Time doesn’t stand still, and it brings changes to organizations of all types of ownership and spheres of activity. The necessity to initiate organizational change can be brought about by external and internal factors. External factors include political, social, economic and technological factors. Internal factors may include new leadership, inadequate performance, and end of an organizational development cycle and so on.
Among the most influential change drivers there are government laws and regulations. No business can be successful without complying to the government regulations and current legislation in such spheres as environment, health and safety, environment protection, relations with customers, etc. The type of government and its stability and economic policy is also very important for business success. Legal acts regulate emergence of organizations in the market, the way they operate and collaborate with each other. There are laws that regulate and coordinate organizational activity in all spheres: trade, manufacture, consulting, health, security, education, etc.
Economic factors that shape organizational behavior include globalization and marketization in all spheres of human activity, the rate of inflation, interest rates, employment and unemployment rates, etc. All businesses operate with a single goal of getting maximum profit from its activity. To attain the goal they have to take into consideration two major market factors – supply and demand – which make a considerable impact on the effectiveness of organizational activity. The ability and readiness of customers to buy a product or a service determines company’s policies and behavior. The demand for certain products and services, which is called utility, may decline over a period of time and force organizations to think of a new brand or a product line before the decrease in sales causes decrease in revenues. The consumer purchasing ability depends on the money in circulation, so banking is another factor that influences getting profit and consequently company’s development strategy.
Individual customer purchasing power is not the only determining economic factor. Country’s economic growth and development is even of greater importance to organizational development. The amount of finances that the population of the country earns determines the amount of money invested into businesses. Level of employment and average family income dictate the demand and limit or enhance people’s purchasing ability. The general price level, which may include cost of raw materials and transportation, influences the cost of goods or services the company offers.
The development of technology also affects the way companies do business to stay competitive. Technology is used to manufacture new products, to automate processes, to market commodities and services, to store data, to sell goods, etc. at a lower cost. Technological advancements help to organize business effectively, reduce costs and thus increase income. Technological advancements also contribute to the spread of globalization which also forces organizations to adjust to the new environment conditions. Technologies make communication within the company and outside it more effective; huge amounts of information can be shared quite securely in seconds.
Social factors influencing the development of organization include the whole range of changes in social structures of the society. These factors may include religious views, language spoken, family traditions, demographic situation, tastes and buying patterns. A great impact on organizational development is made by values and culture of the society. Western societies value time while oriental countries place an utmost importance on relationships. Western societies have low power distance, while in the eastern countries; in the countries of the former Soviet Union tend to have high power distance. All this cannot but influence how organizations do business.
Among internal factors that influence organizations we can mention inadequate organizational performance, change in strategic objectives of the company, change of an organizational or product life cycles, human resource problems, etc. Inadequate organizational performance may be connected with the appearance of the new entrants in the market who employ better technology, advanced marketing strategies and highly qualified personnel.
Changes are also caused by the natural cycles of organizational development. Quinn and Cameron [1] compared nine different models suggested by various researchers and designed a model combining common features described by those authors. All of the authors distinguish three to five stages in operation of organization of any type. Based on the study of government organizations Downs describes three stages: struggle for autonomy, rapid growth and deceleration, which means there is room for innovation and change at the second stage. Lippitt and Schmidt studied the way organizations of private sectors operate and singled out three stages of birth, youth and maturity of organizations. According to Greiner organizations of the public sector go through five stages of development: entrepreneurial and creativity stage, stage of growth through leadership, stage of growth through delegation of authority, stage of growth through coordination and, finally, stage of growth through collaboration. Organizations of the corporate sector were researched by Scott who also proposed three stages in their operation: the stage of a single product, the stage of functional specialization, the stage of diversification characterized by research and development efforts. Katz and Kahn also mentioned three phases: primitive system stage, stable organization stage and stage of structure elaboration which is characterized by the organizational search for the mechanism of adaptation to the external environment. Still another model of organization development is proposed by Kimberly. According to this author the first stage of development is elaboration of the organizational ideology, which happens before the organization is formally established; the second stage is formal establishment of organization which involves hiring employees and entering the market; the third stage is that of high investments both physical and emotional; and the fourth stage is organizational institutionalization characterized by formalization of the processes and predictability of organizational response to the factors of external environment. Lyden connects the development of the organization with the following four stages: innovation leading to finding the niche in the market; acquiring resources and designing work processes; achieving goals and stability.
