Change Management Change .Management DIPL.

-ING VERENA MANNINGER

DIPL.-ING. ELISABETH PLANKENAUER HON. PROF. DIPL.-ING. DR. ALFRED JANES
Lecture VERENA 2011/12 DIPL.-ING. Notes WTMANNINGER

Lecture Notes WT 2010/11

Institute of Production Science and Management

Member of Frank Stronach Institute [FSI]

Univ.-Prof. Dipl.-Ing. Dr.techn. Christian Ramsauer i

TABLE OF CONTENTS
TABLE OF CONTENTS ............................................................................................................................... II 1 THEORETICAL BASICS ON ORGANIZATIONAL REDESIGN ............................................................ 1 1.1 Drivers for Organizational Redesign .............................................................................. 3 1.1.1 1.1.2 1.2 Internal Drivers ................................................................................................. 3 External Drivers ................................................................................................. 3

Organizational Redesign ................................................................................................ 6 1.2.1 1.2.2 1.2.3 Organizational Development ............................................................................ 7 Change Management ........................................................................................ 9 Transformation Management......................................................................... 10

1.3 1.4 2

The Model of Transformation Energy.......................................................................... 12 Change Formula ........................................................................................................... 15

MODELS FOR ORGANIZATIONAL REDESIGN ............................................................................. 16 2.1 2.2 2.3 The Eight-Stage Process Model by KOTTER ................................................................. 16 The Three Step Model by LEWIN ................................................................................. 21 The Congruence Model by NADLER and TUSHMAN.................................................... 23

STRUCTURE AND ORGANIZATION OF CHANGE PROJECTS ....................................................... 25 3.1 3.2 Role Models and Characteristics ................................................................................. 25 Stakeholder Analysis .................................................................................................... 30

HANDLING EMOTIONS AND CONFLICTS................................................................................... 32 4.1 4.2 Handling a conflict by structuring the process ............................................................ 32 Handling a conflict by rules.......................................................................................... 34

LIST OF FIGURES .................................................................................................................................... 38 LIST OF TABLES ...................................................................................................................................... 39 LIST OF REFERENCES .............................................................................................................................. 40

ii

1 THEORETICAL BASICS ON ORGANIZATIONAL REDESIGN

The term change is used in various contexts today. When managers and consultants talk about changes, they mean different concepts, such as evolution, change management, organizational development, modification, transformation or crisis management. This chapter aims to clarify the most relevant terms. Change Management or Organizational Management is the management technique that deals with steering of organizational changes. Changes may occur proactive (e.g. mergers and acquisitions, growth) or are initiated as reactions to crises.1

Figure 1.1 Aspects of Organizational Redesign

Organizational redesign does not take place without considering the human factor. Therefore it basically affects the following components: 3

1 2

LAUER, T. (2010), pp. 3-5 LAUER, T. (2010), p. 6 3 LAUER, T. (2010), pp. 6-7

1. Individuals: Without active participation of individuals, organizational redesign would not be possible. Individuals have to develop abilities that welcome adoptions to new challenges as well as positive attitudes to the goals of the change. 2. Structures cover the company organization structure as well as the process organization, strategies and resources. The transformation of the corporate structure seems simple since it is easily implemented on the paper the informal structures often react against these changes. 3. Culture: The persistent, more informal structures which are responsible for values are called corporate culture the culture is most often independent from individuals.

Organizational redesign that only focuses on individuals and corporate structures is most often problematic. All three aspects have to be considered in order to ensure a successful organizational redesign project. Figure 1.1 demonstrates the three aspects of organizational redesign.

1.1

Drivers for Organizational Redesign

Organizational redesign may be caused by two different aspects. First, due to necessary adoptions to the changing environment of the organization and second, organizational redesign might be necessary when an organization is growing, which requires new structures and processes. This chapter deals with both aspects internal and external drivers of transformation activities.

1.1.1 Internal Drivers Organizational change processes may be caused by internal factors. Some changes may be necessary because of the normal lifecycle of an organization. When it grows, new processes, structures and sometimes a new corporate culture have to be implemented. Further internal drivers for transformation projects are mergers and acquisitions, outsourcing, processoptimizations, introduction of project management, concentration on core competences, etc. 4

1.1.2 External Drivers Companies as open systems: Organizations and companies are embedded into the market. They need a market for their survival. An organizations environment is always in move and companies may react in two ways on this dynamics: 5 Isolation from the environment (as much as possible): This way is also known as hedgehog-tactics, since the hedgehog rolls itself up and withdraws from the environment when dangers from outside appear. In the context of organizations, this approach is only applicable with reservations. Adaption to the changing environment: Organizations that cannot take the isolationmethod have to adapt to their changing environment to ensure a successful survival.

