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Lesson 2: Overview of Organization Development
Why Do Organizations Change?
This seems a self-explanatory and self-evident question. Let’s think about this question a little bit further. For example, under what environmental pressures were organizations propelled toward change? Why aren't all organizations affected equally by such pressures? How is equilibrium or a dynamic balance achieved between forces for stability and forces for change in an organization?
It is not an easy task to identify the variety of pressures of organizational change. The theoretical position of why change occurs can be based on either the economic perspective of organizational change or the organizational learning perspective.
- The economic perspective focuses on satisfying the shareholders of the organization and maintaining their investments, hence ensuring the organization's survival. Change is conducted to improve organizational performance in the form of better balance sheet results. If we reflect on the different images of change introduced in Lesson 1, this position is most aligned with the “management as control” images of change managers, that is, the director, navigator, and caretaker.
- The organizational learning perspective focuses on building the capabilities of an organization to give its members the ability to deal with change. This perspective recognizes the complexity of organizations and human systems which cannot be accurately represented through a single linear objective. This idea is most aligned with the “management as shaping” perspective illustrated by the coach, interpreter, and nurturer images of change managers.
Pressures for change can come from a variety of sources including the environment, the discovery of deviations from standards, new desires and visions of the future, or the fundamental nature of organizations themselves. Now let’s find out WHY organizations change through a discussion of external and internal pressure for change. The following two tables summarize these reasons:
Table 2.1. Environmental Pressures for Change
|
Pressure |
Example |
Description |
Implications |
|---|---|---|---|
|
Fashion pressures |
Boeing Co. |
Boeing underwent a number of structural and cultural changes based on what Jack Welch had done at GE. |
Neo-institutionalism: mimetic isomorphism. An organization imitates companies that are considered to be successful. |
|
Mandated pressures |
Chevron Texaco |
Chevron Texaco was sued for racial discrimination by employees. They changed company practices to ensure fair treatment of employees. |
Neo-institutionalism: coercive isomorphism. An organization changes through either formally or informally mandated requirements. |
|
Geopolitical pressures |
3M |
Once Europe became more unified and moved towards opening its borders, 3M’s presence in various European countries was no longer suitable. |
This is when global changes (or crises) greatly impact an organization and change is necessary for survival. |
|
Market decline pressures |
AOL Time Warner |
In the face of changing technology, AOL saw a decline in the demand for their Internet provision. They needed to implement strategic changes to survive. |
When current markets that the organization operates in begin to decline, there is pressure to find newer, more viable markets. |
|
Hyper- competition pressures |
Gateway |
Gateway faced fierce competition from Dell and HP, and changed the structure and image of the company. |
The increasingly rapid pace of business affects the way organizations respond to their consumers and their competitors. |
|
Reputation and credibility pressures |
Walt Disney Company |
Walt Disney faced serious criticism for the close ties between the directors and CEO and the lack of management experience. They changed structures and practices to rectify this situation. |
In light of recent corporate governance scandals in organizations, the pressure to maintain a good reputation and high level of credibility has increased. |
Table 2.2. Internal Organizational Pressures for Change
|
Pressure |
Examples |
Description |
Implications |
|---|---|---|---|
|
Growth pressures |
Microsoft |
The systems and practices in place from Microsoft’s entrepreneurial roots were not able to be applied to the increased scale of operations as the company grew. |
Existing systems and processes in a small organization may no longer be applicable when its size increases. |
|
Integration and collaboration pressures |
EDS |
EDS had pioneered IT services but found that its own internal system was lacking. There was a lack of coordination and communication between the different business units. |
The possibility of integrating parts of the organization and creating economies of scale can pressure change in organizations. |
|
Identity pressures |
Forte Hotel |
Hotels under this banner were competing against each other and lacked a unified identity with Forte. The company was separated into four distinct market segments and organizational culture programs were put in place. |
A common organizational identity and the unified commitment of staff in different areas of an organization can be difficult to manage and may encourage change.
|
|
New broom pressures |
Sears |
Arthur Martinez decided that the shocking sales record of the company would be rectified through changing products and markets, reengineering store operations, and creating a service culture. |
New authority figures can herald a new era and often initiate significant internal changes in an organization. |
|
Power and political pressures |
Morgan Stanley |
Post-merger at Morgan Stanley were political power plays for the CEO position. |
Power relationships and politicking can change internal processes and decision making. This situation has significant flow-on effects within the organization. |