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12 Leading Change

Learning Outcomes

After reading this chapter, you should be able to:

1. Define organizational culture and organizational change.

2. Identify and explain the change models of Dunphy and Stace, Kotter, and the appreciative inquiry approach.

3. Describe leadership capacities and competencies for planning and implementing change.

iStock/Thinkstock

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Steve Easterbrook, CEO of McDonald’s®—the global fast food giant—said in 2015, “Our recent performance has been poor. The numbers don’t lie. I will not shy away from the urgent need to reset this business. . . . Our existing organization is inefficient and lacks clear accountability. We need to execute fewer things better” (Peterson, 2015).

Six straight quarters of falling profit in the United States signaled the alarm. Overall profits tumbled to $812 million—84 cents per share—from $1.2 billion, or $1.21 per share, from the previous year. Total revenue decreased 11% to $5.96 billion over the same period (Gensler, 2015). McDonald’s has seen a remarkable turnaround under Easterbrook’s leadership. As of May 2018, the company’s sales had rebounded, as had its stock price (Kuehner-Hebert, 2018).

Several factors had pressured the company’s poor performance. Externally, food safety scan- dals in Asia (“CNBC,” 2015), and a growing demand for healthier foods internationally, strained relationships with franchisees. Striking employees demanding higher pay and better work-

ing conditions presented additional challenges for the company (Peterson, 2015). McDonald’s needed to solve its internal problems as well. As the CEO noted, the company needed “stronger financial discipline, faster decision- making, and hard-edged accountabil- ity” (Peterson, 2015).

Easterbrook was the leader that McDonald’s needed. New initiatives he put in place included new menu offer- ings and investment in technology to shorten order wait times. Easterbrook also saw the potential for growth in delivery, partnering with UberEats to roll out McDelivery to nearly 8,000 res- taurants and releasing its own mobile app for orders and payment. Improv-

ing relationships with existing franchisees and accelerating the rate of new franchises also contributed to the company’s turnaround (Reynolds, 2018).

Franchisees praised some of the new menu items, such as Signature Crafted Recipes and McCafé beverages, for increasing guest counts and store sales, but criticized others. The $1 $2 $3 Dollar Menu, designed to give customers more choices, was not found to be “profit- oriented” by franchisees (QSR, 2018). Implementing, managing, and leading change is never simple. It’s a complex process that takes time and resilience. How McDonald’s continues to adapt to shifting global economies and evolving social norms, both domestically and abroad, will prove an interesting case for leading change now and in the future.

Leading and managing large-scale organizational change is an essential part of leader- ship and incorporates many of the concepts that have been covered in this text—including transformational, charismatic, and transactional leadership. It is no easy task. In fact, 2017 research from McKinsey & Company showed that 70% of all transformations failed (Gleeson, 2017). Even if that dismal statistic is true—Harvard Business Review stated that “there is no

Hannelore Foerster/Getty Images Entertainment/Getty Images Steve Easterbrook, CEO of McDonald’s, is in the pro- cess of leading a large-scale change process for the fast food giant.

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Section 12.1 Organizational Change Defined

credible evidence at all to support the notion that even half of organizational change efforts fail” (Tasler, 2017, para. 6)—that still means that an estimated 30% to more than 50% of organizational changes succeed. Given the increasing attention to data and metrics in man- agement and leadership, why have we not been able to increase success rates, however they are measured?

We will examine the reasons behind failure and success and the ways leadership can make a difference. Because organizational change is a popular and important field in itself, this chapter will simply serve as a preview of the major concepts and methods in the field that are available to leaders and managers.

12.1 Organizational Change Defined Organizational change refers to any activity that requires employees to work differently (Mourier & Smith, 2001). It comprises a wide range of activities including corporate acqui- sitions, downsizing, expansion, new strategies, and new infrastructure. These changes are intentional and affect the way that business is conducted, thereby affecting individual jobs. Both crisis management and organizational change can and should be planned.

Organizational change goes beyond simple changes in process to involve leadership, culture, strategy, structure, people, technology, and performance changes. This involves a human ele- ment, which requires that leaders and managers be able to design and guide organizations to transition to new work environments, and to do so in ways that work for business results and for those employees who are retained. One of the biggest challenges of organizational change is that it affects all levels of the organization, from executives to employees, and leaders must find ways to articulate and motivate followers to embrace potentially disruptive changes to their normal, established work flow.

Companies and sometimes entire industries now are confronted with a choice “between radical change—often involving the reinvention of a business model—and imminent obso- lescence (Forbes, 2014, para. 1). Yet, in a 2017 Harvard Business Review survey, when asked about “what worries them most about their company’s future,”executives from primarily large organizations in financial services, manufacturing, technology, health care, and retail responded with concern about their organization’s ability to change rapidly enough “to sur- vive and thrive in an increasingly digital world” (Harvard Business Review, 2017, para. 3). Seventy-five percent of the 376 respondents said “their organizations will require substantial or extensive change to become even more digital,” and only 7% of the executives said their organization “is extremely open to change,” while another 35% said their organization “is somewhat open to change” (Harvard Business Review, 2017, paras. 2, 4). Evidently, today’s executives are actively concerned about disruption from the increasing rate of change in digi- tal technology. Other relevant findings from that survey include the following:

• Eighty-nine percent of the respondents “are creating new organizational structures and teams to support digital operations and business models” (Harvard Business Review, 2017, para. 11).

• A majority of respondents said that communication from leadership that creates a compelling story about the need for change is “one of the three most effective means of building a change-embracing culture—more than any other single factor” (Har- vard Business Review, 2017, para. 10).

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Section 12.1 Organizational Change Defined

• Fifty-one percent of respondents’ companies are using design thinking, deep indus- try and policy knowledge, analytics skills, and creative skills (agile thinking).

A 2014 Forbes survey of 106 senior executives based in the United States and including a range of industries found that the most significant barrier to successful change is “conflict- ing visions among executive leadership or decision makers,” cited by 33% of respondents (Forbes, 2014, para. 5). A classic example of such a vision conflict occurred in 1983 between Steve Jobs and John Scully when Apple®’s board of directors decided to fire Jobs as CEO and bring on Scully as CEO. Scully was the former president of PepsiCo (Forbes, 2014). We will address these topics in this chapter.

