Jeff Fleshman Rensselaer Polytechnic Institute-Troy, NY
Studies have shown that between 50% and 70% of organizational change efforts fail (Hammer & Champy, 1993). It is obvious from this figure that there is a great deal to learn on this fast developing topic. Change in an individual�s life cycle is relatively easy to pinpoint and track (e.g., ceremonies) while organizational change is not as easily defined or recognizable. Perhaps this is what makes its success rate so low. There appears to not only be uncertainty in what it is, but there is also disparity in how certain factions approach organizational change. The popular business press focuses on business� current trends along with issues of interest and intrigue. Practitioners are primarily focused on how to successfully implement change and create more effective organizations. The third perspective is that of the scholars. They tend to focus their efforts on discovering the predictive nature of organizational change and building theory that better describes the phenomenon (Cady & Hardalupas, 1999). No matter the differences in perspectives, the fact remains that organizations are living in a global economy that is always changing with the advancement of technology. This necessitates the need for organizations to acquire and maintain the ability to adapt to the ever-changing environment. The theory of evolution that has been applied to organizations in which slow change is punctuated with radical change explains why companies today are in serious turmoil (Tushman & O�Reilly, 1996). Instead what is needed is for organizations to change with the environment, not as a reaction to it. The rapidly expanding and changing economic climate also makes it necessary for the concept of organizational change to have some semblance of structure. This structure should include such things as measurements of an organization�s readiness to change, models of implementation, and evaluative standards of the change. While there are numerous models of implementation available, much of these models are mere suggestions among the popular business press without much empirical support. More empirical support has been given to the preconditions that lead to a successful change effort and the necessary standards upon which to evaluate the change.
Cady and Hardalupas (1999) best illustrate the confusion within the organizational change research. In their review of 15 journals that spanned 15 years and 2168 issues they uncovered 14 different terms used for organizational change (table 1). Interesting within these findings is that the term transformation, a non-technical term, was used heavily by scholars, practitioners, and business analysts to about the same extent. Also, the term reengineering, a relatively new term, has predominately been used in the popular business press and among a few practitioners. This points to the idea that concepts and terms can �catch� on with little research.
To quell the apparent confusion of organizational change Cady and Hardalupas provide a definition of what they term organizational transformation. They define it as ��a change that alters an entire organization, including strategy, structure, core processes, power distribution, control systems, culture, and people�s work.� (p. 90). The authors argue that this is the most comprehensive term under which many different kinds of organizational change will fall. Much more is needed however to provide a solid foundation on which to base organizational change.
Terms Searched Overall Total Frequency Overall Total Avg Restructuring 480 22.14 Merger 393 18.13 Transformation 162 7.47 Reorganization 140 6.46 Reengineering 124 5.72 Divestiture 84 3.87 Radical Change 47 2.17 Strategic Change 36 1.66 Discontinuous Change 11 0.51 Reorientation 9 0.42 Gamma Change 7 0.32 Large-Scale Change 7 0.32 Second-Order Change 2 0.09 Frame-Breaking Change 1 0.05
There are some factors an organization can assess within itself to determine its readiness for change. If these factors can be measured, the organization will have a feel for the difficulty of the change effort and thus be able to plan accordingly. Burke and Litwin (1992) developed a content model of organizational performance and change to predict individual and organizational performance. This model deals with organizational conditions and the results that come about from these conditions. By doing the model is able to identify transformational and transactional dynamics inherent in successful change efforts. Transactional factors deal with psychological and organizational variables that predict and control the motivational and performance outcomes of a work group. Transformational factors are concerned with aspects that require employees to adapt new behaviors as a consequence of internal and external pressures. These pressures include leadership, culture, mission, and strategy. The identification of these factors is aided by a 150-item questionnaire. Once the factors are identified, a change effort can be developed that focuses on the factors that need attention. For instance, if a transactional factor is lacking, the manager can explicitly focus on that factor, thereby bringing about greater motivation and performance.
Vollman (1996) also developed a model that helps an organization realize the magnitude of the change process it is confronted by. Vollman�s model uses an eight-by-six matrix. This matrix enables an organization to detail the many considerations at play in a change effort. The rows of the matrix include eight issues: (a) strategic intent (e.g., addressing the appropriate issue); (b) competencies (e.g., linking current skills to future transformations); (c) processes (e.g., developing measures for assessment of efficiency and effectiveness); (d) resources (e.g., the human resources of an organization); (e) outputs (e.g., products and services the customer desires); (f) strategic response (e.g., planning); (g) challenges (e.g., anticipating obstacles such as new regulation); and (h) learning capacity (e.g., identifying new required skills and abilities). The six columns include organizational dimensions and resources. They are: (a) culture (e.g., shared beliefs, value systems); (b) configuration (e.g., organization design); (c) coordination (e.g., processes to monitor progress); (d) people (e.g., behaviors); (e) information (e.g., data requirements); and (f) technology (e.g., equipment requirements). An analysis of each column and each row will enable an organization to uncover the magnitude of the proposed transformation, thereby preventing underestimation of the time and resources needed for a successful change. For example, an organization that wishes to change its strategic intent must analyze this change against the six columns to determine the proposed intent�s fit with the current organizational dimensions and resources. If the new strategic intent does not fit well with the configuration of the organization, the time and resources needed for the change will be realized to be greater than originally thought, because the configuration will have to be altered also.
