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Management Insight for effective organisational change

PEX Network Article Compilation

By: DR. Robert Swaim

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INTRODUCTION Overcoming resistance to change is usually cited as one of the biggest challenges in the work of a continuous improvement practitioner. Yet, as volatile markets and technological disruption continue to accelerate the pace at which companies must respond to change, it is clear that companies must get better – and faster – at dealing with it.

All too often, the challenges associated with organisational change are attributed to a problem with people. People are said to be resistant to or afraid of change. But are they really?

We have to make changes all the time in our personal lives. Many of these – starting a new job, the purchase of a new house, getting married – are the cause of celebration and eagerly anticipated. Sometimes, though, more difficult changes need to be adopted.

Organisational change is a well trodden path; the key is to learn to apply the lessons of those who have gone before.

This article compilation, of a series of columns authored by Dr. Robert Swaim published on PEXNetwork.com, explores the enduring truths on managing change in the works of management consultant Dr. Peter F. Drucker – who has been hailed as one of the greatest management thinkers of the last hundred years. It examines the reasons driving change in enterprise, common ways that change efforts fail, and explores a simple formula to help you better manage the “change equation”.

It was originally published as a series of 4 articles on PEXNetwork.com. To read the original articles, please visit: www.pexnetwork.com/columnists/the-drucker-file/

9 reasons organisations need to change

Why people aren’t as afraid of change as you think

Eight reasons change efforts fail

Four steps to managing the change equation

We hope that you enjoy this article compilation.

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“People are not stressed because there’s too much change in organisations, but because of the way

change is made.” - Rd. Peter F. Drucker, Management

Challenges for the 21st Century

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Organisations change for a number of different reasons, so they can either react to these reasons or be ahead of them. These reasons include:

#1. Crisis:

Obviously September 11 is the most dramatic example of a crisis which caused countless organisations, and even industries such as airlines and travel, to change. The recent financial crisis obviously created many changes in the financial services industry as organisations attempted to survive.

#2. Performance gaps:

The organisation's goals and objectives are not being met or other organisational needs are not being satisfied. Changes are required to close these gaps.

#3. New technology:

Identification of new technology and more efficient and economical methods to perform work.

#4. Identification of opportunities:

Opportunities are identified in the market place that the organisation needs to pursue in order to increase its competitiveness.

#5. Reaction to internal & external pressure:

Management and employees, particularly those in organized unions often exert pressure for change. External pressures come from many areas, including customers, competition, changing government regulations, shareholders, financial markets, and other factors in the organisation's

external environment.

#6. Mergers & acquisitions:

Mergers and acquisitions create change in a number of areas often negatively impacting employees when two organisations are merged and employees in duel functions are made redundant.

#7. Change for the sake of change:

Often an organisation will appoint a new CEO. In order to prove to the board he is doing something, he will make changes just for their own sake.

#8. Sounds good:

Another reason organisations may institute certain changes is that other organisations are doing so (such as the old quality circles and re-engineering fads). It sounds good, so the organisation tries it.

#9. Planned abandonment:

Changes as a result of abandoning declining products, markets, or subsidiaries and allocating resources to innovation and new opportunities.

WHAT ORGANISATIONS CAN CHANGE

What organisations can change fall into the following broad areas:

#1. Mission, vision, & strategy:

Organisations should continually ask themselves, "what is our business and what should it be?" answers to these questions can lead to changes in the organisation's mission (the purpose of its business), its vision for the future (what the

By Dr. Robert W. Swaim

DRUCKER STRATEGIES FOR EFFECTIVE ORGANISATIONAL CHANGE

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If business as usual isn’t working, it’s time for change

organisation should look like), and its competitive strategy.

#2.Technology:

Organisations can change their technology (for example the way they produce whatever they sell) in order to increase efficiency and lower costs.

