Innovation and Change Models

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2 Diagnosing and Planning for Change

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Learning Objectives

After reading this chapter, you should be able to do the following:

1. Explain what it means to diagnose organizations for change.

2. Determine an organization’s reason for change using the open-systems theory and model, environment-industry- organization contingency model, and organizational life-cycle model.

3. Examine the assessment model and trigger questions used to identify what type of organizational change is needed.

4. Analyze the appreciative inquiry model.

5. Utilize the action research model to implement change.

6. Describe how organizations can address resistance to change.

By failing to prepare, you are preparing to fail.

—Benjamin Franklin

On March 24, 2015, Zappos’s CEO Tony Hsieh (pronounced “shay”) sent a company-wide memo stating Zappos’s change strategy of becoming a manager-free organization on April 30. His message was clear: Embrace self-management or leave the company (Feloni, 2015a). The online shoe and clothing retail �irm is a wholly owned subsidiary purchased by Amazon for $1.2 billion in 2009. Zappos employs 1,500 people, has annual revenues of $2 billion, and is no stranger to new and unique organizational practices.

Hsieh came to Zappos as an angel investor in 1999 after selling LinkExchange—which he cofounded—to Microsoft in 1998 for $265 million, and he became full time in 2000 (Hsieh, 2010). He and his team increased online sales from $0 in 1999 to $70 million by 2003, and in 2008 they reached $1 billion in gross merchandise sales before selling the company to Amazon. In 2010 Hsieh attributed the company’s success to “customer service, company culture, and employee training and development” (Hsieh, 2010, “What We’re Learning from Amazon,” para. 8).

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Continuing his drive toward greater growth, Hsieh began experimenting with a self-management organizational structure known as Holacracy in 2013. Holacracy is a horizontal type of organizational structure composed of circles where “equally privileged employees work autonomously in codependency with other circles, sometimes overlapping” (Feloni, 2015b, para. 5). The author of this concept is software engineer Brian Robertson, who operates HolacracyOne, a company that distributes software to help clients with the new arrangement.

Hsieh is clear that he wants to break down Zappos’s previous structure, which featured silos/circles of functional departments like merchandising, �inance, and marketing, and replace them with self-organizing and self-managing business-centered circles. The new structure has fewer roles that align employees without the bureaucracy. Hsieh stated in the company memo that he realized the new self-managing, peer- based structure may not �it everyone; therefore, all employees in good standing had the opportunity to take a severance package. He also stated, “Like all the bold steps we’ve done in the past, it feels a little scary, but it also feels like exactly the type of thing that only a company such as Zappos would dare to attempt at this scale” (Hsieh, 2015, “From Tony,” para. 23).

Fast-forward a month later: 210 employees (14% of the company) took the severance pay offer, and 85% went through the �irst part of the transition (Feloni, 2015c). In a company noted for its customer-focused, happy employee and “purpose with pro�it” culture, the announcement and somewhat radical shift to the self-managed system is another Hsieh experiment that may prove prophetic, or not (Pontefract, 2015).

Critical-Thinking Questions

1. Why do you think 14% of employees took the severance pay? Could it have been due to resistance to change? Did they no longer enjoying working at the company? Was it a bad culture �it or something else?

2. What would you have done had you been an employee at Zappos at that time, and why? 3. How would you describe Hsieh’s style as a change leader?

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AP Photo/The Grand Rapids Press, Cory Morse

Zappo’s CEO, Tony Hsieh, raised many questions when he moved so rapidly to restructure his organization.

Introduction: Ready, Aim … Plan! “If you don’t know where you’re going, all roads lead there,” a Roman proverb states. The warning here is that if you don’t set a destination for yourself or have a goal, then your actions will cease to have meaningful consequence. Lacking a goal, of course, is the very opposite of effective change management. In an increasingly globalized world, in which change occurs at an ever faster rate, a good business must always have a set of short- and long-term goals and a detailed strategy for reaching them. As the Zappos transformational change suggests, having a goal is only part of a large-scale change process. There are other important elements involved in diagnosing a change as well. This chapter focuses on the �irst steps of that process: the diagnosing and planning methods that effectively prepare organizations to respond to change.

Diagnosing organizational change raises the key diagnostic questions to be asked by those planning an organizational change: the why, what, who, and how of the change. For example, the opening scenario raises the question of why Zappos’s CEO decided to move so quickly to adopt a completely self-managed structure. Were there forces in the external or international organizational environment that precipitated the need for this change?

In addition, what exactly needed to be changed at Zappos? Were some of its internal systems not meeting expectations? Were any of the groups (sales, marketing, or operations) not performing according to plan? Why change the entire management and employee structure? The company had a collaborative, horizontal structure (Holacracy) that seemed to have been working the previous few years. Was there a need to change the structure based on Zappos’s organizational and leadership life cycle? The company was founded in 1999 but had successfully undergone several organizational life-cycle phases, showing increasing revenue and other effectiveness measures.

Another question to be asked is who needed to change—the managers? It might seem so, since the reorganization was shifting to a self-managed, peer-based system. How would the other stakeholders in and outside of Zappos be affected— namely the surviving employees, managers, customers, and of�icers? Finally, how did and will this change continue to roll out? Hsieh’s e-mail jump-started the process, which seemed to many like a fait acommpli (that is, a decision already made without discussion). We will return to Zappos and these questions as we present different frameworks in this chapter.

Zappos is not representative of the majority of organizations across industry sectors. It does, however, present organizational issues, questions, and lessons from which leaders, team members, and students of organizational change can learn. For example, is Hsieh responding to a problem, opportunity, both, or neither? Do classic and contemporary organizational change models and concepts address opportunity

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creation as well as problems and threats to be solved? We would answer yes to the latter question and will address the former through the models presented here.

Chapter 1 discussed the different types of changes that affect organizations. Here we present classic and contemporary frameworks for diagnosing ways that organizations can meet both external and internal needs, threats, and opportunities. We also explain strategies for understanding and dealing with resistance to change. The methods used here and throughout this text are relevant for large, publicly traded companies, not-for-pro�its, community service, and government organizations.

Most organizations continually plan and implement some type of change, whether transformational or simple. Each day, organizations respond to different types of change in a variety of ways. The list is extensive:

Mergers and acquisitions Reorganizations and restructuring Spin-off businesses Expansions Downsizing Introducing new products and services Implementing new IT software

Because nearly three quarters of large organizational changes fail (Dinwoodie, Pasmore, Quinn, & Rabin, 2013; Keller & Aiken, 2009; Kotter, 1996), it is important to diagnose leaders’ and managers’ motives for changing and understand what is to be changed, what type of change is appropriate, and the change’s strategy. Transformational changes are very costly in human, material, and �inancial terms, so they must be done correctly.

It is important to note at the outset that large-scale planned changes are messy, nonlinear, and in general only as effective as the people leading and sustaining them. Such leadership includes knowing why, when, what, and who to change, but also knowing when not to change. Kesar (2001) cautions that change is not always the cure for all business problems. Instead, leaders should take the time to evaluate and prioritize change proposals and ideas, rather than immediately reacting to internal and external changes. In this way, failing to change can be positive. Kesar is suspicious of business trends that encourage organizational recon�iguration every 5 years and the symbolic value of change as a demonstration of management’s success (Czarniawska-Joerges & Sevón, 1996). In the 21st century necessary change is more a constant than a luxury; nevertheless, organizational leaders have the responsibility to determine whether changes are needed and, if so, what type of change will work in their particular situations.

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2.1 Diagnosing Organizations for Change Organizational diagnosis of change refers to the process of understanding the current state of how an organization functions and providing necessary information to design change interventions—that is, program elements used to manage an organization’s internal relationship (resources, structure, operations) with its external environment to support a business strategy (Cummings & Worley, 2015). Interventions are designed by organizational leaders, managers, and teams to change behaviors of individuals or of a population as a whole. Interventions are used in different settings, such as communities, work sites, schools, health care organizations, religious organizations, or the home, and include educational programs, policies, environmental improvements, or promotional campaigns. The most effective interventions utilize multiple strategies to create a more lasting change (Intervention MICA, n.d.).

Discovering and verifying the motivation for change is the �irst step to a planned organizational change initiative. Diagnostic change models are frequently used in this process. Although such change models are simpli�ications of reality, they provide both a context in which organizations operate and highlight the interrelationships among their internal dimensions, which helps identify desired effectiveness.

Although change models do not necessarily provide the “one best way” or “the truth” about diagnosing organizations, they offer theoretical and practical ways to understand complex situations. Burke (2011) offered �ive purposes of organizational models:

1. Models help reduce the complexity of thousands of things “going on” into manageable categories. 2. Models identify aspects of organizational activities and dimensions that demand attention. 3. Models highlight the interconnectedness of organizational properties like culture, structure, and strategy. 4. Models provide a common language and vocabulary. 5. Models offer a sequence of actions that users can follow in particular change situations.

As stated earlier, the expertise of an organization’s leaders, managers, and change specialists are perhaps the most critical factors for diagnosing, planning, and implementing changes. Consequently, leaders are the ones who must ultimately make decisions based on model projections. Diagnostic models can also help detect and prevent type 1 and 2 errors (discussed in Chapter 1.4 (http://content.thuzelearning.com/books/AUMGT435.16.1/sections/navpoint-11#type1and2) ) from occurring.

We have selected both classic and contemporary models to discuss in greater detail. They include: (a) classic models that led the way and are still relevant, (b) models that are based on different assumptions and view change from various perspectives, (c) macro and micro dimensions that are emphasized in the models, and (d) models that require different quantitative and qualitative approaches to diagnose responses to change.

This chapter organizes change models by the dimensions Why Change, What and Who to Change, and How to Change. These three dimensions and the models presented are in some ways interrelated. However, separating out major models with consultative questions in each dimension helps leaders and change teams pay attention to the systematic process of change as well as the desired end results. We begin by addressing the dimension Why Change by asking what is the need and what is the source? The major models in the �irst section include

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open systems, environment-industry-organization contingency, and the organizational life cycle. Consider these tools and concepts that can be used to diagnose change.

Check Your Understanding

1. In your opinion, what can happen if organizational leaders and managers omit or minimize diagnosing change as a �irst step to planning an organizational change?

2. Why and how can change models help organizational leaders and teams assigned to plan and implement a signi�icant change? Explain.

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2.2 Why Change? Identifying the Need to Change How do organizational leaders and others determine why a change is needed? Sometimes the reasons are obvious, other times less so. In the opening case, it was not entirely clear why Zappos’s CEO called for a sweeping organizational change. Some observers also questioned the way the change was implemented. Diagnosing the reason and need for change begins with an analysis of both the external and internal organizational forces effecting a change.

Open-Systems Theory

Open-systems theory and model, based on Katz and Kahn’s (1978) work, provides a framework for studying how organizations interact with their environments in ways that affect the input, throughput, and output processes, along with interdependencies and outcomes. The model, shown in Figure 2.1, indicates how a product or service produced at the output phase is in�luenced by the organization’s environment and internal processes. This model is widely used by consultants and other organizations planning changes.

