HRMN 495-Mini Case Study 4

Learning Topic

Change Management Why Do Organizations Change

Organizational change is the movement of an organization from one state

of affairs to another. A change in the environment often necessitates

change within organizations operating within that environment. Change

in almost any aspect of a company's operation can be met with resistance,

and different cultures can have different reactions both to the change and

to the way change is promoted.

Several steps can be taken to lower the anxiety of employees and ease

the transformation process. Often, the simple act of including employees

in the change process can drastically reduce opposition to new methods.

In some organizations, this level of inclusion is not possible, and instead

organizations can recruit a small number of opinion leaders to promote

the benefits of coming changes.

Organizational change can take many forms. It may involve a change in a

company's structure, strategy, policies, procedures, technology, or culture.

The change may be planned years in advance or may be forced on an

organization because of a shift in the environment. Organizational change

can be radical and swiftly alter the way an organization operates, or it

may be incremental and slow. In any case, regardless of the type, change

involves letting go of the old ways in which work is done and adjusting to

new ways. Therefore, fundamentally, it is a process that involves effective

Change Management

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UMGC (n.d.): Change Management. Retrieved from https://leocontent.umgc.edu/content/umuc/tus/hrmn/hrmn495/2228/learning-topic- list/change-management.html#

people management.

Managers carrying out any of the P‐O‐L‐C functions (planning, organizing,

leading, and controlling) often find themselves faced with the need to

manage organizational change effectively. Often, the planning process

reveals the need for a new or improved strategy, which is then reflected

in changes to tactical and operational plans. Creating a new organizational

design (the organizing function) or altering the existing design entails

changes that may affect from a single employee up to the entire

organization, depending on the scope of the changes.

Effective decision making—a leadership task—takes into account the

change‐management implications of decisions, planning for the need to

manage the implementation of decisions. Finally, any updates to

controlling systems and processes will potentially involve changes to

employees' assigned tasks and performance assessments, which will

require astute change management skills to implement. In short, change

management is an important leadership skill that spans the entire range of

P‐O‐L‐C functions.

Workplace Demographics

Organizational change is often a response to changes to the environment.

For example, agencies that monitor workplace demographics such as the

US Department of Labor and the international Organisation for Economic

Cooperation and Development have reported that the average age of the

US workforce will increase as the Baby Boom generation nears retirement

age and the numbers of younger workers are insufficient to fill the gap

(Lerman & Schmidt, 2006). What does this mean for companies?

Organizations may realize that as the workforce gets older, the types of

benefits workers prefer may change. Work arrangements such as flexible

work hours and job sharing may become more popular as employees

remain in the workforce even after retirement. It is also possible that

employees who are unhappy with their current work situation will choose

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to retire, resulting in a sudden loss of valuable knowledge and expertise in

organizations. Therefore, organizations will have to devise strategies to

retain these employees and plan for their retirement. Finally, a critical

issue is finding ways of dealing with age‐related stereotypes which act as

barriers in the retention of these employees.

Moore's Law, The Fifth Paradigm (https://content.umgc.edu/file/a4396df6‐

c4c0‐46ff‐82fc‐0ca57aa2eabe

/1/ChangeManagement_Introduction_Category:Moore's_law) by Ray Kurzweil and

Kurzweil Technologies, Inc., is licensed

under CC BY 1.0 (https://creativecommons.org/licenses/by/1.0/deed.en).

Technology

Sometimes change is motivated by rapid developments in technology.

Moore's law (a prediction by Gordon Moore, cofounder of Intel) dictates

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that the overall complexity of computers will double every 18 months

with no increase in cost (Anonymous, 2008), as depicted in the following

figure.

Such change is motivating corporations to change their technology

rapidly. Sometimes technology produces such profound developments

that companies struggle to adapt. A fairly recent example comes from the

music industry. When compact discs (CDs) were first introduced in the

1980s, they were substantially more appealing than the traditional vinyl

records. Record companies were easily able to double the prices, even

though producing CDs cost a fraction of what it cost to produce vinyl

records. For decades, record‐producing companies benefited from this

status quo. But when peer‐to‐peer file sharing through software such as

Napster and Kazaa threatened the core of their business, companies in

the music industry found themselves completely unprepared for such

disruptive technological changes. Their first response was to sue the

users of file‐sharing software, sometimes even underage kids. They also

kept looking for a technology that would make it impossible to copy a CD

or DVD, which has yet to emerge. Until Apple's iTunes came up with a

new way to sell music online, it was doubtful that consumers would ever

be willing to pay for music that was otherwise available for free (even if

illegally so).