#3.Human-behavioural changes:

Training can be provided to managers and employees to provide new knowledge and skills, or people can be replaced or downsized. As result of

the recent financial crisis, many organisations downsized creating massive unemployment that continues to this day.

#4.Task-job design:

The way work is performed in the organisation can be changed with new procedures and methods for performing work.

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#5.Organisational structure:

Organisations can change the way they are structured in order to be more responsive to their external environment. Again, to be more responsive to the marketplace, this also includes where decisions should be made in the organisation (centralized or decentralized).

#6.Organisational culture:

Entities can attempt to change their culture, including management and leadership styles, values and beliefs. Of all the things organisations can change, this is by far the most difficult to undertake.

These are the major elements that organisations can change. It is important to note that changes in one of these elements will usually have an impact on another element. As an example, changing technology may require changes in the human-behavioural area (new knowledge and skills on how to use the technology).

WHY PEOPLE AREN’T AS AFRAID OF CHANGE AS YOU THINK

Peter Drucker spoke of the need for organisations to become “change leaders.” In today’s rapidly changing environment, he stressed that mangers must be able to anticipate, plan and lead change efforts in their organisations. Managers must also be able to create an organisational environment where change is seen as an opportunity, not a threat and resisted.

Drucker also stated, “The organisations most likely to suffer the most are those with the delusion that tomorrow will be like yesterday.”

This section deals specifically with why many change efforts are resisted or why some feel people are afraid of change. Concepts from the field of organisation development are also included to supplement Drucker’s views.

For a more comprehensive discussion of managing complex organisational change including change

strategies, tactics and the

action research model please refer to the author’s book, the Strategic Drucker.

ARE PEOPLE AFRAID OF CHANGE?

Are people really afraid of change? Why do they resist change? Witness the riots in the streets of Athens a few years ago as a result of the government’s efforts to deal with Greece’s financial crisis. These groups were resisting the efforts of their government’s leaders and fearing personal loss as a result of the changes being proposed. We have also seen governments resisting change in the Middle East and North Africa such as in Egypt and Syria where they have relied on armed force to quell these change leaders.

On the other hand, if people are really afraid of change, how do we explain the election victory of a little known junior senator from Illinois, Barack Hussein Obama, whose 2007 platform was based on hope and change with the slogan of “change we can believe in”?

RESISTANCE TO CHANGE AND PERCEIVED LOSS

It’s not accurate to say that people are “afraid of change”. Rather, those who will be impacted by the change effort may resist the change effort for numerous reasons such as in the previous examples of the mobs.

In actuality, though, I prefer to state there is no such thing as resistance to change but rather there is perceived loss or what people think they will lose as a result of the change effort or in some cases, actual loss.

These major sources of resistance to change include:

Source #1: Uncertainty about the causes and effects of the change

People avoid uncertainty (risk); established procedures are well known and predictable.

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Lack of trust – distrust of any changes instituted from above.

Need new skills – may need to learn new skills or information. Could have an initial negative impact on performance and impact rewards (compensation, promotion).

Negative performance – change may be interpreted as not doing present job well.

Source #2: Unwillingness to give up existing benefits (perceived loss)

Unwillingness to give up tasks and relationships - the massive restructuring of the U.S. healthcare industry through the passage of “Obamacare” has been highly resisted as many feel they will lose the relationship they have with their present physician.

Loss of power, prestige, salary, quality of work, and other benefits (security) - the riots in Athens, and London can be attributed to this factor. These mobs are all going to lose certain benefits as a result of their governments’ attempt to deal with their financial crisis and massive debt.

Source #3: Awareness of a weakness in changes being proposed

Potential problems overlooked by initiators of the change (“we tried this before and it didn’t work.”)

Plan to introduce the change considered to be too complicated, costly, and too time consuming. May also disrupt current operations.

Lack of credibility of the change leader - change leader may not be respected by the organisation or have credibility. Has

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this person been able to produce results before? What experience does the change leader have in previous change efforts?