Regardless of the strategy for change, top-level leaders are responsible for guiding and directing transformational changes that involve the entire organization. Leaders who are committed to successful change share key characteristics (Vas, 2001). These leaders need to be courageous, believe in their employees, be able to articulate values that encourage adapt- ability, be able to manage complexity and uncertainty, have a shareable vision, and learn from the past. They should not be interested in maintaining the status quo. Rather, they should see themselves as implementers of change, able to meet the expectations of investors and equi- ties analysts. Strong, articulate leaders can energize their workforce and other stakeholders and stockholders by showing them that change will lead to an improved future for their daily work and for the company’s long-term growth.

Maurer (2014) looks at leaders in terms of eight behaviors, ranking how well each behavior is followed.

• The first behavior is an assessment of the organization’s readiness for change. Before the organization starts implementing change, leaders need to get a feel for the organization’s reaction to the coming change.

• The second behavior is demonstrating support for the change. Without the support of a leader from start to finish, the change will not be as successful.

• Third is the change process itself. The leader must make sure to follow one change process in order to keep the change as straightforward as possible, as to not confuse employees. Change itself is complicated to begin with, and using multiple change processes will only worsen the confusion.

• Demonstrating support is not enough; a leader must also demonstrate trust. Trust in a team allows for the change to run more smoothly.

• A leader must also alert stakeholders to the coming change. The leader must make the stakeholders understand why the change is happening, why it is important, and how it will help the organization.

• Additionally, the leader must gain the support of the stakeholders. Otherwise, the change will be resisted and will not be as effective as it would have been with full backing.

• If the leader has superiors, the leader needs to make sure that his or her superiors are on board for the change, and willing to support the decision to make changes.

• Lastly, the leader needs to learn something from the change that can be used in the future in order to improve upon the change process.

As described earlier, many organizations have been changing from hierarchical structures to flatter, team-oriented ones, and although this has been shown to be effective for many corpora- tions, the shift from one structure to another can be difficult. How will promotions be handled?

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Section 12.2 The Big Picture: Planning and Leading Organizational Change

Will there be layoffs in middle manage- ment? Will this mean more work? Who will be on the team? These changes may be required to breathe life into a stagnating company to help it remain competitive, and the leader’s job is to express the vision of the improved com- pany and to show how the proposed changes will transform the existing organization for the better. For exam- ple, online retailer Revolve has main- tained a flat hierarchy since its launch in 2003. Its sales were approaching $1 billion as it prepared for its initial pub- lic offering in late 2018 (Cheng, 2018). Keeping that flat hierarchy was chal- lenging as the company grew. Found- ers Michael Mente and Mike Karaniko- las told Fast Company that “leaders of flat companies need to be level-headed when their ideas are challenged by col- leagues above or below them. . . . You’ve got to be able to take criticisms and feedback from all angles” (Giang, 2015, para. 10). Strategic thinking and collaboration skills must be fostered across the organization.

12.2 The Big Picture: Planning and Leading Organizational Change

A first step in any change process is to identify why a change is needed, where it should begin, who will it affect, and why. Figure 12.1 proposes basic questions that can be asked at a present state and at a desired future state. That is, an executive-led team responsible for planning a large- scale change might brainstorm by asking, “What business are we in now?” and “Where do we wish, or need, to be next year or at a particular future time?” The same can be done with the other questions: “Who is our customer? What are our core competencies? What is our main product and service? Who and what will or should they be next year or at a particular time in the future?” After asking these questions, a team can begin to identify whether and how their current vision, mission, and values should change after a particular organizational change is implemented. For Random House, such a model helped identify that its market requirements had changed to a more digital focus and recognized that the company would need to strategically partner with companies already in the e-book market, such as Amazon.com, Audible.com, Barnes & Noble, Google, and Sony, and shift production and even editorial competencies to become much more technologically oriented. How would this change affect their vision and values?

Leaders like Markus Dohle at Random House and Steve Easterbrook at McDonalds as well as their top-level team leaders generally have to take calculated risks to achieve growth and per- formance goals when planning and implementing transformational changes. Wealth creation

Sthanlee B. Mirador/Sipa USA via Associated Press Michael Mente and Mike Karanikolas found main- taining a flat organizational hierarchy challenging as their start-up Revolve grew to nearly $1 billion in sales.

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What business are we in?

What are our core competencies?

Who is our customer?

What is our product or service?

• Vision Who are we?

Who will we become?

• Mission What is our strategic purpose

for operating?

• Values What do we stand for and believe? What standards can be used to evaluate

and judge us?

Section 12.2 The Big Picture: Planning and Leading Organizational Change

in organizations is facilitated by strategic leadership that takes risks (Rowe, 2001). Different levels of risk are necessary when envisioning a new future for a company, its stockholders, and stakeholders. Mark Zuckerberg at Facebook believes that “The biggest risk is not taking any risk. . . . In a world that’s changing really quickly, the only strategy that is guaranteed to fail is not taking risks” (Fell, 2014).

On the other hand, taking uncalculated and irresponsible risks can upend companies like Exxon and others. Levy, Krivkovich, El Quali, and Graf (2015) at McKinsey & Company concluded from a study on organizational risk taking, particularly in banks, that “In our experience, most risk incidents tie back to a cultural root cause, fostering inappropriate decisions and actions that result in losses. Crises can continue to emerge when organizations neglect to manage their people’s attitudes and behaviors towards risk across all lines of defense” (p. 1). Based on their experience with banks, Levy et al. also stated that the keys to a successful risk culture trans- formation—which are relevant to other organizations planning changes—are: “(1) Reaching a broad consensus on the desired risk culture that is linked to the linking into overall organiza- tional culture; (2) Reviewing formal mechanisms to enforce a strong risk culture and develop- ing people’s capabilities related to dealing with risks; and (3) Overinvesting in communication and senior leadership role modeling” (Levy, Krivkovich, El Quali, & Graf, p. 3).

Take HUMANMETRICS Risk Attitudes Profiler™ (http://www.humanmetrics.com/rot/rotqd .asp) to get a sense of your risk-taking attitudes. Add this result to your other assessments in this text to discern any patterns in your overall evolving leadership style.

What business are we in?

What are our core competencies?

Who is our customer?

What is our product or service?

• Vision Who are we?

Who will we become?

• Mission What is our strategic purpose

for operating?

• Values What do we stand for and believe? What standards can be used to evaluate

and judge us?

