Tesla-Organizational Change Project - (Management)
Chapter 15
Organization Transformation and Strategic Change
Learning Objectives (part 1 of 2)
- Identify and define organization transformation.
- Understand basic strategy-culture matrix and other approaches to changing culture.
Learning Objectives (part 2 of 2)
- Recognize importance of corporate culture and its relation to strategy.
- Experience these concepts in management simulation.
Strategy and Transformation
- Success can work against a company when it looses touch with customers.
- Radical changes may be only choice for organization in desperate need of change.
Organizational Transformation
(part 1 of 3)
- OT refers to drastic changes in:
- How organization functions.
- How it relates to environment.
- OD strategies represent more gradual approaches to strategic change.
- OT approaches are drastic and abrupt change.
Organizational Transformation
(part 2 of 3)
- OT may or may not be developmental.
- OT tends to use directive, not participative, approaches to change.
- Usually top-down, top-management driven.
- OT shaped by use of power rather than collaboration.
Organizational Transformation
(part 3 of 3)
- Requires:
- Shared vision.
- Willingness to clean house.
- Restructure.
- Tackle many problems.
- Due to immediate threat, this may be only way for organization to survive.
Large-Scale
Change Strategies
- Incremental.
- Long-term planned change.
- Relies upon collaboration.
- Transformative.
- Immediate, drastic change.
- Uses directive methods.
Large-Scale Change Model
Model based on 3 key dimensions.
Time frame of change—short or long.
Level of support of organizational culture.
Degree of discontinuity with environment.
Figure 15.2
Strategies for Planned Change
Four Change Strategies (part 1 of 2)
Participative evolution.
Incremental and anticipates change.
Support of culture through collaborative means.
Charismatic transformation.
Radical change in short time with support of culture.
Four Change Strategies (part 2 of 2)
Forced evolution.
Incremental adjustments over longer period without support of culture.
Dictatorial transformation.
Used in times of crisis.
Major restructuring running counter to internal culture.
Results of OT
- OT may be best or only way to bring back an organization under immediate threat.
- OT more likely to be used by externally recruited managers.
- OT is risky and outcome is uncertain.
The Corporate Culture
- System of shared values held by members that distinguishes one organization from another.
- CEO and managers’ actions, not words, produce culture.
- A culture is organization’s major strength when consistent with strategies.
Strategy-Culture Fit
- Strategy:
- Course of action used to achieve objectives.
- Relates resources of organization to opportunities in environment.
- Culture:
- Set of values for setting priorities.
- Critical factor in implementation of strategy.
Core Characteristics of Culture
- Individual autonomy.
- Sensitivity to customers and employees.
- Managers provide support and assistance.
- Employees initiate new ideas.
- Openness of communication channels.
- Risk-seeking encouraged.
Sharing the Vision
- Management theorists feel vision is essence of leadership.
- Vision involves several stages.
- Share the vision.
- Empower the individual.
- Develop trust.
- Reward performance.
Figure 15.3
Sharing the Vision
Strong Versus Weak Cultures
- Strong culture.
- Basic values intensely held and widely shared.
- Weak culture.
- May be seen in young company or one with high turnover.
- Culture is product of key components.
- Structure, systems, people, and style.
Figure 15.4
Relative Strength of Cultures
Strategy-Culture Matrix (part 1 of 4)
Four basic alternatives in determining strategy changes:
Manage change (manageable risk).
- Change important and compatible with culture.
- Use cultural reinforcement as strategies.
Strategy-Culture Matrix (part 2 of 4)
Reinforce culture (negligible risk).
- Forge vision that emphasizes shared values.
- Reinforce existing culture.
Strategy-Culture Matrix (part 3 of 4)
Manage around culture (manageable risk).
- Change important and incompatible with present culture.
- Reinforce value system, reshuffle power, use leverage in the organization.
Strategy-Culture Matrix (part 4 of 4)
Change strategy to fit culture (unacceptable risk).
- Change important but incompatible with culture.
- Changing culture is explosive, long-term process that may be impossible.
Figure 15.5
Strategy-Culture Matrix
Strategic Change Management
- Seeks to align organization’s strategy, structure, and human resources to fit environment.
- Parts of system in perpetual interaction with environment.
Organizations Composed of 3 Systems
- Technical - solve production problems.
- Political - solve allocation problems of resources and power.
- Cultural - solve value/belief problems.
Figure 15.6
Environmental Forces and Organizational Systems
Three Steps to Strategic Change
Step 1: Develop image of desired organization.
Step 2: Separate systems and intervene separately in each one.
Step 3: Plan for reconnecting three systems.
Reasons for Large-Scale
Cultural Changes
- Company has strong values that do not fit changing environment.
- Industry competitive and changes quickly.
- Company mediocre or worse.
- Firm about to join ranks of very largest.
- Firm small but growing rapidly.
Cautions in Cultural Change
- Cultural change can be difficult and time consuming.
- Should be attempted only after less-difficult solutions have been ruled out.
OD Application
Transformation at Home Depot
- Home Depot is number-one home-improvement retail chain in U.S.
- It had unstructured and entrepreneurial culture.
- Competitor Lowe’s began taking market share.
- Nardelli was brought in as CEO to turn around dysfunctional culture.
- Nardelli brought in new top management team.
- Lacked support from lower levels.
- Changes resulted in unintended consequences.
- Culture became one of revolt.
- Innovation and sense of ownership declined.
- When market share declined more, board replaced Nardelli with Ellison.
- Ellison has made methodical and long-range changes.
Key Words And Concepts
- Culture.
- Reflects organization’s past and is rooted in firm’s history.
- Incremental approach.
- Long-term planned change that relies on collaboration.
- Organization transformation (OT).
- Drastic, abrupt change to structure, management, and culture.
- Strategic change management.
- Focus on alignment with strategy, structure, and human resources systems.
- Strategy.
- Course of action used to achieve major objectives.
- Strategy-culture matrix.
- Assess readiness of culture for strategic changes.
- Technical, political, and cultural systems.
- Organizational systems of strategic change management model.
- Transformational change.
- Immediate drastic change accomplished by directive methods.
- Vision.
- Mental image of a possible and desirable future state of organization.
OD Skills Simulation 15.1
The GenTech Company
- Purpose.
- To experience and observe how information affects strategic decision making.
- To develop strategy and culture in an organization.
- To receive feedback on your risk-taking level.
Preparations for Next Chapter
- Read Chapter 16.
- Complete the Profile Survey and Profile Form in Simulation 16.1, Part A, Step 1.
- Complete Step 1 of OD Skills Simulation 16.2.