organization change7th edition APA formatted paper
XNM123
ManagingOrganizationalChange.pdf
2021/1/28 Managing Organizational Change
https://www.shrm.org/resourcesandtools/tools-and-samples/toolkits/pages/managingorganizationalchange.aspx 1/13
Managing Organizational Change
Scope—This article provides an overview of key considerations in planning and implementing major organizational changes. It focuses mainly on the scope and impact of change on business, steps to take to ensure the success of organizational change initiatives, and how to overcome common obstacles encountered during change. Additionally, this article highlights HR issues and challenges in handling specific types of major organizational change.
Overview
Change management is the systematic approach and application of knowledge, tools and resources to deal with change. It
involves de�ning and adopting corporate strategies, structures, procedures and technologies to handle changes in external
conditions and the business environment. E�ective change management goes beyond project management and technical tasks
undertaken to enact organizational changes and involves leading the "people side" of major change within an organization. The
primary goal of change management is to successfully implement new processes, products and business strategies while
minimizing negative outcomes.
This article discusses the management of large organizational changes that may have far-reaching impacts on the organization
and its workforce, including the following topics:
The nature and extent of organizational change.
The business case for a systematic approach to change management.
The roles of management and HR during major change initiatives.
Steps to take in managing organizational change.
How to overcome common obstacles encountered during organizational change.
Legal and global considerations in managing change.
This article also highlights some of the special issues and challenges in implementing certain types of major organizational
change, including mergers and acquisitions, downsizing, bankruptcy, business closure, outsourcing, and changes within the HR
function.
Background
To keep pace in a constantly evolving business world, organizations often need to implement enterprisewide changes a�ecting
their processes, products and people. Change is a fact of life in businesses today. It can be di�cult, and people often resist it.
But to develop an agile workplace culture, organizations should follow a systematic approach to managing major change.
Organizational development experts have established approaches for successfully navigating through change.
Organizational leaders must identify and respond quickly to market changes and unexpected challenges, but most are not in a
position to create an agile culture. Yet agile leadership—from CEOs down to line-level managers—separates high-performing
from lower-performing organizations. Companies that consistently outperform competitors in pro�tability, market share, revenue
2021/1/28 Managing Organizational Change
https://www.shrm.org/resourcesandtools/tools-and-samples/toolkits/pages/managingorganizationalchange.aspx 2/13
growth and customer satisfaction reported much greater agility than lower performers. See Don't Just Adapt to Change—Lead It
(www.shrm.org/hr-today/news/hr-magazine/0817/pages/do-not-just-adapt-to-change-lead-it.aspx).
Business Case
The rate of major organizational change has accelerated dramatically in this decade. Global research and advisory company
Gartner reports that the average organization has undergone �ve enterprise changes in the past three years and 73% of
organizations expect more change initiatives in the next few years.
As change initiatives have become more frequent and widespread, the importance of managing individuals through change has
gained credence. Major changes can a�ect organizations across all levels. Many corporate leaders have concluded that failing
to manage employees through change can be costly: Employees who are dissatis�ed with or upset by change are generally
less productive.
An employer that is serious about change management should develop a communication plan, a road map for change
sponsors, integrated training programs and a plan for dealing with resistance. See SHRM Foundation Report a Primer for
Change Management (www.shrm.org/resourcesandtools/hr-topics/organizational-and-employee-development/pages/shrm-
foundation-report-change-management.aspx).
HR should be involved in major organizational changes from the beginning and can assist by in�uencing the following:
Improving employees' understanding of change.
Increasing communication between management and employees.
Identifying and mitigating risks.
Enhancing employee satisfaction.
Boosting trust between management and employees.
Improving employee skills and pro�ciency through change-related training initiatives.
See How Leaders Can Help Employees Accept Technology Changes. (www.shrm.org/hr-today/news/hr-
magazine/0716/pages/how-leaders-can-help-employees-accept-technology-changes.aspx)
The Roles of Management and HR
Business managers who want to undertake major transformation to stay competitive must work with HR sta� to gain employee
acceptance and support.
Management's role
Having the right leadership and buy-in from the executive team is critical to unifying the organization behind a common
strategic direction.
