tc1@bolton.ac.

uk

Contemporary
Management
Issues
Managing Change
1
 Types of Change.
 Learning Objectives.


—To acquaint the learner with the Open

Systems view of Organisations.
—
—To identify the significance of internal
and external sources of change.
—
—To differentiate between incremental and
radical change.
—
—To provide a framework for “types of
change”.
2
 Organisations as Open
Systems.
— Everyorganisation must change in order to
survive, because organisations are “open
systems” and cannot shield themselves from
environmental instability.


 To what extent can this be achieved?



 Could the present recession have been

managed against?


 What can you possibly comment on about

those company’s who did not take risks in the
past say 10 years (expanding their business –
entering new markets – possibly taking out
business loans)
 3
 O rg a n isa tio n a s O p e n
S y ste m .
ENVIRONMENT

Material
Transformation Process Outputs
People Inputs
Expertise Products/Servi
ces
Boundary Production, Maintenance,
Boundary
Spanning Adaptation, Management.
Spanning.

Information
Financial
Resources
Source : Daft
. ; 1998:13

4
 Elements of external
environment
In d u stry se cto r Fin a n cia lR e so u rce s
se cto r
R a w M a te ria ls se cto r
E co n o m ic C o n d itio n s
H R se cto r
se cto r
M a rke t se cto r.
G o ve rn m e n t se cto r
Te ch n o lo g y se cto r
S o cio - cu ltu ra lse cto r
In te rn a tio n a l se cto r.

5
Change Vs. Innovation.
—Organisational change is the
adoption of a new idea or
behaviour by an organisation.
—
—Organisational innovation is
the adoption of a new idea or
behaviour that is new to the
organisation’s industry, market
or environment.
6
—
 Need for Change?
—…occurs when managers are
dissatisfied with current
performance
—
 or
—
—…they perceive an opportunity
to exceed current
performance. 7

—
 Types of
change/Innovation
Product Changes in the products/services offered
Innovation by the organisation; e.g. new model
Toyota, new MBA, etc
Process Changes in the ways products/services
Innovation Are created and delivered; e.g.
manufacturing methods change to
produce new or existing products.
Position Changes in the context in which
Innovation products/services are introduced; e.g.
Lucozade.
Paradigm Changes in the underlying mental models
Innovation which frame organisational activity; On
line banking; low-cost flights.
8
 Implementation.
—Occurs when organisation
members actually use the
idea.
—
—Resources, human energy and
activity are required to bring
about change as well as capital
in most cases.
9
 Incremental Vs Radical
Change
Incremental Change Radical Change .

Continuous Progression Discontinuous

Equilibrium Progression
Focused change on part Attain New Equilibrium.
of the organisation Transformation
Utilise existing encompassing all the
structure and organisation
management processes Generate new structure
New(ish) Technology and management processes
Meet market Breakthrough technology
expectations with new Create new markets with
products/services new products/services

10
 Component Vs System
change.
—Change can occur at
component or systems level,
but remember change at (the
higher) systems level often has
implications for changes lower
down (component level).
—

11
 S y ste m ic / co m p o n e n t
In n o v a tio n .
New versions of New generations; Steam Power
motor cars, TV, MP3 and downloads Vs ICT revolution
aeroplane. Music on Casette and CDs. Bio-technology
System
Level

Improvements New components for Advanced materials to

To components. existing systems improve component
performance

Component
Level
Incremental Radical
“ doing better “ new to the World ”
“ new to the
what we do ” enterprise ”

12
 Strategic Advantage
Through Innovation.
—Building capability to innovate is only
part of the requirements to achieve
strategic advantage through innovation.
—
—If innovation is not aligned to the
strategy of the organisation (assuming
that an appropriate strategy exists)
then how it will contribute to the
organisation’s well being is
questionable. Bessant & Tidd (2007:21-
23) offer some insights in the following
tables
—
13
 Strategic Advantage Through
Innovation.
Mechanism Strategic e.g.
Advantage
Novelty in Offering something Introducing the first:
product or no-one else can dishwasher digital
camera, on line
service.
bank
Novelty in Offering it in ways On line book sales,
process others can’t; faster, internet banking.
cheaper, etc
Complexity Offer something Jet Engines
others find difficult
to master

14
 Strategic Advantage Through
Innovation
Mechanism Strategic Advantage e.g.
Legal protection of Offer something Blockbuster drugs;
IPR. others can’t do Zantac, Prozac,
unless they pay a Viagra.
Add to or extend licence/fee
Move basis of Japanese car
range of competition; e.g. producers; price to
competitive factors from price to price & quality & price
quality, etc. shorter life cycles,

15
 Strategic Advantage Through
Innovation
Mech- Strategic Advantage e.g.
anism
Timing First Mover advantage Amazon.com
(market share in new areas). Yahoo
Apple’s ill fated
OR Fast follower advantage; Newton PDA
Let someone else make the flopped 5 years
early mistakes…. before Palm Pilot
swept up.