As Figure 2.1 illustrates, an open-systems approach can serve as the �irst step in diagnosing an organizational change since it presents a big- picture approach for identifying the input, throughput, and output of resources comprising and needed in the change. As discussed in Chapter 1, diagnosing how the forces in the general environment (that is, the economic, technological, legal, governmental–political, sociocultural, and natural disaster elements) affect an organization in any and all of the three open-systems dimensions provides insights into the need for an organizational response and, perhaps, change. An organization’s “task environment” takes a closer look at the forces that affect organizations more directly—that is, customers, interest groups, suppliers, competitors, employees, and regulations from governing bodies. Perhaps Hsieh at Zappos reasoned that less managerial bureaucracy would serve a changing customer base more effectively and ef�iciently.

Figure 2.1: The open-systems approach

The open-systems approach is a process showing how the environment changes with the input of resources, followed by the throughput of transformational and organizational processes, such as leadership, strategy, structure, culture, and systems. This results in the output, or the product or service outputs.

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Source: Adapted from Katz, D., and R. Kahn. (1978). The social psychology of organizations (2nd ed.) New York: Wiley.

Consider an example from a different industry that illustrates the environment’s effects on an open-systems model. Nursing shortages in the United States and globally are a recurring problem. However, a third wave of such shortages appears to have different causes than previous shortages. Speci�ically, there are general environmental factors external to the industry as well as task environmental in�luences that are aggravating this shortage. These include the aging of nurses, general workforce shortages in ancillary professions and support labor, fundamental changes in patient care in a managed care environment, decreased length of hospital stays, and demand for more acute ambulatory and home settings care (Ming, Lam, Fong, & Yuan, 2012; Nevidjon & Erickson, 2001; Rosseter, 2014). Although issues surround outdated images of nursing, new nurse recruitment, and retention of nurses, closer scrutiny of this shortage shows that one underlying cause of the problem is the level of expertise available compared to what is needed (Ming et al., 2012.)

From this partial diagnosis, nursing associations, educational programs, and care-providing institutions can consider strategies for change in how they attract, educate, and generate more specialized nurses. With this context in mind, we will look at the input, throughput, and output dimensions for a hypothetical educational institution with a large nursing program. First, note that the inputs are resources, information, or items that are intentionally put into an organization’s internal system that effect and/or will be affected by the intended change. Outputs are the results that occur after an organization’s interventions affect the targets of the change process. In other words, outputs are the results from a department, division, or entire organization’s change process (Krippendorff, 1986).

At the input phase, a college program might analyze demographics and other statistics about its student nursing recruitment and the enrolled population to see what changes and innovations could be made. Administrators might investigate additional funding and resource acquisition initiatives for talent recruitment. At the throughput phase, institutions could analyze the retention rate, quality, and competitiveness of their courses and professors, as well as how they match external market demand and nursing requirements. At the output phase—that is, the results in an open-systems approach to planned organizational change—analyzing graduation rates, placement sources, and feedback from sources of employment and graduates’ experiences could provide valuable information for decision makers regarding the input and throughput phases of the programs.

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Environment-Industry-Organization Contingency Model

Related to the open-systems model is Duncan’s (1972) environment-industry-organization contingency (“�it”) model, which examines how effectively an organization is suited to its environmental niche. Organizations that are able to respond to external environments are more effective in meeting goals and serving end users and customers. Aldrich and Pfeffer’s (1976) resource dependency theory asserts that organizations are dependent on the environments in which they operate, and the main goal of the individuals running the organization is to survive and enhance the company’s autonomy, while also ensuring that its exchange relations remain stable (Davis & Cobb, 2010).

Drees and Heugens (2013) conducted a meta-analysis of 175 studies regarding companies’ use of resource dependence tactics (including interlocks, alliances, joint ventures, in-sourcing, and mergers and acquisitions). They found a positive association between environmental interdependencies and companies’ use of resource dependence tactics. Moreover, �irms’ use of such tactics was positively associated with organizational performance (Davis & Cobb, 2010).

The environment-industry-organization contingency model shown in Figure 2.2 can be used to understand an organization’s existing environment and to diagnose the direction in which it might need to move to increase its performance. Duncan’s model is a simple big picture and straightforward way to map an organization’s �it with environmental complexity. The two dimensions of environments are shown as environmental change (that is, stable or unstable) and environmental complexity (that is, simple or complex).

Figure 2.2: Environment-industry-organization “�it”

How “�it” an organization is depends on the level of complexity and the stability of the environment.

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General Motors and Organizational Change

In this video, the General Counsel for General Motors describes the situation leading up to their large-scale organizational change. Apply the Environment-Industry- Organization Contingency model to GM’s situation. What is GM’s environmental niche? In what ways did they lose touch with their niche, and why?

Source: Duncan, R. B. (1972). Characteristics of organizational environments and perceived environmental uncertainty. Administrative Science Quarterly, 17(3), 313–327; Daft, R. (2010). Organization theory and design (10th ed.). Mason, OH: South-Western, Cengage Learning, p. 157.

A simple–complex dimension of environmental uncertainty indicates the number and dissimilarity of external elements that affect an organization’s functioning (Daft, 2015). The higher the number of forces (such as in�lation and changing client demographics) and the greater the number of dissimilar elements (such as different companies and competitors), the greater the environmental complexity. Such complex, unstable, and therefore highly uncertain environments characterize companies in the aerospace, telecommunications, airlines, and computer industries. The following example from Zappos illustrates an interpretive use of this model.

Referring to Figure 2.2, in which quadrant of the environment-industry-organization model does Zappos best �it? It is the number one online e-tail shoe and clothing company. It has chosen customer service, company culture, and employee training and development as competitive and distinctive competencies. In addition, it has a superior supply chain, excellent customer service, trained call center employees, a fast web interface, and large online product offering. Its culture emphasizes “Wow” (Zappos, n.d.) delivery services, accepting and driving change, creating fun and weirdness, being humble, and other passionate elements.

The model suggests that the company may be in a simple + unstable, high- moderate uncertainty environment niche with other e-commerce, fashion clothing industries. However, because Zappos is also a technology company driving toward larger product lines and customers, as well as faster and higher sales and revenues, it seems Hsieh wanted to move into a complex + unstable, high-uncertainty environment. Toward which quadrant is he driving his internal structure? Which environmental niche would you recommend that he move in to be successful over the long term?

We will now analyze two additional examples of organizations facing major change using the environment-industry-organization model.

Hewlett Packard Why did HP recently need an organizational change? Facing a highly uncertain environment, HP CEO Meg Whitman (former eBay CEO) has been trying to move HP back to its previous position as a dominant global technology leader or face failing market share, which could ultimately

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General Motors From Title: Turning Around General Motors

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result in the sale of the company. HP has been undergoing a transformation under Whitman’s leadership since 2011. She has laid off more than 55,000 employees and counting.

One problem has been the lack of a unifying vision for the company, which is in a complex + unstable, high-uncertainty environment, according to Figure 2.2. Whitman has pursued a risky move based on her predecessor’s decision to split the giant company into two different entities: Hewlett- Packard Enterprises (focusing on the hypercompetitive businesses of cloud technology and cyber security) and HP Inc. (focusing on the slower businesses of personal computers and printers). This division was determined by Whitman to stimulate HP’s growth in an ever-changing technological environment (Chen, 2015).

Each of the two independent companies is large enough to be listed on the Fortune 500 list. Fierce competitors seeking increasing market share in each company’s industry will either weaken the companies or provide them with more �lexibility to succeed in their niches. Residing in a highly uncertain (complex + unstable) environmental niche that splits in two is not easy. However, HP’s board of directors has been pleased with Whitman’s performance. When Whitman arrived in 2011, HP had a net debt of $12 billion on its operating company, and in June 2015 the company had $5 billion in net cash; the stock price has climbed from $11 to $34 (Johnson, 2015).

From an organizational change perspective, the question arises: Has Whitman accurately diagnosed HP’s situation regarding why it should change?

Universities Figure 2.2 suggests that universities in general inhabit complex but stable, or low-moderate uncertainty environments. The environments in this quadrant have traditionally had few elements that cause instability and change but several dissimilar factors that create complexity. For this reason, the question of Why Change is not relevant. Could new competitive global and domestic forces in the environment move some universities to a more complex + unstable industry �it? A number of forces suggest this may be the case.

For example, student debt is estimated at $1 trillion, rising administrative and tuition costs have not subsided, and since the downturn in the economy, many companies have dropped their tuition reimbursement programs, presenting additional challenges for universities. Cutbacks in budget-constrained state funding for public universities add yet another dimension of uncertainty. Some industries and companies have

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Dan Whobrey/iStock/Thinkstock

Traditional brick-and-mortar universities are - evolving their course offerings and processes due to changes brought about by the increasing prominence of online institutions, such as the University of Phoenix.

also questioned the value of traditional educational degrees, although data show that students with certain higher educational degrees earn more than those without them (Kurtzleben, 2014).

The environment was more stable for nonpro�it traditional colleges before competition from a number of sources emerged, including free massive online open curriculum courses and other Internet-based institutes and programs. For- pro�it universities like the University of Phoenix also provided a market jolt. Though not all nonpro�it colleges were threatened by the for-pro�it universities, these new market entrants introduced innovative and convenient educational opportunities, especially for students who could not or did not wish to attend traditional classes. Even Harvard and Massachusetts Institute of Technology (MIT) started programs for the masses using online courses and programs.

Larger environmental threats to contemporary universities will not subside in the near future because of the market forces identi�ied, including a lack of donor loyalty in giving to many universities (Giménez, Martıń- Retortillo, & Pires de Carvalho, 2010). Each college will have to determine which quadrant in Figure 2.2 it is currently positioned in and if it should strategically migrate to another to remain viable and competitive. Simply stated, creating stable organizations to perform in an environment of complex and fast-moving change can be disastrous. Since the main motivators of organizational effectiveness are dynamic, the elements and process of strategy and organization must be as well (Lawler &

Worley, 2006). Both private and nonpro�it universities will change more now than in the past as environmental forces shift and competitive pressures mount (Carey, 2015).

The Organizational Life-Cycle Model

Another model that addresses the Why of change is Greiner’s (1972, 1998) organizational life-cycle approach, which remains a classic and highly used road map for diagnosing the types of crises and challenges organizations face as they age. Relevant to the open-systems and environment-industry-organization approaches, the organizational life-cycle model adds a historical dimension to understanding an organization’s developmental needs in terms of deciding why it may need to change, especially in regard to capabilities required of leaders to grow organizations along their life cycle.

As organizations evolve and follow a somewhat predictable path, they move through punctuated equilibrium—periods of stability with embedded crises. If these predicted crises are not solved, leadership and management can be forced out of business and replaced by a team that can bring in the needed changes (True, Jones, & Baumgartner, 2006).