Another key is making sure all managers are equipped to coach their direct reports toward commitment. One-on-one
conversations help individual team members analyze how the change will a�ect them, determine their level of commitment and
choose how they will act. Questions managers should address with employees include:
What is changing?
Why is it changing?
How will it a�ect your area?
How will it a�ect you directly?
See Changing the Change Rules at Google (https://blog.shrm.org/blog/changing-the-change-rules-at-google-0).
1
2021/1/28 Managing Organizational Change
https://www.shrm.org/resourcesandtools/tools-and-samples/toolkits/pages/managingorganizationalchange.aspx 3/13
Unfortunately, many managers are not adept at change management. The lack of change management skills among managers
can make change initiatives di�cult to achieve. A Towers Watson Change and Communication ROI Survey found that 87
percent of employers train managers on e�ective change management; however, only one-quarter of those employers found
the training to be e�ective. To increase managers' skills, HR should provide training that is tailored to the speci�c change
initiative and the competencies necessary to lead successful change. See Leadership Critical to Organization Change E�orts
(www.shrm.org/hr-today/news/hr-news/Pages/leadershipcriticaltochangee�orts.aspx) and Senior Leader Accountability: Critical
to Successful Change (www.shrm.org/ResourcesAndTools/hr-topics/organizational-and-employee-
development/Pages/SeniorLeaderAccountability.aspx).
HR's role
HR can play a dual role in change management by initiating and leading the change and by serving as a facilitator for changes
that other leaders and departments initiated. See What is HR's Role in Managing Change? (www.shrm.org/hr-today/trends-and-
forecasting/special-reports-and-expert-views/pages/deb-cohen.aspx) and HR Can Improve Employee Buy-In for Organizational
Change (www.shrm.org/ResourcesAndTools/hr-topics/organizational-and-employee-development/Pages/ImproveBuyIn.aspx).
The HR department performs a variety of functions associated with the communication, implementation and tracking of major
changes. Most commonly, HR professionals assist employees by serving as a point of contact for questions and concerns and
by explaining any impact on sta�ng. In addition, HR often coordinates meetings and communications about the change and
related initiatives. Other common HR roles and responsibilities include:
Providing initial employee communications about changes.
Developing training programs.
Preparing informational documents.
Assessing readiness before the change.
Analyzing potential impact.
HR can also play a strategic role in change management by calculating the post-implementation return on investment by
identifying key performance indicators (KPIs) to be measured and by tracking and communicating these results.
By championing change, HR can help the organization increase buy-in, comfort and support for change across departments,
thereby increasing the success of change initiatives. See Managing Organizational Change with an HR Department of One
(www.shrm.org/resourcesandtools/hr-topics/behavioral-competencies/relationship-management/pages/managing-
organizational-change-with-an-hr-department-of-one.aspx).
Steps in the Change Management Process
Organizations should systematically prepare for and implement major organizational change. John Kotter, a Harvard Business
School professor, developed a well-known and widely adopted approach for managing organizational change. This approach,
updated in Kotter's book Accelerate, involves the following eight stages:
2
3
2021/1/28 Managing Organizational Change
https://www.shrm.org/resourcesandtools/tools-and-samples/toolkits/pages/managingorganizationalchange.aspx 4/13
1. "Create a sense of urgency." Successful transformation e�orts usually begin when leaders examine the market for
changes that may lead to new competitive realities for the organization. These changes can stem from demographic
shifts, social trends, new technology, market or competitor changes, or new government regulations. The leaders
should explain that a potential crisis or major opportunity is imminent, and they should encourage frank discussion
throughout the organization. Creating a sense of urgency that the status quo is no longer acceptable is essential to gain
the workforce's energetic cooperation.
2. "Build a guiding coalition." Once employees feel a sense of urgency, leaders should establish a group with
enough power to lead the change. Members need substantial authority based on position, expertise, credibility and
leadership, as well as e�ective management skills and proven leadership abilities. This coalition must learn to work
together based on trust and set a common goal. Many guiding coalitions build trust through o�site meetings, joint
activities and conversation.
3. "Form a strategic vision and initiatives." The guiding coalition should craft a clear vision for the future, motivate
people to take appropriate actions and coordinate their actions. An e�ective vision is imaginable, desirable, feasible,
focused, �exible and communicable, according to Kotter. Creating an e�ective vision takes time and can be a
challenging process, but the end product provides a clear direction for the future.
