Managing strategic change

Many business strategies involve a change of some type. Managing the change aspects successfully during the implementation stage can often be critical to the success of the strategy itself. 

This page considers different types of change and how to manage the change.

Types of strategic change

Classification of change

Change can be classified by the extent of the change required, and the speed with which the change is to be achieved:

• Transformation entails changing an organisation's culture. It is a fundamental change that cannot be handled within the existing organisational paradigm.
• Realignment does not involve a fundamental reappraisal of the central assumptions and beliefs.
• Incremental change can take a long period of time, but results in a fundamentally different organisation once completed.
• Big Bang change is likely to be a forced, reactive transformation using simultaneous initiatives on many fronts, and often in a relatively short space of time.

Selecting an approach to strategic change

Another way that evolution can be explained is by conceiving of the organisation as a learning system. However, within incremental change there may be a danger of strategic drift, because change is based on the existing paradigm and routines of the organisation, even when environmental or competitive pressure might suggest the need for more fundamental change.

In selecting an approach to strategic change, most managers struggle with the question of how bold they should be. On the one hand, they usually realise that to fundamentally transform the organisation, a break with the past is needed. To achieve strategic renewal it is essential to turn away from the firm's heritage and to start with a clean slate. On the other hand, they also recognise the value of continuity, building on past experiences, investments and loyalties. To achieve lasting strategic renewal, people in the organisation will need time to learn, adapt and grow into a new organisational reality.

The 'window of opportunity' for achieving a revolutionary strategic change can be small for a number of reasons. Some of the most common triggers are:

• competitive pressure - when a firm is under intense competitive pressure and its market position starts to erode quickly, a rapid and dramatic response might be the only approach possible. Especially when the organisation threatens to slip into a downward spiral towards insolvency, a bold turnaround can be the only option left to the firm.
• regulatory pressure - firms can also be put under pressure by the government or regulatory agencies to push through major changes within a short period of time. Such externally imposed revolutions can be witnessed among public sector organisations (e.g. hospitals and schools) and highly regulated industries (e.g. utilities and telecommunications), but in other sectors of the economy as well (e.g. public health regulations). Some larger organisations will, however, seek to influence and control regulation.
• first mover advantage - a more proactive reason for instigating revolutionary change, is to be the first firm to introduce a new product, service or technology and to build up barriers to entry for late movers.

Change and organisational culture

For change to be effective an organisation will often have to change its culture. The extent of the change required will be influenced by the type of change that is planned. For example, revolution is likely to require a greater cultural change than adaptation.

Very often the existing culture can be one reason for resistance to change - the culture becomes "embedded".

What is culture?

 Culture is the set of values, guiding beliefs, understandings and ways of thinking that are shared by the members of an organisation and is taught to new members as correct. It represents the unwritten, feeling part of the organisation.

Culture is 'the way we do things around here' (Charles Handy).

Culture is a set of 'taken-for-granted' assumptions, views of the environment, behaviours and routines (Schein).

The effect of culture

Culture, as a set of taken-for-granted assumptions, will effect:

• strategy - what should the company do? What can it do?
• approaches to strategic planning.
• perceptions about competitors
• perceptions about customers
• management style
• attitude to various stakeholders
• ethical behaviour
• attitudes towards CSR.

The cultural web

The cultural web was devised by Gerry Johnson as part of his work to attempt to explain why firms often failed to adjust to environmental change as quickly as they needed to.

He concluded that firms developed away of understanding their organisation - called a paradigm - and found it difficult to think and act outside this paradigm if it were particularly strong.

 The different elements of the cultural web

It is concerned with the manifestations of culture in the organisation and has six inter-related elements.

• Routines and rituals - routines are 'the way things are done around here' and may even demonstrate a beneficial competency. They can be the written or unwritten rules of the game within the organisation.
• Stories and myths - that employees tell one another and others about the organisation, its history and personalities; used to communicate traditions, standards and role models.
• Symbols - such as logos, offices, cars, titles, type of language and terminology commonly used become a shorthand representation of the nature of the organisation.
• Power structure - formal or informal power or influence by virtue of position, control of resources, who the person knows, or history. This may be based on management position and seniority but in some organisations power can be lodged with other levels or functions.
• Organisational structure - reflects the formal and informal roles, responsibilities, and relationships and ways in which the organisation works. Structures are likely to reflect power.
• Control systems - the measurement and reward systems that emphasise what is important to monitor and to focus attention and activity upon.

Many organisations find that some elements of the cultural web are easier to change than others.

For example, it may be easier to change the formal organisational structure than it is to change long established routines and habits.

Models of the change process

The change process - Lewin

The process of change, shown in the diagram below, includes unfreezing habits or standard operating procedures, changing to new patterns and refreezing to ensure lasting effects.

• Unfreezing - create the initial motivation to change by convincing staff of the undesirability of the present situation.
• The change process itself - mainly concerned with identifying what the new behaviour or norm should be. This stage will often involve new information being communicated and new attitudes, culture and concepts being adopted.
• Refreezing or stabilising the change - implying reinforcement of the new pattern of work or behaviour by rewards (praise, etc).

Force field analysis (Lewin)

Lewin also emphasised the importance of force field analysis. He argued that managers should consider any change situation in terms of:

• the factors encouraging and facilitating the change (the driving forces)
• the factors that hinder change (the restraining forces).