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Figure 2.3 illustrates the �ive phases of growth: creativity, clear direction, delegation, coordination, and collaboration. Each period is characterized by a leadership style used to realize growth that is appropriate for that particular phase. Each stage is also characterized by a crisis that must be solved before growth can occur. The pattern presented in Figure 2.3 is assumed for organizations in industries with moderate growth over a long term. Greiner (1998) stated that companies in fast-growing industries may experience all �ive phases more rapidly, and organizations in slow-growing industries may experience only two or three phases over several years.

As you look at Figure 2.3, notice that each stage has extended periods of growth without a signi�icant change to the organization’s practices. Then a revolutionary phase occurs, denoting periods of extensive disturbance. Greiner (1972) originally hypothesized that the length of time in each phase of an organization’s life cycle varies by industry, company, and the changing environment. He also proposed that an organizational crisis could occur at the end of each growth stage and that the organization’s ability to manage and solve these crises will determine its survival (Simmons, 2005).

Figure 2.3: The developmental life-cycle of organizations

The organizational life-cycle model provides understanding of an organization’s needs based on its history, present capabilities, and potential. It consists of �ive stages, with a crisis in each stage, followed by a period of growth.

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Source: Adapted from Greiner, L. (1972, July–August). Evolution and revolution as organizations grow. Harvard Business Review, 50, 37–46; and Quinn, R. E., & Cameron, K. S. (1983). Organizational life cycles and shifting criteria of effectiveness. Management Science, 29, 33–51.

This theory also assumes that each stage is both a result of the previous phase and cause for the next phase. In stage 2 the organization grows under leadership with clear direction—solving the previous crisis of leadership needed. However, over time, leadership with clear direction leads to a crisis of control, and then a leadership style that emphasizes coordination and delegation is needed. Examine Table 2.1 to understand the organizational characteristics and requirements of each stage, not only in terms of leadership style, but also with regard to structure, systems, strengths, weaknesses, and crisis points.

Greiner (1998) hypothesized that during each period, leaders and managers are limited in what they are able to do for growth to occur. For example, a company experiencing a crisis of control in stage 3 cannot return to offer clear directive management for a solution; the leader must adopt a new style of delegation in order to move to the next stage of development and growth.

Empirical research on substantiating effectiveness criteria in life-cycle theories of organizations is mixed. Quinn and Cameron (1983) found support for one version of the theory but also noted that the predictions in these theories are often not substantiated in research, since organizational responses to the external environment differ across the stages of the life cycle. As you read about each stage, you will be able to see how these responses would differ across the life cycle and among companies.

Refer to Table 2.1 as you read through each stage. Although its elements are explained in the text, there are descriptions in this table that reinforce the characterization and meaning of each stage of the model.

Stage 1: Growth Through Creativity Stage 1, growth through creativity, occurs during the period that resembles a typical start-up. Greiner (1998) notes that the founders are generally technically or entrepreneurially oriented and that their energies are absorbed making and selling a new product or service. Communication is frequent and informal. Workdays are long and pay is modest. Decisions and motivation are directed to the marketplace. These individualistic and creative activities are necessary at this stage. But as the company develops, those activities and leadership styles become the problem.

Table 2.1: Characteristics of life-cycle growth phases

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Source: Clarke, L. The Essence of Change, 1st Ed. Copyright © 1994, pp. 12. Reprinted by permission of Pearson Education, Inc., New York, New York.

Observe in Table 2.1 that under stage 1, the structure used is informal. The systems re�lect immediate response to customer feedback and styles of leaders and employees are individualistic, creative, and entrepreneurial. The strengths at this stage of development are fun and market response. The crisis point is that of leadership, and along those same lines, the weaknesses often have to do with the fact that the founder may not be temperamentally suited to management and those in charge may be overloaded.

According to Greiner (1998), a crisis of leadership develops during this stage. It could lead to a revolution if the major problems are not solved. Lack of structure and formalized management systems and practices require a different type of leadership and management. If the existing leadership does not or cannot assume new responsibilities of organizing, then a more sophisticated, formalized leadership style must be brought in for growth to continue.

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Stage 2: Growth Through Direction Stage 2, growth through direction, occurs under more structured leadership and management styles. A functional organizational structure is adopted; that is, a basic arrangement of departments where sales and marketing, manufacturing, production, �inance, and research and development are formed with expertise in each area. Specialized jobs are assigned.

Systems are put into place, such as accounting, human resources, inventory, shipping, and so on. Budgets, pay systems, and working rules are also established. A more structured culture evolves where communication is formal and impersonal, titles and positions are developed, and managers assume more authority, with strategic decision making generally occurring at the top level.

The second crisis and possible revolution Greiner (1998) notes evolves from a crisis of autonomy. The new directive styles work to spur growth but then become too constraining to integrate and control the organizational diversity and complexity that evolve. A centralized hierarchy constrains and con�ines employees who know and have learned more about markets and customers than their leaders and managers. Employees are con�licted between following meaningless procedures and taking action themselves.

To continue to grow, leaders must either give up some control, learn to delegate, loosen and change hierarchy, or be replaced. Part of this crisis stems from leaders and managers who are perhaps entrenched in past training or older procedural methods and unable to share responsibility with lower level managers and employees. Those leaders and managers who stay often cause disenchanted, talented employees to leave. In effect, the crisis of stage 2 is the opposite of stage 1; by formalizing processes in stage 2 to grow from stage 1, the pendulum swings too far in the other direction, becoming too �ixed and rigid. Stage 3 then works to strike a more productive balance.

Stage 3: Growth Through Delegation Stage 3, growth through delegation, occurs when more responsibility is given to managers and employees to accomplish organizational goals and their work. This stage is also achieved when the hierarchical structure changes to decentralized units, bonuses and pro�it centers are established, managers stop micro-managing, communication and decision making is less top down and also decentralized, and managers are able to move into larger markets faster and begin innovating.

Crisis and possible revolution occur at this stage if leadership and management try to take control of the entire organization and return to a centralized system of decision making, communication, and ways of managing. Greiner (1998) argued that this revolution would fail because of the organization’s expanded operations and its ability to �ind new solutions in special coordination techniques.

Stage 4: Growth Through Coordination Stage 4, growth through coordination, occurs when formal systems are used to achieve greater coordination by more ef�iciently allocating corporate and local resources. As Greiner (1998) noted:

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Decentralized units are merged into product groups. Formal planning procedures are established and intensively reviewed. Numerous staff members are hired and located at headquarters to initiate companywide programs of control and review for line managers. Capital expenditures are carefully weighed and parceled out across the organization. Each product group is treated as an investment center where return on invested capital is an important criterion used in allocating funds. Certain technical functions, such as data processing, are centralized at headquarters, while daily operating decisions remain decentralized. Stock options and companywide pro�it sharing are used to encourage employees to identify with the organization as a whole. (p. 62)

The crisis occurs over the accumulation of red tape. Systems and programs exceed their usefulness. A lack of con�idence and resentment grows between line and staff (“line” are professionals in an organization’s departments that are revenue generators, such as manufacturing and selling; “staff” are in organizational support departments that are revenue consumer, such as human resources and accounting), headquarters and the �ield, and different groups of employees, usually over bureaucratic procedures. In addition, there is a lack of innovation and a rigidity in obtaining information, making decisions, and completing work.

Stage 5: Growth Through Collaboration and Innovation Stage 5, growth through collaboration and innovation, occurs as a result of and a reaction to stage 4. This stage endorses interpersonal collaboration, �lexibility, and behavioral leadership and management styles. Whereas the previous stage emphasizes formal systems and procedures, this stage promotes spontaneity through teams and meaningful confrontation over interpersonal differences. Red tape and formal controls are replaced by self-discipline and social control.

This stage is accomplished through quick problem solving by cross-functional teams; reducing and reintegrating headquarters staff members; instituting matrix types of structures with the right teams solving appropriate problems; holding frequent conferences with key managers to solve signi�icant problems; launching educational programs to train managers; adopting real-time information systems that are integrated into daily decision-making processes; offering economic rewards for team performance (rather than individual performance); and experimenting with new practices across the organization (Greiner, 1998).

Although Greiner (1998) did not identify a particular crisis that would develop from stage 5, he stated that the revolution stemming from the crisis in this stage would probably result from a high number of employees who are physically and emotionally exhausted because of the extreme amount of teamwork needed and the pressure to create new solutions. If this happens, part of the solution would involve new programs and structures that permit employees to regularly rest and refresh themselves. The following scenario illustrates one example of this model.

Steve Jobs and Apple Steve Jobs passed away from cancer in October 2011, but his legacy continues in the brand he created. Tim Cook, appointed by Jobs, assumed leadership of the company that year. The relationship between Jobs and Apple exempli�ies the dynamics of the organizational life-cycle

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AP Photo/Paul Sakuma

The late Steve Jobs of Apple was an extremely innovative CEO who helped reinvent and revitalize Apple over several stages of its organizational life cycle.

model. Few, if any, CEOs have successfully reinvented themselves as many times as Jobs did at Apple. It may be more accurate to say that few CEOs have reinvented a company like Apple over its life cycle as did Jobs. Although there are no de�initive dates that characterize Apple’s organizational life cycle, the following grouping of stages (based on and reconstructed from Geek, 2010; Linzmayer, 2006; Young & Smith, 2005) is an approximation designed to discuss and illustrate Greiner’s (1972, 1998) framework.

Apple Computer’s entrepreneurial stage (stage 1), based on the logic of the organizational life- cycle model, started before 1976 but lifted off April 1, 1976, when Jobs and Steve Wozniak launched their company. The Apple I computer sold for $666.66. In 1977 the Apple II was introduced as the �irst personal computer; it came in a plastic case and featured color graphics. In 1980 Apple went public, selling 4.6 million shares priced at $22 each. It was an exciting and challenging time for the technically oriented Wozniak and the intellectually shrewd Jobs. Neither was a leader or manager, but both were pioneers, blazing a new historical path in very informal but focused ways.

The collectivity stage (stage 2) likely started in 1981 when Jobs brought in Mike Markkula to serve as Apple’s �irst president. Jobs and Wozniak acknowledged that they did not have the skills for running a growing company at that time. The company struggled to launch the Macintosh (the �irst computer with a graphical user interface) in 1984. The machines accumulated in storage and did not sell during the 1984 Christmas season. Apple announced its �irst quarterly loss in the company’s history and laid off 20% of its staff. The collectivity stage was coming to an end, since there was a need for clear direction. Jobs was �ired after a power struggle with the newly appointed CEO John Sculley (former president of PepsiCo), who, as an older, experienced corporate ex-president, brought a sense of direction and order. There was a de�initive crisis of leadership during this time. Wozniak left that same year, and Jobs started NeXT Inc., another computer �irm.

The formalization stage (stage 3) began and lasted during the years that Sculley, followed by CEOs Michael Spindler (1993–1996; former chief �inancial of�icer [CFO] of Apple) and Gil Amelio (1996–1997) took unsuccessful turns at leading the company. Although they each tried to manage and innovate while formalizing systems and bringing order to Apple, product innovation and quality suffered during this period. The bureaucratization, control, and lack of coherent delegation came to an end after Sculley’s last successor, Markkula, was let go.