4 5

JANES, A.; PRAMMER, K.; SCHULTE-DERNE, M. (2001); LAUER, T. (2001), pp. 18-21 LAUER, T. (2010), pp. 12-13

Based on the second aspect, organizations need to deal with more and more complexity. Following list shows some drivers according to the second theory (adaption): Change in market-conditions Globalization Virtual project management Leading intellectual teams Knowledge management Management training

New legal entities Privatization: monopolists become competitors

Change of Leadership New technology New ways of working

KOTTER summarized the main forces for globalization that require organizational redesign activities in four categories: the technological change, international economic integration, maturation of markets in developed countries, and the fall of communist and social regimes worldwide. (see Figure 1.2) People of my generation or older did not grow up in an era when transformation was common. With less global competition and a slower-moving business environment, the norm back then was stability and the ruling motto was: If it aint broke, dont fix it. Change occurred incrementally and infrequently. If you had told a typical group of managers in 1960 that businesspeople today, over the course of eighteen to thirty-six month, would be trying to increase the productivity by 20 to 50 percent, improve quality by 30 to 100 percent, and reduce new-product development times by 30 to 80 percent, they would have laughed at

you. That magnitude of change in that short a period of time would have been too far removed from their personal experience to be credible. 6

Figure 1.2 Economic and Social Forces Driving the Need for Major Change in Organizations

6 7

KOTTER, J.P. (1996), pp. 17-20 KOTTER; J.P. (1996), p. 19

1.2 Organizational Redesign

Organizations are social systems that do not have a change-gene. They do not automatically change or grow according to natural laws. Change is necessary in order to ensure the organizations survival. Employees only welcome change when they see an advantage for them. This basically means that change is neither good nor bad sometimes it is necessary to survive. Organizational Redesign has to deal with three issues: 8

Process Design: One central aspect in organizing change projects is the process design which has to consider various aspects. It has to be clarified, how competences, responsibilities and tasks are shared within the project team. Furthermore, the process needs a clear structure and a predefined timeframe. Another important topic while designing the process is the roles of externals and internals and to consider emotions from the beginning of the process.

Learning Design: The learning design considers possibilities to deal with new views, information and concepts. It is an essential tool to gain preconditions for the change process within the organizations. The results of a learning design often lead to organizational rules.

Emotions: Every change process within organizations has to deal with emotions of various types. How the affected people deal with changes is most often influenced by feelings.

Organizational redesign has to deal with the problem of increasing pace the development of the different approaches of organizational redesign is a response to the speed of the economic world today. The following sections describe the three approaches of organizational redesign: organizational development, change management, and transformation management. Figure 1.3 shows the three approaches regarding two aspects the integration of the involved people and the speed of the process.

JANES, A.; PRAMMER, K.; SCHULTE-DERNE, M. (2001), pp. 12-15

Figure 1.3 Acceleration and Integration two basic aspects of ORD concepts

Three concepts should be clarified here in regards of organizational redesign: Organizational Development (OD), Change Management (CM), and Transformation Management (TM).

1.2.1 Organizational Development In the 1970ies a new form of corporate development established which was called organizational development. The main focus of this approach was not only to concentrate on structural and economic dimensions when doing analyses and deriving development processes in organizations, institutions and departments, but also taking into consideration individual expectations of managers, employees and directly affected people in the same level. 9 Organizational development can be defined as long-term related, organizational development and change process of organizations and its employees. This process relies on
9

Cf. DOPPLER, K.; LAUTERBURG, C. (2008), p. 89

learning of all affected people through to direct involvement and practical experience. Its goal is to improve the effectivity of an organization, while improving the quality of the organizational culture. 10 According to the organizational development approach, changes are integrated into an organizations long-term development process. Furthermore, the different transformation goals are not defined by externals (e.g. consultants) or by the management goals are developed together with the involved people. Transformations do not mainly aim to increase the productivity and fulfill the interests of the shareholders but at the same level of importance to increase the prosperity of the affected employees. This approach was more a philosophy than a concept with tools and methods to ensure a quick and successful transformation process. The concepts of organizational development have been influenced by a process-like, evolutionary, developmental approach. The main principles of organizational development are: 11

To preserve the cultural identity of the affected organization/system To involve everyone affected to actively participate and carry out changes by themselves To regulate and shape the actions necessary for continuous changes in a process-like manner

The paradigm on which organizational development is based on is Darwins theory of evolution which states that development is the process of a species adapting to its environment. This process of adaption is regulated by the random generation, selection, and accumulation of the characteristics which prove to be superior in the battle for survival. Furthermore, the theory says that the time-period of such a process is unlimited. The central focus of organizational development is the reflection of what exists and what is necessary in order to survive. Basically, regulating and shaping organizational development processes always means to regulate the reflection and the learning process of people, groups, and organizations concerned.
10 11

DOPPLER, K.; LAUTERBURG, C. (2008), p. 89 JANES, A.; PRAMMER, K.; SCHULTE-DERNE, M. (2001), pp. 4-5

1.2.2 Change Management Organizations today are increasingly influenced by external factors: technological developments (information & communication technology, nanotechnology, alternative energy), global political and economic conditions (laws, labor costs, tax policy), global competition, new and rapidly changing forms of collaboration (co-operations, alliances, shared value chains). This requires a new method how to deal with changes. Organizational development as implemented in the 1960ies and 1970ies was strongly focused on internal aspects: employees, structures and processes. Today, change management has to go further and consider external factors as well. Firms have to adapt their processes to fit to and survive in its environment. 12 Consultancy firms are no longer socio-psychologically / systemically oriented. They no longer cooperate with the heads of education, organizational and personnel development departments of the organizations but with the operational managers. These projects are no longer driven by adoptions but by frame-breaking, re-engineering, and radical innovation. External consultants develop new business processes, structures, business fields, etc. based on as-is analyses, branch comparison, benchmarks and best-practice concepts. The affected organization aims to speed up the implementation of concepts and to break away from old process analysis methods. The driving force behind the changes is not the organization members potential for reflection but the energy of the managers that are responsible for the transformation. The underlying paradigm of the change management approach is no longer the continuous, step-by-step adoption but rather the powerful, fast, volatile change of the internal and external general framework of an organization which breaks with tradition. 13 The content of the transformation processes are based on goals that have been developed outside the system. Usually, they are brought in by external consultants and are then cleared with the management of the organization. Especially in the early stages of the process (information gathering, analysis), even people from various hierarchical levels are involved