4. "Enlist a volunteer army." Once the guiding coalition has developed the vision, its members should provide
extensive communications about how the change will improve the business and how those improvements will bene�t
employees. Key elements in e�ective communications include simplicity, use of examples, multiple forums, repetition,
explanation of apparent inconsistencies and two-way communication. The group should model the behavior expected
of employees.
5. "Enable action by removing barriers." To empower workers to support change and act on the vision, change
leaders should identify and remove obstacles. Four categories of important obstacles are:
�. Formal structures that make it di�cult for employees to act.
�. A lack of needed skills.
�. Personnel or information systems.
�. Supervisors who discourage actions toward implementing the new vision.
6. "Generate short-term wins." Successful and enduring change takes time, which can be discouraging to employees
at all levels of the organization. To maintain urgency, leaders should create conditions that support early successes and
visible improvements. The key is to actively search for opportunities to score early achievements and to recognize and
reward those who made these accomplishments possible. Good short-term wins have unambiguous results, are visible
to many people and are clearly related to the change e�ort.
7. "Sustain acceleration." Until major changes are embedded in an organization's culture (which could take up to a
decade), they remain vulnerable to resistance and regression. It is important to use the early successes as a foundation
for larger challenges and to revise all systems, structures and policies that do not �t the change vision. HR can
consolidate gains by hiring, promoting and developing employees who can implement the transformation vision.
Additionally, the change process can be reinvigorated with new project themes and change agents.
8. "Institute change." The �nal stage in Kotter's model for successful change is linking the changes to two key
components of corporate culture—norms of group behavior and shared values.
Another model for organizational change includes a four-phase change management process:
�. De�ne—Align expectations regarding the scope of the change as well as timing and business impact.
�. Plan—Understand how the change will impact stakeholders and design a strategy to help them navigate it.
�. Implement—Engage with leaders and associates to execute the change.
2021/1/28 Managing Organizational Change
https://www.shrm.org/resourcesandtools/tools-and-samples/toolkits/pages/managingorganizationalchange.aspx 5/13
�. Sustain—Work with leaders and employees to track adoption and drive lasting change.
A large global retailer uses this model to increase the speed and impact of change initiatives while reducing the downturn of
performance, thereby achieving desired outcomes quicker.
Overcoming Common Obstacles Encountered in Implementing Change
2021/1/28 Managing Organizational Change
https://www.shrm.org/resourcesandtools/tools-and-samples/toolkits/pages/managingorganizationalchange.aspx 6/13
Organizations can have a clear vision for changes and a technically and structurally sound foundation for making changes, but
the initiatives can still �ounder due to obstacles that arise. Employee resistance and communication breakdown are common
obstacles faced during major organizational change. See How to Avoid Common Mistakes in Change Management
(www.shrm.org/hr-today/news/hr-magazine/0218/pages/how-to-avoid-common-mistakes-in-change-management.aspx).
Employee resistance
Successful change starts with individuals, and failure often occurs because of human nature and reluctance to change.
Employees may also lack the speci�c behavioral traits needed to adapt easily to changing circumstances, which could
decrease employee engagement and e�ectiveness and put organizational productivity at risk. How organizations treat workers
during a change initiative determines how successful the change—and the organization—will be.
There are six states of change readiness: indi�erence, rejection, doubt, neutrality, experimentation and commitment.
Organizations about to embark on a transformation should evaluate workforce readiness with assessment instruments and
leader self-evaluations to identify the areas in which the most work is needed.
Leaders should have a solid strategy for dealing with change resistance. Some actions to build employee change readiness
include:
Developing and cascading strong senior sponsorship for people-focused work. In the absence of visible sponsorship,
leaders should build alliances, meet business needs and promote wins.
Developing tools and information for front-line supervisors and managers. Organizations should involve them early—
train them, prepare them and communicate regularly.
Coaching employees to help them adapt and thrive during change.
Rewarding desired behaviors and outcomes with both tangible and intangible rewards.
Relying on insights from both those in the �eld and subject-matter experts.