Jobs returned in 1997 as interim CEO, which marked the beginning of the elaboration period (stage 4). It is reported that very shortly after Jobs walked back into the Apple of�ices he was �ired from 12 years earlier,

wearing shorts, sneakers, and a few days’ growth of beard, he sat down in a swivel chair and spun slowly.… “Ok, tell me what’s wrong with this place?” … Executives began offering some answers. Jobs cut them off. “The products SUCK!” he roared. “There’s no

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sex in them anymore!” (Burrows & Grover, 2006, para. 2)

He returned to Apple and stayed until the day he retired, in August 2011. His product innovations and the company he built (which some describe as a mix between GE and Disney) during this time remain legendary. In 2001 the iPod, a palm-sized, hard drive–based digital music player, was introduced. In 2003 the iTunes Music Store, which sold music, audio books, and movies for Internet download, was launched. In 2005 the iPod that played video was introduced. During that year Jobs also announced that Apple computers would use rival Intel Corporation’s microprocessors. During 2006 Apple started selling Macs that ran on Intel chips, and in 2007 the iPhone and iPod Touch were announced. In 2008 the App Store—an update to iTunes—was added to Jobs’s list of innovations, and in 2009 Apple released the iPhone 3GS, which was later followed by the 4G version. Jobs brought the iPad to market in 2010, a tablet computer with an Apple homemade processor. The global popularity of these products and innovations speaks directly to the success of Jobs’s decision making in revitalizing Apple.

Greiner (1972) placed a question mark after the elaboration stage in his original organizational life-cycle model, which indicated that an organization can either be revitalized to grow and prosper or it can decline. Jobs’s successor, Cook, has proved that he can and is revitalizing Apple, with introductions of new iPhone models along with the Apple Watch. In April 2015 Apple became the �irst company in U.S. history to reach a $700 billion valuation. The organizational change that has occurred from Jobs’s death to the leadership under Cook should not be overlooked.

Organizational Failure The organizational development life-cycle model is a useful framework for understanding why organizations fail and succeed, and at what stage of their development. As Anderson (2015) wrote with regard to start-ups in the sharing economy, “Studying failure is a recipe for success in the collaborative economy” (para. 1). She reported on a study of 45 of the more signi�icant collaborative economy start-ups across Europe/the United Kingdom, Asia–Paci�ic, and the United States between 2010 and 2014 that either closed their doors or faced a setback that could have destroyed the company. Thirty-�ive �irms were based in the United States, seven were UK companies, two were European, and one was Australian. Firms included Accoleo, Arribaa, BlackJet, Car2Go, Crashpadder, Legit.Co, WhipCar, Neighborrow, Airbnb, Uber, and Lending Club.

Major reasons for failure or signi�icant setback included lack of scale (inability to achieve a level of business activity to sustain a business model), unclear value proposition (the product did not compel customers to become repeat users), insuf�icient funding, lack of and shift in product focus and target market, regulation and government issues, lack of market readiness, lack of trust and engagement with their customer community, invalidated product offering (lacking a suf�icient market for the product), and competition.

Referring back to Greiner’s (1972, 1998) organizational life-cycle model, we may assume that not only did the collaborative company start- ups fail from a potential crisis in leadership in the �irst stage, but their founders and teams made other mistakes as well. For example, start-up founders and leaders may misread or overlook the need for their product or service at the input phase of the open-system model. They may also misjudge the effects that environmental forces can have on their start-ups: namely, regulation, customer demand, and suf�icient resources (funding). Moreover, not having a clear vision and business model is also a detriment.

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All of these issues may arise during the �irst phase of a start-up’s existence. Perhaps these failings also contribute to the fact that more than 100,000 U.S. nonpro�it groups will fail by 2017. Even a few large recognizable nonpro�its that succeed do not account for large numbers in this area, despite about 1.4 million nonpro�it organizations that are registered with the Internal Revenue Service and that do account for 5.2% of GDP with 8.3% of wages and salaries paid in the United States (Alliance Trends, 2015).

Check Your Understanding

1. Brie�ly explain why is it important to understand where an organization is in its life cycle and how it can be helpful in diagnosing and planning an organizational change.

2. What lessons can be learned about today’s Apple (and its products) by understanding its past life-cycle history? 3. Using the life-cycle approach, determine what type of leader would make the ideal successor for Cook at Apple. Explain your reasoning.

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2.3 Diagnosing What to Change After identifying why change is needed within an organization, the questions turn to what, who, and what type of change is needed? In the previous section, we discussed models for diagnosing and assessing an organization’s present state, and where it “is” in its present state. Now we will turn our attention to diagnosing what needs to be changed.

Assessment Model: Determining What Changes to Make

Figure 2.4 shows three types of changes available to an organization, as well as levels of intervention, issues, and opportunities that trigger a change. Note that although this �igure appears sequential on paper, the connecting arrows between the dimensions are multidirectional. Identifying what to change within an organization is not a mechanistic process but a messy, sometimes political, argumentative, but (hopefully) creative and productive one, so long as it is tempered by sound judgment.

Figure 2.4: Diagnostic change issues, opportunities, and interventions

When matching types of change interventions to organizational needs and issues, it is important to ask, “What types of changes are needed to produce optimal results in an organization’s internal systems?”

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Source: Adapted from Cummings, T. G., & Worley, C. G. (2015). Organization development & change (10th ed.). Stamford, CT: Cengage Learning, Chapter 5.

Depending on what needs to be changed, different types of change can be used. We discussed three types of change in Chapter 1: developmental, transitional, and transformational. These changes are also referred to as �irst- and second-order changes. First-order (- adaptive) changes are incremental, small-scale, �ine-tuning, and developmental. These changes involve adjustments to systems, processes,

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and structures rather than fundamental or radical changes to strategy, core values, or identity (Newman, 2002). Examples include installing a new software application in a department, revising procedures for a purchasing system, and revising a training system for business users on a new IT system. The level of intervention in Figure 2.4 may be departmental, divisional, by team, by group, or by number of individuals.

Second-order (discontinuous) changes are radical, transformational, and sometimes transitional in nature and involve the entire organization or different units (Bate, 1994). Such changes are also called “frame bending” and may be done with a big bang, as illustrated earlier by HP’s move to divide the company into two separate entities.

Many change management texts focus on transformational rather than transitional and developmental changes. Frohman (1997), however, argued that small-scale organizational changes that involve personal initiatives deserve more attention. Frohman emphasized the importance of people to organizations, especially people who initiate and bring about local organizational changes by exceeding their job responsibilities, striving to make a difference, being action oriented, and focusing on results. These people are known by staff members in their organization but are less recognized by managers and higher-ups (Palmer, Dunford, & Akin, 2009).

Individuals may trigger the need for a radical change, as was shown by Mohamed Bouazizi, a 26-year-old Tunisian street vendor who in 2011 took his life by burning himself in protest of a stodgy government bureaucracy that negatively affected his livelihood (Fahim, 2011; Ryan, 2011). The incident set off the Arab Spring, a wave of demonstrations, protests, and riots that ushered in frame bending changes in the Tunisian government and across the Middle East. However, although individuals like Bouazizi can be catalysts for change, it is still institutions and organizations—in this example, governments, military, and legislatures—that must follow through to implement and institutionalize changes.

There are three levels of intervention—that is, planned actions to enhance an organization’s effectiveness that focus on the organization, group, or individual, shown in Figure 2.4. This is an important decision that could be wasteful and costly if misjudged. Zappos CEO Hsieh decided to make a complete structural and systems change by removing most of the formal management positions. This change decision was made by the leader, Hsieh himself, with the assumed intent of keeping a dynamic culture alive among employees, their peers, and groups in order to drive the hypercompetitive growth strategy of staying close to customers.

Presenting issues are problems and opportunities that are believed, perceived, and/or argued to be of primary importance for requiring a planned change. Several classi�ications of issues that organizational leaders use to identify and justify changes are listed in Figure 2.4.

For example, suppose a university is performing well with the exception of decreasing enrollments in its graduate degree programs. This becomes the presenting issue. At �irst, administrators may attribute the issue to increased regional and local competition. Closer scrutiny by a consultant and other staff members shows that the programs are not as attractive or marketable as competitors’ offerings. Further analysis reveals that those responsible for selecting and planning the courses were not knowledgeable about competitors’ programs. Also, there did not seem to be a compelling strategy or suf�icient online marketing to promote the programs. The presenting problems, or what needs to change, then shift from focusing only on competition to analyzing each program’s strategy, marketing, and people responsible for selecting program content.

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Figure 2.5: The focus of organizational change

These questions help identify and diagnose who and what part of an organization needs to change, and why.

Larger, transformative organizational changes may involve an entire organization, as is the case in many of the chapter’s examples. A question arises: How many of these large enterprise transformations are successful? As indicated earlier, 1 out of 3 transformations succeeds (Aiken & Keller, 2009; James, 2012). Although there is an abundance of theories, anecdotal conjecture, as well as some substantial evidence to explain this failure rate, it can be argued that the presenting issues of leaders whose rationales are not supported by evidence may also be a contributing factor. Again, taking a big-picture systems view of planned organizational change requires systematically diagnosing the why, what, who, and how of presenting problems and desired opportunities.

Diagnostic Trigger Questions: Identifying the Level(s) of Intervention

Internal change teams and change specialists can use trigger questions to pinpoint speci�ic change targets and interrelationships with and between leadership, strategy, structure, culture, people, and systems. The questions shown in Figure 2.5 are simple and straightforward. They serve as a �irst step for further investigation, planning, and decision making to identify what and who to change. In conjunction with the previous diagnostic approach, Figure 2.5 provides a simpli�ied view of what needs to change.

For example, Atlassian, an Australian software company founded in 2002 with more than 1,100 employees, was organized into teams. Using a “best HR practices” performance review, employees reviewed their own and peers’ performance twice a year using a �ive-point scale in a 360-degree performance review—similar to Google’s and Salesforce’s. This system determined employee bonuses (Luijke, 2011). The trigger question —“Where’s the pain, tension, in the system?”—became obvious: The model was not working as planned. The lengthy reviews were demotivating employees and managers instead of uplifting them.

So, what needed to be changed, and how? The vice president (VP) of Talent & Culture worked with a team to analyze the traditional performance review model in detail. Employees were asked what made them perform at a higher level and what sections of the reviews worked. The VP and his team talked with other tech companies about their experiences. They found nothing on the market, including HR approaches, that matched what they wanted.

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Source: Adapted from Cohen, A., Fink, S., Gadon, H., & Willits, R., with Josefowitz, N. (1992). Behavior in organizations (5th ed.). Boston: Irwin, pp. 424–426.

They therefore created their own more lightweight performance review that included coaching and focused on employees’ strengths and spending time on what they love to do. The new system also centered on motivation and recognition, including a “kudos model” in which coworkers can recognize great performance among each other without a manager’s approval. The new performance system was implemented. The result? Seventy-�ive percent of staff who showed outstanding performance were recognized by peers. Independent, internal staff surveys showed that 87% received extraordinarily high engagement scores. The company has been on a number of best employer lists and was named a best U.S. medium- sized company to work for.

