Week 8 Final
Organization Development & Change 11 edition Thomas G. Cummings • Christopher G. Worley
CHAPTER
17
Transformational Change
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Learning Objectives
Describe the characteristics of transformational change.
Present the integrated strategic change intervention and understand how it represents the revolutionary and systemic characteristics of transformational change.
Explain the organization design process, including domestic and worldwide applications.
Discuss the process and key success factors associated with downsizing.
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Characteristics of Transformational Change
Change is triggered by environmental and internal disruptions
Change is initiated by senior executives and line managers
Change involves multiple stakeholders
Change is systemic and revolutionary
Change involves significant learning and a new paradigm
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Integrated Strategic Change
Integrated Strategic Change ………
is a deliberate coordinated process that
leads to gradually or radically systemic
realignments between the environment
and a firm’s strategic orientation resulting
in improvement in performance and
effectiveness.
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Integrated Strategic Change (ISC) Key Features
Strategic Orientation
Creating the Strategic Plan
Integrating Individuals and Groups into the Process
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The Integrated Strategic Change Process
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Implementing the ISC Process
Strategic Analysis
Assess the readiness for change and top management’s ability to carry out change
Diagnose the Current Strategic Orientation
Strategic Choice
Top management determines the content of the strategic change
Designing the Strategic Change Plan
Development of a comprehensive agenda to achieve the change
Implementing the Strategic Change Plan
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Organization Design
Conceptual Framework
Strategy
Structure
Work Design
Human Resources Practices
Management Processes
Key Concepts
Fit, Congruence, Alignment among Organizational Elements
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Comprehensive Model for Diagnosing Systems: Organizational Level
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The Functional Structure (1)
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The Functional Structure (2)
Advantages
Promotes and develops technical specializations
Reduces duplication of scarce resources and supports flexible deployment
Enhances career development, facilitates communication when superiors share expertise with subordinates
Supports the development of common processes
Disadvantages
Emphasizes routine tasks; encourages short time horizons
Fosters narrow perspectives by managers, not business metrics and broader criteria for decision making
Processes cut across functions making coordination and scheduling more difficult; obscures accountability for overall outcomes; managers and employees may not have a line of sight to business
Contingencies
Stable and certain environment
Small- to medium-size
Routine technology, interdependence within functions
Goals of efficiency and technical quality
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The Divisional Structure (1)
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The Divisional Structure (2)
Advantages
Recognizes sources of interdepartmental dependencies, reduces complexity
Allows diversification an expansion of skills and training
Ensures accountability by departmental managers; promotes delegation of authority
Heightens departmental cohesion and involvement in work
Disadvantages
May use skills and resources inefficiently; difficult to coordination across divisions
Limits career advancement by specialists to movements out of their departments; impedes specialist’s exposure to others; hard to create common processes
Line of sight is to business; divisional objectives over organization objectives
Contingencies
Unstable and uncertain environments
Large size
Technological interdependence across functions
Goals of product specialization and innovation
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The Matrix Structure (1)
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The Matrix Structure (2)
Advantages
Makes specialized, functional knowledge available to all projects
Use people flexibly and can adapt to environmental changes
Maintains consistency by forcing communication between managers
Recognizes and provides mechanisms for dealing with legitimate, multiple sources of power
Disadvantages
Can be difficult to implement; makes inconsistent demands and can promote conflict and short-term crisis orientation
Increases role ambiguity, stress, and anxiety and may reward political skills over technical skills
Performance is lowered without power balancing between projects and functions
Contingencies
Dual focus on unique product demands and technical specialization
Pressure for high information-processing capacity
Pressure for shared resources
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The Process-Based Structure (1)
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The Process-Based Structure (2)
Advantages
Focuses resources on customer satisfaction
Improves speed and efficiency; Adapts to environmental change rapidly
Reduces boundaries between departments; Increases ability to see total work flow; Enhances employee involvement
Lowers costs dues to overhead
Disadvantages
Can threaten middle managers and staff specialists; Requires changes in command-and-control mindsets
Duplicates scarce resources
Requires new skills and knowledge to manage lateral relationships and teams
May take longer to make decisions in teams; Can be ineffective if wrong processes are identified
Contingencies
Uncertain and changing environments
Moderate to large size
Non-routine and highly interdependent technologies
Customer-oriented goals
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The Customer-Centric Structure (1)
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The Customer-Centric Structure (2)
Advantages
Presents one integrated face to the customer
Generates a deep understanding of customer requirements
Enables organization to customize and tailor solutions for customers
Builds a robust customer response capability
Disadvantages
Customer teams can be too inwardly focused
Sharing learnings and developing functional skills is difficult
Managing lateral relations between customer-facing and back office units is difficult
Developing common processes front and back is problematic
Clarifying the marketing function is problematic
Contingencies
Highly complex and uncertain environments
Large Organizations
Goals of customer focus and solutions orientation
Highly uncertain technologies
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Comparing Product-Centric with Customer-Centric Structures
| Organization Feature | Product-Centric | Customer-Centric |
| Goal | Best product for customer | Best solution for customer |
| Source of Value | New products, new features | Customized bundles of products, services, support, education and consulting |
| Core Structures | Product teams, product reviews, product profit centers | Customer teams and segments, customer P&L’s |
| Core Processes | New-product process | Customer relationship management processes and integration/solutions |
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The Network Structure
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Organization Designs
| MECHANISTIC DESIGN | ORGANIC DESIGN | |
| Strategy | Cost minimization | Innovation |
| Structure | Formal/hierarchical Functional | Flat, lean, and flexible Matrix, process, and network |
| Work Design | Traditional jobs Traditional work groups | Enriched jobs Self-managed teams |
| Human Resource Practices | Selection to fit job Up-front training Standard reward mix Pay for performance and individual merit Job-based pay | Selection to fit organization Continuous training and development Individual choice rewards Pay for performance and business success Skill-based pay |
| Management and Information Systems | Command and control Closed, exclusive, centralized information | Employee involvement Open, inclusive, distributed information |
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Worldwide Organization Designs
Offer products/services in more than one country
Balance product and functional concerns with geographic issues of distance, time, and culture
Carry out coordinated activities across cultural boundaries using a wide variety of personnel
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Worldwide Success Factors
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The International Design
Characteristics of the International Design
Sell existing products/services to nondomestic markets
Goals of increased foreign revenues
Implementing the International Orientation
OD facilitates extending the existing strategy into the new market
Cross-cultural training and strategic planning
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The Global Design
Characteristics of the Global Design
Centralized with a global product structure
Goals of efficiency through volume
Implementing the Global Orientation
OD supports career planning, role clarification, employee involvement, conflict management and senior management team building to help achieve improved operational efficiency
OD helps the organization transition to global integration from local responsiveness
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Multinational Design
Characteristics of the Multinational Design
Operate a decentralized organization
Goals of local responsiveness through specialization
Implementing the Multinational Orientation
OD helps with intergroup relations, local management selection and team building
OD facilitates management development, reward systems, and strategic alliances
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Transnational Design
Characteristics of the Transnational Design
Tailored products
Goals of learning and responsiveness through integrations
Implementing the Transnational Orientation
Extensive selection and rotation
Acquire cultural knowledge and develop intergroup relations
Build corporate vision
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