MANAGING FOR COMPETITIVE ADVANTAGE (PART 18 - THE CONCLUSION)

Managing Change

 by

 Charles Lamson 

Every manager needs a clear understanding of how to manage change effectively. Organizational change is managed effectively when

1. The organization is moved from its current state to some planned future state that will exist after the change.
2. The functioning of the organization in the future state meets expectations; that is, the change works as planned.
3. The transition is accomplished without excessive cost to the organization.
4. The transition is accomplished without excessive cost to the individual organizational members.

People are the key to successful change. For an organization to be great, or even just to survive, people have to care about its fate, and know how they can contribute. But typically, leadership lies with only a few people at the top. Too few take on the burden of change; the number of people who care deeply, and who make innovative contributions, is too small. People throughout the organization need to take a greater interest and a more active role in helping the business as a whole. They have to believe they can make a difference. And they have to identify with the entire organization, not just with their unit and close colleagues.

These important attitudes and feelings are not unusual in startups and very small organizations. Too often they are lost with growth and over time. In large, traditional corporations, they are all too rare. There needs to be a permanent rekindling of individual creativity and responsibility, a true change in the behavior of people throughout the organization. The essential task is to motivate people fully to keep changing in response to new business challenges.

Motivating People to Change

People must be motivated to change. But often they resist changing. For example, if your boss were to tell you, we have to become world-class, what would be your reaction?

Many people settle for mediocrity rather than aspire to world-class status. They resist the idea of striving mightily for excellence. They say things such as the following:

• "Those world class performance numbers are ridiculous! I don't believe them, they are impossible! Maybe in some Industries, some companies . . . but ours is unique."
• "Sure, maybe some companies that she needs those numbers, but there's no hurry . . . We're doing all right. Sales were up 5 percent this year, costs were down 2 percent. And we've got to keep cutting corners . . . "
• "We can't afford to be world-class like those big global companies; we don't have the money or staff . . ."
• "We don't believe this stuff about global markets and competitors. We don't need to expand internationally. One of our local competitors tried that a few years ago and lost its shirt."
• "It's not a level playing field . . . the others have unfair advantages . . ."

To deal with such reactions, and successfully implement positive change, it is important to understand why people often resist change. Some reasons are general and arise in most change efforts. Other reasons for resistance relate to the specific nature of a particular change.

General Reasons for Resistance Several reasons for resistance arise regardless of the actual content of the change.

• Inertia. Usually people don't want to disturb the status quo. The old ways of doing things are comfortable and easy, so people don't want to shake things up and try something new. For example, it is easier to keep living in the same apartment or house than to move to another.

• Timing. People often resist change because of poor timing. Maybe you would like to move to a different place to live, but do you want to move this week? Even if a place were available, you probably couldn't take the time. If managers or employees are unusually busy or under stress, or if relations between management and workers are strained, the timing is wrong for introducing new proposals. Where possible, managers should introduce change when people are receptive. 

• Surprise. One key aspect of timing and receptivity is surprise. If the change is sudden, unexpected, or extreme, resistance may be the initial---almost reflexive---reaction.

• Peer pressure. Sometimes work teams resist new ideas. Even if individual members do not strongly oppose a change suggested by management, the team may band together in opposition if a group is highly cohesive and has anti-management norms, peer pressure will cause individuals to resist even reasonable changes.

Change-Specific Reasons for Resistance Other causes of resistance arise from the specific nature of a proposed change. Change-specific reasons for resistance include:

• Self-interest. Most people care less about the organization's best interest than they do about their own best interests. They will resist a change if they think it will cause them to lose something of value.

What could people fear to lose? At worst, their jobs, if management is considering closing down a plant. A merger or reorganization, or technological change, could create the same fear. Despite assurances that no one will be laid off or fired, people might fear a cut in pay or loss of power and status under the new arrangement.

• Misunderstanding. Even when management proposes a change that will benefit everyone, people may resist because they don't fully understand it. People may not see how the change fits with the firm's strategy, or they simply may not see the change's advantage over current practices.

• Different assessments. Employees receive different and usually less information than management receives. Even within top management ranks, some executives know more than others do. Such discrepancies cause people to develop different assessments of proposed changes. Some may be aware that the benefits outweigh the costs, while others may see only the costs and not perceive the advantages. This is a common problem when management announces a change, say, in work procedures, and doesn't explain to employees why the change is needed. Management expects advantages in terms of increased efficiency. But workers may see the change as another arbitrary, ill-informed management rule that causes headaches for those who must carry it out.

• Management tactics. Sometimes the change that is successful elsewhere is undertaken in a new location, and problems may arise during the transfer. Management may attempt to force the change and may fail to develop employee commitment. Or it may fail to provide the necessary resources, knowledge, or leadership to help the change succeed. Sometimes a change receives so much exposure and glorification that employees resent it, and resist.

It is important to recognize that employees assessments can be more accurate than management's; they may know what change will not work even if management doesn't. In this case, resistance to change is beneficial for the organization. Thus, even though management typically considers resistance a challenge to be overcome, it may actually represent an important signal that a proposed challenge requires further, more open-minded scrutiny.

A General Model for Managing Resistance Motivating people to change often requires three basic strategies: unfreezing, moving to institute the change, and refreezing.

In the unfreezing stage, management realizes that its current practices are no longer appropriate and the company must break out of (unfreeze) its present mold by doing things differently. People must come to recognize that some of the past ways of thinking, feeling, and doing things are obsolete. Perhaps the most effective way to do this is to communicate to people the negative consequences of the old ways by comparing the organization’s performance to its competitors. Management can share with employees data about costs, quality, and profits. However, care must be taken not to arouse people’s defensiveness by pinning the blame directly and entirely on them.