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Check Your Understanding

1. Frohman (1997) argued that small-scale organizational changes that involve personal initiatives deserve more attention than transformational changes. Do you agree or disagree? Explain your reasoning.

2. Consider an organization you have worked for in the past. Describe a change this company may have needed based on your answers to each trigger question.

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kaspiic/iStock/Thinkstock

The AI method involves engaging employees from the bottom up and asking questions to diagnose and plan for change.

2.4 How to Change Transformationally Using the Appreciative Inquiry Approach Large-scale transformational change requires comprehensive planning approaches that both the organizational development and change management �ields offer. The models in this chapter have thus far shown how to identify why a change is needed, where in an organization’s system the presenting issues are, and what needs to be changed. In this section, we present a model for further diagnosing how a change can be planned: the appreciative inquiry (AI) approach from Cooperrider and Whitney (1999).

In the following section, we will present a second model, the OD action research model (also known as Kotter’s [1996] eight-step approach, which was discussed in Chapter 1.1 (http://content.thuzelearning.com/books/AUMGT435.16.1/sections/navpoint-8#ch01sec1.1) ). Note that the AI approach is used as a collaborative method. It is based on opportunity creation as well as problem resolution when there is suf�icient time, supportive leadership, and willing followers, and a need to identify problems as opportunities for improvement. Kotter’s approach involves methods for planning and implementing change processes that address problems and issues requiring change. These models are based on different motivations and ways of thinking (philosophies) that serve different purposes at different times. One approach does not replace the other, nor is one approach superior.

The eight-step approach and the AI approach are the two most popularly used multistep road maps (by all types of organizations). These approaches include leadership, a shared need, guidance, commitment, communication, empowerment, and ensuring that changes stick (Gilley, Gilley, & McMillan, 2009). Both approaches have been used for transitional changes that involve organizational divisions, departments, and business units of organizations.

Examples of programs that result from transformational planning processes include mergers and acquisitions, restructuring, new leadership and management, cultural change, and crises requiring complete organizational turnarounds. Kotter’s model is more of a traditional, top-down problem solving and opportunity-producing corporate process that has become a classic standard for corporate change planning. The AI approach centers on bottom-up opportunity- generating processes to identify the What and How elements of organizational change.

Unlike traditional problem-solving approaches, AI engages employees across the organization in creating positive change that focuses on learning from success (Cooperrider, Whitney, & Stavros, 2003). As de�ined by Cooperrider and Whitney

(1999), AI leads to discovering the best of what exists—such as the best in people, organizations, and the surrounding world. It means asking questions and searching for what gives an effective and capable system “life” so as to increase its positive potential.

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AI is commonly used in all types of organizations—pro�it, not-for-pro�it, governments, educational institutions, hospitals, and large private and publicly traded corporations around the world. It starts by asking, “What is possible? What do we wish to achieve?” The approach applies at any level: individual, group, department, division, or for the entire organization. At the organizational level, AI begins by involving a large group of individuals that includes leaders, employees, and members external to the organization (for example, customers, partners, suppliers), then moves across groups with designated individuals in each group, recording main insights to be combined and analyzed. Figure 2.6 depicts the overall model. The process is explained from each of the four phases, or the four Ds: discovery, dream, design, and delivery.

We will discuss the methods involved in each phase �irst before reviewing the approach in theory and practice.

Figure 2.6: Appreciative inquiry four Ds model

The process of appreciative inquiry is explained using the four Ds: discovery, dream, design, and delivery.

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Source: Based on Cooperrider, D. & Whitney, D. (1999). Appreciative inquiry: A positive revolution in change. Fig. 1, p. 249. In P. Holman & T. Devane (Eds.), The change handbook: Group methods for shaping the future. Copyright © 1999 by Peggy Holman and Tom Devane. Berrett-Koehler Publishers, Inc.

Discovery Phase

The discovery phase mobilizes a systemic inquiry into the positive change core (Cooperrider & Whitney, 1999). Each individual in each group (8 to 12 people) is interviewed and interviews others on the selected topic or question of positive inquiry that is grounded in the best of what exists. Topic selection starts the process. It requires searching for positive statements of what is desired by the organization. The topic

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represents what the organization wants to discover and/or learn and what will evoke dialogue about a desired future, or what people want to see develop in their organization (Stevenson, 2014).

Examples of topical questions with regard to attorney/employee satisfaction in law �irms include: “What situations or circumstances created your loyalty to this �irm? Describe a situation in which you felt that you received exceptional mentoring. How are you best mentored?” The results of the discussions and re�lections are recorded and serve as a resource during the next phase.

Dream Phase

In the dream phase, participants envision the organization’s greatest potential for positive in�luence and impact on the world. Participants share dreams through stories, recollections, and re�lections collected during the interviews. The intent during this phase is to energize the participants and their insights through a mutually shared learning process. Possibilities and new ideas emerge about the topic as participants are encouraged to dream big.

Design Phase

During the design phase, each individual and the group as a whole begins to design an organization to enact positive change. The design phase involves creating a provocative proposition, which bridges the best of “what is” in the organization’s present state toward a speculative “what might be” future state. This idea is provocative in the sense that it extends beyond the current status quo by challenging common assumptions or routines and suggests a realistic, desirable future for the company and its employees (Cooperrider, 2002).

This phase creates a platform for developing the idealized state derived from the �irst two phases of the process. Actual organizational dimensions are discussed with concrete characterizations in terms of the leadership, culture, strategy, shared values, business practices, social responsibility, competencies, stakeholder relations, and desired results in �inancial, diversity, or other areas (Stevenson, n.d.).

Destiny Phase

Finally, the destiny phase involves an invitation to action inspired from the other phases. During this phase, groups publicly declare intended actions and ask for support to consider next steps. Self-selected groups are organized to move the organization forward.

The AI Approach Put Into Practice

A case presented in the Harvard Management Update provides a good representation of the strengths of AI, as general manager John Cwiklik of the Santa Ana Star Casino in Barnanillo, New Mexico, used this approach to �inancially turn the entire organization around. The establishment opened in 1993 and had the largest market share in the region until competition arrived. Even with a $60 million facility expansion, the casino was ranked in fourth place (Kinni, 2003). Problems appeared in the form of poor customer service and a lack of

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employee attention and engagement with customers—few people smiled or talked. Cwiklik stated that employees felt that management did not care about them or wish to speak to them (Kinni, 2003).

Cwiklik engaged the entire 820-member staff in an AI consultation focused on delivering a superior service experience to customers. However, when the casino was pressured to lay off 250 employees in October 2002, many developed a mind-set that the AI effort played an unexpectedly helpful role. Cwiklik stated, “We had to do it to save the business but we wanted to do it in an appreciative way” (as cited in Kinni, 2003, p. 1). In an effort to use best practices, the casino achieved its goals and gave a generous severance and outplacement package to permanent employees.

Cwiklik again turned to AI consultants in December 2002 and January 2003, with the aim of repositioning the business as “the hometown casino” to bring in local customers. He stated, “We did an AI in our table-games department and in our slots department. We asked employees how to become this new hometown casino, and we took their ideas and implemented them in our marketing and operations” (as cited in Kinni, 2003, p. 1). One result, Cwiklik noted, was a $10 million turnaround in operating pro�its in �iscal year 2003. He stated, “AI has been instrumental in making our numbers a lot better” (as cited in Kinni, 2003, p. 1).

Effectiveness and Questions About the Approach

Case studies, anecdotal evidence, and testimony demonstrate that as a transformational change method, AI has been successful at the individual, group, community, corporation, and national levels (Browne & Jain, 2002; Cooperrider, Whitney, & Stavros, 2008; Kelm, 2005). Still, some scholars argue for more empirical, longitudinal, and comparative studies to address such questions as: How long lasting are the effects of an AI consultancy? Does this method �it within a particular cultural or managerial orientation; that is, could the failure of an AI project be attributed to a certain consultative style, facilitator skills, or cultural context? Also, under what conditions would this method be considered an effective change process (Bushe, 2010, 2011)? These unanswered questions are reasonable and can be applied to any and all change methods. In the meantime, AI remains a respected and major change approach.

Check Your Understanding

1. Brie�ly summarize AI and explain the ways it differs from Kotter’s approach to organizational change. 2. If you were to help plan and implement a sizable organizational change with a team, would you prefer Kotter’s (eight-step) or

Cooperrider’s (AI) approach? Explain your reasons.

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2.5 How to Change Using Action Research The best change strategies and plans can be compromised if the human factor is neglected. Ultimately, regardless of what diagnostic model is employed or what strategy for change is put into place, it is people who directly enact the change, and it is people who are directly affected. Not to account for such a critical factor in all phases of the change process is to greatly imperil the strategy as a whole. The following story is based on actual events and illustrates what can happen when an organization’s personnel are neglected in the change process.

An organization asked its operations and IT departments to select a strategy to implement what they felt would best save costs. The departments decided to consolidate the use of printers: They would remove all personal printers and install conveniently located networked printers that employees could connect to wirelessly. This strategy was estimated to save the company $3 million annually. Leadership agreed to the plan, the printers were purchased, and employees were told about the new system and how they would bene�it.

A few weeks after the networked printers were installed, IT began removing personal printers from of�ices, which was met by much resistance. Employees objected to the new setup, complaining that they were not asked about the change and that con�idential documents would be unprotected—despite the fact that the printers were only feet away from the employees. The resistance compelled the leadership team to revise the plan and instead gradually implement the changes over 2 years, signi�icantly decreasing the projected savings.

Now that we have seen what can happen when the human factor is ignored in a change strategy, we turn to an action research model that presents a classic OD process. This useful teaching and learning method puts individuals in the driver’s seat if the change management team asks them to participate from the start. The action research model provides a step-by-step approach for identifying the problem or opportunity, researching and diagnosing the targets for change, and presenting the diagnosis in a plan to the client (a CEO, HR executive, or change team). This is a common process that can be used by an internal team, consultant, or student intern working with a change team.

The action research model, shown in Figure 2.7, has been described as the dominant methodological logic and basis for planned change (Cummings & Worley, 2015). It was originally adapted to an applied OD context by Frohman, Sashkin, and Kavanagh (1976); Shein (2004); and Cummings and Worley (2001). This approach is designed to provide objective information and analysis that goes beyond the super�icial level of presenting issues.

The model’s straightforward process is presented from the perspective of an external consultant. In practice, the change specialists are considered “colearners” vis-à-vis the organizational members with whom they are working. They are equal partners in the process, so neither party is dominant and tasks are shared (Cummings & Worley, 2001). Both bring different and important expertise and perspectives.

The consultative, problem, and/or opportunity search process shown in Figure 2.7 illustrates how potential sources of organizational problems and opportunities are discovered from structured steps. As noted with other �igures in this text, the actual change cycle is rarely as

Figure 2.7: The action research model

The action research model provides a step- by-step process that OD and change management consultants can use when working with a change team.