Torbert and Adizes do not distinguish stages or phases in organizational development, but associate it with “individual mentalities of the organization members” and types of organizational activities respectively. Thus, we will not take these two models into consideration in our study.
Russian researchers (T. Bazarov, B. Yeremin) distinguish similar stages of formation, growth, stabilization and decline of organizations. Semenkov recognizes three stages: youth, when the organization can change easily adapting to changes in external environment despite lack of proper control; maturity, which is the stage when the organization is still very adaptive and flexible and at the same time controllable; and aging characterized by a tuned control but insufficient flexibility. Ivantsevich and Lobanov distinguish four phases similar to what we have already read in other sources: the stage of formation which includes determining the mission of the organization and its major customers; the stage of securing the position in the market when the organization works on its image, diversifies products and enlarge the circle of its customers; stabilization stage and, finally, the stage of crisis, when the organization has to look for alternative ways of its development [2].
Following Quinn and Cameron [1] we notice that despite the fact that all the models described are based on different organizational phenomena they still pass through the same stages of development.
Different causes for change entail different types of organizational change. There are several contemporary theories of change proposed in accordance with the factor causing this change. The most comprehensive typology of such theories was proposed by Van de Ven and Poole [3] and includes life cycle, teleological, dialectical and evolutionary theories. Teleological and evolutionary theories are the most popular theories in contemporary management theory. Later there were also proposed social cognition and cultural models. Evolutionary change theories are divided into social and biological evolutionary models. The major assumption of the theory is that change is a slow process of transformations occurring due to environmental influences. Organizations, being a part of the social system, evolve over time naturally and the nature of change is influenced by environment to a greater degree rather than people. Change is not planned, but managed once it occurs.
Teleological change is synonymous with planned change and scientific management. The basic assumption of teleological theory is that organizations are purposeful and adaptive, change happens because it is initiated by organization leaders, and organization staff is aware of necessity for change. The result of change is appearance of new structures and organizing principles.
Life cycle change approach is to certain extend similar to evolutionary theories of change but bare some differences. This difference is in emphasis placed on the importance of people in the process of change. This theory focuses on stages of organizational development: growth, maturity and decline. Change is viewed as part of these stages or as transition from stage to stage; it is viewed as a natural process which “cannot be stopped or altered”.[3]
Dialectical theory of change assumes that every norm, value or pattern within the organization is always present with its opposite. Organizations go through long periods of evolutionary change and short periods of revolutionary change [4]. Sooner or later opposite beliefs clash resulting in radical change. Conflicts are viewed as a natural characteristic of human communication. Bargaining, persuasion, influence and power are used as tools of interaction. This theory does not assume that everyone is involved in the process of change – those who are involved belong to conflicting coalitions.
Social cognitions change theories have become popular in the last two decades. These theories tie the process of change to the process of development and learning. The theory
introduces a phenomenon of cognitive dissonance, which occurs when two conflicting pieces of information are brought together, leads to change and contributes to learning. According to the theory change is not caused by external environment or organization management, but by cognitive dissonance between values or actions.[4]
Cultural change theory combines principles and assumptions of social cognition and dialectical approaches to change. It assumes that change is a response to external environment and involves modification of beliefs, norms and values of the organization. According to this theory the process of change is slow and lasting; it is important to know and understand history since it contains facts about change; change outcomes can be both predicted and non-predicted.
Gilley, Gilley and McMillan [5] state that understanding organizational change includes investigating types of change within organizations. Following Weick and Quinn [6] we can assert that changes can be viewed as episodic and continuous. Episodic changes happen as a result of change in the market, mergers or acquisitions or change of organizational structure. Constant changes occur in attempts to keep up with the continuous changes in external environment such as continuous technological improvements. Additionally, change can be viewed as transitional, transformational and developmental if we look at it from the point of view of organizational evolution. Transitional change, which is the most frequent type of change, is aimed at improving organizational performance through a series of ongoing changes in structure, technology or product, and may be both unit specific and affecting the entire organization [5].