See Is Change Stressing Your Workers? Turn to a Millennial (www.shrm.org/resourcesandtools/hr-topics/behavioral-
competencies/global-and-cultural-e�ectiveness/pages/millennials-and-change.aspx) and Wanted: Workers Who Can Adapt to
Change (www.shrm.org/hr-today/news/hr-magazine/0617/pages/workers-who-can-adapt-to-change.aspx).
Communication breakdown
Sometimes decisions about major organizational changes are made at the top management level and then trickle down to
employees. As a result, why and how the company is changing may be unclear. According to a Robert Half Management
Resources survey, poor communication commonly hinders organizational change-management e�orts, with 65 percent of
managers surveyed indicating that clear and frequent communication is the most important aspect when leading through
change.
To avoid this problem, HR should be involved in change planning early to help motivate employees to participate. E�ective
communication promotes awareness and understanding of why the changes are necessary. Employers should communicate
change-related information to employees in multiple forms (e.g., e-mails, meetings, training sessions and press releases) and
from multiple sources (e.g., executive management, HR and other departments). See Why United Airlines' Lottery-Based Bonus
Idea Fell Flat (www.shrm.org/resourcesandtools/hr-topics/employee-relations/pages/united-airlines-bonuses-by-lottery-.aspx).
To avoid communication breakdowns, change leaders and HR professionals should be aware of �ve change communication
methodologies—from those that provide the greatest amount of information to those that provide the least:
"Spray and pray." Managers shower employees with information, hoping they can sort signi�cant from insigni�cant. The
theory is that more information equates to better communication and decision-making.
2021/1/28 Managing Organizational Change
https://www.shrm.org/resourcesandtools/tools-and-samples/toolkits/pages/managingorganizationalchange.aspx 7/13
"Tell and sell." Managers communicate a more limited set of messages, starting with key issues, and then sell
employees on the wisdom of their approach. Employees are passive receivers, and feedback is not necessary.
"Underscore and explore." Managers develop a few core messages clearly linked to organizational success, and
employees explore implications in a disciplined way. Managers listen for potential misunderstandings and obstacles.
This strategy is generally the most e�ective.
"Identify and reply." Executives identify and reply to key employee concerns. This strategy emphasizes listening to
employees; they set the agenda, while executives respond to rumors and innuendoes.
"Withhold and uphold." Executives withhold information until necessary; when confronted by rumors, they uphold the
party line. Secrecy and control are implicit. The assumption is that employees are not sophisticated enough to grasp the
big picture.
Experts estimate that e�ective communication strategies can double employees' acceptance of change. However, often
companies focus solely on tactics such as channels, messages and timing while failing to do a contextual analysis and consider
the audience. Some of the speci�c communication pitfalls and possible remedies for them are the following:
The wrong messengers are used. Studies have found that employees tend to trust information from managers.
Understanding the organization's culture will dictate who is the best messenger for change—the manager, the senior
executive team or HR.
The change is too sudden. Leaders and managers need to prepare employees for change, allow time for the message
to sink in and give them an opportunity to provide feedback before a change is initiated.
Communication is not aligned with business realities. Messages should be honest and include the reasons behind the
change and the projected outcomes.
Communication is too narrow. If the communication focuses too much on detail and technicalities and does not link
change to the organization's goals, it will not resonate with employees.
Executive leaders and HR professionals must be great communicators during change. They should roll out a clear, universal,
consistent message to everyone in the organization at the same time, even across multiple sites and locations. Managers
should then meet both with their teams and one on one with each team member. See Say What?! Honing Communication Skills
at the Top (www.shrm.org/ResourcesAndTools/hr-topics/organizational-and-employee-
development/Pages/HoningCommunicationSkills.aspx).
Leaders should explain the change and why it is needed, be truthful about its bene�ts and challenges, listen and respond to
employees' reactions and implications, and then ask for and work to achieve individuals' commitment. See Keep it Clear: Three
Ways to Help Communicate Change in Your Organization (https://blog.shrm.org/blog/keep-it-clear-three-ways-to-help-
communicate-change-in-your-organization) and Managing Organizational Communication
(www.shrm.org/ResourcesAndTools/tools-and-samples/toolkits/pages/managingorganizationalcommunication.aspx).
Other obstacles
Employee resistance and communication breakdowns are not the only barriers that stand in the way of successful change
e�orts. Other common obstacles include:
Insu�cient time devoted to training about the change.