12 13

DOPPLER, K.; LAUTERBURG, C. (2008), pp. 96 JANES, A.; PRAMMER, K.; SCHULTE-DERNE, M. (2001), pp. 5-7

into the process. Examples of change management projects are mergers, outsourcings, product reassessments, and internal reorganizations. 14

1.2.3 Transformation Management The original concept of organizational development has a deep focus on internal aspects, as humans, processes, and structures. Today, change management is far beyond that: Firms have to focus on its environment, have to develop concepts and processes that ensure the active participation and survival at the global markets. 15 Comparing the two approaches of organizational development and change management, the big strength of organizational development is the involvement and collaboration of the affected people in the change process. The disadvantage is that these processes are socially complex and might become tedious in the case of large projects. In contrast, change managements advantages are the dynamics and the speed of the change process. Change management projects might on the other hand often source problems and come to a standstill in the implementation phase. Therefore, a third approach of organizational redesign is to be discussed here transformation management. It combines aspects of organizational development and change management. Transformation management is not very different to the change management approach in the initial phase. One or more managers from outside start the transformation process of the organization. The basic approach and the timeframe of the project have been committed by managers and external consultants. All further measures and decisions resulting from this initial commitment are recursively regulated: those that decide are always affected directly by what they decide. External consultants never make decisions that influence the affected people inside the system (as it is done in change management). Contrary to the organizational development approach the concerned on the inside constantly make decisions affecting people on the inside. Transformation management is characterized by constantly process reviews during the important stages of the process.

14 15

JANES, A.; PRAMMER, K.; SCHULTE-DERNE, M. (2001), pp. 6-7 DOPPLER, K.; LAUTERBURG, C. (2008), pp. 95-96

10

Organizational Development Process Logic

Pre-existing system logic Ideas are generated by the system itself

Transformation Management
Uses a combination of internal and external logic in order to create a tailor-made solution

Change Management

External logic imposed on the system

Internal stakeholder involvement

Total internal

integration the

of whole

Internal different

stakeholders tasks at

Internal of

stakeholders and

stakeholders

continuously involved in different times, but all types of involvement are possible

only involved in provision information analysis

throughout process

Process characteristics

Flowing evolutionary

process,

Active

evolutionary

Fast Start-Stop

changes combined with step-wise changes

Design Method

Re-design reflection

by

internal

Initial setting

external

goal

External goal setting

Co-operative process of goal identification and/or acceptance

Time perspective Focus

Long-term Area Development of

Middle long-term Concerns Positioning, single Segment, Market Business Structures,

Short middle-term M&A, Reduction, Reorganization, BusinessProcess Optimization Restructuring, Cost-

organizational development organizational units

Outsourcing,

Corporate Culture

Table 1.1 Overview about the three approaches of organizational redesign

11

1.3 The Model of Transformation Energy

Organizational redesign and transformation requires a level of energy in order to ensure that the change is geared towards a common goal within the system. Furthermore, it is important to provide conditions that ensure a successful transformation process.

Figure 1.4 The Model of Transformation Energy (Transformation Energy Curve)

16

Figure 1.4 illustrates the model of transformation energy which outlines three aspects of change: the current situation (or situation before the transfer), the expected situation (after the change) and the path between current and expected situation. The involved people have to deal with following questions: What are the deficiencies of the current situation? Is the expected situation attractive? What about the path between current and expected situation? Is it feasible and attractive? Experience shows that at least two of these questions have to be answered positively in order to ensure a successful transformation. According to that following preconditions have to be given:

16

JANES, A.; PRAMMER, K.; SCHULTE-DERNE, M. (2001), p. 19

12

The current situation shows deficiencies and the expected situation seems attractive. The current situation shows deficiencies and the path to the expected situation seems feasible and attractive.

All three aspects are given the current situation shows deficiencies, the path between current and expected situation seems feasible and the expected situation is attractive enough.

It is not enough to have an attractive way to the expected situation and the expected situation is attractive. Every transformation requires deficiencies of the current situation. People are only motivated to change something, if there is a visible deficit in the current situation.