Globalization

Globalization is another threat and opportunity for organizations,

depending on their ability to adapt to it. Because of differences in

national economies and standards of living from one country to another,

organizations in developed countries are finding that it is often cheaper

to produce goods and deliver services in less developed countries. This

has led many companies to outsource (or offshore) their manufacturing

operations to countries such as China and Mexico.

In the 1990s, knowledge work was thought to be safe from outsourcing,

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but in the 21st century, we are also seeing many service operations

moved to places with cheaper wages. For example, many companies have

outsourced software development to India, with Indian companies such

as Wipro and Infosys emerging as global giants. Given these changes,

understanding how to manage a global workforce is a necessity. Many

companies realize that outsourcing forces them to operate in an

institutional environment that is radically different from what they are

used to at home. Dealing with employee stress resulting from jobs being

moved overseas, retraining the workforce, and learning to compete with a

global workforce on a global scale are changes companies are trying to

come to grips with.

Changes in the Market Conditions

Market changes may also create internal changes as companies struggle

to adjust. For example, the airline industry in the United States has

undergone serious changes during the past decade or so. Demand for air

travel fell after the September 11 terrorist attacks. At the same time, the

widespread use of the Internet to book flights made it possible to

compare airline prices much more efficiently and easily, encouraging

airlines to compete primarily based on cost. This strategy seems to have

backfired when it intersected with dramatic increases in the cost of fuel

beginning in 2004. As a result, by mid‐2008, airlines were cutting back on

amenities that had been taken for granted for decades, such as the price

of a ticket including meals, beverages, and checked luggage. Some

airlines, such as Delta and Northwest Airlines, merged to stay in business.

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Widmer Brewing Company headquarters

(https://content.umgc.edu/file/a4396df6‐c4c0‐46ff‐

82fc‐0ca57aa2eabe

/1/ChangeManagement_Introduction_File:Widmer_Bre

wing_Company_headquarters_‐

_Portland,_Oregon.JPG) by M. O. Stevens is

licensed under CC BY‐SA 3.0

(https://creativecommons.org/licenses/by‐sa/3.0

/deed.en).

Growth

It is natural for once‐small start‐up companies to grow if they are

successful. An example of this growth is the evolution of the Widmer

Brothers Brewing Company, which started as two brothers brewing beer

in their garage. This growth happened over time as the popularity of their

key product—Hefeweizen—grew in popularity and the company had to

expand to meet demand. In 2007, Widmer Brothers merged with

Redhook Ale Brewery, growing from the two founders to the 11th‐largest

brewery in the United States by 2008. So, while 50 percent of all new

small businesses fail in their first year (Get ready, 2008), those that

succeed often evolve over time into large, complex organizations.

Poor Performance

Change can also occur if the company is performing poorly and if there is

a perceived threat from the environment. In fact, poorly performing

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companies often find it easier to change compared with successful

companies. Why? High performance actually leads to overconfidence and

inertia. As a result, successful companies often keep doing what made

them successful in the first place.

When it comes to the relationship between company performance and

organizational change, the saying "nothing fails like success" may be

fitting. For example, Polaroid was the number one producer of instant

films and cameras in 1994. Less than a decade later, the company filed for

bankruptcy, unable to adapt to the rapid advances in one‐hour photo

development and digital photography technologies that were sweeping

the market.

Successful companies that manage to change have special practices in

place to keep the organization open to changes. For example, Finnish cell

phone maker Nokia finds it important to periodically change the

perspective of key decision makers. For this purpose, they rotate heads of

businesses to different posts to give them a fresh perspective.

In addition to the success of a business, change in a company's upper‐

level management is a motivator for change at the organization level.

Research shows that long‐tenured CEOs are unlikely to change their

formula for success. Instead, new CEOs and new top management teams

create change in a company's culture and structure (Barnett & Carroll,

1995; Boeker, 1997; Deutschman, 2005).

Resistance to Change

Changing an organization is often essential for a company to remain

competitive. Failure to change may influence the ability of a company to

survive. Yet employees do not always welcome changes in methods.