Sta� turnover during the transition.
Excessive change costs.
An unrealistic change implementation timeline.
Insu�cient employee participation in voluntary training.
Software/hardware malfunctions.
2021/1/28 Managing Organizational Change
https://www.shrm.org/resourcesandtools/tools-and-samples/toolkits/pages/managingorganizationalchange.aspx 8/13
Downturn in the market or the economy.
See How Leaders Can Help Employees Accept Technology Changes. (www.shrm.org/hr-today/news/hr-
magazine/0716/pages/how-leaders-can-help-employees-accept-technology-changes.aspx)
Change management experts have suggested that unsuccessful change initiatives are often characterized by the following:
Being too top-down. Executives relate their vision of what the end result of the change initiative should be, but do not
give direction or communication on how the managers should make the change happen.
Being too "big picture." The organization's leaders have a vision of the change but no idea of how that change will
a�ect the individuals who work there.
Being too linear. Managers work the project plan from start to �nish without making even necessary adjustments.
Being too insular. Most organizations do not seek outside help with change initiatives, but businesses may need
objective external input or assistance to accomplish major changes.
Successful change management must be well-planned, well-timed and well-integrated. Other critical success factors include a
structured, proactive approach that encompasses communication, a road map for the sponsors of the change, training
programs that go along with the overall project and a plan for dealing with resistance. Change leaders need to be active and
visible in sponsoring the change, not only at the beginning but also throughout the process. Turning their attention to
something else can send employees the wrong message—that leaders are no longer interested. See Executive Brie�ng: How to
Combat Change Fatigue (www.shrm.org/hr-today/news/hr-magazine/pages/0415-execbrief.aspx) and Dan Heath: Find the
'Bright Spots' to Generate Change. (www.shrm.org/ResourcesAndTools/hr-topics/bene�ts/Pages/DanHeath.aspx)
Managing Varied Types of Major Organizational Change
Organizational change comes in many forms. It may focus on creating new systems and procedures; introducing new
technologies; or adding, eliminating or rebranding products and services. Other transformations stem from the appointment of a
new leader or major sta�ng changes. Still other changes, such as downsizing or layo�s, bankruptcy, mergers and acquisitions,
or closing a business operation, a�ect business units or the entire organization. Some changes are internal to the HR function.
In addition to the general framework for managing change, change leaders and HR professionals should also be aware of
considerations relating to the particular type of change being made. The subsections below highlight some of the special issues
and HR challenges.
Mergers and acquisitions
A merger is generally de�ned as the joining of two or more organizations under one common ownership and management
structure. An acquisition is the process of one corporate entity acquiring control of another by purchase, stock swap or some
other method. Nearly two-thirds of all mergers and acquisitions (M&As) fail to achieve their anticipated strategic and �nancial
objectives. This rate of failure is often attributed to HR-related factors, such as incompatible cultures, management styles, poor
motivation, loss of key talent, lack of communication, diminished trust and uncertainty of long-term goals.
HR professionals face several challenges during M&As, including the following:
Attempting to maintain an internal status quo or to e�ect change—either to facilitate or thwart (in the case of a hostile
takeover) a possible merger or acquisition, as instructed by upper management.
Communicating with employees at every step in the M&A process with appropriate levels of disclosure and secrecy.
Devising ways to meld the two organizations most e�ectively, e�ciently and humanely for the various stakeholders.
Dealing with the reality that M&As usually result in layo�s of super�uous employees. This process entails coordinating
separation and severance pay issues between the combining organizations.
2021/1/28 Managing Organizational Change
https://www.shrm.org/resourcesandtools/tools-and-samples/toolkits/pages/managingorganizationalchange.aspx 9/13
Addressing the ethical dilemmas involved, such as when an HR professional may be required to eliminate his or her
own position or that of a co-worker or an HR counterpart in the combined organization.
Downsizing
Successfully implementing a layo� or reduction in force (RIF) is one of the more di�cult change initiatives an HR professional
may face. Tasks HR professionals will need to undertake include:
Planning thoroughly. Each step in the process requires careful planning, considering alternatives, selecting employees
to be laid o�, communicating the layo� decision, handling layo� documentation and dealing with post-layo�
considerations.
Applying diversity concepts. HR should form a diverse team to de�ne layo� criteria and make layo� selections.