Evaluation of the Current Situation For analyzing the current situation, it is important having access to relevant information in order to be able to identify deficiencies. Without an explicit (or at least an implicit) awareness about weaknesses of the current situation, no energy for transformation (within the system) occurs. The more aware the affected people are, the more likely they welcome change initiatives. 17

Evaluation of the Expected Situation/Vision On the other hand, if the desired situation is not attractive enough there is as well not enough energy for a change. Even if the current situation is really problematic, transformation energy is not given if the expected situation is not attractive. 18

Evaluation of the Path The involvement of groups and individuals in change processes depends, besides to the need for change and the attractiveness of the expected situation, also on how the involved people assess the feasibility of the planned changes. Here, especially experiences from previous
17 18

Cf. JANES, A.; PRAMMER, K.; SCHULTE-DERNE, M. (2001), p. 20 Cf. JANES, A.; PRAMMER, K.; SCHULTE-DERNE, M. (2001), p. 21

13

projects play a significant role. Furthermore, a positive path may be ensured by designing a slow step-wise process that provides clear structures and short-term wins. 19

All single aspects (the current situation, the vision and the path) play a significant role when analyzing the transformation energy for an organizational change. A highly attractive vision may influence an assessment of deficiencies and may release additional energy for the transformation. This may also be true the other way around.

19

Cf. JANES, A.; PRAMMER, K.; SCHULTE-DERNE, M. (2001), p. 21

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1.4 Change Formula

According to these considerations BECKHARD and HARRIS developed the so called change formula. This formula expresses in a very incisive way the identified factors which are crucial for a change to happen, as shown in Figure 1.5.

Figure 1.5: Beckhards and Harris change formula

20

Beckhard and Harris are explaining this formular in the following way: 21 Factor A, B, and D must outweigh the perceived costs [X] for the change to occur. If any person or group whose commitment is needed is not sufficiently dissatisfied with the present state of affairs [A], eager to achieve the proposed end state [B] and convinced of the feasibility of the change [D], then the cost [X] of changing is too high, and that person will resist the change. [] resistance is normal and to be expected in any change effort. Resistance to change takes many forms; change managers need to analyze the type of resistance in order to work with it, reduce it, and secure the need for commitment from the resistant party. This implies that all of the three factors need to be considered and it provokes major problems of the likelihood of change if that is not the case. In short, the factors A, B and D do not compensate for each other, therefore each of them need to be emphasized. This formula is, although very simply, extremely useful as it can be easily integrated at any stage of a change process and explained to all parties involved.

20 21

CAMERON, E.; GREEN, M. (2009), p. 117 BECKHARD, R. F.; HARRIS, R. T. (1987)

15

2 MODELS FOR ORGANIZATIONAL REDESIGN

In order to drive the change, different models which are leading to a successful change are proposed by various authors. Although some aspects can be found in several models, the perspective of the authors varies. However, ORD models are crucial in order to understand and structure a change process. The following chapter contains three different ORD models in order to provide an overview about the common processes, including the eight-stage process model by KOTTER, the three-step model by LEWIN and the congruence model by NADLER and THUSHMAN.

2.1 The Eight-Stage Process Model by KOTTER

The development of the eight-stage process model started with the question Why firms fail at a change process. KOTTER discovered that there are several common made errors which he describes as follows: 22 Error #1: Allowing too much complacency Error #2: Failing to create a sufficiently powerful guiding coalition Error #3: Underestimation the power of vision Error #4: Undercommunicating the vision by a factor of 10 (or 100 or even 1.000) Error #5: Permitting obstacles to block the new vision Error #6: Failing to create short-term wins Error #7: Declare victory too soon Error #8: Neglecting to anchor changes firmly in the corporate culture

Making any of those mistakes can provoke serious consequences such as not well implemented new strategies, not achieved expected synergies through acquisitions, too long and too costly reengineering, not getting costs under control by downsizing and not delivered hoped-for results by quality programs. 23

22 23

KOTTER, J. P. (1996), pp. 4 Cf. KOTTER, J. P. (1996), p. 16

16

Based on those considerations, KOTTER developed the eight-stage change process associated with the eight most often made errors mentioned above while clearly emphasizing that change is not an event, but rather a process. The eight stages are supposed to be passed through in sequence, although it even can be operated in multiple phases at once, but missing even one single step or progressing too fast without a solid base almost always causes problems. Each stage requires specific actions needed and has common pitfalls, as described in detail in Table 2.1.