Transformational change occurs when organizations attempt to make fundamental transformations in their culture and behavior and consequently in the way they do business. Transformational change often involves changes in leadership’s style and overall company strategy as a result of mergers and acquisitions. Developmental change is the least radical among all; it involves changes aimed at improvement of daily operations of the company. Development change is an on-going process to ensure company’s competitiveness in the market, and since these are day-to-day modifications they are not viewed as change by the employees and the degree of stress and risk here is minimal.
Cook and Macaulay [7] differentiate between incremental (or morphostatic) change, which is a series of modifications made by the organization in order to adapt to the changing market environment, and step (or morphogenic) change, which is taking some major opportunity or fighting some major problem.
Organizations often package change as a program or a project which is targeted at taking the organization to its stated vision or strategic aim [7]. Such programs or projects help to determine framework for activities to implement change and include such programs as Business Process Reengineering (BPR), Six Sigma, Total Quality Management (TQM), Business Excellence Models, ISO 9000, Brand Alignment and so on.
Burtonshaw-Gunn [8] in his the Essential Management Toolbox: Tools, Models and Notes for Managers and Consultants proposes a two dimensional change option grid (Fig. 1) showing the dependence of change type on time available and change magnitude.
Fig. 1 Change options
There is a series of factors that influence the choice of the certain change option. When the organizations are low on time and the changes they undertake are insignificant it is enough to make some adjustments in the organizational strategy, structure or operation. When the change is planned to be a strategic one and the results are expected to span over a long period of time, the organizations goes for transformational or radical changes.
The same author [8] proposes another model of organizational change which is shaped as a pyramid and conveys the idea that changes should be made from simple and easily implemented to complex and requiring much time and effort. (Fig. 2)
Fig. 2 Change pyramid
The three basic change levels of the change pyramid are connected with changes made to an organization: changing tasks is associated with designing process; changing roles has to do with designing jobs and changing structures involves organizational redesign. The two upper levels are associated with individuals at work and are impossible without passing through the lower levels.
Baekdal et al [9] proposes five models of organizational change: light (or simple), normal (or medium-sized), complex, quick and day-by-day tasks. The light model is designed for small short-term changes and should have no more than two goals. If the company has more than two goals it should consider a medium sized model of change. This model requires one to two month for implementation about a half of which is devoted to analysis of the situation. This type of change cannot be realized without having a “power team” that will take care and monitor the entire process of change. A complex model is designed for changes that cover all or multiple departments of the organization. It is a long-term project that may take up to three years to implement it, more than one “power team” and effective communication policy. A quick mode is similar to Burtonshaw-Gunn’s “tinkering” or “quick fix” and is applicable in situations when organizations have no time for analysis and have to be content with a quick action plan. This model cannot ensure longterm wins for the organization and, thus, cannot be used often. A day by day model is not focused on the organizational change per se, but on everyday tasks and is targeted at daily tasks and corporate culture projects.
According to Lewin [5] organizational change models contain three steps: unfreezing, moving and refreezing. Durant also states that any type of organizational change goes through three similar stages: unfreezing, incorporating change and refreezing. At the stage of unfreezing organizations analyze the situation, realize the necessity for change, prepare to make the first move to change. This is the stage when organizations weigh the alternatives, compare advantages and disadvantages and choose the change path (force field analysis). Once organizations determine the change strategy they develop an action plan and move into the second stage – move, incorporating change or change itself. This stage is the hardest – it includes a wide range of activities from training the employees to incorporating complex operational techniques; this is the stage of overcoming resistance, making mistakes and taking pains. Setting examples, using role models and effective communication are crucial to the success of this stage. The stage of refreezing involves achieving stability and turning the change into a new habitual routine.
As one of the change managing tools Kurt Lewin [5] also proposed performing a force-filed analysis which studies driving forces and restricting factors of any possible or current change situation. The basic principle for the effective change to happen is that driving forces should overweigh restricting factors. The analysis should performed at the unfreezing stage before moving into action. The idea is that restricting (or restraining) forces need to be decreased and driving forces need to be reinforced. It is good when both actions happen simultaneously. The second stage – move – is implementation of the agreed action plan and, finally, refreeze is assessing the results and post-implementation review.