Addressing the needs of the laid-o�. This step involves reviewing severance policies, outplacement bene�ts,
unemployment eligibility and reference policies.
Dealing with the emotional impact. HR professionals should understand and prepare for the emotional impact of
layo�s on the downsized employees and their families, on the managers making layo� decisions, on other HR
professionals involved, and on remaining employees and managers working with the post-layo� workforce. In some
situations, an HR professional may even be responsible for implementing his or her own layo�, a case calling for the
utmost in professional behavior.
Managing the post-layo� workforce.
See Managing Downsizing by Means of Layo�s (www.shrm.org/ResourcesAndTools/tools-and-
samples/toolkits/Pages/managingdownsizing.aspx) and Drive Team Performance Using Organizational Transformation
(www.shrm.org/resourcesandtools/hr-topics/organizational-and-employee-development/pages/drive-team-performance-using-
organizational-transformation.aspx)
Bankruptcy
Filing for a business bankruptcy and successfully emerging from the process is generally a complex and di�cult time for all
parties. HR may have to cut sta�, reduce bene�ts, change work rules or employ a combination of such actions. A major strategic
concern during a Chapter 11 bankruptcy is retaining key personnel.
Compassion, frequent communication and expeditious decision-making will help reduce the stress an organization's employees
are likely to experience during this di�cult organizational change. Showing genuine respect for people and treating them with
honesty, dignity and fairness—even as di�cult decisions are being made about pay, bene�ts and job reductions—will drive the
success or failure of an organization post-bankruptcy. See Managing Human Resources for a Company in Bankruptcy
(www.shrm.org/ResourcesAndTools/tools-and-samples/toolkits/Pages/companyinbankruptcy.aspx).
Closing a business operation
Businesses make the di�cult decision to close all or part of their operations for many reasons, including economic recession,
market decline, bankruptcy, sale, a realignment of operations, downsizing, reorganization, outsourcing or loss of contracts.
HR professionals will play an integral role during such business closures, from developing the plan for the closure through the
�nal stages of shutdown. Some of HR's major responsibilities during this type of organizational change are listed below:
Following facility-closing noti�cation laws. HR must determine whether and to what extent the business must comply
with noti�cation requirements under federal or state laws for mass layo� and facility closings. HR will also lead the
announcement process and participate in all aspects of employee communications, which may include all-employee
meetings, written announcements and media interviews.
2021/1/28 Managing Organizational Change
https://www.shrm.org/resourcesandtools/tools-and-samples/toolkits/pages/managingorganizationalchange.aspx 10/13
Announcing the closure news. HR has an important role to play in anticipating and responding to workforce reactions
by having as much information and resources on hand as possible. To avoid hostilities or other destructive behavior, HR
should consider using an employee assistance program or an outplacement �rm.
Providing employee bene�ts information. After the shock of the announcement subsides, the most frequently asked
questions involve bene�ts, including unemployment compensation, health care continuation, pension plan issues, and
retirement plan distributions and rollovers.
Coordinating outplacement services. O�ering outplacement services for departing employees may enable business
owners and managers to provide much-needed support and protect the organization's reputation. If �nancially feasible,
the organization may o�er departing employees outplacement services from a private outplacement consulting �rm or,
in some states, a state agency.
Negotiating with unions. In unionized facilities, employers have a duty to bargain about the e�ects of a business
closure decision. These negotiations typically involve assistance bene�ts, seniority issues, pension plan issues and
employment opportunities at facilities not a�ected by the closure.
Costing the closure. Anticipating the costs of a business closure is critical from an early stage of the process and will
fall heavily on HR. This procedure involves assessing the cost of winding down employee bene�ts, assistance bene�ts,
payroll and administrative costs, severance payments, union demands, unresolved employee claims or charges, security
precautions, and any closing noti�cation penalties.
Disposing of company property. HR should know the organization's policy for disposal of company property and
respond to employees' requests for o�ce furniture, equipment, machinery and other tangible business assets. If the
business does not sell or transfer assets or is not in debt to creditors, HR may help determine whether to give items to
employees, community groups, schools or other potential recipients.