According to a 2007 survey conducted by the Society for Human

Resource Management, employee resistance to change is one of the top

reasons change efforts fail. In fact, reactions to organizational change

may range from resistance to compliance to enthusiastic support of the

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change, with the latter being the exception rather than the norm

(Anonymous, 2007; Huy, 1999).

Reactions to change may take many forms.

Active resistance is the most negative reaction to a proposed change

attempt. Those who engage in active resistance may sabotage the change

effort and be outspoken objectors to the new procedures. In contrast,

passive resistance involves being disturbed by changes without

necessarily voicing these opinions. Instead, passive resisters may dislike

the change quietly, feel stressed and unhappy, and even look for a new

job without necessarily bringing their concerns to the attention of

decision makers. Compliance is practiced by those who go along with

proposed changes but show little enthusiasm. Finally, those who show

enthusiastic support are defenders of the new way and actually

encourage others around them to give support to the change effort as

well.

To be successful, any change attempt will need to overcome resistance on

the part of employees. Otherwise, the result will be loss of time and

energy, as well as an inability on the part of the organization to adapt to

the changes in the environment and make its operations more efficient.

Resistance to change also has negative consequences for the people in

question. Research shows that when people react negatively to

organizational change, they experience negative emotions, use sick time

more often, and are more likely to voluntarily leave the company (Fugate,

Kinicki, & Prussia, 2008). These negative effects can be present even

when the proposed change clearly offers benefits and advantages over

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the status quo.

The following is a dramatic example of how resistance to change may

prevent improving the status quo. Have you ever wondered why the

keyboards we use are arranged the way they are? The QWERTY

keyboard, named after the first six letters in the top row, was actually

engineered to slow us down. When the typewriter was first invented in

the nineteenth century, early prototypes of the keyboard would jam if

one key were pressed too soon after an adjacent key. Therefore, it was

important for manufacturers to slow typists down. They achieved this by

putting the most commonly used letters to the left‐hand side and

scattering the most frequently used letters all over the keyboard.

Sony laptop with Dvorak keyboard layout

(https://www.flickr.com/photos/bon/2221777306

/in/photolist‐4okbZh‐aZaWJg‐

2PJNt2‐5rVeA8‐4x64tT‐4VymYg‐4FyH9o‐

9aLpY2‐3kACh1‐5Sv8xa‐4kUDtp‐81HFnx‐3kzZZh‐

3kvDZP‐3kvw3R‐3kA4TC‐3kA2Y7‐5gZyvR‐brANvL‐

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63i6hw‐5mbYf4‐8nxxSg‐8nxwwF‐8nAGsb‐

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8nABM1‐3kvEYM‐3YpbFx‐4hGHh4‐7ycSMg‐

482mcH‐3qpgze‐3SxwXS‐5GanQp‐DSK1e‐52heF‐

3cXsYB‐3qt6LS‐4fXS1P‐3qtVMS‐92s4H1) by John

Blackbourn

is licensed under CC BY‐NC 2.0

(https://creativecommons.org/licenses/by‐nc/2.0/).

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Later, the problem of letters being stuck was resolved. In fact, an

alternative to the QWERTY developed in the 1930s by educational

psychologist August Dvorak provides a much more efficient design and

allows individuals to double traditional typing speeds. Yet the Dvorak

keyboard never gained wide acceptance because too many people

resisted the change. The reasons? Teachers and typists resisted because

they would lose their specialized knowledge. Manufacturers resisted due

to costs inherent in making the switch and the initial inefficiencies in the

learning curve (Diamond, 2005). In short, the best idea does not

necessarily win, and changing people requires understanding why they

resist.

Why Do People Resist Change?

Disrupted Habits

People often resist change for the simple reason that change disrupts our

habits. When you hop into your car for your morning commute, do you

think about how you are driving? Most of the time probably not, because

after a while, driving generally becomes an automated activity. You may

sometimes even realize you have reached your destination without

noticing the roads you used or having consciously thought about any of

your body movements.

Now imagine you drive for a living, and even though you are used to

driving an automatic car, you are forced to use a stick shift. You can most

likely figure out how to drive a stick, but it will take time, and until you

figure it out, you cannot drive on automatic pilot. You will have to

reconfigure your body movements and practice shifting until you become

good at it. This loss of a familiar habit can make you feel clumsy; you may

even feel that your competence as a driver is threatened. For this simple

reason, people can be surprisingly outspoken when confronted with

simple changes such as updating to a newer version of a particular

software or a change in their voice mail system.