16
 Strategic Advantage Through
Innovation
Mechanism Strategic Advantage e.g.
Re-write the Offer a completely Typewriter Vs
rules new product or PC.
process concept Electric Vs Gas
which makes the old lamps.
way redundant
Robust/ Offer something Boeing 737 (30+
Platform which provides the years old).
Design platform for other VW Beetle.
variants… Intel processors

17
 Strategic Advantage Through
Innovation
Mechanism Strategic Advantage e.g.
Transfer Recombining Polycarbonate
across different established elements for wheels; from rolling
application different markets. luggage to
contexts. lightweight micro-
scooters.

Reconfigure Rethink how bits of the Zara, Bennetton in

parts of the system work together; clothing.
process Building more effective Reebok in shoes.
networks, outsourcing;
co-ordination of a virtual
company
18
Exploring Innovation Space.
—The tables above suggest no
shortage of ways to gain
advantage through innovation; the
opposite may be true.
—
—Which one(s) do you choose and
why?
—
—Bessant & Tidd(2007) suggest
strategy as “… a process of
exploring the space defined by our19
Exploring Innovation
Space .
Paradigm

Incr?
Rad or
Rad or Rad or Incr?
Incr? Prod/serv
Process Innova
tion
Rad or Incr?

Position
20
New Product Success:
—According to Daft a pattern is
emergent;
—
—Tailor innovations to customer
requirements.
—
—Effective utilisation of technology.
—
—Influential ideas champion supports
the project.
— 21
 D u a l C o re A p p ro a ch
—Administrative Core.
—
—Direction of change is top down.
—Examples of change; Downsizing,
—Re-structuring, policy alterations.
—Best Organisation Design; Mechanistic.

—Technical Core.
—
—Direction of change; bottom up.
—Examples of change; Production techniques, work
flows, product ideas.
—Best organisation design; Organic.

Source: Daft, 1998:303.

22
The administrative core
—is above the technical core in the
hierarchy and its responsibilities
include; the structure, control and
co-ordination of the organisation.
—
—It is concerned with the
environmental sectors of
government, finance, economic
conditions and human resource
issues.
— 23
 The technical core
—is concerned with transforming raw
materials into organisational
services and products and involves
the environmental sectors of
customers and competition
—

24
 Human Resources.
—These may involve changes
in:
—employee attitude,
—behaviours and beliefs,
—skills,
—expectations and
—styles.
—
25
 Environment, Structure &
Innovation.
—Burns and Stalker (1961) discovered the
external environment was related to
 the internal management structure of
organisations.


—When the external environment was

stable, the internal organisation was
characterised by the majority of
structural variables remaining high,
offering a mechanistic organisation.
Mechanistic structures facilitate the
efficient production of standardised
goods and services. 26
—
Mechanistic structures
—May be more appropriate for
organisations that have frequent
changes of policies, goals, strategies,
control systems, and personnel, e.g.
administrative changes are more crucial
to government organisations than
technical changes.
—
—A top-down mechanistic structure is also
considered more appropriate for times
of crisis and emergency when power
can be re-centralised at the top of the
organisation structure. 27
—
 Innovation.

—When the external environment

was found to be unstable,
dynamic and fast changing,
successful organisations
tended to much lower levels of
each structural variable, or
organic organisational forms.
—

28
Organic Organisations
—Organic organisations are more typically
associated with change and considered
to be better at adapting to a shifting set
of environmental conditions.
—
—The flexibility of the organic organisation
is attributed to its ability to create and
introduce new ideas. They encourage a
“bottom – up” approach to innovation.
—

29
 Structural Variables:
—FORMALISATION: The Amount of
written documentation in
circulation. Regulations,
Procedures, Policy Manuals, Job
Descriptions, etc.
—
—SPECIALISATION: If extensive, each
employee performs only a narrow
range of tasks. If limited, each
employee performs a wide range
of tasks. A.K.A. Division of Labour.
—
30
 Structural Variables:
—STANDARDISATION: The extent to
which work activities are
performed in a similar manner.
High standardisation at
McDonalds, for example.
—
—HIERARCHY OF AUTHORITY:
Depicted by the number of vertical
layers on an organisation chart.
—
—Related to SPAN OF CONTROL: How
many staff report to one
supervisor. 31