INCREASING RESISTANCE TO CHANGE

All of these factors contributing to resistance or perceived loss will increase if:

Change perceived as threatening – change is seen as threatening if not perceived as helpful.

Change not requested by impacted group – change will be opposed by the impacted group unless they have specifically requested it.

The previously described mobs all strongly resisted because of these two factors. The change agents (government leaders) did a relatively poor job of communicating why the changes would be helpful to their counties and state as well as why there was a sense of urgency to prevent a financial crisis and national disaster. Once again this deals with not managing the “change equation” properly as will be covered shortly.

Line management did not request change – change will be opposed by management as a real or imaginary threat to their prestige and authority unless they have specifically requested the change.

Group opposition – group opposition is usually more than the sum total of individual’s opposition (2 + 2 = 6).

Magnitude of the change – the greater the change, the greater the opposition by the impacted groups. Once again, the mobs’ opposition was greater than any one individual’s and particularly impacted by the magnitude of the changes required to avert the financial crisis facing their governments.

These factors that increase resistance can be potentially reduced by

communicating the benefits of the change and that there is also continuity with the change. Also, the greater the prestige of the manager supporting the change effort, or that of the change leader, the greater influence he or she can exert for the change.

Providing information as to the seriousness of the situation now and the potential benefits of in the future as a result of the change can substantially reduce this resistance. Involving members of the impacted groups in the planning process can also create internal pressure for the change as they will have ownership in the change effort and therefore be more committed to the change – selling the benefits of the change to their other group members.

WHY CHANGE EFFORTS FAIL:

According to Drucker, people really do not resist change. It is the way changes are introduced in organisations that they often object to. What then are some of the errors that are made when a change effort is introduced which creates resistance and hinders the success of their change efforts?

These errors, which are presented in an organisational change context include:

Error #1: Not establishing a great enough sense of urgency

Opportunities are lost because the organisation fails to establish a sense of urgency as to why the change is needed.

Error #2: Not creating a powerful enough and guiding coalition

Organisations fail to assemble a group with enough power and prestige to lead the change effort and also may not have top management’s commitment and full support.

Error #3: Lacking a vision

Organisations fail to create a vision for the future to help direct the change effort – what will be

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different after the change? What will be preserved? What is the strategy and objectives for achieving the vision?

Error #4: Under-communicating the vision

Organisations fail to communicate a vision for the future. What the organisation will look like as a result of the change? The vision has to be presented as an opportunity, not a threat.

Error #5: Not removing obstacles to the new vision

Systems, policies, or structures that seriously undermine the vision are not dealt with and removed.

Error #6: Not systematically planning & creating short-term wins

Individuals are not recognized or rewarded for performance improvement as a result of their change efforts.

Error #7: Declaring “victory” too soon

Organisations fail to monitor the progress of their change efforts and evaluate results. Oftentimes, victory is declared when the change has not been totally implemented.

Error #8: Not anchoring changes in the organisation’s culture

Organisations fail to have employees accept the change as the way things will be done from now on and as such, they revert to their old familiar ways of doing things.

CHANGE AND THE NEED FOR CONTINUITY

According to Drucker, change should also be accompanied with continuity. Education and communications are extremely important relative to changes the organisation plans to implement. Part of these communications must include what is going right in order to reinforce morale, protect self worth, build creditability, and reduce potential

resistance.

Also, in addition to describing the vision (what the organisation will look like after the change), it is important to communicate what will be preserved. Equally important, is communicating the relationship or linkage between the planned change and the overall direction of the organisation. That the change is consistent with the organisation’s mission, vision and values.

“When you introduce change, it’s very important to maintain continuity and the commitment to fundamental values, which don’t change,” said Dr. Peter F. Drucker

DRUCKER AND WHAT ORGANISATIONS SHOULD NOT CHANGE

There are a number of things, according to Drucker, that organisations should not change. These things are mainly in the human-behavioural area and include:

The need for recognition:

Employees need to be recognized for their contribution. Although changes may be required in the organisation, employees must be assured that they are doing some things “right” and that the changes being made are not as a result of, or a reflection of their performance.