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Personality

Some people are more resistant to change than others. One of the "Big

Five" personality traits is Openness to Experience; obviously, people who

rank high on this trait will tend to accept change readily. Research also

shows that people who have a positive self‐concept are better at coping

with change, probably because those who have high self‐esteem may feel

that whatever the changes are, they are likely to adjust to it and be

successful in the new system. People with a more positive self‐concept

and those who are more optimistic may also view change as an

opportunity to shine as opposed to a threat that is overwhelming. Finally,

risk tolerance is another predictor of how resistant someone will be to

stress. For people who are risk avoidant, the possibility of a change in

technology or structure may be more threatening (Judge et al., 1999;

Wanberg & Banas, 2000).

Feelings of Uncertainty

Change inevitably brings feelings of uncertainty. You have just heard that

your company is merging with another. What would be your reaction?

Such change is often turbulent, and it is often unclear what is going to

happen to each individual. Some positions may be eliminated. Some

people may see a change in their job duties. Things may get better—or

they may get worse. The feeling that the future is unclear is enough to

create stress for people because it leads to a sense of lost control

(Ashford, Lee, & Bobko, 1989; Fugate, Kinicki, & Prussia, 2008).

Fear of Failure

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Lindsay van Driel and Anakha Coman, Awake at

Intel

organizers (https://www.flickr.com/photos

/intelfreepress/10012443565/in/photolist‐

gfLoDk‐gfLQBa‐7awEUJ‐pRrfPG‐uAZkDr‐

6tBU8k‐746VYB‐6V8TBY‐nA9scA‐7Tx3yN‐

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vY5csj‐dkzLAX‐cp4c1Q‐7gth8o‐iT3pws‐

kQ8pn2‐9ffdso‐e4v9kd‐e4vPLh‐

6NBxY8‐3BvxyK‐8fnHdf‐eXn9tg‐8NYUAR‐

dV7N2o‐dkzX7t‐jcQioA‐jcN33k‐rcrEc9‐

s79P2m‐rRRoHm) by Intel Free Press is licensed

under CC BY‐SA 2.0

(https://creativecommons.org/licenses/by‐

sa/2.0/).

One reason employees resist change is the fear of failure under the new

system. People also resist change when they feel that their performance

may be affected under the new system. Those who are experts in their

jobs may be less than welcoming of change because they may be unsure

whether their success will last under the new system. Studies show that

people who feel that they can perform well under the new system are

more likely to be committed to the proposed change, while those who

have lower confidence in their ability to perform after changes are less

committed (Herold, Fedor, & Caldwell, 2007).

Personal Impact of Change

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It would be too simplistic to argue that people resist all change, regardless

of its form. In fact, people tend to be more welcoming of change that is

favorable to them on a personal level (such as giving them more power

over others or change that improves quality of life, such as a bigger or

nicer office). Research also shows that commitment to change is highest

when proposed changes affect the work unit with a low impact on how

individual jobs are performed (Fedor, Caldwell, & Herold, 2006).

Prevalence of Change

Any change effort should be considered within the context of all the

other changes that are introduced in a company. Does the company have

a history of making short‐lived changes? If the company structure went

from functional to product‐based to geographic to matrix within the past

five years and the top management is in the process of going back to a

functional structure again, a certain level of resistance is to be expected

because employees are likely to be fatigued as a result of the constant

changes. Moreover, the lack of a history of successful changes may cause

people to feel skeptical toward the newly planned changes. Therefore,

considering the history of changes in the company is important to

understanding why people resist.

Another factor is how major the planned change is. If the company is

considering a simple switch to a new computer program, such as

introducing new database software, the change may not be as extensive

or stressful compared with a switch to an enterprise resource planning

(ERP) system such as SAP or PeopleSoft, which require a significant time

commitment and can fundamentally affect how business is conducted

(Labianca, Gray, & Brass, 2000; Rafferty & Griffin, 2006).