Complying with legal requirements. Numerous legal issues surround the closing of a business. Depending on the
number of employees and the employer's commitments to employee bene�ts programs, legal compliance may require
following closing-noti�cation requirements, sending out COBRA notices and termination letters, issuing �nal paychecks,
making any required severance payments and communicating unemployment compensation. HR must know how to
comply with the laws and avoid litigation risks.
Outsourcing
For several reasons, including cost savings and freeing sta� to focus on more strategic e�orts, an organization may decide to
outsource HR or other business functions. Outsourcing is a contractual agreement between an employer and a third-party
provider whereby the employer transfers the management of and responsibility for certain organizational functions to the
external provider. Many types of outsourcing options are available to employers, from outsourcing one aspect of a single
function to outsourcing an entire functional department. This change can have a similar impact on employees as downsizing or
closing a department.
When deciding whether to outsource, an organization should carefully consider questions about its needs in a particular
functional area, current processes, business plan and outsourcing options, including:
Does the situation merit outsourcing?
Is the department providing excellent service with existing sta� and processes? Is it meeting the organization's needs?
Can the a�ected department handle outsourcing without disrupting operations?
Will the CEO and top management team support and pay for an outside vendor?
How might an outsourcing arrangement fall short of expectations? How can such risks be mitigated?
2021/1/28 Managing Organizational Change
https://www.shrm.org/resourcesandtools/tools-and-samples/toolkits/pages/managingorganizationalchange.aspx 11/13
During an HR outsourcing process, HR professionals may be asked to identify solutions to guide organizations through vendor
selection and management of the outsourcing relationship. See Outsourcing the HR Function
(www.shrm.org/ResourcesAndTools/tools-and-samples/toolkits/Pages/outsourcingthehrfunction.aspx).
Changes within HR
HR professionals frequently help other parts of the organization respond to change, but what happens when the HR
department becomes the epicenter of change? These kinds of transformations, such as moving to a shared services model,
integrating with another HR function following a merger or delivering new services to new clients, can be more di�cult for HR
professionals to manage than other types of organizational changes.
During major changes within the HR function, HR should do the following:
Lead by example. Do exactly what HR asks other leaders and managers to do during major change initiatives.
Remember that HR professionals' responsibilities never cease. The HR department must continue to serve employees
while contending with the discomfort, confusion and demands that department-speci�c change creates.
Keep in mind that few organizational changes occur in isolation. If senior leaders decide to implement an HR shared
services model, for instance, the information technology, �nance and procurement functions also could move to a
similar model or initiating e�ciency projects.
Measure the degree to which HR sta� is prepared to change before plunging into the change. HR leaders should
assess sta� readiness and engagement through interviews and surveys. After evaluating the results, they should make
necessary adjustments in sta� readiness and engagement levels before proceeding.
Realize that most HR transformations require fresh, or refreshed, talent. HR leaders can �re and hire, or they can
retrain and develop.
Legal Issues
In addition to managing the "people side" of organizational change initiatives, HR professionals should keep leadership
informed of any applicable employment laws and the potential legal implications of various types of change. Typically, HR will
be responsible, in consultation with legal counsel, for ensuring compliance with pertinent federal, state, local and international
employment laws and regulations.
Legal compliance requirements may vary considerably based on the nature of the change initiative, the location(s) and size of
the organization, whether the employer is unionized, and other factors. Federal laws that may apply to particular organizational
change initiatives include:
Title VII of the Civil Rights Act of 1964.
Age Discrimination in Employment Act (ADEA).
Americans with Disabilities Act (ADA).
National Labor Relations Act (NLRA).
Worker Adjustment and Retraining Noti�cation Act (WARN) of 1988.
Employee Retirement Income Security Act (ERISA).
Health Insurance Portability and Accountability Act (HIPAA) of 1996.
Consolidated Omnibus Budget Reconciliation Act (COBRA).
See Federal Statutes, Regulations and Guidance (www.shrm.org/ResourcesAndTools/legal-and-compliance/employment-
law/pages/federal-statutes-regulations-and-guidance.aspx).