The need for respect:

Regardless of what changes may be required, individuals in the organisation must continue to be treated with respect. One way of providing respect is to continually communicate why the change or changes are necessary.

The need for trust:

Employees must continue to have trust in their management. One way of maintaining trust when change efforts take place is to communicate to employees what will be preserved and that the changes are consistent with the organisation’s mission, objectives, vision and strategy.

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The need to feel productive:

According to Abraham Maslow and his “hierarchy of needs theory,” people strive for self actualisation, the need to be able to utilise their knowledge and skills in performing meaningful work. Although changes may be taking place, there needs to be continuity with respect to people’s

work.

Changes which are being implemented must appear to be consistent with the direction and vision of the organisation and individual contributions.

Compared to this, the formula for managing change is quite simple!

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The need to grow:

Organisations must continue to provide their managers and employees with an opportunity to learn and grow. Change can be a very positive opportunity to provide personal learning and growth opportunities.

A FORMULA FOR HANDLING CHANGE

The following is a discussion of a tool that can be used early on in analysing and planning the change effort, the “change equation” as depicted in the following equation:

C= (F-N) X P > R

Change = (Future - Now) X Plan > Resistance

It is important to note for the mathematically inclined that the equation is used for illustrative purposes and cannot be quantified. The elements of the equation include:

c - the desired change

f - the situation in the future (desired state or vision) as a result of the change

n - the situation now

p - the plan of how to get from the now to the future

r - potential resistance to the change

It should be noted that the r could also be denoted as pl or perceived loss. That is, what those who will be impacted by the change effort perceive they will lose as a result of the change (power, prestige, benefits, reporting relationships, authority and responsibility, etc.) as discussed in the previous section.

If the sum of the future minus the present is positive, and multiplied by the change plan is greater than the potential resistance, the change effort will be successful.

MANAGING THE CHANGE EQUATION

The following is a discussion of each element of the equation and how the change leader can manage it.

Change Equation Step 1 – Managing the “n”

The first step in managing the change equation deals with “n” or the situation “now.” The change leader must create dissatisfaction with the present situation and create an awareness of a need for change.

As an example, “customers are complaining about our products’ poor quality. We are losing sales and good customers as a result. If this continues we may have to close the plant, lay off workers, etc.” The job here is create as much dissatisfaction with the present situation as possible (deficits or (-)). Using education and communication and involvement and participant tactics are recommended here. Share information with those that will be impacted by the change such as results from customer surveys, task forces, focus groups, etc.

As Drucker pointed out, it is also important to acknowledge what is going right and that not everything needs to be changed. This is important to reinforce morale, protect other’s self-worth, build creditability in the change leader, and helps to reduce resistance.

Change equation step 2 – managing the “f”

Managing the “f” presents a vision for the future – what will things be like after the change? Here it is necessary to show the benefits of the change as well as what will be preserved. The goal is to create and present the value (+) of moving to the future, that deficits (-) will be removed, organisational needs will be satisfied, and value will be obtained. Also, convert any potential perceived loss (resistance) into gain.

In communicating the future, the communications campaign should include:

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Whether the way people work will change.

What new skills may be required and how they will be provided.

Whether people will have to behave differently.

Whether the change will present a good opportunity for the people or there may be some negative consequences.

Link the change effort to show consistency with the organisation’s mission, vision, and values.

How the change supports the organisation’s business direction and objectives.

Focus on people – they need to feel valued and included.

The figure below illustrates how the first two elements of the change equation (now, and future) should be managed:

Change Equation Step 3 – managing the “r”

Managing the “r” deals with those who will be impacted by the change effort and overcoming potential resistance or perceived loss or what people think they will lose as a result of the change effort. Participation and involvement strategies and tactics are most appropriate to use here – involving those who will be impacted by the change or representatives of those groups in the change planning process in order that they gain a sense of ownership in the desired change. Care must be taken however to ensure that the horse does not become a camel because of their involvement.

