CHAPTER 12 MANAGING CHANGE AND INNOVATION 1. INTRODUCTION. Change has always been part of a manager's job. Managing change and innovation are the focus of this chapter. 2. WHAT IS CHANGE? Change is defined as an alteration in people, structure, or technology. Change is ever-present in organizations and cannot be eliminated. Instead, we need to look at the key issues related to managing change. 3. FORCES FOR CHANGE. There are external and internal forces that can create the need for change. A. External forces that create the need for change come from various sources. 1. The marketplace. 2. Government laws and regulations. 3. Technology. 4. Labor markets. 5. Economic changes. B. Internal forces tend to originate mainly from the internal operations of the organization or from the impact of external changes. 1. Changes in strategy. 2. Changes in the workforce. 3. New equipment. 4. Changes in employee attitudes. C. The manager as change agent. The manager may act as a change agent, which is defined as people who act as catalysts and manage the change process. 4. TWO DIFFERENT VIEWS ON THE CHANGE PROCESS. Two very different metaphors can be used to describe the change process. A. The "calm waters" metaphor characterizes the process of change as being like a ship crossing a calm sea. It is best illustrated by Lewin's 3-step process for change. 1. Unfreezing the equilibrium is the first step. This can be accomplished in one of three ways. a. Driving forces, which direct behavior away from the status quo, can be increased. b. Restraining forces, which hinder movement from the existing equilibrium, can be decreased. c. The two approaches can be combined. 2. The next step is to implement the change itself. 3. The final step is to refreeze the situation. B. The "white-water rapids" metaphor describes change that takes place in uncertain and dynamic environments. C. Putting the two views in perspective. Not every manager faces a world of constant and chaotic change. However, the number of managers who don't face this type of environment is dwindling fast! 5. ORGANIZATIONAL INERTIA AND RESISTANCE TO CHANGE. Organizations can build up inertia that drives them to resist change. A. Resistance to change can stem from three reasons. 1. Uncertainty. 2. Concern over personal loss. 3. Belief that the change is not in the organization's best interests. B. Techniques for reducing resistance. Six tactics have been proposed for use by managers in dealing with resistance to change. 1. Education and communication. 2. Participation. 3. Facilitation and support. 4. Negotiation. 5. Manipulation and cooptation. 6. Coercion. 6. TECHNIQUES FOR MANAGING CHANGE. The manager's options for managing change fall into one of three categories. A. Changing structure is the first option. 1. Managers can change one or more of the structural components as far as degree of complexity, formalization, and centralization. 2. Managers might change the actual structural design. B. Changing technology is another option and might include any of the following. 1. Introducing new equipment tools or operating methods. 2. Introducing automation. 3. Expanding computerization. C. Changing people is the final option. 1. Organization development (OD) involves techniques to change people and the quality of interpersonal work relationships. 2. Sensitivity training is a method of changing behavior through unstructured group interaction. 3. Survey feedback is a technique for assessing attitudes, identifying discrepancies in them, and resolving the differences by using survey information in feedback groups. 4. Process consultation involves help given by an outside consultant to a manager in perceiving, understanding, and acting upon process events. 5. Team building includes interaction among members of work teams to learn how each member thinks and works. 6. Intergroup development involves changing the attitudes, stereotypes, and perceptions that work groups have of each other. 7. CONTEMPORARY ISSUES IN MANAGING CHANGE. There are some issues in managing change that managers will face even into the twenty-first century. A. Changing organizational cultures. If an organization's culture becomes inappropriate, it might need to be changed. 1. Understanding the situational factors can help facilitate cultural change. The following conditions stimulate cultural change. a. A dramatic crisis occurs. b. Leadership changes hands. c. The organization is young and small. d. The culture is weak. 2. How can cultural change be accomplished? It is best to approach cultural change in the following way. a. Conduct a cultural analysis. b. Make the crisis visible. c. Appoint new leadership with a new vision. d. Initiate a reorganization. e. Introduce new stories and rituals that convey the new vision. f. Change the selection and socialization processes. B. Implementing TQM. Our knowledge of change processes can be used to help determine how to effectively implement TQM. 1. Focusing the change effort. The change effort can be focused on any of the following. a. Structure b. Technology c. People 2. Role of the change agent. Research has shown that the success of the programs depends upon unwavering commitment from the CEO. C. Re-engineering, as defined in an earlier chapter, refers to a radical redesign of an organization's processes. 1. Today's dynamic "white-water rapids" world demands a new kind of change agent one who can throw out conventional wisdom and initiate radical change. 2. Turbulent times demand revolutionary, not orderly change. 3. Re-engineering is not a replacement for any other organizational change efforts. Instead, it's probably the first step in changing. 4. Re-engineering isn't just another term for TQM. Although both are focused on organizational change, the goals and means they use are clearly different. D. Handling employee stress. Change can create stress. 1. Stress is defined as a dynamic condition in which an individual is confronted with an opportunity, constraint, or demand related to what he or she desires and for which the outcome is perceived to be both uncertain and important. 