2021/1/28 Managing Organizational Change
https://www.shrm.org/resourcesandtools/tools-and-samples/toolkits/pages/managingorganizationalchange.aspx 12/13
HR professionals may also be responsible for negotiating contracts with unions, service providers or vendors. In such cases,
they need to be familiar with key contract terms and issues and be able to represent the organization's interests e�ectively in
contract negotiations and management. See Conducting E�ective Business Negotiations
(www.shrm.org/ResourcesAndTools/tools-and-samples/toolkits/pages/conductinge�ectivebusinessnegotiations.aspx).
Global Issues
Signi�cant organizational changes can create ongoing con�ict between two locations in the same country. But con�ict is more
likely to occur, and is harder to address, when di�erences in language, time zones, institutions and business practices exist.
According to research conducted by the Economist Intelligence Unit, companies will continue to become larger and more
global, handling operations in more countries than they do today.
Culturally based assumptions about customer needs, infrastructure, competitive threats and other factors make it more di�cult
to �nd common ground during a cross-cultural change initiative. What di�erentiates an organization's products or services in
one country may not be the same elsewhere, and the strengths that it has in its home market may not be easily replicated in
other countries.
Common problems in cross-cultural change initiatives include:
Lack of a partnership approach. It is natural for an organization to consider its home market and its largest customers
when planning change e�orts. However, those voices can easily drown out the needs of employees or clients in distant
markets, including those that could have high growth potential. By partnering with all employees and clients from the
beginning and considering future potential for revenue, pro�t and growth, an organization can build an approach to
change that integrates the patterns of past successes with future directions.
Misreading similarities and di�erences in markets. Multinational organizations might project solutions suitable for one
country onto another country or assume that customers abroad want to behave "more like us." To make matters more
complicated, foreign products may have considerable appeal in some markets but often for reasons that only make
sense in the local context. Companies may expect the same competitive landscape, yet the largest competitive threats
may come from companies that are unknown back at headquarters.
Not enough accountability. Establishing accountability at the local level is di�cult when employees lack a sense of
ownership for a new initiative. This situation can be exacerbated by the typical matrix organizational structure at many
global companies. Employees who report into both a global business unit and a local management structure frequently
pay the closest attention to the managers they encounter every day who are most likely to a�ect their futures.
Leaders of global change initiatives should consider these potential problems and plan to address them in advance. They will
be far more likely to avoid change-related pitfalls; achieve their objectives; and build business partnerships characterized by
mutual learning and superior business results.
Endnotes
Gartner. (2018). Change Management. Retrieved from https://www.gartner.com/en/insights/change-management
(https://www.gartner.com/en/insights/change-management)
Willis Towers Watson. (2013, August 29). Only one-quarter of employers are sustaining gains from change management
initiatives, Towers Watson survey �nds. Retrieved from https://www.towerswatson.com/en/Press/2013/08/Only-One-Quarter-of-
Employers-Are-Sustaining-Gains-From-Change-Management (https://www.towerswatson.com/en/Press/2013/08/Only-One-
Quarter-of-Employers-Are-Sustaining-Gains-From-Change-Management)
4
1
2
2021/1/28 Managing Organizational Change
https://www.shrm.org/resourcesandtools/tools-and-samples/toolkits/pages/managingorganizationalchange.aspx 13/13
CONTACT US (WWW.SHRM.ORG/ABOUT-SHRM/PAGES/CONTACT-US.ASPX) | 800.283.SHRM
(7476)
© 2021 SHRM. All Rights Reserved
SHRM provides content as a service to its readers and members. It does not o�er legal advice, and cannot guarantee the accuracy or
suitability of its content for a particular purpose.
Disclaimer (www.shrm.org/about-shrm/Pages/Terms-of-Use.aspx#Disclaimer)
Kotter, John. (2014). Accelerate: Building strategic agility for a faster-moving world. Boston, MA: Harvard Business Review
Press.
Economist Intelligence Unit. (2010). Global �rms in 2020: The next decade of change for organisations and workers. Retrieved
from https://www.shrm.org/hr-today/trends-and-forecasting/research-and-surveys/Documents/10-Economist%20Research%20-
%20Global%20Firms%20in%202020.pdf (www.shrm.org/hr-today/trends-and-forecasting/research-and-surveys/Documents/10-
Economist%20Research%20-%20Global%20Firms%20in%202020.pdf)
3
4
HR DAILY NEWSLETTER
News, trends and analysis, as well as breaking news alerts, to help HR professionals do their jobs better each business day.
Email Address