Change Equation Step 4 – Managing the “p”

As pointed out, having an incomplete plan can contribute to resistance to the change effort. Therefore, it is essential that the plan meet the following criteria:

1. The plan must not be complicated and should be easily understood.

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2. The plan must be perceived as doable and present the credibility of the change leader.

3. The plan must not consume large amounts of time or resources or be disruptive to operations.

4. The plan must indicate what will be preserved.

Other criteria includes involving those who will be impacted by the change effort in the planning process and communicating that the plan will be successful and produce the desired results.

Elements of the plan

The change effort plan should include the following elements:

1. Description of the “n” & “f” – What the organisation looks like today and what you want it to look like after the change.

2. Communications plan – Informing everyone about the change, as well as keeping them up-to-date as your change effort evolves.

3. Recognition plan – How you will celebrate successes and reward those employees that support you and your change effort?

4. Guidelines – Defining processes, roles and responsibilities in order to reduce conflict and potential power struggles.

5. Measurements – Identifying accountability and tracking success.

There are many benefits to having a good change effort plan. First, it acts as a roadmap and lets everyone know where we are going, how to get there, and when we have arrived.

Second, it is a communications tool that lets everyone know why the change is needed, clarifies any misunderstandings, tells employees what they need to do, and what they can expect of you.

Third, it is a marketing tool to help sell the employees on the change effort. Other benefits include; a quality assurance tool to provide quality control of the change effort, a credibility builder to let employees know you are in charge and in control, and a resistance reducer providing evidence that the change effort will be a success.

As can be seen, the change equation can be a good diagnostic tool in analysing and planning a change effort. Experienced change leaders use this tool early in the process to help determine what groups might be impacted and potentially resist the change effort and thus select the appropriate change strategies and tactics.

But, if at the end of this series you still have any hesitations about your ability to make change happen, I refer you to this quote by Peter F. Drucker: “To try to make the future is highly risky. It is less risky however, than not to try to make it.”

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“This is a new era of opportunity, but only for those who are willing to

accept change as an opportunity, not for those

who are afraid of it.”

- DR. Peter F. Drucker

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ABOUT THE AUTHOR

Dr. Robert W. Swaim was a colleague and personal friend of Dr. Peter F. Drucker for nearly thirty years and worked with him for five years prior to his death to develop both the Drucker EMBA and executive development programs that are now offered in china. He is no doubt the foremost authority in Asia on Drucker’s work and in this article he attempts to relate a number of Drucker’s concepts to today’s present uncertain environment – what would Drucker have said about this and would his concepts still be applicable? Dr. Swaim also expands on these views in his new book that was released in 2010, the strategic Drucker: peter Drucker’s strategies for business growth published

by John Wiley and Sons (Asia) PTE Ltd.

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INTERESTED IN LEARNING MORE?

The themes explored in this article compilation will be discussed in more detail at Process Transformation Week 2014 as Senior Process Executives from across Europe and the Middle East will come together to debate the issues and identify solutions to today’s most pressing process challenges 7-9 April 2014 in London, UK. Find out how process excellence can help support and

accelerate transformational change.

HOT TOPICS AT PROCESS TRANSFORMATION WEEK 2014:

Driving process innovation for breakthrough business performance and competitive advantage

Breaking down functional silos to manage processes end-to-end and enable greater business agility

Taking advantage of next generation technologies - big data, cloud, mobile, social - to create the business operations of the future

Transforming culture and employee behaviours to embed operational excellence and customer focus throughout your organisation

To find out more about the event, and find the sessions that will help your change initiatives deliver greater business value please visit: http://www.processtransformationweek.com/Brochure.aspx