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linear as this model suggests. There are usually continuous feedback loops (informal and formal) as contingencies, mishaps, and changes in the environment and the organization occur.

Identify the Problem or Opportunity

The initial phase begins when a CEO or other top-level member of the executive team discovers a problem or realizes a potential opportunity that needs to be solved. Consider the following example: Kevin Rollins, former president and CEO of Dell, said his company was always “scouring for anything that could come up and bite us. In fact, we asked ourselves all the time, ‘What is our greatest fear?’ Whenever we �ind something, we try to �igure out how we can embrace it” (as cited in Fishburne, 1999, para. 10). Jack Welch, former GE CEO, would talk to his managers about the industry and advise them to understand their competitors. They would then explore what they could to do to “change the game” (Fulmer, Gibbs, & Goldsmith, 2000).

Consult With the Client—Initial Meeting

The initial consultation between the change consultant and the client involves a mutual assessment of purpose, roles, and relationships. The client is generally interested in the consultant’s experience, expertise, methods, and fees. The consultant is likewise interested in the client’s methods, as well as the organization’s culture and goals.

Culture and other assumptions should be clari�ied, including those of the consultant. For example, in international settings it is important to understand what roles, information, and level of involvement lower and midlevel employees can play in problem identi�ication, diagnosis, and other phases of the process. In some countries (for example, in Asia and the Middle East), relationships and power are more hierarchical than they are in the West. OD consultants whose values, perceptions, and practices view employees as partners and colearners in certain international or even local cultures could encounter problems.

Value differences can also vary in both international and national cultural contexts. Some consultants view their role as identifying and solving problems, whereas top management may disagree. What happens when a consultant discovers systematic sexual harassment while diagnosing an inventory system? This problem is reported to management who may be uninterested, or even ask the consultant to avoid the issue. Communicating a clear understanding between the consultant and the client with regard to work and professional values and operating ethical principles and practices is important before and at the contracting phase.

Source: Adapted from Cummings, T. G., & Worley, C. G. (2001). Organization development & change. Cincinnati: South-Western College, Fig. 2.1, p. 19. Copyright © 2001 by South-Western College Publishing, a division of Thomson Learning.

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Another role-and-method question to be clari�ied at this phase is how proactive the consultant should be in the engagement. It is best to obtain this type of information and understanding at the contractual phase where the consultant asks for clari�ication on cultural “do’s and don’ts” that extend from strategic to procedural decisions and ways of doing (or not doing) things.

Collect Data

As noted previously, the presenting issue or opportunity needs to be veri�ied. The consultant and his or her team gain access and, depending on the problem or opportunity, begin the search and collection process using interviews, observation (in meetings, business processes, transactions), questionnaires and surveys, performance reports, �inancial data, and other information relevant to the consultant’s search plan.

This phase is usually an iterative process; that is, members of the consulting team may return for additional information to obtain a longitudinal set of observations rather than one-shot looks or interviews. Consultants may also interview customers, vendors, suppliers, and other external stakeholders relevant to the search.

At this stage, con�identiality and privacy (as well as other ethical issues) must be strictly clari�ied, agreed on, and observed. For instance, how will the information be used? How will it be interpreted, protected, and disseminated? Who can be unintentionally hurt by this information?

Some of the same cultural issues already discussed also apply here. For example, Mack, Woodsong, MacQueen, and Namey (2005) discuss ethical guidelines for observing con�identiality and privacy during this phase of data collection. They state that consultants should be unobtrusive and avoid disrupting normal activity, but they should also be open, so that individuals being observed and interacted with do not feel their privacy is compromised. Consultants’ manner is often dependent on the situation: sometimes consultants should announce who they are and what their purpose is, while other times it may not be appropriate to do so.

It is the OD consultant’s responsibility to protect the privacy and integrity of all individuals who participate in surveys, interviews, and discussions that relate to the data collection process. However, it is also the consultant’s responsibility to provide truthful information and results to the sponsor of the consultancy.

Make a Preliminary Diagnosis

This diagnosis follows data collection and interpretation. The preliminary diagnosis is just that—preliminary. Because the consultant is reporting the �indings and interpretation back to the client, it is important to note that the diagnosis could change as more information is collected. Also, additional hypotheses and different views of the problem or opportunity may arise after initial data is collected. This raises the question of whether the consultant is simply a messenger who delivers what she or he is told, or is a more active and inquiring participant.

The consultant may have started with an initial request to �ind data that con�irms top management’s interpretation of a problem. However, he or she could later discover information that disproves management’s problem identi�ication. This phase should anticipate how to present and

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Digital Vision/Photodisc/Thinkstock

A critical aspect of a change specialist’s job is to provide timely, comprehensive, and objective feedback to the client.

discuss what happens if the consultant discovers another, radically different set of problems. In such a case, it is key to be honest and tactful. Feedback serves two purposes: to ensure the results are validly interpreted and to increase ownership among the members of the organization (McLean, 2006).

For example, suppose a manager hires a consultant to prove that members of a sales team are lazy and not performing to their potential. However, the consultant has preliminary evidence indicating that the team’s leader is not setting an effective strategy. It is the consultant’s obligation to report this evidence, even though it is contrary to what the hiring manager asserted.

If preliminary results differ or even con�lict with later discoveries, consultants can offer context and explain their �indings. Again, the goal is to report what actually happened or is happening in order to �ind the root cause(s) of problems, issues, and possibilities for opportunities.

Present Feedback to the Client

This is also a preliminary phase in which the consultant presents an analysis of the data. During this initial “show and tell,” no recommendations are made. This meeting presents strengths and weaknesses and con�irms, discon�irms, or even extends the initial problem identi�ication or opportunity statement. This meeting also provides the consultant with initial impressions regarding the �indings before the next step.

During this phase, a consultant’s obligation is to report and emphasize �indings and recommendations based on reliable evidence. Returning to the sales leader and team example, at this meeting, the consultant presents the evidence, data, and interpretations showing that the sales leader could not articulate a strategy that motivated and effectively organized the team to meet or exceed its sales objectives. The consultant would also explain the methods used to discover and con�irm this �inding, and offer recommendations to address the problem.

Jointly Diagnose Problem/Opportunity/Findings With the Client

This step in the process offers the consultant an opportunity to share the preliminary �indings, the methods used in the diagnosis, and the diagnosis itself. If the consultant develops a common frame of reference in which the client can collaboratively discuss, share, argue, and ultimately reach agreement on the methods, problem/opportunity, and ways to proceed, the process can continue and the action research method can, to this point, be considered effective (Schein, 1969).

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Involving clients as coparticipant observers in a consulting project, as discussed earlier in this section, facilitates reporting �indings and diagnosing problems and opportunities. The consultant from the sales team example can provide a framework to involve the hiring manager and/or staff members to also examine the evidence and help diagnose the team and leader’s issues.

Instigate Joint Action Steps

The consultant now directly involves the client in planning how to implement the change management process in order to reach the “desired state” of the initiative. The design of the interventions to be used is also agreed on in this phase, along with an assessment of the organization’s readiness, capabilities, resources, budget, risks, timelines, and responsibility chart (who does what, when, and how). Enterprise- or organization-wide change requires a communication rollout plan involving the organization’s leaders and its top-level management team.

After the hiring manager and the consultant discover, verify, and agree that the leader of the sales team has a dif�icult time identifying and implementing an effective team strategy, the manager and consultant draw up a plan together to help the leader design and enact a sales strategy. The manager and consultant may have also found that leaders of other sales teams could also bene�it from learning how to use new software to develop a more sophisticated sales strategy. In effect, the plan involved a much broader scale and scope of participants, and the president of the company as well as the hiring manager and vice president of sales were all involved in planning the new training, because the anticipated bene�its would enhance revenues and reduce costs for the entire company.

Implement Change

This phase means “go.” It involves actually transitioning procedures, structures, work, jobs, technologies, and people into place. New behaviors and practices may require training, coaching, and advising to build new skills and reinforce desired behaviors. At this phase, interventions are required at the individual, team, business unit, division, and entire enterprise levels. In the sales team example, an implementation plan involved not only training to use new software, but also new reporting procedures, skills, and behaviors that affected all sales team members’ overall effectiveness.

Managing Change

The Change Consultant’s Role

Suppose a large corporation utilizes an of�ice services support company. The company has served the corporation’s needs in-house for 5 years, performing maintenance duties, cleaning, shipping/receiving, printing, mail delivery, and service to copiers. The manager of

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the services company has a direct liaison in the corporation’s operations department, and the working relationship has been strong thus far.

In recent months the number of complaints from employees has risen, regarding everything from cleanliness to printer outages. There have been equipment problems and the level of service requests has increased to a level that is challenging for the number of staff on duty at a given time.

You are a change consultant brought in by the corporation to work with both the operations representative and the service company manager to systematically diagnose and implement needed changes.

Discussion Questions

1. What phase of growth do you think this of�ice services company falls into, and what type of leadership is needed to return to positive progress?

2. What type of change do you think is needed, in general? 3. As the change consultant, using the action research model, describe the process for diagnosing change in this circumstance.

(See the end of the chapter for possible answers.)

Collect Postimplementation Data

Collecting postimplementation data requires gathering further information from individuals, teams, business units, divisions, and top management—as well as from external stakeholders (vendors, suppliers, customers, and government agencies)—to ensure the effectiveness of the changes, both from an internal systems perspective and from an external view. Feedback from multiple departments helps identify whether the systems changes are aligned and their effectiveness. This information is then given to different client teams and individuals who evaluate the results and make adjustments as needed. In some cases, of course, additional diagnoses are required.

Diagnostic Change Tactics: Identifying the Level(s) of Intervention

Identifying the level of intervention, referred to in Figure 2.4 (http://content.thuzelearning.com/books/AUMGT435.16.1/sections/navpoint- 19#�ig2.4) , occurs during the action research process when an external consultant working with assigned organizational managers and members follows evidence leading them to speci�ics such as leadership, strategy, structure, culture, people, and systems, or interrelations among these dimensions. In addition to these organizational dimensions, the change components illustrated in Figure 2.5 (http://content.thuzelearning.com/books/AUMGT435.16.1/sections/navpoint-19#�ig2.5) are useful and more basic.

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For example, after Jobs was �ired from Apple, the locus of many of the company’s problems became obvious. The leadership styles of CEOs Sculley, Spindler, and Amelio were lacking. Because Apple was essentially a product company, without Jobs’s creative and innovative leadership, new products were not invented. Consequently, there was confusion and decline in the company’s strategy, structure, culture, and systems. Employee morale also suffered during that period. Revenues and pro�its tumbled while expenses mounted.

Apple’s story before Jobs returned illustrates how the formal and informal components of an organization’s interconnected and interrelated systems and subsystems can work together unsuccessfully. Formal components generally include organizational strategies, structures, systems, and business processes. Informal organizational dimensions include culture, leadership styles, politics, groups, and team relationships. Both formal and informal systems are interwoven with the values, beliefs, and attitudes that employees bring to and adapt from their workplaces (Senior & Fleming, 2006b). When these systems and attitudes are not working in harmony, change becomes imperative.