Stage 1. Establish a sense of urgency 2. Form a powerful guiding coalition

Actions Needed
- Examining market and competitive

Pitfalls
- Underestimating

the difficulty of

realities
- Identifying

driving people from their comfort and discussing crises, zones

- Becoming paralyzed by risks - No prior experience in teamwork at

potential crises or major opportunities

- Assembling a group with enough

power to lead the change effort

- Encouraging

the top work

- Relegating team leadership to an HR,

the

group

to

together as a team

quality, manager

or

strategic-planning

executive rather than a senior line

3. Create a vision

- Creating a vision to help direct the

- Presenting

vision or

thats to

too be

change effort
- Developing strategies for achieving

complicated

vague

communicated in five minutes

that vision

4. Communicate the vision

- Using

every

vehicle

possible

to

- Undercommunicating the vision - Behaving in ways antithetical to the

communicate the new vision and strategies

- Teaching

vision new behaviors by the

example of the guiding coalition

17

5. Empower others to act on the vision

- Getting rid of obstacles to change - Changing systems or structures that

- Failing

to

remove

powerful

individuals who resist the change effort

seriously undermine the vision

- Encouraging

risk

taking

and

nontraditional ideas, activities, and actions

6. Plan for and create short-term wins 7. Consolidate improvements and produce more change

- Planning

for

visible

performance

- Leaving short-term successes up to

improvements
- Creating those improvements - Recognizing and rewarding employees

chance
- Failing

to score successes early

enough

involved in the improvements

- Using increased credibility to change - Declaring victory too soon with the

systems, structures, and policies that dont fit the vision

- Hiring, promoting, and developing

first performance improvement

- Allowing

resistors

to

convince

troops that the war has been won

employees who can implement the vision

- Reinvigorating the process with new

projects, themes, and change agents

8. Institutionalize new approaches

- Articulating the connections between

- Not creating new social norms and

the new behaviors and corporate success

- Developing the means to ensure

shared changes

values

consistent

with

- Promoting people into leadership

leadership succession

development

and

positions who dont personify the new approach

24

Table 2.1: The eight-stage process of creating major change according to KOTTER

24

KOTTER, J. P. (2007), p. 3 and p. 7

18

There are a lot of reasons why people are more afraid of a change and rather stick to the well-known ways of doing things. Too much sources of complacency exist; therefore it is absolutely crucial to push up the level of urgency at the very beginning of a change process. KOTTER determines the following nine possible ways: 25 1. Create a crisis by allowing a financial loss, exposing managers to major weaknesses vis--vis competitors, or allowing errors to blow up instead of being corrected at the last minute. 2. Eliminate obvious examples of excess (e.g. company-owned country club facilities, a large air force, gourmet executive dining rooms). 3. Set revenue, income, productivity, customer satisfaction, and cycle-time targets so high that they cant be reached by conducting business as usual. 4. Stop measuring subunit performance based only on narrow functional goals. Insist that more people be held accountable for broader measures of business performance. 5. Send more data about customer satisfaction and financial performance to more employees, especially information that demonstrates weaknesses vis--vis the competition. 6. Insist that people talk regularly to unsatisfied customers, unhappy suppliers, and disgruntled shareholders. 7. Use consultants and other means to force more relevant data and honest discussion into management meetings. 8. Put more honest discussions of the firms problems in company newspapers and senior management speeches. Stop senior management happy talk. 9. Bombard people with information on future opportunities, on the wonderful rewards for capitalizing on those opportunities, and on the organizations current inability to pursue those opportunities.

25

KOTTER, J. P. (1996), p. 44

19

Some initial movement may also be achieved with a low level of urgency and people are tempted to directly move on to stage two. However, skipping stage one always seems to catch up and cause major troubles when facing the first problems. 26 The eight-stage model by KOTTER is directed towards a managerial perspective and is a very practical approach. The key lessons for a successful change derived from KOTTERs consulting experience are converted into a useful process model.27

26 27

Cf. KOTTER, J. P. (1996), p. 49 Cf. CAMERON, E.; GREEN, M. (2009), pp. 114

20

2.2 The Three Step Model by LEWIN

LEWIN developed a model of organizational change which today is well known and also often used by managers. In the course of this he also established the force field analysis, whereas the basic principle is that the driving forces for a change must overbalance the resisting forces against it. Figure 2.1 shows an example where the change is to speed up the executive reporting process.

Figure 2.1: Lewins force field analysis

28

LEWIN emphasizes that in order to realize a successful change, either the driving forces need to increase or the resisting forces need to decrease, or better, both of it takes place. Increasing forces can derive from external sources such as environmental changes, new technologies, etc. as well as from internal occurrences. 29 This force field analysis is an integrated part of LEWINs three-step model, which is shown in Figure 2.2. In the first step the major task is to unfreeze the status quo, including the definition of the current state, analyzing, increasing respectively decreasing the driving and resisting forces, plus defining the desired end state. Once unfreezed the status quo, the next step is to move, to actually make changes and involve the people. LEWINs model concludes

28 29

CAMERON, E.; GREEN, M. (2009), p. 110 LAUER, T. (2010), p. 56

21

with the third and last step which is to refreeze the new standards, focusing on making the change permanent, establishing new way of things plus rewarding the success. 30

Figure 2.2 Lewins three-step model

The three-step model by LEWIN emphasizes the very last step, i.e. to refreeze the new status quo. Because of the natural tendency of an organization to go back to the original steady state where it has been before the change, this step is at least as crucial as unfreezing the current status and moving it towards the desired status.31

30 31

CAMERON, E.; GREEN, M. (2009), pp. 110 CAMERON, E.; GREEN, M. (2009), p. 111

22

2.3 The Congruence Model by NADLER and TUSHMAN

The change management model by NADLER and TUSHMAN provides a more system-oriented instead of a process-oriented perspective. Therefore, the emphasis is put on the elements the organization consists of, which involves work and people as well as the formal and informal organization, as illustrated in Figure 2.3

Figure 2.3: Congruence model by NADLER and TUSHMAN

32

These elements which cannot be considered isolated but depending on each other are described as follows: 33 Work: This is the actual day-to-day activities carried out by individuals. Process design, pressures on the individual and available rewards must all be considered under this element. People: This is about the skills and characteristics of the people who work in an organization. What are their expectations, what are their backgrounds? Formal organization: This refers to the structure, systems and policies in place. How are things formally organized?

32 33

NADLER, D. A.; TUSHMAN, M. L. (1997) CAMERON, E.; GREEN, M. (2009), p. 120

23

Informal organization: This consists of all the unplanned, unwritten activities that emerge over time such as power, influence, values and norms.