—
Structural Variables.
—COMPLEXITY: (VERTICAL, HORIZONTAL,
SPATIAL). Vertical Complexity refers to
the number of vertical layers in the
hierarchy. Horizontal Complexity refers
to the number of job titles or
departments existing. Horizontally
across the organisation. Spatial
Complexity refers to the geographical
dispersion/location of the organisation.
—
—CENTRALISATION: Refers to the locus of
decision making.
—
32
Structural Variables.
—PROFESSIONALISM: The level of
formal education and training
among employees. Can be the
average number of years of
education of employees.
—
—PERSONNEL RATIOS: E.g.
administrative ratio, professional
ratio, indirect: direct labour, etc.
—
33
 Contradiction:
—Organic conditions are not ideal for
implementing and utilising new ideas
for stable production.
—
—More recent thinking has tended to
regard the initiation and utilisation of
change as two distinct processes, i.e.
“The Ambidextrous Approach”, where
the organisation can behave in an
organic way when a new idea is called
for and a mechanistic way to implement
and use the new idea.
—
34
 Techniques for
ambidextrous approach.
1.Switching Structures: an organisation


shifts to an organic structure when such a

structure is needed for the initiation of a
new idea viz; 3M where 15% of technical
staff’s time is “free”.


2.Innovation departments: Systems



Analysis, R&D, O&M, etc.



3.Venture Teams: Given separate



locations and facilities so that they are

distracted or interrupted by current
organisational procedures, e.g. Dow Jones
Chemicals, idea champions, etc.
— 35
 Environmental
Dynamics
—Ansoff and McDonnell (1990) also
describe environmental dynamics and
suggest 5 stages of declining certainty.
—
—1. Predictable.
—2.Forecastable by extrapolation.
—3.Predictable threats and opportunities.
—4. Partially predictable opportunities.
—5. Unpredictable surprises.
—

36
 1. Predictable.
—Repetitive environment.
—
—Market stability.
—
—Challenges repeat themselves.
—
—Organisation can change faster
than market requirements.
—
—Future is expected to be same as
the past 37
 2. Forecastable by
Extrapolation
—
—Complexity increases but
managers can gauge
responses to changes from
experience.
—
—Forecasts made confidently.
—

38
 3. Predictable
threats/opportunities
—Complexity increases further.
—
—Organisational ability to
respond becoming
problematic.
—
—Future forecasts still have some
credibility.
—
39
 4. Partially predictable
opportunities.
—Uncertainty increases.
—
—Socio political change and
—
—Globalisation contribute to this.
—
—Future becoming only partly
predictable.


— 40
 5. Unpredictable
surprises.
—Environment changes exceed
organisational ability to respond.
—
—“Turbulent” conditions prevail in
environment.
—
—Organisation has to “hang on” and
“weather the storm”.
—
—These levels of change can be compared
to Stacey’s (1996) types of change.
— 41

—
 Stacey’s Change
Scenarios.
—1. Closed change.
—
—2. Contained Change.
—
—3. Open-ended change.
—

42
 Stacey’s Closed
Change.
—Organisational history has sequence of
agreed events/stages.
—
—Causes/consequences of change can be
stated.
—
—Can confidently state how this sequence
will continue to affect the organisation’s
future.
—
—Normally applies to future of an existing
organisation.
—
43
 Stacey’s Contained
Change.
—Can identify only probable events
and their causes/consequences.
—
—Impact on future operations is also
only a “probable” statement.
—
—Forecasts become difficult except in
the short term- where they can be
assisted by market research,
statistical projections, lifestyle
studies.
— 44
 Stacey’s Open Ended
Change.
—Past actions/events continue to
impact the organisation.
—
—But causal explanations are not
widespread.
—

45
Varieties of Change.
—Threemain types of change
suggested by Grundy (1993)
—
—1. Smooth Incremental Change
—2. “Bumpy” Incremental Change.
—3. Discontinuous Change
—

46
Grundy’s Major Types of
Change.
Discontinuou
s
Rate of Change

Bumpy / Incremental

Smooth
Incremental

Time

47
 Smooth Incremental
—Experienced by organisations operating
at levels 1 and 2 of Ansoff and
McDonnell’s levels of declining
certainty.
—
—Change that evolves slowly and
systematically.
—
—Rare in the 21st Century!
—
—NB Vertical axis represents rate of
change not amount of change. 48