Check Your Understanding

1. Explain the importance of including the human factor when planning and implementing a change strategy. 2. Describe each step in the action research model.

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ajkkafe/iStock/Thinkstock

Change introduced without warning or adequate preparation can create uncertainty and resentment among employees.

2.6 Why People Resist Change Ten reasons people resist organizational change are loss of control, loss of face, excess uncertainty, sudden surprise, everything seems different, fear of incompetence, increased workload, ripple effects, previous resentments remembered, and the hurt of change (Kanter, 2012). Signi�icant organizational changes can cause emotional pain and hurt, especially when jobs are lost, perks are cut, salaries are lowered, and favorite customers and accounts are threatened, if not lost. Kanter (2012) suggests that although leaders may not be able to help those in pain feel comfortable, they can minimize discomfort by identifying each source of resistance in order to take the �irst step toward solutions. Even the process of asking for feedback from resistors can begin the process of accepting changes.

Change—especially if sudden and without disclosure—can create a great deal of uncertainty and surprise, and threaten employees’ sense of competence. Not being able to prepare for such jolts can be disconcerting. Employee reactions initially

include shock, then resentment and inertia. Leaders can help by creating structure and certainty in schedules, processes, and other controllable tasks that are accompanied by simple, step-by-step instructions. It is also helpful to provide information, education, and training to employees who need support if they are assigned new tasks using different technologies. Such support can alleviate a loss of con�idence in those who feel overwhelmed.

Employees who are suddenly faced with increased work will also feel overwhelmed, more anxious, and resistant to the change. To diminish negative reactions and resistance toward the company and the change, provide time and opportunity for them to focus on the new tasks and reward them with perks, such as recognition for their efforts, parking privileges, and meals.

Loss of face is another consequence for those who played a large role in or were associated with an organization’s practices and culture. With the loss of value of things past, those who were connected with that past might feel defensive or even to blame. According to Kanter (2012), leaders can help those affected maintain their dignity by honoring what worked and was valued while acknowledging the new changes for different times. Those affected may �ind it easier to let go and move on. Also, leaders can show empathy and provide guidance to help employees affected by change heal the past before assuming new roles and responsibilities. Sometimes it can help to simply acknowledge those who experience pain and show them respect.

Resistance to the change can also have ripple effects—that is, those negatively affected can reach out to others in different parts of the organization, and even outside the organization, such as valued customers and neighbors. Leaders should consider enlarging their communication with and attention to people affected by the change to minimize rumors and negative misinformation.

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Because most large-scale changes fail, resistance can be expected. If change is not led or managed competently, why wouldn’t people resist? We explore additional reasons for resistance and suggest some assessment and planning methods that detect, and can thus better prevent, resistance. However, if particular changes are not accurately or well-de�ined, led, and managed, resistance may be a legitimate response. What is your tolerance for change? To �ind out, please take Assessment 2.1.

Assessment 2.1: Thinking About Change

Instructions: Indicate whether you agree or disagree with the following statements. Mark your answers in the space provided.

1 = Strongly Disagree; 2 = Slightly Disagree; 3 = Neither Agree nor Disagree; 4 = Slightly Agree; 5 = Strongly Agree

___1. I look forward to changes at work.

___2. I usually resist new ideas.

___3. I am inclined to try new ideas.

___4. Change usually bene�its organizations.

___5. I usually support new ideas.

___6. Most of my coworkers bene�it from change.

___7. I don’t like change.

___8. Change frustrates me.

___9. Changes tend to stimulate me.

___10. Most changes at work are irritating.

___11. I often suggest new approaches to things.

___12. Change often helps me perform better.

___13. I intend to do whatever possible to support change.

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___14. Other people think that I support change.

___15. I usually hesitate to try new ideas.

___16. Change usually helps improve unsatisfactory situations at work.

___17. I �ind most changes to be pleasing.

___18. I usually bene�it from change.

Scoring:

Add your answers to questions 4, 6, 12, 14, 16, and 18, and then divide by 6. This is your “belief and opinion about change” score. Next, add your answers to questions 1, 7, 8, 9, 10, and 17, and divide by 6. This score re�lects how “change makes you feel.” Now, add your answers to questions 2, 3, 5, 11, 13, and 15, and divide by 6. This score re�lects how “change makes you want to act (behave).” A score of 4 and greater re�lects a positive attitude toward change. A score of 2 and less re�lects an attitude that is negative and potentially resistant to change.

Source: Dunham, R. B., Grube, J. A., Gardner, D. G., Pierce, J. L., & Cummings, L. L. (1989, August). The development of an attitude towards change instrument. Annual Meeting of the Academy of Management, Washington, D.C. Reprinted with permission. Retrieved from http://citeseerx.ist.psu.edu/viewdoc/download? doi=10.1.1.194.9511&rep=rep1&type=pdf (http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.194.9511&rep=rep1&type=pdf)

Organizational inertia (the tendency of organizations to maintain the status quo) is a major reason people resist change. If inertia is strong and widespread in an organization’s culture, resistance to change can threaten the organization’s survival (Carr, Hard, & Trahant, 1996). Most people do not like to change unless it is to their personal bene�it. Resistance to change is not only found at the individual level; it can also be identi�ied at the group and organizational levels as well.

At the organizational level, resistance is often part of having to give up bureaucratic command-and-control practices. Hierarchical structures also bring power and status, as well as control, to those in positions of authority. Leaner and more open organizational arrangements (for example, organic structures) have fewer “bosses,” rules, and procedures. There is less inertia.

At the group or team level, resistance is found in cultural dynamics: values, norms, attitudes, and practices. Groups grow comfortable with routines and people they know and with whom they are comfortable. Also, groups that are risk averse generally resist change. Moving from known to unknown states can be risky.

At the individual level, people experience any or all of three basic fears: failure, loss of the familiar, and fear of the unknown. Individuals resist change for both rational (self-interest) and psychological reasons. Those who resist change due to self-interests may also experience the three

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basic fears. When all three fears are experienced together, individuals may develop signi�icant stress (Klein, 1984). Other common sources of individual resistance to change include:

Threat to one’s expertise Threat to one’s resources Threat to one’s status Authoritarian attitudes Fear of losing something of value Lack of trust in the change initiators Disagreement with the change Cynicism (Robbins, 2001, p. 547)

The opposite of each of these sources suggests an individual’s or group’s inclination to support change in general. For example, having con�idence in and satisfaction with one’s expertise, resources, and status, in addition to trusting an organization’s leaders, would suggest openness to change. OD change agents have the skills to analyze and help organizational leaders, individuals, and groups understand and, in many instances, overcome their sources of resistance to organizational changes.

Addressing Resistance to Change

The best approach to addressing resistance to change is competent direction, planning, and preparation for the change. Ultimately, the CEO and executive team members are responsible for planning and preparing employees and key external stakeholders and partners for the change. In addition to the frameworks, approaches, and intervention assessment methods discussed in this chapter, ways to address and deal with change are presented.

Coaching individuals and teams can help overcome resistance and resentment to organizational change. Organizational managers and OD consultants typically assist employees and teams in the following ways:

Let people know they have a choice. Listen to employees’ ambivalence and reinforce their motivation (employees do not need total commitment to the change to start to embrace it). Listen to employees’ concerns and involve them in the design and implementation of plans (when employees make choices, they are motivated). Involve employees in the action of the new changes. Train employees in new desired behaviors to prevent slippage to old behaviors. Provide information and solicit top management support in continuing to provide training, especially to those who begin to “relapse” to old attitudes (HR Focus, 2002).

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It is important for leaders to be involved and to show visible and convincing support before and during the planning stage. Leaders need to be honest and authentic when communicating and repeating the vision and the change’s end state. Additionally, they and their managers can make the incentives and rewards for change more enticing to employees. Appointing competent, respected “change champions” who engage and involve key stakeholders and contributors throughout the organization can also gain support. These champions need to take a positive but concerned approach to dealing with issues and resistance. Their role is not cheerleading but helping, supporting, providing real-time information, and listening.

Kotter and Schlesinger’s Change Approaches

In addition to Lewin’s force-�ield analysis that addresses strategies for preventing resistance that was presented earlier, Kotter and Schlesinger (1979) created six approaches for dealing with change. These are illustrated in Table 2.2, along with the conditions for which each approach is suited and the advantages and disadvantages of each. Although Kotter and Schlesinger do not de�ine resistance to change, they state that one major duty of managers is to execute change, which also involves overcoming opposition to it (Gravenhorst, Werkman, & Boonstra 2003; Kotter & Schlesinger, 1979).

Table 2.2: Change approaches

Approach Commonly used in situations Advantages Disadvantages

Education and involvement

When there is lack of information or inaccurate information and analysis.

Once persuaded, people will often help with the implementation of change.

Can be very time-consuming if many people are involved.

Participation and involvement

When the initiators do not have all the information they need to design the change and when others have considerable power to resist.

People who participate will be committed to implementing change.

Can be very time-consuming if participants design an inappropriate change.

Facilitation and support

When people are resisting because of adjustment problems.

No other approach works as well with adjustment problems.

Can be time-consuming and still fail.

Negotiation and agreement

When someone or some group will clearly lose out in a change and when that group has considerable power to resist.

Sometimes it is a relatively easy way to avoid major resistance.

Can be too expensive in many cases if it alerts others to negotiate for compliance.

Manipulation and co- optation

When other tactics will not work or are too expensive. It can be a relatively quick and inexpensive solution to resistance problems.

Can lead to future problems if people feel manipulated.

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Approach Commonly used in situations Advantages Disadvantages

Explicit and implicit coercion

When speed is essential and the change initiators possess considerable power.

It is speedy and can overcome any kind of resistance.

Can be risky if people become upset with the initiators.

Source: Reprinted by permission of Harvard Business Review, An exhibit from “Choosing Strategies for Change” by J. P. Kotter and L. A. Schlesinger (March/April 1979), Copyright © 1979 by the President and Fellows of Harvard College; all rights reserved.

The strategies in Table 2.2 range from the best, most desired approach for dealing with change—that is, education and communication—to the less desired but perhaps necessary approach, explicit and implicit coercion. It is important to note that this model helps provide options that relate to different situations. Manipulation and coercion may be necessary tactics to solicit employee involvement in a change when other tactics will not work or are too expensive; however, its downside is that future problems can surface if people feel manipulated. Relationships between the manipulators and the manipulated can be damaged in the process and cause other performance and trust problems down the road.

It is also worth stating that manipulation, co-optation, and explicit and implicit coercion approaches may violate people’s rights if done in unethical and illegal ways or if anyone is actually harmed. Lawsuits and human relations problems can arise. Consequently, although such tactics may be necessary under certain dif�icult circumstances, they must be employed with the utmost caution and care.

Check Your Understanding

1. List the 10 reasons people are resistant to change. Have you used any to resist change in your own life (in your career or academically)? Describe the situation and whether you were able to overcome your resistance.