As mentioned above, the components depend on each other, this means that an effective management of change has to be addressed to each of them. What is more, in the retro perspective this model helps to analyze why changes failed. However, the setting of goals or e.g. the building of a guiding coalition are missing in this model. A very similar approach is established by McKinsey named the seven S model. It also represents the various parts of an organization as interconnected and interdependent subsystems, which provides a useful checklist for those who want to make the change happen. The seven S are to be understood as abbreviations for the following categories: 34 Staff: important categories of people Skills: distinctive capabilities of key people Systems: routine processes Style: management style and culture Shared values: guiding principles Strategy: organizational goals and plan, use of resources Structure: the organization chart

34

PASCALE, R. (1990)

24

3 STRUCTURE AND ORGANIZATION OF CHANGE PROJECTS

This chapter introduces different role models within change projects in the first place and concludes with a stakeholder analysis. Therefore, it attempts to explain the very specific structure and organization of change projects from an internal and external perspective. The first part dealing with Role Models and Characteristics introduces the relevant roles which can be identified in a change project and discusses its characteristics. Later on, the Stakeholder Analysis represents a very useful tool for the identification and structuring of the different expectations of the affected stakeholders, i.e. from the outside, in order combine them with the requirements from inside.

3.1 Role Models and Characteristics

Within a change project, the normal organizational structures and the implied forms of communication are no more adequate. Specific structures need to be designed and organized to make a change project work. There are various relevant roles that are responsible for leading a change successfully as named in the following: 35 Patron Project team Project leader Decision making board Consultants Sounding board

The following chapter provides an overview about the role models and explains their characteristics more detailed.

35

Cf. KNIGSWIESER, R.; EXNER, A. (2008), p. 50

25

1. Patron. 36 The main functions of a patron are: Initiate the project Define the strategic orientation Define the projects size and relevance Provide the budget Control the process and the results Role model and managerial function

2. Project Team. 37 The project team is basically in charge of making the change happen and developing possible solution concepts. But in order that the project team does not consist of lone individuals, but to build a coalition that can make change happen, the following points are of very high importance: Find the right people - With strong position power, broad expertise, and high credibility - With leadership and management skills, especially the former Create trust - Through carefully planned off-site events - With lots of talk and joint activities Develop a common goal - Sensible to the head - Appealing to the heart

36 37

Cf. KNIGSWIESER, R.; EXNER, A. (2008), p. 51 KOTTER, J. P. (1996), p. 66

26

3. Project leader. 38 The project leader is in charge of the management of the project, of the strategic and operative business. However, it is not required to take over all accruing tasks but, to take over the responsibility that they are fulfilled on a high quality level within time and resource limits. Further, the project leader enforces the decisions of the decision making board and takes the necessary steps and initiatives for their implementation. What is more, there is also a very close co-operation between the project leader and external consultants, which is made much easier when setting up clear defined contracts. Therefore, the crucial functions are: Co-operating coordinator and facilitator Contact point to the external consultants Contact point to the internal organization Organizer

4. Decision making board. 39 The decision making board is usually made up of 2-3 senior managers. The main responsibilities are: Management function: prepare and make necessary decisions, ensure the operative implementation Controlling function: integrate feedback loops in order to see how the current change management process is performing or respectively if there are troubles and therefore intervene if necessary.

5. Consultants. 40 Basically consultants are incorporated in a change project in order to clear the content, i.e. to define the problems, to set the goals, to co-operate with the patron or other affected people such as employees or leaders. Further, consultants can also be involved in order to develop the structure of the projects process. The role of the external consultant has to be clarified as early and concrete as possible in the course of a change project, as their role is expected and perceived in various
38 39

Cf. KNIGSWIESER, R.; EXNER, A. (2008), p. 51 Cf. KOTTER, J. P. (1996), p. 52 40 Cf. JANES, A.; PRAMMER, K.; SCHULTE-DERNE, M. (2001), pp. 31

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ways. There are two basic styles of consulting, i.e. counseling and advising, which are described in Table 3.1.

Counseling
Asking, observing

Advising
Answers, instructions/recipes advices/expertise,

Primary consultant instrument

Hypothesis Interventions Orientation models

Intention

Aid to self-help Facilitating the (internal) experts to bring

Outside-help Bringing the best solution on the table of the patron / decision-making-board

Solution

the best solution(s) on the table of the patron or the decision-making-board

- The consultant for the process and the

- The consultant for the finding of

Responsibility

instruments
- The client for the decision making

solutions and the decisions

- The client for its implementation (this

can even vary) Table 3.1: Comparison of different styles of consulting

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6. Sounding board. 41 The sounding board can be made up of members of the decision making board, the executive board, the work council as well as other key persons, important people or informal leaders. The sounding board is basically supposed to sound, i.e. to act as a sounding box. As the decision making board cannot represent all relevant concerns within a company, the sounding board aims at supporting the decision making board. Their main functions are: Feedback of the perceptions concerning the project from different perspectives Information about the implication and the progress of the project in specific parts Guidance and advices regarding previous defaults, necessary initiatives, feasibility, etc.