—
Bumpy Incremental Change.
—Periods of relative calm broken by
acceleration in pace of change.
—
—E.g. periodic re-organisation.
—
—Can be viewed as associated with
the means by which organisations
reach their goals rather than the
goals themselves.
—
49
Discontinuous Change
—Marked by rapid shifts in strategy,
structure or culture
—
—Or all three.
—
—Can be caused by technology (e.g.
Internet).
—
—More like the higher levels of Ansoff
and MacDonnell’s environmental
dynamics.
— 50
 Tushman et al’s(1988)
Convergence & Upheaval
—Tushman, Newman and Romanelli
talk of Convergence and Upheaval.
—
—Their research points to periods of
incremental change or
convergence punctuated by
discontinuous change.
—
—They suggest converging change
falls into two categories; fine-
tuning and incremental
adaptation. 51
Fine Tuning and Incremental
Adaptation.
—Both have the common aim of
maintaining the fit between
strategy, structure and process.
—
—Fine Tuning refers to doing better
what is already done well.
—
—Incremental adaptation involves
small changes in response to small
environmental shifts.
— 52
Discontinuous change.
—May be necessary at points in the
organisation’s life cycle (OLC –
covered later) when incremental
change will not produce the
desired results.
—
—Largelybecause as organisations
grow their ability to change
becomes constrained by the key
contextual variable of their size.
Consequently discontinuous or
frame-breaking change may be 53
 Causes of Frame-Breaking
Change
—Tushman et al (1988) suggest this results
from a combination of the following:
—
—Industry discontinuities.- Sharp changes
in the P.E.S.T. context including;
government de/regulation, substitute
technologies, emergence of industry
standards, major economic changes,
war, pestilence, famine, acts of terror,
etc.
—
54
Causes of Frame-Breaking
Change
—Product life cycle shifts.
—
—Those that follow an emergent
product to established market
position.
—
—InternalCo dynamics; new
management, new style of
management,
—
55
 Frame-Breaking
Change
—Usually implemented rapidly and can
involve:
—
—Reformation of Co mission.
—
—Altered Power Status to reflect shifts in
resource allocation.
—
—Re-organisation to accommodate new
strategy/structure/systems/processes.


Revised communication/procedures.
New executives????

—
56
Reasons for frame-breaking
change
—Synergy- requirement for all of the
organisation to pull in same direction.
—
—Pockets of resistance – develop more
easily when frame-breaking change is
implemented slowly.
—
—Pent-up need for change – when
constraints are relaxed.
—
—Risk/uncertainty. –become greater the
longer the implementation period.
—
57
 Defining the Scale of
Change:
—Dunphy and Stace (1993) offer
four scales:
—
—1. Fine Tuning.
—2. Incremental Adjustment.
—3. Modular Transformation.
—4. Corporate Transformation.
—

58
 Fine Tuning.
—Ongoing process to fine tune “fit”
between strategy, structure, people,
processes.
—
—Refine policies/procedures.
—
—Create specialists to monitor
quality/cost/CRM etc.
—
—Personnel Development- better
training, rewards, etc.
—
—Fostering commitment to the
organisation. 59

—
 Incremental
adjustment.
—Less than radical but nonetheless distinct
modifications. Includes:


 Shifting product mix.



 Improved process/production
technology.


 Expanding/retracting sales territory.



 Adjustments to organisational
structures. 60


 Modular
Transformation.
—Major restructure of part of organisation.
—
—Changes in management in affected
area.
—
—Work/productivity studies
increase/decrease workforce numbers
significantly.
—
—Reformed departmental/divisional goal(s)
—
—Significant technological change for
affected area(s). 61
—
 Corporate
Transformation.
—Radical shifts in strategy.
—
—Altered power and status.
—
—Major re-organisation of structures,
systems, procedures across the
entire firm.
—
—Revised interaction patterns.
—
—New executives in key areas.
— 62
 Activity.
—Think about 3 organisations you know.
—
—Evaluate their environmental
dynamics using Ansoff and
MacDonnell’s framework.
—
—Can you match these to Stacey’s 3
levels of change situations?
—
—For each of the 3 organisations, what
are the drawbacks and benefits of
both incremental and frame-breaking
change?
— 63
 Further Reading
— Day, G.S. and Shoemaker, J.H. (2005)
Scanning the Periphery, HBR Nov 2005
135-148
— This article offers a diagnostic to test
boundary spanning abilities.
— Stacey, R.D. (2000) Strategic Management &
organisational Dynamics, FT Prentice Hall,
Harlow.
See Chapter 1 The Nature of Strategy &

Organisational Change.
— Johnson, G. and Scholes, K. (2002) Exploring
Corporate Strategy; Text and Cases, FT
Prentice Hall.
See Chapter 1.Introducing Strategy, especially
64
1.4 Strategic Management in Different