While the two models presented above are adequate in identifying requirements and challenges an organization faces in a transformation they do not explore the more individual factors that can affect change. Nor do the models explore specifically organizational factors such as size, product diversity, or history. These are all relevant factors as to whether an organization is willing to change and whether that transformation will be successful.
Judge, Thoresen, Pucik, and Welbourne (1999) were able to identify seven dispositional traits that predict managerial coping with change. These seven traits are (a) locus of control; (b) self-efficacy; (c) self-esteem; (d) positive affectivity (underlying personality disposition manifested in characteristics such as well being, energy, and affiliation); (e) openness to experience; (f) tolerance for ambiguity; and (g) risk aversion (propensity of individuals to avoid risk). The seven traits were related to each other, thus allowing the authors to group them into two independent factors. These factors were labeled positive self-concept and risk tolerance. The positive self-concept factor was composed of internal locus of control, positive affectivity, self-esteem, and self-efficacy. The risk tolerance factor was composed of openness to experience, low risk aversion, and tolerance for ambiguity. Six of the seven traits (all but risk aversion) were positively related to a positive coping with organizational change. Risk aversion was negatively related. These findings were consistent with both self-reports and independent assessments. When looking at the relationship between coping and the two factors, it is then clear that having a positive self-concept and a high tolerance for risk helps a manager cope with transformation that he or she may be experiencing within an organization. The authors also explored the relationships between coping with organizational change and the following career outcomes: (a) job satisfaction; (b) organizational commitment; (c) extrinsic career outcomes (salary, ascendancy-past and prospective movement); and (d) job performance. Coping successfully with transformation was also related positively to these career outcomes, thereby implying that individuals who are more successful will adapt better. Perhaps this adaptability allowed them to be successful. These findings point to the idea that there is a link between an individual�s dispositional traits and his or her career outcomes. The findings here clearly suggest to organizations that selection of managers who display positive self-concept and risk tolerance is a wise thing, particularly if these organizations wish to adopt a culture of transformation.
Looking at observable organizational factors is also an adequate indicator of an organizational change�s likelihood and success. A study by Stoeberl, Parker, and Joo (1998) examined organizational factors within the wine industry. The factors they included in their study were (a) size of the organization; (b) age of the organization; (c) frequency of past changes; (d) number of brands; and (e) variability in wine consumption (market fluctuations). This study developed these factors from the organizational ecological perspective. This perspective attempts to explain organizational development and failure at population levels (Hannan & Freeman, 1989). Hannan and Freeman detail three particularly important aspects of the organizational ecological perspective: structural inertia, the liability-of-newness clock, and the niche theory. Inertia is the resistant nature of an organization that can be broken down into two parts: absolute and relative. Strong absolute inertia means that the rate of organizational change is at or near zero. Strong relative inertia means that the organization is trying to change, but it is trying at the wrong time in response to environmental shifts. Another important aspect Hannan and Freeman detail is the liability-of-newness clock. This is the idea that newer organizations have a high rate of failure when compared to older organizations. The four reasons for this are (a) learning costs for the new roles and tasks; (b) capital or creativity constraints on new roles; (c) lack of information about normative procedures; and (d) unstable links to clients, supporters, and customers. The niche theory is used to describe the relationship between the environment and the growth rate of an organization. Essentially this deals with the relationship between organizational performance and demand changes in the population. If two organizations are competing in the same niche, the growth of one will almost invariably lead to the decline of the other because demand for the organization that isn�t growing will decline. These three concepts of the organizational ecological perspective are similar to the concepts of organization size, organization age, and variability in wine consumption that Stoeberl, Parker, and Joo included in their study.
