Tesla-Organizational Change Project - (Management)

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Chapter 15

Organization Transformation and Strategic Change

Learning Objectives (part 1 of 2)

  • Identify and define organization transformation.
  • Understand basic strategy-culture matrix and other approaches to changing culture.

Learning Objectives (part 2 of 2)

  • Recognize importance of corporate culture and its relation to strategy.
  • Experience these concepts in management simulation.

Strategy and Transformation

  • Success can work against a company when it looses touch with customers.
  • Radical changes may be only choice for organization in desperate need of change.

Organizational Transformation
(part 1 of 3)

  • OT refers to drastic changes in:
  • How organization functions.
  • How it relates to environment.
  • OD strategies represent more gradual approaches to strategic change.
  • OT approaches are drastic and abrupt change.

Organizational Transformation
(part 2 of 3)

  • OT may or may not be developmental.
  • OT tends to use directive, not participative, approaches to change.
  • Usually top-down, top-management driven.
  • OT shaped by use of power rather than collaboration.

Organizational Transformation
(part 3 of 3)

  • Requires:
  • Shared vision.
  • Willingness to clean house.
  • Restructure.
  • Tackle many problems.
  • Due to immediate threat, this may be only way for organization to survive.

Large-Scale
Change Strategies

  • Incremental.
  • Long-term planned change.
  • Relies upon collaboration.
  • Transformative.
  • Immediate, drastic change.
  • Uses directive methods.

Large-Scale Change Model

Model based on 3 key dimensions.

Time frame of change—short or long.

Level of support of organizational culture.

Degree of discontinuity with environment.

Figure 15.2
Strategies for Planned Change

Four Change Strategies (part 1 of 2)

Participative evolution.

Incremental and anticipates change.

Support of culture through collaborative means.

Charismatic transformation.

Radical change in short time with support of culture.

Four Change Strategies (part 2 of 2)

Forced evolution.

Incremental adjustments over longer period without support of culture.

Dictatorial transformation.

Used in times of crisis.

Major restructuring running counter to internal culture.

Results of OT

  • OT may be best or only way to bring back an organization under immediate threat.
  • OT more likely to be used by externally recruited managers.
  • OT is risky and outcome is uncertain.

The Corporate Culture

  • System of shared values held by members that distinguishes one organization from another.
  • CEO and managers’ actions, not words, produce culture.
  • A culture is organization’s major strength when consistent with strategies.

Strategy-Culture Fit

  • Strategy:
  • Course of action used to achieve objectives.
  • Relates resources of organization to opportunities in environment.
  • Culture:
  • Set of values for setting priorities.
  • Critical factor in implementation of strategy.

Core Characteristics of Culture

  • Individual autonomy.
  • Sensitivity to customers and employees.
  • Managers provide support and assistance.
  • Employees initiate new ideas.
  • Openness of communication channels.
  • Risk-seeking encouraged.

Sharing the Vision

  • Management theorists feel vision is essence of leadership.
  • Vision involves several stages.
  • Share the vision.
  • Empower the individual.
  • Develop trust.
  • Reward performance.

Figure 15.3
Sharing the Vision

Strong Versus Weak Cultures

  • Strong culture.
  • Basic values intensely held and widely shared.
  • Weak culture.
  • May be seen in young company or one with high turnover.
  • Culture is product of key components.
  • Structure, systems, people, and style.

Figure 15.4
Relative Strength of Cultures

Strategy-Culture Matrix (part 1 of 4)

Four basic alternatives in determining strategy changes:

Manage change (manageable risk).

  • Change important and compatible with culture.
  • Use cultural reinforcement as strategies.

Strategy-Culture Matrix (part 2 of 4)

Reinforce culture (negligible risk).

  • Forge vision that emphasizes shared values.
  • Reinforce existing culture.

Strategy-Culture Matrix (part 3 of 4)

Manage around culture (manageable risk).

  • Change important and incompatible with present culture.
  • Reinforce value system, reshuffle power, use leverage in the organization.

Strategy-Culture Matrix (part 4 of 4)

Change strategy to fit culture (unacceptable risk).

  • Change important but incompatible with culture.
  • Changing culture is explosive, long-term process that may be impossible.

Figure 15.5
Strategy-Culture Matrix

Strategic Change Management

  • Seeks to align organization’s strategy, structure, and human resources to fit environment.
  • Parts of system in perpetual interaction with environment.

Organizations Composed of 3 Systems

  • Technical - solve production problems.
  • Political - solve allocation problems of resources and power.
  • Cultural - solve value/belief problems.

Figure 15.6
Environmental Forces and Organizational Systems

Three Steps to Strategic Change

Step 1: Develop image of desired organization.

Step 2: Separate systems and intervene separately in each one.

Step 3: Plan for reconnecting three systems.

Reasons for Large-Scale
Cultural Changes

  • Company has strong values that do not fit changing environment.
  • Industry competitive and changes quickly.
  • Company mediocre or worse.
  • Firm about to join ranks of very largest.
  • Firm small but growing rapidly.

Cautions in Cultural Change

  • Cultural change can be difficult and time consuming.
  • Should be attempted only after less-difficult solutions have been ruled out.

OD Application
Transformation at Home Depot

  • Home Depot is number-one home-improvement retail chain in U.S.
  • It had unstructured and entrepreneurial culture.
  • Competitor Lowe’s began taking market share.

  • Nardelli was brought in as CEO to turn around dysfunctional culture.
  • Nardelli brought in new top management team.
  • Lacked support from lower levels.
  • Changes resulted in unintended consequences.

  • Culture became one of revolt.
  • Innovation and sense of ownership declined.
  • When market share declined more, board replaced Nardelli with Ellison.
  • Ellison has made methodical and long-range changes.

Key Words And Concepts

  • Culture.
  • Reflects organization’s past and is rooted in firm’s history.
  • Incremental approach.
  • Long-term planned change that relies on collaboration.
  • Organization transformation (OT).
  • Drastic, abrupt change to structure, management, and culture.

  • Strategic change management.
  • Focus on alignment with strategy, structure, and human resources systems.
  • Strategy.
  • Course of action used to achieve major objectives.
  • Strategy-culture matrix.
  • Assess readiness of culture for strategic changes.

  • Technical, political, and cultural systems.
  • Organizational systems of strategic change management model.
  • Transformational change.
  • Immediate drastic change accomplished by directive methods.
  • Vision.
  • Mental image of a possible and desirable future state of organization.

OD Skills Simulation 15.1
The GenTech Company

  • Purpose.
  • To experience and observe how information affects strategic decision making.
  • To develop strategy and culture in an organization.
  • To receive feedback on your risk-taking level.

Preparations for Next Chapter

  • Read Chapter 16.
  • Complete the Profile Survey and Profile Form in Simulation 16.1, Part A, Step 1.
  • Complete Step 1 of OD Skills Simulation 16.2.