If we want to bring about change we must disturb the equilibrium by:

• strengthening the driving forces
• weakening the restraining forces
• or both.

The model encourages us to identify the various forces impinging on the target of change, to consider the relative strengths of these forces and to explore alternative strategies for modifying the force field.

Overcoming resistance to change

Part of unfreezing existing behaviour will be to break down resistance to change. Resistance to change is the action taken by individuals and groups when they perceive that a change that is occurring is a threat to them.

 Resistance is 'any attitude or behaviour that reflects a person's unwillingness to make or support a desired change'.

Resistance may take many forms, including active or passive, overt or covert, individual or organised, aggressive or timid. For each source of resistance, management need to provide an appropriate response.

Reasons for resisting change

According to Kotter and Schlesinger (1979) there are four reasons that explain why certain people resist change.

Leadership styles

Kotter and Schlesinger set out the following change approaches to deal with resistance:

• Participation - aims to involve employees, usually by allowing some input into decision making. This could easily result in employees enjoying raised levels of autonomy, by allowing them to design their own jobs, pay structures, etc.
• Education and communication - used as a background factor to reinforce another approach. This strategy relies upon the hopeful belief that communication about the benefits of change to employees will result in their acceptance of the need to exercise the changes necessary.
• Power/coercion - involves the compulsory approach by management to implement change. This method finds its roots from the formal authority that management possesses, together with legislative support.
• Facilitation and support - employees may need to be counselled to help them overcome their fears and anxieties about change. Management may find it necessary to develop individual awareness of the need for change.
• Manipulation and co-optation - involves covert attempts to sidestep potential resistance. The information that is disseminated is selective and distorted to only emphasise the benefits of the change. Co-optation involves giving key people access to the decision-making process.
• Negotiation - is often practised in unionised companies. Simply, the process of negotiation is exercised, enabling several parties with opposing interests to bargain. This bargaining leads to a situation of compromise and agreement. 

The context for change (Balogun and Hope Hailey)

For change to be successful, implementation efforts need to fit the organisational context. There is no simple 'off the shelf' approach  that will work for all organisations.

The change kaleidoscope was developed by Julia Balogun and Veronica Hope Hailey to help managers design such a 'context sensitive' approach to change.

The kaleidoscope has three rings:

• The outer ring relates to the wider strategic change context.
• The middle ring relates to specific contextual factors that need to be considered when formulating a change plan.
• The inner circle gives a menu of choices and interventions ('design choices') available to change agents.

Contextual features

• Time - is there time for longer term strategic development or does the firm have to react quickly to a crisis?
• Scope - how much of the organisation will be affected? Is the change best described as realignment or transformation?
• Preservation - which aspects of working, culture, competences and people need to be retained?
• Diversity - the need to recognise that different departments (e.g., marketing and R&D) may have different sub-cultures.
• Capability - whether abilities exist to cope with the change. These can be on an individual, managerial or organisational level.
• Capacity - are resources (e.g. money, managerial time) available to invest in the change process?
• Readiness - are staff aware of the need for change and are they committed to that change?
• Power - how much authority and autonomy do change agents have to make proposed changes?

Each of these factors can be assessed as positive, negative or neutral in the context of change. Positive features facilitate change and negative ones restrict change.

Design choices

Design choices represent the key features of a change management approach:

• Change path - clarifying the types of change in terms of timescales, the extent of change and the desired outcomes.
• Change start point - where the change is initiated (e.g. top-down or bottom up).
• Change style - which management style should be adopted (e.g. collaborative, participative, directive or coercive)?
• Change interventions - which mechanisms should be deployed (e.g. education, communication, cultural interventions)?
• Change roles - assigning roles and responsibilities (e.g. leadership, use of consultants, role of change action teams).

Managing the change - the people involved

Effective leadership is crucial for any organisation. This section looks at who these leaders might be.

Strategic leadership

Strategic leadership means having the ability to anticipate, prepare and get positioned for the future. A leader must be 'tuned in' to the signals that provide insight about the needs and wants of team members, senior management and suppliers. Such leaders must have:

 Who are strategic leaders?

Strategic leaders are individuals upon whom strategy development and change are seen to be dependent.

• They are individuals personally identified with and central to the strategy of their organisation.
• Their personality or reputation may result in others willingly deferring to them and seeing strategy development as their province.
• In some organisations an individual may be central because he or she was its owner or founder; often the case in small businesses.
• It could be that an individual chief executive has turned round a business in times of difficulty and, as such, personifies the success of the organisation's strategy.

Middle managers

Middle managers are the linking pin between the senior management team and the rest of the organisation. They have responsibility for helping their staff through the change process while simultaneously undertaking change themselves. They have four roles to perform. They need to:

• undertake personal change
• help their teams through change - build up and maintain the momentum of change until the change is completed and act as facilitator
• implement the necessary changes in their parts of the business - encourage individuals to use their initiative and put emphasis on teamwork
• keep the business going in the interim.

The change agent

Whether internal or external, the change agent is central to the process, and is useful in helping the organisation to:

• define the problem and its cause
• diagnose solutions and select appropriate courses of action
• implement change
• transmit the learning process to others and the organisation overall.

Leadership skills - Kanter

Attributes of companies that manage change successfully.

• The imagination to innovate.
• The professionalism to perform.
• The openness to collaborate.

Kanter identified the skills that leaders must have if there organisations are to be adept at managing change:

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