The study found that larger wineries were less frequently involved in brand and product line changes. This finding signifies the importance of structural inertia. The authors revealed that inertia increases as the size of the winery increases. Also noteworthy is the finding that a larger winery with a smaller number of brands is less likely to fail than a smaller winery with a larger number of brands. Because this large winery has fewer brands it is believed to be more stable in the sales of its limited brands, thereby giving it more inertia and stability within its environment. Age of the winery was not found to be a factor in the likelihood of a company undergoing a transformation. This finding was in opposition to Hannan and Freeman�s hypothesis that older organizations are more reliable in their performance and that they exhibit more structural inertia. Although age was not a factor in predicting change, frequency of organizational changes in the past was found to be a good determinant of whether or not future changes would take place, as was the number of brands a winery has (i.e., the more brands the more likely there will be an organizational change). The final factor examined, variability in wine consumption, was found to be a significant predictor in whether a change would take place in the organization. When the environment fluctuates (i.e., people begin drinking more or less wine), organizations try to respond to the fluctuation to sustain their niches by undergoing changes within themselves. Importantly, the number of changes was not found to be related to the failure of the wineries. This finding shows that change is not always accompanied by organizational failure. Finally, population variability and density was significant in predicting winery failure. This is obvious because if the winery becomes too large to support a small population or if wine consumption decreases, the winery will not be able to generate enough capital to stay afloat. These are important findings for scholars and practitioners in that they help to identify which factors will help predict whether or not an organization will go through a transformation. It can be inferred that these factors will be useful in predicting an organization�s resistance to change (i.e. a larger organization will have more structural inertia and thus be more resistant to change). Another important finding was that transformation was not related to failure. This finding serves to prove that change does not lead to downfall.
Another precondition to whether or not organizational transformation is successful is how organizations present the change to employees. This presentation greatly affects employees� reactions to any attempted transformation (Fairhurst & Sarr, 1996). A study by Rousseau and Tijoriwali (1999) revealed that the belief in quality reasons, which is a social account offered for the change, is positively related to the perceived legitimacy of quality as the actual reason for the change. A social account is something beyond the immediate supervisor�s control. In this case the initiative of increased quality was handed down from the top and the employees perceived their immediate supervisors explanation as legitimate and accepted the reason for the transformation. The authors found that level of trust was a moderator between these two variables. Also noteworthy in this study was the finding that work-group beliefs regarding reasons for transformation were positively related to individual beliefs. Obviously, the group has an effect on the individuals. It is important to infer the importance of communication from these findings. If the communication is not effective, employees will develop their own reasons for the change, therefore, the organization must be open and forthright. It is also necessary to create a trusting environment in which reasons given will be perceived as legitimate.
Evaluating a change effort is the final step. The evaluation should not be overlooked because information from this evaluation can help an organization determine if further effort is needed, and it can help it evaluate what was done correctly and what was done incorrectly. Simply evaluating a transformation using the �bottom line� criteria of profitability is not enough (Armenakis & Bedeian, 1999). Individual employee responses must be taken into account if an organization wishes to effectively monitor and evaluate changes. Change efforts may evoke undesirable responses such as denial and resistance, which will lead to increased stress and decreased organizational commitment. Research suggests that these responses can serve as criteria for tracking the likelihood of employees enacting behaviors necessary in a transformational situation (Armenakis & Bedeian, 1999). Becker, Billings, Eveleth, and Gilbert (1996) have researched the rationale for using commitment as a criterion in assessing the impact of organizational transformation on employee-organization relations. They examined three types of commitment: (a) compliance commitment (i.e., a person�s willingness to comply with rules, policies, and reward structures); (b) identification commitment (i.e., attachment a person feels to being affiliated with an organization and its members); and (c) internalization commitment (internally accepting values of the transformation). These three types of commitment influence the psychological attachment employees feel for an organization. This feeling of attachment then leads to the degree of performance, stress, cynicism, and forms of workplace withdrawal (e.g., turnover, and lateness). Becker, et al (1996) showed that these three types of commitment can be very useful in evaluating the effectiveness of a transformation, with the internalization commitment being most strongly related to other success factors (e.g., profitability).
Other affective criteria beyond the traditional criteria (e.g., stress, commitment, and satisfaction) should not be overlooked. Some of the less-used criteria that must be evaluated include depression, anxiety, and exhaustion for they offer additional insights into change efforts (Armenakis & Bedeian, 1999). McHugh (1997) has shown that a climate of constant change is a major source of negative affect for employees. Beer and Eisenstat (1996) demonstrated that, despite initial success, a transformation may eventually fail because top management removes themselves from the negative affect experienced by the organizational employees. Therefore, it is imperative for all members at all levels of an organization to give support, thereby increasing commitment to the organization and one another. Encouraging is the research of Schweiger and DeNisi (1991). They assessed the effects of communication on affective reactions following an organizational change. Although they found that uncertainty increased following the announcement of a merger, a group that practiced realistic communications that contained structure, formality, and feedback helped employees cope with the merger. Even more encouraging is that these effects became greater over time. Perhaps the difficulty in researching organizational change is that it is such a rapidly changing and expanding topic. After all, it seems the word, in some form or another, is in the jargon of every company. Before this concept gets out of control and misused, there must be some guidance provided to the topic. There have been great leaps in the knowledge attainment of what makes a change effective or not. Yet, there is much to learn, and with the global market continually changing, there doesn�t seem to be a shortage of topics to research.
References
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