An important contributor to unfreezing is the recognition of a performance gap, which can be a precipitator of major change. A performance gap is the difference between actual performance and the performance that should or could exist. A gap typically implies poor performance; for example, sales, profits, stock price, or other financial indicators are down. This situation attracts management’s attention, and management introduces changes to try to correct things.

Another, very important form of performance gap can exist. This type of gap can occur when performance is good but someone realizes that it could be better. Thus, the gap is between what is and what could be. This is where entrepreneurs seize opportunities and where companies that engage in strategic maneuvering gain a competitive edge. Whereas many change efforts begin with the negative, it often is more valuable to identify strengths and potential and then develop new modes of operating from that positive perspective.

As an impetus for change, a performance gap can apply to the organization as a whole; it also can apply to departments, groups, and individuals. If a department or work group is not performing as well as others in the company, or if it sees an opportunity that it can exploit, that unit will be motivated to change. Similarly, an individual may receive negative performance feedback or see a personal opportunity on which to capitalize. Under these circumstances, unfreezing begins, and people can be more motivated to change than they are if no such gap exists.

Moving to institute the change begins with establishing a vision of where the company is heading. The vision can be realized through strategic, structural, cultural, and individual change. Cultural changes are institutionalized through effective leadership. Individuals will change as new people join the company and as people throughout the organization adopt the leader's new vision for the future.

Finally, refreezing means strengthening the new behaviors that support the change. Changes must be diffused and stabilized throughout the company. Refreezing involves implementing control systems that support the change, applying corrective action when necessary, and reinforcing behaviors and performance that support the agenda. Management should consistently support and reward all evidence of movement in the right direction.

In today's organizations, refreezing is not always the best third step, if it creates new behaviors that are as rigid as the old ones. The ideal new culture is one of continuous change. Refreezing is appropriate when it permanently instills behaviors that maintain central core values, such as a focus on important business results and those values maintained by the companies that are built to last. But refreezing should not create new rigidities that might become dysfunctional as the business environment continues to change. The behaviors that should be refrozen are those that promote continued adaptability, flexibility, experimentation, assessment of results, and continuous improvement. In other words, lock in key values, capabilities, and strategic mjssion, but not necessarily specific management practices and procedures.

Specific Approaches to Enlist Cooperation You can try to command people to change, but the key to long-term success is to use other approaches. Developing true support is better than driving a program forward. How, specifically, can management motivate people to change? Most managers underestimate the variety of ways they can influence people during a change. Several effective approaches to managing resistance and enlisting cooperation are available.

1. Education and communication. Management should educate people about upcoming changes before they occur. You should communicate not only the nature of the change but it's logic. This process can include one-on-one discussions, presentations to groups, or reports and memos.
2.  Participation and involvement. Change requires reflection and dialogue, it is important to listen to the people who are affected by the change. They should be involved in the change's design and implementation. For major, organization-wide change, participation in the process can expand from the top to the very bottom of the organization. When feasible, management should use the advice of people throughout the organization. People who are involved in decisions understand them more fully and are more committed to them. People's understanding and commitment are important ingredients in the successful implementation of a change. Participation also provides an excellent opportunity for education and communication.
3.  Facilitation and support. Management should make the change as easy as possible for employees and be supportive of their efforts. Facilitation involves providing the training and other resources people need to carry out the change and perform their jobs under the new circumstances. This step often includes decentralizing authority and empowering people, that is, giving them the power to make the decisions and changes needed to improve their performance. Offering support involves listening patiently to problems, being understanding if performance drops temporarily or the change is not perfected immediately, and generally being on the employee's side and showing consideration during a difficult period.
4.  Negotiation and rewards. When necessary management can offer concrete incentives for cooperation with the change. Perhaps job enrichment is acceptable only with a higher wage rate, or a work rule change is resisted until management agrees to a concession on some other rule, say, regarding taking breaks. Even among higher-level managers, one executive might agree to another's idea for a policy change only in return for support on some other issue of more personal importance. Rewards such as bonuses, wages and salaries, recognition, job assignments, and perks can be examined and perhaps restructured to reinforce the direction of the change. When people trust one another change is easier. A change is further facilitated by demonstrating its benefits to people.
5.  Manipulation and cooptation. Sometimes managers use more subtle, covert tactics to implement change. One form of manipulation is cooptation, which involves giving a resisting individual a desirable role in the change process. The leader of a resisting group often is coopted. For example, management might invite a union leader to be a member of an executive committee, or ask a key member of an outside organization to join the company's board of directors. As a person becomes involved in the change, he or she may become less resistant to the actions of the coopting group or organization.
6.  Explicit and implicit coercion. Some managers apply punishment or the threat of punishment to those who resist change. With this approach, managers use force to make people comply with their wishes. For example, a boss might insist that subordinates cooperate with the change and threaten them with job loss, denial of a promotion, or an unattractive work assignment. Sometimes you just have to lay down the law: The game is changing, and you need to play by the new rules or play somewhere else.

Each approach to managing resistance has advantages and drawbacks and, like many of the other situational and contingency management approaches, each is useful in different situations. Managers should not use just one or two general approaches, regardless of the circumstances. Effective change managers are familiar with the various approaches and know how to apply them according to the situation.

Throughout the process, change leaders need to build in stability. In the midst of change, turmoil, and uncertainty, people need anchors on to which they can latch. This means keeping some things constant and visible, such as the organization's values and mission. In addition, strategic principles can be important anchors during change. It can help further to maintain the visibility of key people, continue key assignments and projects, and make announcements about which organizational components will not change. Such anchors will reduce anxiety and help overcome resistance. 

*SOURCE: MANAGEMENT: THE NEW COMPETITIVE LANDSCAPE, 6TH ED., 2004, THOMAS S. BATEMAN & SCOTT A. SNELL, PGS. 556-562*

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