Figure 12.1: Strategic alignment questions

Source: From Weiss, J. (2009). Business ethics: A stakeholder and issues management approach (5th ed.). Mason, OH: South-Western, Cengage Learning. Reprinted by permission of the author.

http://www.humanmetrics.com/rot/rotqd.asp

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Shared Values

Stategy

Systems

Skills Style

Structure

Staff

Hard S’s

Soft S’s

Section 12.2 The Big Picture: Planning and Leading Organizational Change

Organizational Alignment Matters As organizations change, organizational alignment becomes increasingly important. George (2014) argues that alignment is the “key” to success. Siloed organizations often function out of alignment, which can inhibit change. Therefore, it is important for organizational functions to align “internally” and between other organizational functions (George, 2014).

Change leaders must also be aware that any time a major strategy is changed, other aspects will likely also have to change. In Chapter 9, we discussed how strategy is one of the 7-S model assessments in the organizational alignment framework (see Figure 12.2). The other six 7-S model tools— structure, systems, shared values, skills, and style—must be realigned to main- tain consistency and cohesiveness among employees, legitimacy among stockholders and stakeholders, and connection with customers. When Random House shifted focus from print to digital media, it also moved its key staff members into different positions. The team’s struc- ture was likely to become less hierarchical (a functional team) and more cross-functional, self-managed, and even partially virtual, depending on geography and expertise availability.

The company also likely followed suit with changes in its systems (reward, accounting, human resource, and technology) to fit with the digital business focus. For example, iPads, iBooks, and other new products will likely increasingly use their products. The internal culture began to change as new hires with different skills came on board with different values and work- ing styles. Such internal and external realignments do not happen overnight. They must be planned, coordinated, led, and managed with foresight.

Figure 12.2: Shared values model

Shared Values

Stategy

Systems

Skills Style

Structure

Staff

Hard S’s

Soft S’s

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Section 12.2 The Big Picture: Planning and Leading Organizational Change

Once an organization is realigned, it is important to make sure that the alignment is sus- tained. George (2014) argues that there are three important aspects for sustaining alignment: planning and incentives, communication, and feedback and reporting.

• The realignment not only needs to be planned before implementation, but the plan- ning needs to span into the future as to how the alignment will stay intact. There also needs to be an incentive for sustaining the alignment, such as increased perfor- mance or bonuses.

• Communication is also important in sustaining alignment because it allows for increased transparency, knowledge, and trust. Alignment is much easier when every- one is on the same page from having the same information.

• A third aspect for sustaining alignment is feedback and reporting, which is closely related to communication. In this case, communication can be used to fix problems and improve upon processes, as well as track performance.

Culture Counts in Organizational Change Culture remains a most important dimension in any organizational change and realignment. As seen in the 7-S framework (Figure 12.2), shared values are at the center of alignment models. The effects of cultural shift can be felt throughout the organization, including in and across teams.

Middle- and lower-level leaders and managers can assist with this type of shift by having top-level leaders join them with teams and groups of employees in informal roundtable dis- cussions about the issues that the employees are experiencing. Discussing specific ways that different professional and team needs can be met is also part of these discussions. Many leaders have “town meetings,” where top-level leaders offer more information and plans for integrating the larger culture with mid- and lower-level organizational units. Providing forums to listen to mid- and lower-level employees’ experiences with such cultural shifts is another way of showing concern, as is following up with suggestions from employees on how to enhance their work and meet their cultural needs after a major organizational change.

When planning an organizational change, classic and contemporary models are used not only by change management specialists and consultants but also by top-level leadership teams and internal organizational staff. Three classic and current models are described here.

Dunphy and Stace’s Change Model Dunphy and Stace’s change model helps leadership teams decide on the scope, size, and nature of a desired change. Is it fine-tuning, incremental adjustment, or modular—all are defined here by Dunphy and Stace’s (1993) four levels of change.

Level 1: Fine-Tuning This generally is not a large-scale change, and has traditionally required minimal effort and resources to refine policies, develop people, or adjust processes. It is usually focused at a

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Section 12.2 The Big Picture: Planning and Leading Organizational Change

departmental or divisional level. However, as with Alibaba, Netflix, Amazon and other tech- nology companies, fine-tuning can involve an ongoing process of matching and “fitting” parts of an organization’s strategy, structure, people, and processes with the environment.

Level 2: Incremental Adjustment Incremental adjustments are predictable changes that evolve slowly and systematically at a constant rate over time within the organization to fit the external environment. No radi- cal changes are needed, but modifications are made such as shifting emphasis among prod- ucts, expanding a sales territory, and modifying a mission statement to employees. Both this type of change and fine-tuning are developmental in nature. The focus is on executing a well- defined shift in the way things work. For example, a large technology company wishes to integrate specialized engineers into regional sales teams. This involves role changes, client assignments, compensation, goals, and teamwork. Hundreds of people will be affected. So this is not a trivial change, but neither does it involve the entire organization.

Level 3: Modular Transformation Organizational change is radical in this type of change, but in modular transformation it is focused on subparts rather than on the entire organization, for example, restructuring depart- ments or divisions; changes in key executives and managers’ responsibilities; introducing new processes in IT, human resources, or a business process. This type of change is related to transitional change.

Level 4: Corporate Transformation Corporate transformation, like transformational change, involves a radical shift in the busi- ness strategy and changes in the vision, mission, culture, and systems. The plan and projected outcomes are more unpredictable and experimentation and risk is involved. There is outside recruitment of new executives and key management positions. Most, if not all, of the internal systems and dimensions of an organization are affected. Kotter’s eight-step change process, discussed in the following section, addresses this type of planned organizational change. Also in transformational change the organization may essentially be reinvented. For example when Meg Whitman took over as CEO at HP (Hewlett-Packard) in 2011 and then became chair in 2014, she realized she would be in charge of a transformational turn-around for one of the world’s largest computer and printer firms. With stocks trending downward and strat- egy seeming confused, she moved forward with her predecessor’s plan to split HP into two companies: one an enterprise-computing technologies service, and the other selling products like personal computers and printers.

Kotter’s Model of Organizational Change Because organizational change does not happen easily, leaders can facilitate and help their organizations accept new opportunities and adapt to external threats. As with the process of team building, change implementation follows certain stages, and a successful leader under- stands the process and can guide the organization through systematic steps. J. P. Kotter’s

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7. Build on the change

8. Make it stick

6. Create quick wins

5. Empower action

4. Communicate the vision

Creating the climate for

change

Engaging and enabling the organization

Implementing and sustaining for

change

3. Create a vision for change

2. Form a powerful coalition

1. Create urgency

Section 12.2 The Big Picture: Planning and Leading Organizational Change

book Leading Change (1996) is a seminal work on leading transformational change Kotter’s change model is perhaps the most widely used by corporations, organizations, and change consultants. His eight-step program for leading change can apply to a wide range of organiza- tional change situations (see Figure 12.3). Kotter’s eight stages of organizational change are outlined in the following sections.

