes markets.

Since the Enron bankruptcy is the largest in business history, its effect will be widespread and long term.
In addition, new developments in the Enron situation occur on almost a daily basis. Therefore, students
should be encouraged to look to current business news regarding Enron to update their knowledge of
how Enron is dealing with change.
COHESION CASE -- PART IV

PROCTER & GAMBLE (D)

1. What useful managerial and/or organizational lessons are provided by Procter & Gambles
Organization 2005 initiative?

Three very powerful lessons evolve from P&Gs Organization 2005 initiative. First, as a complex
multinational business organization, P&G has discovered what may be an important key to true global
success. P&G is seeking to simultaneously be both global and local in its operations. It is global in the
sense of developing and marketing product lines around the world. It is local in terms of developing
strategies and establishing distribution channels to effectively market the companys entire portfolio of
products to customers in different countries and regions. Second, organizational change efforts should
improve a companys capability to achieve challenging goals. In this context, the intent of the
Organization 2005 initiative is to improve P&Gs ability to attain its stretch, innovation, and speed
objectives. Third, achieving the stretch, innovation, and speed objectives requires a highly integrated
organization. The Organization 2005 initiative is intended to create such an organization through its
emphasis on a holistic approach to change that reaches throughout the company. Moreover, the
components of the change program (i.e., the four structural pillars and cultural change) should be
mutually supportive and reinforcing.

2. From your perspective, how are the stretch, innovation, and speed objectives related to the four
structural pillars? How are they related to cultural change?
Stretch involves reaching for the highest upside possible on all the opportunities that P&G pursues.
Innovation involves setting the toughest product performance standards in the world, and then continually
exceeding those standards with improvements on existing products and the development of new products.
Speed concerns getting P&Gs products into the global marketplace faster than any competitor anywhere.

The structural pillars work together in achieving the stretch, innovation, and speed objectives. The global
business units focus on developing and marketing product lines for sale throughout the world. The market
development organizations work in tandem with the GBUs in developing and implementing marketing
strategies and distribution channels to serve the tastes and preferences of customers in each local market.
global business services centers and corporate functions support the work of the GBUs and MDOs.

Cultural change also facilitates the achievement of the stretch, innovation, and speed objectives. P&G
focuses on creating a culture that rewards appropriate goal attainment, supports risk taking, stimulates
innovations, encourages visionary leadership, values speed, fosters fast streamlined decision making, and
capitalizes on diversity. Collectively, these cultural features support and reinforce the stretch, innovation,
and speed objectives.

3. Several cultural changes are mentioned in the case. In your opinion, what implications will these
cultural changes have for the organizational challenges of globalization, technology, diversity, and
ethics?

As noted in the solution for question (2), P&G has focused on creating a culture that rewards appropriate
goal attainment, supports risk taking, stimulates innovations, encourages visionary leadership, values
speed, fosters fast streamlined decision making, and capitalizes on diversity. Most, if not all, of these
cultural changes (or in some instances, cultural refinements) will enhance P&Gs ability to address the
challenges of globalization and technology. Capitalizing on diversity confronts this challenge head-on; it
makes diversity an asset rather than a liability. The ethics challenge will also be affected to the extent that
these cultural changes promote, support, and reinforce ethical actions.

Of particular interest is the fact that P&G is willing to change anything that influences the nature of work
and work relationships except its core values and guiding principles [see Procter & Gamble (A) for
information on P&Gs guiding principles]. These guiding principles imply enduring commitments to
corporate actions that clearly and directly reflect actions in the globalization, technology, diversity, and
ethics arenas.