41

Cf. KNIGSWIESER, R.; EXNER, A. (2008), pp. 53

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3.2 Stakeholder Analysis

The stakeholder analysis supports the identification and structure of the different expectations of the stakeholders influenced by a change. It is a tool that helps, especially in the beginning, with the plans for change projects. It attempts to link the outside view to the inside view. A stakeholder analysis aims to support strategic decisions about the change by combining the expectations from outside with requirements from inside. Following steps have to be observed: 42

1. Preparation Collecting the relevant stakeholders and choose the 6-8 most important ones. 2. Significance Depict the stakeholders with circles of various sizes. Size of the circle = significance for the systems survival in the long term 3. Emotional reliance Arrange the circles in different distances to the centre (=system). The closer the circle is arranged, the more emotional reliance to the system is given 4. Frequency of contact Connecting the circles with the system in the centre by using 1-3 lines. The lines represent the frequency of contact to the stakeholder. 1 line = rarely 2 lines = normally 3 lines = frequently

42

Cf. JANES, A.; PRAMMER, K.; SCHULTE-DERNE, M. (2001), pp. 44-47

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5. Quality of relationship Supplement the quality of communication using symbols of emotional bias: ~ conflicts in communication positive communication indifferent

6. Expectations Using keywords about the stakeholders expectations from the system (and vice versa)

The stakeholder analysis gives an overview about the various stakeholders and therefore answers in a single view which relationships are more important to the system and which are less. Furthermore, it shows which expectations have to be fulfilled in order to survive now and in the future. It is important keeping in mind the different stakeholders and their expectations during the whole change process.

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4 HANDLING EMOTIONS AND CONFLICTS

Change projects are by nature predestinated to provoke conflicts at some point of time, because a change by itself induces fear concerning the new. Therefore, the major question is how to deal with those arising conflicts. This chapter presents two ways of dealing with conflicts in change projects. First it is by structuring the process in an appropriate way, which prevents conflicts a priori. However, if still some conflicts arise, the second part of this chapter provides certain rules how to deal with them. To start with, it is crucial to understand the nature of a conflict, which is based on the following considerations. There are two contradicting interests coming up, with each person (or some persons) is (are) identified with. Because of that, both of them are true, they are real

4.1 Handling a conflict by structuring the process

In order to handle respectively prevent a conflict a priori, there are some crucial issues which need to be taken into account. Introduce a change process at the very beginning and proceed according to it Building up and creating appropriate organizational structures for the change project Empowering people for a broad-based action

To impede conflicts as good as possible from the very beginning, it is crucial to introduce a change process, such as they are described in detail in chapter 2, and proceed according to it. Additionally, the emphasis has to be put on building up and creating appropriate organizational structures for the change project. This refers of course to the project team respectively the guiding coalition itself, which is emphasised in literature by various authors, but also to other representatives of the affected system. Therefore, chapter 3 contains different role models within a change process plus their characteristics, concluding with all relevant stakeholders which are affected by it. 32

KOTTER 43 particularly focuses not only on building the guiding coalition, i.e. project team, but also on empowering people respectively employees for a broad-based action and support. As with discouraged and disempowered employees an enterprise can never become a winner in a globalising economic world, he determines this source of power to be crucial for succeeding with a change project and therefore specifies the following issues.44 Communicate a sensible vision to employees: If employees have a shared sense of purpose, it will be easier to initiate actions to achieve that purpose. Make structures compatible with the vision: Unaligned structures block needed action. Provide the training employees need: Without the right skills and attitudes, people feel disempowered. Align information and personnel systems to the vision: Unaligned systems also block needed action. Confront supervisors who undercut needed action: Nothing disempowers people the way a bad boss can.

Change-friendly organizational culture The crucial fundament for realizing an appropriate structure, for making employees accept and support a change project, is based on an established change-friendly corporate culture, which is characterized by the following five key-factors. 45 Creative restlessness: Organizational changes not only cause restlessness but also require a certain degree of unrest within the system. Pioneering spirit, creative restlessness and eagerness to experiment are necessary characteristics of a changeculture. Ability to handle conflicts: If structures, regulations, behaviors, information channels and decision paths change, traditions and habits have to be replaced by something new. This is not often possible to realize without conflicts. Different meanings,
43 44

KOTTER, J. P. (1996) KOTTER, J. P. (1996), p. 115 45 DOPPLER, K.; LAUTERBURG, C. (2009), pp. 68-71

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interests and requirements collide. Only a constructive culture is a success factor: the ability to early localize conflict potentials and not to simply pass over conflicts but deal with conflicts in a constructive way. Cultural Solidarity: We instead of the others. An organizational culture that is based on trust, openness and acceptance. Conveying the meaning: This is the art of conveying the companys philosophy and objectives, the meaning of the acting as a service for the client and the society, as well as of the significance of the individuals contribution to every single employee. This is of course much easier to realize in a rehabilitation clinic than in an armament factory. However, the more each individual understands and internalizes the importance of his or her contribution, the more he or she will be committed to the company and therefore willing to accept additional burdens. Communication: The most important insight is that it is impossible to communicate too much. What could happen at the most is to misinform. Considering that a formal organization is basically not capable to ensure the degree of direct and personal communication which is crucial in times of changes in a company, the informal communication has to be enhanced consequently. Information events have to be organized across all operational levels of a company. The basic principle is to talk to each other instead of producing paper. In order to understand what is going on in the company, thus to provide orientation and ensure controlling, Management by wandering around has become well-established.