Stage 1: Create Urgency Everyone in an organization, from executives to employees, is willing to change if it’s impor- tant. Politicians know this well and constantly invoke crises to win over constituents. Urgency wins support and cooperation. If the people in the organization, in particular the leaders, feel complacent, they have no impetus to change. If everything is OK, they will maintain the status quo. However, in a crisis situation, leaders are motivated to get involved and to recruit follow- ers, which adds momentum to any change initiative.

Figure 12.3: Kotter’s eight stages of organizational change

7. Build on the change

8. Make it stick

6. Create quick wins

5. Empower action

4. Communicate the vision

Creating the climate for

change

Engaging and enabling the organization

Implementing and sustaining for

change

3. Create a vision for change

2. Form a powerful coalition

1. Create urgency

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Section 12.2 The Big Picture: Planning and Leading Organizational Change

The economic crash provided one strong reason for organizational change. Many companies have had to downsize in the face of decreased revenue, and although layoffs are never popular, the urgency of many situations requires organizational changes, especially if change means potentially saving the organization or its viability in the marketplace.

Stage 2: Form a Guiding Coalition A strong team with a shared objective can implement change far better than a single individual, and this force is needed for transformation within an organization.

With a diverse team, members can find ways to share and communicate the new vision in ways that their specific followers can understand—the CFO can explain the reasons for change in a way that wins buy-in from the finance department, and the head of research and development can show how changes will benefit that department.

In addition to communication, a guiding team can oversee the creation of new processes within the organization far better than a single executive can. A team can also draw on more resources than an individual, even a powerful CEO, and demonstrate quick results, which in turn can secure support from more leaders and employees.

When Chuck Robbins became CEO of Cisco Systems, he shook up the company’s execu- tive ranks, putting together “a high-energy team with a healthy level of impatience,” he told CRN (Computer Retail News) in 2018 (Brown, 2018, p. 1). He described his team as “incredibly aligned on what we’re trying to accomplish,” with deep subject matter exper- tise in their functions, balanced with an ability to, “at a high level, tell the story of what we’re trying to accomplish” (Brown, 2018, p. 1). His team is not only gender diverse but also diverse in experience and approach, which, Robbins said, “is helping us think more holistically about how we attack opportunities and solve problems” (Brown, 2018, p. 3). The company surged in growth between 2009 and 2013, driven by a strategic focus on acquisitions and mergers led by Robbins’s predecessor, John Chambers.

Stage 3: Create a Vision and a Strategy A clearly articulated vision simplifies organizational change for employees. Instead of listing dozens of minute decisions, a vision sets a general direction and motivates employees toward that positive outcome, and the strategy defines how that goal will be accomplished. A simple vision can direct thousands of individuals, and even if initial steps in the change are painful,

Photodisc/Thinkstock Many leaders have “town meetings” where top-level leaders offer more information and plans for inte- grating the larger culture with mid- and lower-level organizational units.

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Section 12.2 The Big Picture: Planning and Leading Organizational Change

such as losing colleagues through downsizing or breaking up an established team during reorganization, it provides a picture of a hopeful outcome.

A change vision is a guide for what an organization will look like after changes have been made, and for what opportunities there are for the organization after the changes have been implemented. It is a good tool for motivating employees to support the changes (Kotter, 2011). An effective change vision is: easy to understand, easy to communicate, short and to- the-point, is emotionally appealing, and applicable to a wide range of people (Kotter, 2011). If a change vision is created effectively, it should help others to “buy in” to the change.

A vision statement is different from a mission statement. A mission statement is based on the present and aims to explain the purpose of the organization, while a vision statement is focused on the future and aims to inspire and lead the organization in the right direction (Arline, 2014).

In addition to a vision statement, an organization needs to have a strategy. In 2016, research by the firm Navalent estimated that 67% of well-formulated strategies failed due to poor execution, 61% of executives are not prepared for the strategic challenges they faced upon being appointed to senior leadership roles, and 50%–60% of executives fail within the first 18 months of being promoted or hired (Carucci, 2017).

Expert on execution, Larry Bossidy, former Chairman and CEO of Honeywell International, wrote “People think of execution as the tactical side of business, something leaders delegate while they focus on the perceived ‘bigger’ issues. This idea is completely wrong. Execution is not just tactics—it is a discipline and a system. It has to be built into a company’s strat- egy, its goals, and its culture. And the leader of the organization must be deeply engaged in it” (Altfeld, n.d.). In 2018, the University of Notre Dame’s Mendoza College of Business posted a list of “7 Leadership Behaviors that Build Success,” (updating Bossidy’s list from 2002): 1—Ethics and integrity; 2—Trust; 3—Growing others; 4—Inspire the vision; 5— Decision-making; 6—Encouraging innovation; and 7—Rewarding achievements (Univer- sity of Notre Dame, 2018).

O’Connor and O’Connor (2015) took a look at why so many business strategies fail, and came up with 10 reasons.

1. The strategy is formulated without a team, or the team members are not the right people for the job.

2. The strategy does not motivate employees. 3. There is a separation in responsibility regarding creating the strategy and imple-

menting the strategy. 4. The company is internally focused, not taking into account outside factors. 5. Lack of structure and accountability. 6. Too many strategies are attempted to be implemented so the process becomes

unfocused. 7. Strategy results are not measured to check on progress and success. 8. The execution team does not have meetings to discuss the progress of the strategy.

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Section 12.2 The Big Picture: Planning and Leading Organizational Change

9. The entire company is not updated on the progress of the strategy, which would increase understanding and transparency.

10. The company does not take an objective perspective, or bring in an outsider to man- age the creation and execution of the strategy.

In order to ensure that a strategy is successful, these 10 common reasons for strategy failure must be considered.

Leong (2014) observed that there are three reasons companies may face problems with form- ing a vision for the future state, that is, too big, too numbers-driven to implement, and too complicated to achieve. Leong (2014) writes that “Vision statements may be lofty and inspira- tional, but they don’t take the place of the tactical actions workers must take to move toward the future.” Vision statements that are too far-reaching can create a “paralyzing environ- ment” in which leaders continue to pursue ill-defined plans. Vision statements that are too numbers-driven may be understood by employees but not agreed upon. Vision statements that are also too complicated also cause confusion. To avoid these errors, responsible and talented leaders and managers should be clear, engage their teams and work with them to see how work connects to and fits with the vision to ensure successful change efforts and outcomes.