2. What approach to overcoming resistance to change do you feel would be most effective? Explain your reasoning.

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Summary and Resources

Chapter Summary This chapter lays the foundation for understanding how leaders and change specialists diagnose, assess, and plan for organizational change. Key questions of why, what, and how to change are organized through diagnostic models and methods, starting with the open-systems framework. Examples from businesses such as Zappos, HP, and other companies are featured.

Several approaches presented here were introduced in Chapter 1, including a section that discussed the �it between organizations and their environments to explain how organizations change to effectively �it with different external markets. The organizational life-cycle approach shows the different stages of development through which companies evolve and the types of leadership and structural changes required for growth at each stage.

The AI approach illustrates how organizations can change by searching for the best of what exists in people, organizations, and the surrounding world. The action research model used by OD consultants is explained in a step-by-step approach that students of change management can learn and apply to any part of any organization. Finally, strategies and methods for learning how to handle resistance to changes in organizations, groups, and individuals across different situations is discussed, along with a force-�ield analysis that can be applied to any planning process. This chapter prepares the way for a discussion on how to implement change.

Learning Objectives Recap 1. Organizational diagnosis of change is the process of understanding why, what, and how an organization needs to change, if it does.

The diagnostic process also provides information for designing change interventions. Change models reduce complexity, identify activities demanding attention, highlight the interconnectedness of organizational dimensions, provide a common language, and offer a sequence of change events.

2. The open-systems framework shows how organizations are open to environmental in�luences through the processes of input, throughput, and output of products and services. This model enables leaders and change agents to learn if and why a change is needed to process products and services ef�iciently through the phases of resource allocation, transformation, and �inal delivery. The environment-industry-organization contingency model considers the environment, industry, and organization in terms of both environmental change and complexity. The organizational life-cycle model helps diagnose the types of crises and challenges organizations and leaders face as the organization matures. This particular model adds a historical dimension for understanding an organization’s developmental needs in terms of changing capabilities required of leaders to grow organizations along their life cycle.

3. Change can be transformational, transitional, or developmental. These types of change correspond to two broad distinctions of change: �irst-order and second-order change. First-order change involves small-scale adjustments to systems, processes, and structures. Second-order change involves radical transformations to the entire organization. Interventions can be focused at organizational, team/group, or individual levels. They are focused, planned actions to enhance effectiveness. As Figure 2.4

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(http://content.thuzelearning.com/books/AUMGT435.16.1/sections/navpoint-19#�ig2.4) illustrates, different interventions can be planned and implemented within and across the organizational dimensions (leadership, strategy, culture, structure, people, and systems).

4. Kotter’s top-down eight-step approach, presented in Chapter 1.1 (http://content.thuzelearning.com/books/AUMGT435.16.1/sections/navpoint-8#ch01sec1.1) , is presented here as a problem-solving model in contrast to the bottom-up and across AI approach that is based on identifying opportunities and empowering employees to dream, design, and implement changes. Both approaches are popular and work in different situations. The four phases of the AI model are discovery, dream, design, and delivery. This model focuses on how people and the organization add value (instead of the problems they face) and how they can contribute more thorough planned change.

5. The action research model for diagnosing change from the perspective of a change specialist involves the following steps: identifying the problem or opportunity, consulting with the client, collecting data, formulating a preliminary diagnosis, presenting feedback to the client, diagnosing the problem and �indings with the client, jointly planning action steps, implementing those steps, and collecting postimplementation data.

6. Employee assessments evaluate the reasons for resistance and how competent direction, planning, preparation, and coaching can help organizations to address and resolve resistance. Kotter and Schlesinger (1979) present a change approach, along with Lewin’s force-�ield analysis that addresses strategies for preventing and resolving dysfunctional resistance.

Discussion Questions 1. What does the adage “If you don’t know where you’re going, all roads lead there” mean with regard to organizational change? 2. Why would an organizational leader need to use change models? What are the advantages? Disadvantages? Explain. 3. Explain where a traditional university and a high-tech computer software �irm would �it in Figure 2.2

(http://content.thuzelearning.com/books/AUMGT435.16.1/sections/navpoint-18#�ig2.2) environment-industry-organization contingency model.

4. Assume you are a change management specialist. Return to the opening scenario of Zappos CEO Hsieh’s announcement and implementation of his new structure. Refer to other websites that discuss this scenario. Using concepts from this chapter, evaluate Hsieh’s change leadership approach.

5. Evaluate how Cook, Jobs’s successor at Apple, is doing according to the development life-cycle model in Figure 2.3 (http://content.thuzelearning.com/books/AUMGT435.16.1/sections/navpoint-18#�ig2.3) .

6. If you were assigned to an organization’s planned change team and were asked how Figure 2.4 (http://content.thuzelearning.com/books/AUMGT435.16.1/sections/navpoint-19#�ig2.4) could be used with Figure 2.5 (http://content.thuzelearning.com/books/AUMGT435.16.1/sections/navpoint-19#�ig2.5) and Figure 2.6 (http://content.thuzelearning.com/books/AUMGT435.16.1/sections/navpoint-20#�ig2.6) , how you would respond?

7. Explain how Kotter’s change process model from Chapter 1.1 (http://content.thuzelearning.com/books/AUMGT435.16.1/sections/navpoint-8#ch01sec1.1) differs from the AI approach in this chapter. Explain which of these models you would prefer to use if you were diagnosing an organization to plan a change.

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8. Explain the reasons why some people in organizations generally resist large-scale change. Do you generally resist change? Why or why not?

9. Describe what you would say if you had to deliver a presentation on how to address, prevent, and resolve professionals’ resistance to change in organizations that must plan and implement changes.

10. Respond to the following quote and explain your reasoning:

Change is not always good, and it certainly is not a panacea for all the issues.… More leaders may need to prioritize various change proposals and defuse poor ideas, rather than always responding to changes from the internal and external environment. Therefore, failure to change can be a positive response. I am highly suspicious of the recent trends in business to recon�igure organizations every �ive years and of the idealization and symbolic value of change as a trophy of managerial success. (Czarniawska-Joerges & Sevón, 1996, p. 8)

Key Terms

change interventions Planned actions designed to help enhance an organization’s effectiveness by solving a problem or creating an opportunity.

environmental change A dimension of environments based on their stability or instability.

environmental complexity A dimension of environments based on their level of simplicity.

�irst-order (adaptive) changes Incremental, developmental changes involving small-scale adjustments to systems, processes, and structures.

input phase The beginning phase of the systems contingency model, before the transformation of the inputs. See open systems theory and model.

levels of intervention Planned actions to enhance an organization’s effectiveness that focus on the organization, team/group, or individual.

open-systems theory and model A framework for studying how organizations interact with their environments in ways that affect the input, throughput, and output processes, along with interdependencies and outcomes.

organizational diagnosis of change

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The process of understanding the current state of how an organization functions and providing necessary information for designing change interventions.

organizational inertia The tendency of organizations to maintain the status quo.

output phase The �inal phase of the systems contingency model. See open systems theory and model.

presenting issues Problems and opportunities that are believed, perceived, and/or argued to be of primary importance for requiring a planned change.

resource dependency theory The theory that organizations are dependent on the environments in which they operate to ensure their survival, autonomy, and stability.

second-order (discontinuous) changes Radical, transformational changes involving the entire organization.

simple–complex dimension of environmental uncertainty The number and dissimilarity of external elements that affect an organization’s functionality.

Additional Resources YouTube clip: Brief recap of Steve Jobs’s life http://www.youtube.com/watch?v=7or2-x5r41Y (http://www.youtube.com/watch?v=7or2- x5r41Y)

YouTube clip: John Kotter on “Changing Hearts and Minds” http://www.youtube.com/watch?v=1NKti9MyAAw&feature=related (http://www.youtube.com/watch?v=1NKti9MyAAw&feature=related)

Overcoming resistance to change, group exercises http://www.google.com/url? sa=t&rct=j&q=&esrc=s&source=web&cd=42&ved=0CCEQFjABOCg&url=http%3A%2F%2Fwww.mhhe.com%2Fbusiness%2Fmanag ement%2Fasset_gallery%2Fbuildyourmanagementskills%2Fresourcemanual%2F�iles%2FTopic14%2FT14_GE_Overcoming_Resist ance_to_Change.doc&ei=ONvCTtm6Mo2osALYtfGRCw&usg=AFQjCNFAGXsN3I2ySCwzOvKgAk0NM5rzzA&sig2=VFnRGhp0HULqdnsJs GBwyA (http://www.google.com/url? sa=t&rct=j&q=&esrc=s&source=web&cd=42&ved=0CCEQFjABOCg&url=http%3A%2F%2Fwww.mhhe.com%2Fbusiness%2Fmanagement%2Fasset_gallery %2Fbuildyourmanagementskills%2Fresourcemanual%2F�iles%2FTopic14%2FT14_GE_Overcoming_Resistance_to_Change.doc&ei=ONvCTtm6Mo2osALYtf GRCw&usg=AFQjCNFAGXsN3I2ySCwzOvKgAk0NM5rzzA&sig2=VFnRGhp0HULqdnsJsGBwyA)

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Managing Change Sample Answers

Managing Change—The Change Consultant’s Role 1. As a change consultant you might analyze the company’s lifecycle from inception to present, and its history and signi�icant events.

Given that the company has performed well for the corporation for 5 years, it could conceivably be at the formalization stage or elaboration stage, thus requiring better coordination for growth. You may need to scrutinize the company’s history with the corporation more closely (in addition to its history before dealing with the corporation, if any) to determine what bumps in the road had occurred before to accurately plot the stage of this company. Perhaps managers’ complacency has resulted from the latest run of stability but led to issues in productivity and effectiveness.

2. If the company has worked well overall with the corporation thus far, barring any obvious clashes in leadership it does not seem that second-order or discontinuous change is necessary. Such an approach may do more harm than good. Rather, adaptive, �irst-order changes that adjust systems and processes for better outcomes seem more appropriate. But the change consultant must gather all required background information on the situation to make the best choice.

3. The corporation has discovered a problem that needs solving. You come in for the initial meeting with the operations executive and the service company manager to state purpose, roles, and responsibilities in the process, and gather history from each side. You send a survey out to the corporation’s employees to gather data on the issues raised, and for good measure send a separate survey to the of�ice services company employees for their input. Based on the results, you can make a diagnosis of where inef�iciencies may lie in the service delivery, but also of any internal issues happening within the service company itself that may be contributing to declining conditions. Present the �indings to the corporation representative and company manager, explain the tactics of the survey, and con�irm the �indings among the parties. Together, the representative and company manager can participate with the change consultant in deducing solutions and changes to be implemented, and the change consultant will then plan with both parties how to take steps toward improvement. Once the relevant parties in the change of processes are identi�ied, those people can be involved in implementing the change. Postimplementation, surveys are �ielded again to assess the success of the change and reaction from the corporation at large and the of�ice services company. Communicating results is important for survey participants as it validates their input.