2. Causes of stress can be found in personal factors, job-related factors, and in one's personality. a. Type A behavior is defined as behavior marked by a chronic sense of time urgency and an excessive competitive drive. b. Type B behavior is defined as behavior that is relaxed, easygoing, and noncompetitive. 3. Symptoms of stress can be found in three different categories. a. Physiological factors. b. Psychological factors. c. Behavioral factors. 4. Reducing stress can be done through various methods. a. Employee selection plays an important role in preventing some job-related stress. b. Employee counseling can provide stress relief. c. Time-management programs may be helpful in sorting out employee priorities. d. Physical-activity programs can also be useful. 8. STIMULATING INNOVATION. Innovation is important to organizational success in the marketplace. A. Innovation versus creativity. Creativity is the ability to combine ideas in a unique way or to make unusual associations between ideas. Innovation is defined as the process of taking a creative idea and turning it into a useful product, service, or method of operation. B. Fostering innovation. Three sets of variables have been found to stimulate innovation. 1. Structural variables can be summarized as follows. a. Organic structures positively influence innovation. b. The easy availability of organizational resources provides a critical building block for innovation. c. Frequent inter-unit communication helps break down possible barriers to innovation. 2. Cultural variables show that an innovative culture is likely to be characterized by the following. a. Acceptance of ambiguity. b. Tolerance of the impractical. c. Low external controls. d. Tolerance of risk. e. Tolerance of conflict. f. Focus on ends rather than means. g. Open systems focus. 3. Human resources variables refers to the important role that people play in innovative organizations. a. Innovative organizations actively promote the training and development of their employees. b. Innovative organizations offer employees high job security. c. Innovative organizations encourage individuals to become "champions" of change. ANSWERS TO REVIEW QUESTIONS 1. Why is handling change an integral part of every manager's job? Handling change is part of every manager's job because customers' demands change, government regulations are modified, employees are replaced, and competitors are typically introducing new products or services. The world is not fixed. As changes occur, managers must adapt to them or fail. 2. What internal and external forces create the need for organizations to change? Examples of external forces that create the need for organizations to change include the marketplace, government laws and regulations, new technologies, labor market fluctuations, and economic changes. Examples of internal forces that create the need for organizations to change include new organizational strategies, changes in the workforce, the introduction of new equipment, and changes in employee attitudes. 3. Who are change agents, and what role do they play in the change process? Change agents are persons who act as catalysts and manage the change process. The change agents play an important role in managing the change process. They can be either internal to the organization or external. 4. Describe Lewin's three-step change process. How does it relate to the "calm-waters" metaphor? to the "white-water rapids" metaphor? Lewin's three-step change process encompasses unfreezing, changing, and refreezing. Unfreezing involves identifying what needs to be changed; changing involves making the change; and refreezing involves ensuring commitment and dedication to the change. This perspective on change is very appropriate for the "calm-waters" metaphor since changes are viewed as upsets in equilibrium. But, it's not appropriate for the "white-water rapids" view since the environments that organizations face today are increasingly dynamic and uncertain. 5. What is OD and what are some of the techniques it involves? Organizational development includes techniques to change people and the quality of interpersonal work relationships. Some of the techniques it involves are sensitivity training, survey feedback, process consultation, team building, and intergroup development. 6. Why might an organization such as Procter & Gamble have more trouble changing its culture than a small software company? It should be easier to change the culture in a small, high-tech firm because the organization is younger and smaller than a company like Procter & Gamble. This makes its culture decidedly less-entrenched. 7. Is TQM consistent with the goal of introducing radical change into an organization? Discuss. No, TQM is not consistent with the goal of introducing revolutionary change into an organization since the philosophy of TQM is continuous improvement. However, introducing TQM into an organization could proceed in a two-step process with the continuous improvement activities of TQM being the second phase. 8. What signs would indicate to a manager than an employee's stress level might be too high? Signs that an employee's stress level may be too high include elevated blood pressure, headaches, tension, anxiety, irritability, boredom, or procrastination. 9. List the characteristics of organizational culture that encourage innovation. The characteristics of organizational culture that encourage innovation include the following: acceptance of ambiguity, tolerance of the impractical, low external controls, tolerance of risk, tolerance of conflict, focus on ends rather than means, and open systems focus. 10. List the characteristics of organizational culture that encourage innovation. The characteristics of organizational culture that encourage innovation include accepance of ambiguity, tolerance of the impractical, low external controls, tolerance of risk, tolerance of conflict, focus on ends rather than means, and open systems focus.