Stage 4: Communicate the Vision Simply having a vision is not enough. In order to keep followers motivated, leaders need to constantly communicate that vision, reinforcing the shared, positive outcome. Consistency of message is important in transformative change, as it keeps leaders and employees focused on the desirable end to a disruptive process; so instead of concentrating on potentially upsetting daily changes, leaders from the CEO down to managers should promote the same message of a positive outcome.

Piyush Gupta, CEO of DBS, Singapore’s largest bank, made one of his priorities to clarify the bank directed and future vision. He held off-site meetings for three days to develop with his team a clear strategy, the outcome being a “nine-point strategic road map that the bank has executed during the past four years” (Leong, 2014). He is guiding DBS to be a leading Asian bank by ensuring that its leadership works closely together building franchises in wealth management, SME banking, transaction banking, and treasury and markets.

Leaders who can create clear visions and strategies with their teams and companies are more likely to succeed in planned changes than those who do not. After Steve Jobs left Apple and before his death, Tim Cook took his place as CEO in August of 2011.

ASSOCIATED PRESS/Wong Maye-E Piyush Gupta, CEO of DBS, Singapore’s largest bank, made one of his priorities to clarify the bank directed and future vision.

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Section 12.2 The Big Picture: Planning and Leading Organizational Change

Employees were faced with uncertainty. Would Apple be the same? What changes would be made? How would this affect the products that were created and the day-to-day work of the employees?

In order to combat this uncertainty, Cook’s first email as CEO stated “Apple is not going to change” (Kane, 2014). What he actually meant is that the fundamentals of Apple would not change. In the days to come, he would demonstrate through his actions how the culture of Apple would become more relaxed and focused on teamwork.

Cook started a charity program as one change, which was well received by employees. He also started communicating with employees more frequently through e-mails, meetings, and even during lunch. Cook decided that he would introduce himself to different employees in order to create more intimate relationships.

What also contributed to strengthening Cook’s new role was his early e-mails reassuring employees that they would still have their jobs. He also communicated the change in culture through his actions—frequent e-mails and getting to know individual employees. His clear communication throughout the early change process was a critical aspect of also managing that change.

Goman (2013) believes that Pennington’s book, Make Change Work: Staying Nimble, Relevant, and Engaged in a World of Constant Change (2013), correctly outlines five common questions that employees have about change, and that these questions should be addressed.

1. What is changing? 2. How will this change the day-to-day operations for individual employees? 3. Will this change actually bring improvement? 4. How is the success of the change going to be measured? 5. How much support is behind the change, and who is supporting it?

Goman (2013) also stresses the importance of nonverbal communication, such as body lan- guage. Body language has the power to reinforce or derail verbal communication. Leaders and executives need to align their body language with their verbal communication. For exam- ple, leaders speaking about being open to ideas and comments while they are on a stage and behind a podium find that their message is not effective because their verbal and nonverbal communication is not in alignment. However, a leader speaking to a group while they are on the same level, without anything between the speaker and audience, is more effective at com- municating the message.

Stage 5: Empower Action The first half of Kotter’s eight-stage plan involves motivating employees by keeping them informed and focused on a positive outcome. Empowering employees to act also removes resistance to change by including followers in the process. Instead of this change being imposed from above, followers can engage in and affect the outcome. This empowerment can occur through knowledge, resources, and discretion to support and further change. When FedEx implemented teams, it trained and empowered its employees, who then col- laborated to improve internal processes. Although the change was disruptive, it resulted in buy-in.

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Section 12.2 The Big Picture: Planning and Leading Organizational Change

Stage 6: Create Quick Wins Organizational change takes time, so it is important to demonstrate quick results to keep employees motivated to stay on board for the long haul. The most effective short-term wins are highly visible, so that many followers can see the results; unambiguous, so that the change initiative can’t be questioned; and clearly a product of the transformation. Employees want to know that their efforts and the difficulties of the process are worth completing, and short-term wins prove that they should continue and that their current path will lead to a positive outcome.

When the U.S. government changes hands between political parties, it employs this strategy. The new ruling party tries to pass a few straightforward bills that its constituents support in order to demonstrate effectiveness and progress.

Stage 7: Build on the Change In this stage, leaders build on the support gained through short-term wins in order to pro- duce enough momentum to push for larger efforts. Successful change leaders do not declare victory after small wins, but use them to bolster the energy and confidence that followers can achieve more significant goals. As employees see the results of larger initiatives, they have even more drive to complete the change.

In the case of attempting to turn a company around during a recession, the success of a new product may serve as impetus for an entirely new line. The initial success of a relatively small experiment can motivate excitement and drive for the larger project, just as the Rockefeller Foundation uses small successes to leverage larger investment.

Stage 8: Make it Stick Transformations are not complete until they become part of an organization’s culture. During this stage, leaders model new values, attitudes, and behaviors so that employees understand the permanent improvement, much like developing norms in team building. Leaders can use this stage to celebrate and promote employees who adopt the new values or beliefs of the organiza- tion. These individuals in turn can serve as examples for others and reinforce the revised norms.

Recent Revisions to Kotter’s Classic Model Appelbaum, Habashy, Malo, and Shafiq (2012) introduces limitations to Kotter’s eight-step model, the most prominent of which is that this framework is only applicable for “fundamen- tal changes” and not for more complicated ones. The steps are also supposed to be followed in order, which means that the framework is not flexible for organizations that would prefer to change the framework to align more with their corporate culture. In some cases, not all of the steps apply to the change; for example, changes that need to be kept a secret do not allow for communication. These steps also do not address issues that may arise from lack of com- mitment. However, Appelbaum et al. (2012) state that although Kotter’s eight-step model has some drawbacks, it is a great starting point for implementing changes.

In 2014, Kotter updated his eight-step process in his book, Accelerate. In this book, Kotter made four key changes to his original process (LeStage, 2015). All four changes address Appelbaum et al.’s (2012) concern that the process is not flexible. Kotter’s first revision is that

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Identify and appreciate the best

What will be

What might be?