4.2 Handling a conflict by rules

Although a change project should be aimed at being structured in such a way that conflicts dont even occurs, however, it still can happen. So if there is a conflict coming up between two or even more parties, there are certain rules how to deal with it, which are introduced in the following.

34

First, as a matter of principle, prophylaxis is better than therapy. Therefore, the following competences are crucial: 46 Identify conflicts early enough Address conflicts in an open and unprejudiced way Fight the conflict in a constructive minded way as person affected Help to structure a conflict as a person non-affected

In daily life it can be difficult to create an atmosphere of constructive debate, especially with superiors, new business partners, clients, just to name a few. However, the attitude of determining conflicts to be harmful, a culture of love, peace and harmony, even evokes more damage. Differences of opinions or respectively conflicts should not be repressed, as they if conducted in an adequate way induce a constructive criticism and therefore improvement and innovation.47 Figure 4.1 illustrates a model of human behavior in conflicts.

Figure 4.1: Model of human behavior in conflicts

48

46 47

Cf. DOPPLER, K.; LAUTERBURG, C. (2009), p. 451 Cf. DOPPLER, K.; LAUTERBURG, C. (2009), p. 452 48 Cf. DOPPLER, K.; LAUTERBURG, C. (2009), p. 440

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In a conflict situation, there are four different possibilities of human behavior, as shown in Figure 4.1. The main goal always has to be creating a win / win situation, i.e. ensuring that both the energy for enforcing the satisfaction of own and the partners needs reaches a high level, where negotiation and co-operation can take place. In order to conduct a conflict as a conflict manager while ensuring an atmosphere of constructive debate and creating a win /win situation, there exist the following 10 golden rules. 49

1. Make an accurate diagnosis Understanding the backgrounds and causal relations of the conflict Understanding the dynamic of the incident

2. Proceed systemically Planning how to proceed No working without an appropriate concept A journey to the unknown doesnt lead to success

3. Define the roles Ensuring the same understanding of each ones role and task Consequently staying with the defined role

4. Create acceptance Taking all involved parties seriously Trying to see things from the others perspective

5. Enhance communication Enhancing continual communication between all parties involved Ensuring continual communication between all parties involved

49

Cf. DOPPLER, K.; LAUTERBURG, C. (2009), pp. 450

36

6. Let emotions happen Not trying to prohibit emotions at any prize Emotions are important realities and therefore must not be repressed.

7. Remain neutral Never taking someones side under any circumstances Remaining independent

8. Stay open and honest Being transparent and credible Not behaving differently at a joint meeting or at a bilateral conversation

9. Be patient Not expecting quick progress and results Value the small steps into the right direction

10. Remain modest Not feeling responsible by oneself for the success All parties need to be willing to resolve the conflict Nobody can perform miracles

Considering those 10 golden rules is a highly important step in order not to repress conflicts, not to preserve a harmony, which actually does not exist, but instead to create an atmosphere of constructive debate as a basis for new ways of solutions.

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LIST OF FIGURES
Figure 1.1 Aspects of Organizational Redesign .......................................................................... 1 Figure 1.2 Economic and Social Forces Driving the Need for Major Change in Organizations . 5 Figure 1.3 Acceleration and Integration two basic aspects of ORD concepts ........................ 7 Figure 1.4 The Model of Transformation Energy (Transformation Energy Curve) .................. 12 Figure 1.5: Beckhards and Harris change formula ................................................................. 15 Figure 2.1: Lewins force field analysis ..................................................................................... 21 Figure 2.2 Lewins three-step model ........................................................................................ 22 Figure 2.3: Congruence model by NADLER and TUSHMAN ..................................................... 23 Figure 4.1: Model of human behavior in conflicts ................................................................... 35

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LIST OF TABLES
Table 1.1 Overview about the three approaches of organizational redesign ......................... 11 Table 2.1: The eight-stage process of creating major change according to KOTTER............... 18 Table 3.1: Comparison of different styles of consulting .......................................................... 28

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LIST OF REFERENCES
BECKHARD, R. F.; HARRIS, R. T.: Organizational Transitions: Managing complex change, Reading, MA 1987

CAMERON, E. & GREEN, M.: Making Sense of Change Management A complete guide to the models, tools & techniques of organizational change, London 2009

DOPPLER, K.; LAUTERBURG, C.: Change Management Den Unternehmenswandel gestalten, Frankfurt 2008

JANES, A.; PRAMMER, SCHULTE-DERNE, : Transformations-Management, Wien 2001

KNIGSWIESER, R.; EXNER, A.: Systemische Intervention Architekturen und Designs fr Berater und Vernderungsmanager, Stuttgart 2008

KOTTER, J. P.: Leading Change, Boston 1996

KOTTER, J. P.: Leading Change Why Transformation Efforts Fail, Harvard Business Review, 2007

LAUER, T.: Change Management, Berlin Heidelberg 2010

NADLER, D. A.; TUSHMAN, M. L.: Competing by Design: The power of organizational architecture, New York 1997

PASCALE, R.: Managing on the Edge, London 1990 40