Perceived Loss of Power

Another reason people may resist change is that change may affect their

power and influence in the organization. Imagine that your company

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moved to a more team‐based structure, turning supervisors into team

leaders. In the old structure, supervisors were in charge of hiring and

firing all those reporting to them. Under the new system, this power is

given to the team. Instead of monitoring the progress the team is making

toward goals, the job of a team leader is to provide support and

mentoring to the team in general and ensure that the team has access to

all resources to be effective. Given the loss in prestige and status in the

new structure, some supervisors may resist the proposed changes even if

it is better for the organization to operate around teams.

In summary, there are many reasons individuals resist change, which may

prevent an organization from making important changes.

Is All Resistance Bad?

Resistance to change may be a positive force in some instances. In fact,

resistance to change is a valuable feedback tool that should not be

ignored. Why are people resisting the proposed changes? Do they believe

that the new system will not work? If so, why not? By listening to people

and incorporating their suggestions into the change effort, it is possible to

make a more effective change. Some of a company's most committed

employees may be the most vocal opponents of a change effort. They

may fear that the organization they feel such a strong attachment to is

being threatened by the planned change effort and the change will

ultimately hurt the company. In contrast, people who have less loyalty to

the organization may comply with the proposed changes simply because

they do not care enough about the fate of the company to oppose the

changes. As a result, when dealing with those who resist change, it is

important to avoid blaming them for a lack of loyalty (Ford, Ford, &

D'Amelio, 2008).

References

Anonymous. (December 2007). Change management: The HR strategic

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imperative as a business partner. HR Magazine, 52(12).

Anonymous. Moore's Law. Answers.com. http://www.answers.com/topic

/moore‐s‐law

Ashford, S. J., Lee, C. L., & Bobko, P. (1989). Content, causes, and

consequences of job insecurity: A theory‐based measure and substantive

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Barnett, W. P., & Carroll, G. R. (1995). Modeling internal organizational

change. Annual Review of Sociology, 21, 217–236.

Boeker, W. (1997). Strategic change: The influence of managerial

characteristics and organizational growth. Academy of Management

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Deutschman, A. (2005, March). Building a better skunk works. Fast

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Diamond, J. (2005). Guns, germs, and steel: The fates of human societies.

W. W. Norton.

Fedor, D. M., Caldwell, S., & Herold, D. M. (2006). The effects of

organizational changes on employee commitment: A multilevel

investigation. Personnel Psychology, 59, 1–29.

Ford, J. D., Ford, L. W., & D’Amelio, A. (2008). Resistance to change: The

rest of the story. Academy of Management Review, 33, 362–377.

Fugate, M., Kinicki, A. J., & Prussia, G. E. (2008). Employee coping with

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Get ready. United States Small Business Association. http://www.sba.gov

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Herold, D. M., Fedor, D. B., & Caldwell, S. (2007). Beyond change

management: A multilevel investigation of contextual and personal

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Psychology, 92, 942–951.

Huy, Q. N. (1999). Emotional capability, emotional intelligence, and radical

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Resources

• Organizational Change? Organizational Development? Organizational

Transformation?: Why Do We Care What We Call It?

(https://leocontent.umgc.edu/content/scor/uncurated/ldt/2218‐

ldt640/learning‐resource‐list/organizational‐change‐‐organizational‐

development‐‐organizationa.html?ou=693701)

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• Organizational Change (https://leocontent.umgc.edu/content

/scor/uncurated/ldt/2218‐ldt640/learning‐resource‐

list/organizational‐change0.html?ou=693701)

• Leadership Styles in Relation to Employees—Trust and Organizational

Change Capacity: Evidence from Nonprofit Organizations

(https://leocontent.umgc.edu/content/scor/uncurated/ldt/2218‐

ldt640/learning‐resource‐list/leadership‐styles‐in‐relation‐to‐

employees‐‐trust‐and‐organizati.html?ou=693701)

Licenses and Attributions

This text has been adapted from the following work: 7.5 Organizational

Change (https://open.lib.umn.edu/principlesmanagement/chapter/7‐5‐

organizational‐change/) from Principles of Management by the University

of Minnesota Libraries Publishing, an adaptation of a work whose original

author and publisher request anonymity, available under a Creative

Commons Attribution‐NonCommercial‐ShareAlike 4.0 International

(https://creativecommons.org/licenses/by‐nc‐sa/4.0/) license, ©

2015. UMGC has modified this work and it is available under the original

license.

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