Visioning

What could be? The Ideal

Appreciative Topic

2. Dream

4. Destiny

3. Design

1. Discovery

Section 12.2 The Big Picture: Planning and Leading Organizational Change

the steps should run “concurrently and continuously.” Second, a volunteer group should be formed from all over the organization (top, bottom, and across) in order to drive the change. Third, there should be an allowance for flexibility and agility outside of the traditional orga- nizational hierarchy form, while still allowing the flexibility and agility to work with the hier- archy. Finally, the process should be dynamic and leaders should look for opportunities and initiatives to quickly and efficiently take advantage of. Clearly, Kotter’s steps are still relevant today, but the process was in need of adaptation.

Appreciative Inquiry Change Model Unlike other “problem solving” change models, appreciative inquiry (AI) is an opportunity generating process that involves employees from the bottom- and middle-up and cascades throughout the entire organization to create and implement changes. The model has been used by all sizes of organizations worldwide to effectively involve, engage, and mobilize lead- ers, managers, employees, and stakeholders. As cofounder David Cooperrider explains:

Appreciative Inquiry is about the coevolutionary search for the best in people, their organizations, and the relevant world around them. In its broadest focus, it involves systematic discovery of what gives ‘life’ to a living system when it is most alive, most effective, and most constructively capable in economic, ecological, and human term. (Cooperrider & Whitney, n.d.)

The model as depicted in Figure 12.4 is a guide to a group’s change process. The first step is discovery. Group members brainstorm to identify the best situation that exists in their orga- nization. This is done through members sharing stories, personal experiences, and recalling other examples and information to form a common picture.

Figure 12.4: Appreciative inquiry model

Identify and appreciate the best

What will be

What might be?

Visioning

What could be? The Ideal

Appreciative Topic

2. Dream

4. Destiny

3. Design

1. Discovery

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Section 12.2 The Big Picture: Planning and Leading Organizational Change

The second, dream stage, involves members identifying what could be as a future state in their organization, what they would like to see happened. This process empowers and further bonds members together as they share their aspirations about real-time possibilities that a vision could produce. The third stage, design, starts the process of articulating an action plan for what should be, based on the previous two stages. This could involve a system that is needed, a new facility, policy and procedures that do not yet exist. Finally, during the fourth stage, the destiny stage, members translate the plan into project activities and steps that can be implemented.

Appreciative inquiry has been used by some of the largest for-profit global corporations, such as John Deere, BP, and Ernst & Young, as well as by governments, health organizations, and volun- teer and community groups. It is transformative in that it engages organizational members from a positive and forward-looking perspective. At the same time, it is not an easy method to use.

Why Organizational Change Fails There are numerous studies and many more beliefs about why major organizational change fails. Mindless, misguided change, or change that serves the careers or individual interests of a few, deserves to fail. Other technical and managerial reasons offered for such failure may be corrected with different types of leaders, training, and more expertise. Harvard profes- sor emeritus Michael Beer’s (2003) experience as a gifted professor and wise consultant are worth noting. He argued that top-down change and “total quality management” programs (programs for continuously improving the quality of products and processes) fail to create deep and sustained change in organizations for the following reasons:

1. Failure to institutionalize. These programs become fad driven. There is a gap between top management’s rhetoric about what they want, on the one hand, and, on the other, the reality of implementation among different organizational subunits and the senior team’s capacity to develop commitment to the new change direction and to behave and make decisions consistently with the change direction.

2. Failure to develop cross-functional mechanisms, leadership skills, and team culture needed for the change implementation.

3. Failure to create a climate of open dialogue about the change progress that enables learning and further change.

Lipman (2013) describes five key reasons why change fails, based on a study by Towers Watson (2013). As a result, Lipman noticed the following pitfalls:

1. The goals for the change are not realistic. Sometimes, change has good intentions, but goes against the core culture or essence of a business. The change needs to be analyzed to see if it is a good fit for the organization.

2. Executives are not involved enough. Executives need to be fully invested in the change, and show their involvement to the rest of the organization. Employees, senior management, and middle management are more likely to buy-in to the change if they see that the executive is fully committed.

3. Senior management also has to be fully invested and involved. Again, employees and middle management are more likely to buy-in if they see that their superiors are fully supportive of the change.

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Section 12.3 Leaders as Change Champions: Capacities and Competencies

12.3 Leaders as Change Champions: Capacities and Competencies

Leaders often see change as a necessary and creative way to strengthen their organizations, while workers often view change as painful and disruptive to their daily schedules. Because of this, one of the most critical aspects of leading people through change is to understand that resistance from employees is natural. One of the main reasons that employees resist change

4. Middle managers and supervisors need to understand why the change is occurring. Out of all of the managers, this group is more involved with the day-to-day activities of the organization, because they are in direct contact with employees. Therefore, they have more of an understanding of the everyday business operations. In order to buy-in to the change, they need to understand why the change is happening, and how it will impact these regular activities.

5. The organization must be fully dedicated to the change, understanding that it will not happen overnight. If any of the management levels are not fully dedicated to the change, employees will pick up on it, and the change will not be as successful. All parties need to be invested, and willing to put in hard work toward the change for however long it takes. This involves trust, as the organization as a whole must believe and trust that the change is worth it in the long run, which acts as motivation for the journey toward change. See “Take the Lead: Leading and Managing Organizational Change” to apply concepts.

Take the Lead Leading and Managing Organizational Change As the CEO of a manufacturing company that distributes product through a retail franchise network, you’ve received disturbing news in your recent customer-satisfaction survey results: Customers are overlooking your world-class engineering and manufacturing process, which results in a near-zero defect production system, and they are instead focusing on their displeasure with the purchasing experience.

Customers indicate they are primarily dissatisfied with the retail franchises that sell your products—specifically, (1) the negotiations which take place and (2) the personnel in the franchises. You’ve received similar results with previous surveys, but this time you’re determined to change things.

Based on what you’ve learned about leading and managing organizational change, determine how you would answer the following:

1. What are your primary goals in setting out on your change initiative? 2. Who will you need to ensure that you’re strategically aligned with? 3. How will you ensure such alignment? 4. What hurdles do you anticipate encountering during your change initiative? 5. How will you effectively manage your change initiative?

See the appendix for possible answers.

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Section 12.3 Leaders as Change Champions: Capacities and Competencies

is that it violates the personal compact between workers and their organization (Stebel, 1996). Personal compacts are the mutual obligations and commitments, either written or communicated orally, that define the relationship between employees and organizations. This may include specific job tasks, performance requirements, evaluation procedures, and compensation. When employees feel that proposed organizational changes might affect the personal compact that they have accepted, they are likely to resist. Quast (2012) outlines the top five reasons why employees resist change.