Ulrich and Kotter suggest more complex change models, however upon careful examination they show certain similarity with the basic Lewin’s model, but provide certain decoding of certain stages. Kotter developed his model upon analyzing performance of about a hundred different organizations. At the first stage – establishing a sense of urgency – organizations examine environment, determine the need for change and possible paths of change. The second stage is forming a powerful coalition of people who will work together as a change team. The stage is followed by creating a vision which will help to direct the change process. A very important part of change management is communicating the vision to shape desired behavior of the employees. The next step is changing structures and eliminating obstacles that might hinder the change process. Creating short-term wins and celebrating them make the change process visible and give a sense of prominence to the entire process. The next stage is promoting and rewarding people who work towards the vision and, finally, institutionalizing new approaches – making sure that everyone understands and supports new organizational behavior.
Bullock and Batten propose a planned changed model consisting of four stages: exploration, planning, action, and integration. The major activity at the exploration stage is verifying the need for change and attracting necessary resources. It is followed by planning which is realized by key decision makers and experts. The plan is implemented during the action stage which also includes some feedback that allows adjusting the plan to the situation. At the stage of integrations the change is aligned with other areas of the organization and formalizing them.
According to Bridges there is a clear distinction between planned change and transition, the latter, in Bridges’s view, being a more complex and is “harder to achieve”. There are three distinguished stages of transition: ending, neutral zone and new beginning. At the stage of ending organizations need to define what exactly needs to be left in the past forever. Neutral zone marks the period of disorientation and de-motivation. It is the part of the process and that needs to be acknowledged. At this stage it is important for the manager to communicate clearly what is necessary for change: the purpose (why the organization should change), the picture (what should be changed), the plan (how the change will be performed) and the part to play (what exactly each member of the organization should do). Beginning is the stage marking that people are ready to do something in a new way.
Backhard and Harris [10] suggested a change formula which helps to identify the factors which need to be present for the change to happen (Fig 3).
C = [ABD] > X
where C is change
A – level of dissatisfaction with the current situation B – desirability of the proposed change or end state D – practicality of the change
X – cost of change
Fig. 3. Beckhard’s change equation
According to the formula change happens only in case when level of dissatisfaction, desire to reach an end state and practicality of change overweigh its cost. Sometimes a formula is written down as a multiplication which means that if any of the factors is equal to zero, the product of the multiplication will also be equal to zero. This is very helpful to understand that if any of the factors of Backhard’s formula is nonexistent, the change will not happen.
Nadler and Tushman [11] proposed a model which provides another set of factors that can pre-determine success of organizational change and, thus, is absolutely different from the models described previously. The model is based on an assumption that organizations consist of interacting sub-systems which adjust their behavior in accordance with internal and external environment. The elements of the system are people, work, formal and informal organization. Strategy, resources and environment are the input components of transformation process, while individual, team and organizational performance are the products of change. The basic idea of the model is that all elements of it are interrelated and interdependent, and the higher the congruence among the elements the higher are the performance results.
Another model that does not present stages but describes areas of change and management was introduced into management by Colin Carnall [12]. Carnall states that effective change depends upon effective transition management, dealing with organizational culture, managing organizational politics. These three managerial skills are, in their turn, dependent on creativity, risk-taking, learning, and ability to rebuilt self-esteem. When all the components described by Carnall are in place, then external and internal pressure to change leads to achieving organizational change and learning.
To conclude it is important to mention that both external and internal factors can cause social (unexpected, not planned) and teleological (expected, planned) changes depending on whether the organization is aware of what is happening in external organizational environment and within the organization. Changes in both external and internal environment can lead to transitional, transformational and developmental change or episodic and continuous change. Thus, we can state that there is no obvious dependence between the type of change and the locus of the force that drives it. However, there is a tendency to choose the strategy for change depending on its nature. Thus, episodic change is most likely to be managed with some “quick fix” tools, while continuous change requires extensive research and tailored strategies.
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