1. First, people have a fear of the unknown or they do not like surprises. This can be prevented through communication, transparency, and giving employees enough time to adjust to the idea of change.

2. Second, employees resist change if they do not trust their manager or executives. This can arise if new management or executives come in and announce change without first earning the trust of employees. Employees are more likely to trust a manager or execu- tive that they have known for a longer period of time, because trust has been built.

3. Third, employees are worried about their job security and not having control. When- ever a company announces change, employees want to know how it affects them. Employees resist change if they think that they may lose their job or lose their say in the company.

4. Fourth, employees resist change if it involves bad timing. Trying to implement change too quickly or during a peak business time may be met with resistance from employees.

5. Finally, the fifth reason why employees resist change is that some people naturally have a lower tolerance for change than others. Although some people like change because it brings in new ideas and practices, others prefer sticking to the same routine.

As a result, leaders need to understand why employees may resist change, and what they can do to minimize resistance.

However, resistance is not always a bad thing. Resistance can be used as feedback to boost the effectiveness of change (Ford & Ford, 2009). Many of the employees that resist change are people that are more involved with day-to-day operations. There is a large chance that they are resistant to change because they believe that it will not work with the day-to-day opera- tions. If executives take the time to listen to the concerns of these resistors, they have the opportunity to adjust the planned changes, if needed, in order to prevent issues in day-to-day operations from happening. The executives will also be showing these employees that their opinion is valued, which may increase buy-in.

Leaders can improve the chances of a successful change outcome by following Kotter’s eight- step change theory. Effective leaders also mobilize their followers by engaging them on an emotional level (Fox & Amichai-Hamburger, 2001). In addition, leaders can use the following additional implementation techniques to smooth the change process for their employees.

Communication and Training Open and honest communication is one of the most effective ways leaders can overcome resistance to change from their employees. Frequent and open communication builds trust and a sense of control between employees and leaders. Leaders who communicate possible

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Section 12.3 Leaders as Change Champions: Capacities and Competencies

organizational changes to the public but neglect to communi- cate information to the employ- ees most affected by the change are more likely to face heavy resistance, and one of the most common reasons for failures in organizational change is that employees learn of proposed changes from outsiders (Rich- ardson & Denton, 1996). This breaks the compact between employees and the organization.

In addition to communication about the change, employees should receive training to acquire any new skills needed to perform their new roles and responsibili- ties, so that they are comfortable and ready for their new roles. FedEx successfully reorga- nized 1,000 clerks into teams of 5 to 10 by providing leadership training so that these teams could manage themselves. Advanced Micro Devices also offers training so that employees can understand the data they can access through the intranet, which enables them to interpret how their work impacts product development and yields.

Participation and Involvement When leaders seek opinions from their employees in designing change, employees are given a sense of control over the occurring changes. This helps them understand the reasons for change and its necessity. Participatory approaches result in a smoother implementa- tion process when a company introduces change (Mirvis, Sales, & Hackett, 1991). This is in large part why executive teams are so important to CEOs. When higher level executives can offer advice and directly affect the company’s direction, they invest in the changes and become key players in execution. Higher level executives, particularly CEOs who wish to assume roles as steward (if not servant) leaders, would also, as noted earlier, hold meetings themselves with different teams and organizational levels to hear employee concerns, sug- gestions, and ideas about the design and impact of organizational changes on them and on the entire organization.

Coercion As an absolute last resort, leaders have the option of overcoming resistance by threatening the loss of jobs. Although a drastic option, it may be necessary in crisis situations when a rapid response is needed. While Elon Musk is admired as a strategic leader, he is also known for using coercive power (Wartzman, 2015). Tesla employees reported that they were warned not to walk past his desk because he was so prone to firing sprees (Hamilton, 2018). This option is often left for last as it has the potential to deeply affect employee morale and can lead to greater resistance.

Georgia Kuhn/Cultura Limited/Superstock Despite differences in leadership models, all methods of organizational change require teamwork, communication, shared vision, and trust.

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Section 12.3 Leaders as Change Champions: Capacities and Competencies

Identifying areas of resistance and responding appropriately to gain support are key duties for change leaders. Heifetz and Linsky (1994) described change leadership as “getting on the balcony” to understand what was happening at the moment and then to look out at the horizon. Their primary concern was adaptive change, which has the potential to destabilize an organization and its employees.

Monitoring and Rewarding The leader, in addition to thinking strategically and operationally, must address the psycho- logical component of change by keeping day-to-day business operations going. Although the organization might be changing, employees continue to work, report to managers, and follow certain processes. While encouraging followers to settle into new routines, the leader also elicits feedback in order to understand what is working and what can be improved. The view from the balcony only provides a top-down perspective of organizational change; it is impor- tant to know what is happening on the ground.

Kanter (2002) argued that an organization faces its greatest challenges once change is already underway. Her concern was that task forces often begin the process of organi- zational change then lose momentum, or hope that followers will figure out the rest for themselves.

Kanter’s method of managing organizational change involves external monitoring through listening to clients, to hear whether and how they have been affected by the change. Has busi- ness suffered? Or have client’s experiences improved? If so, how? Kanter (2002) also encour- aged interdisciplinary projects, with employees rotating positions to gain new perspectives. Like Kotter, she believes in creating and sharing a vision, although she specifies that this vision should be inspirational, and she encourages coalition building so that organizations have a specific team devoted to change. She recommends expanding this coalition to include implementers. While change leaders can bring resources, implementers focus on the day- to-day management of change. This team sticks with the transformation and ensures that it happens. Finally, Kanter (2002) notes that recognizing and rewarding achievements from the process is important. This provides closure to one organizational overhaul while building energy for the next initiative.

Although most of these examples of change leadership have focused on how leaders can engage followers, Senge et al. (1999) challenged these approaches. Instead of a top-down approach, these researchers posited that successful change comes from within an organi- zation and claimed that executives had less power to implement change than believed. Try Assessment 12.1 to see if you’re a change leader.

According to Senge et al., the myth of the “hero leader” creates a vicious cycle in which orga- nizations face a crisis, look for a CEO to save the company, undergo aggressive short-term changes, and then face a new crisis. The top-down approach leads to lack of commitment from employees, lack of long-term organizational learning and growth, and little actual change. Rather than focusing on top-down leadership, they recommended developing leader- ship capacity across the organization and identify three types of leaders: local line leaders, executive leaders, and network leaders.

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Section 12.3 Leaders as Change Champions: Capacities and Competencies

Local line leaders (Cameron & Green, 2004) design products and services. As managers, they focus on small teams and clients. Executive leaders are on the management board. They can foster a culture of innovation and set up systems of reward. However, in this model, real change begins at lower levels. Network leaders connect groups led by local line leaders and serve as guides and partners. The three types of leaders are interconnected, with executive leaders providing the infrastructure for line leaders who collaborate via network leaders. For effective change to occur, these three types of leaders must communicate.

Assessment 12.1: Are You a Change Leader?

Instructions Think specifically of your current or a recent full-time job. Please respond to the following 10 items according to your perspective and behaviors in that job. Indicate whether each item is mostly false or mostly true for you.

Mostly False

Mostly True

1. I often try to adopt improved procedures for doing my job. _______ _______ 2. I often try to change how my job is executed in order to be

more effective. _______ _______

3. I often try to bring about improved procedures for the work unit or department.

_______ _______

4. I often try to institute new work methods that are more effective for the company.

_______ _______

5. I often try to change organizational rules or policies that are nonproductive or counterproductive.

_______ _______

6. I often make constructive suggestions for improving how things operate within the organization.

_______ _______

7. I often try to correct a faulty procedure or practice. _______ _____ 8. I often try to eliminate redundant or unnecessary

procedures. _______ ______

Scoring Please add the number of items for which you marked Mostly True, which is your score: _____. This assessment measures the extent to which individuals take charge of change in the workplace. A score of 7 or above indicates a strong take-charge attitude toward change. A score of 3 or below indicates an attitude of letting someone else worry about change.

Before change leaders can champion large planned change projects, they often begin by taking charge of change in their workplace area of responsibility. To what extent do you take charge of change in your work or personal life? Do you see yourself being a change leader? What factors and forces prevent you from taking charge, or help and support you to take charge? Source: Taking Charge At Work: Extrarole Efforts to Initiate Workplace Change by E. W. Morrison & C. C. Phelps. Academy of Management Journal, vol. 42 no. 4, pp. 403-419. Copyright (c) 1999 by Academy of Management. Reproduced with permission of the Academy of Management.

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Summary & Resources

Despite differences across these leadership models, all methods of organizational change require teamwork, communication, shared vision, and trust. Whether leaders directly effect change in the organization or not, they serve as visible models of new organizational norms and set examples for appropriate interactions and company culture.

Another strategy to help worthwhile change succeed is developing leadership capacity in followers who can support top-level leaders in moving change initiatives forward through empowerment and feedback.

Summary & Resources

Chapter Summary Organizational change is any activity that requires employees to alter their conventional work habits (Mourier & Smith, 2001). Large-scale changes include corporate acquisitions, down- sizing, expansion, new strategies, and new infrastructure. These changes are intentional and affect the way that business is conducted, thereby affecting individual jobs. Top-level leaders are responsible for guiding and directing transformational changes that involve the entire organization.

Leaders who are committed to successful change need to be courageous, believe in their employees, be able to articulate values that encourage adaptability, be able to manage com- plexity and uncertainty, have a shareable vision, and learn from the past. A first step in any change process is to identify why a change is needed, where it should begin, and whom it would affect and why. Generally, a change involves getting from “here” to “there.” Identifying an “as is” state (where we are) compared with a “to be” state (where we need and want to be). The change process can begin by addressing the questions: “What business are we in now?” and “Where do we wish, or need to be next year or at a particular future time?” “Who is our customer? What are our core competencies? What is our main product and service? Who and what will or should they be next year or at a particular future time?”

Three change models help leaders and managers plan a change: Dunphy and Stace’s model, Kot- ter’s eight steps, and the appreciative inquiry model. How can concepts, models, and ideas in this chapter help you be part of solutions to change and not resisters? Leaders as change cham- pions need capacities and competencies to vision, plan, and guide the implementation of trans- formational changes. These capacities and competencies actually involve skills and concepts covered throughout this text. In particular, leaders—and you—can learn the skills of listening, mobilizing, executing, and supporting the processes, systems, and people in the organization, who in turn are needed to drive the changes—and be active in sustaining the new vision.

Web Resources

Assessing your attitudes toward risk

http://www.humanmetrics.com/risk-taking Take HUMANMETRICS’ Risk Attitudes Profiler™ to get a sense of your risk-taking attitudes. Add this result to your other assessments in this text to discern any patterns in your overall evolving leadership style.

http://www.humanmetrics.com/risk-taking

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Summary & Resources

Critical Thinking Questions

1. Explain why change experts say that over 60% of planned organizational changes fail.

2. What is needed to help organizations succeed in large planned changes? 3. What is the most important dimension of the 7-S change alignment model and why

is it important? 4. What are some of the most significant differences between Kotter’s and

Cooperrider’s appreciative inquiry models of change? Explain. 5. Which of the two models, Kotter’s or Cooperrider’s, would you feel most and least

comfortable leading? Explain. 6. What type(s) of leadership skills and capacities are required to lead complex

organizational changes? 7. Argue the pros and cons of the importance of coercion as a change leader’s style. 8. Are you ready to participate in helping plan and implement an organizational

change in an organization? Briefly explain a process you would use from the first steps to completion. What questions would you ask? What types of tools, concepts, and understanding based on this chapter would be helpful for you in this role.

Key Terms

appreciative inquiry (AI) Change approach that focuses on creating opportunities rather than solving problems and identifying what is working well and what others believe can work better. Opportunities can materialize when people in the organization focus their attention and energy.

Dunphy and Stace’s change model Defines four types and characteristics of organizational change as either fine- tuning, incremental adjustment, modular, or transformational.

fine-tuning This type of change involves an ongoing process of matching and fitting an organization’s strategy, structure, people, and processes with the environment.

incremental adjustments Predictable changes that evolve slowly and systemati- cally at a constant rate over time within the organization to fit the external environment.

Kotter’s change model Eight-step sequen- tial, top-down planned organizational model that addresses transformational changes.

modular Transformation organizational change is radical in this type of change, but it is focused on subparts rather than the entire organization.

organizational alignment A type of cul- ture that is open to and embraces external change and is characterized by flexibility.

organizational change Any activity that requires employees to work differently.

personal compact The mutual obligation and commitment, either written or orally communicated, that defines the relationship between employees and the organization.

planned organizational change A process that moves companies from a present state to a desired future state with the goal of enhancing their effectiveness; ultimately, the goal of planned organizational change is to improve an organization’s capabilities.

transformational change Involves the emergence of a new, unknown state for the organization.