What is organizational change? Definition and meaning
Organizational Change looks both at the process in which a company or any organization changes its operational methods, technologies, organizational structure, whole structure, or strategies, as well as what effects these changes have on it. Organizational change usually happens in response to – or as a result of – external or internal pressures.
It is all about reviewing and modifying structures – specifically management structures – and business processes. Small commercial enterprises need to adapt to survive against larger competitors – they also need to learn to thrive in that environment. Large rivals need to adapt rapidly when a smaller, innovative competitor comes onto the scene.
In order to avoid falling behind, or to remain a step ahead of its rivals, a business must seek out ways to operate more efficiently and cost effectively.
Ever since the advent of the Internet, the business environment today has been changing at a considerably faster pace compared to forty years ago. Organizational change is a necessary requirement for any commercial enterprise that wants to survive and thrive.
Change is something that should be embraced – not feared. Only with change will businesses be able to lay the foundations for long-term success.
According to Cambridge Dictionary, organizational change is:
“A process in which a large company or organization changes its working methods or aims, for example in order to develop and deal with new situations or markets.”
Many people would disagree with Cambridge Dictionary’s description, which limits organizational change just to something that happens in large companies.
Organizational change drivers
An organization’s change drivers include:
– The economic climate: if there is a recession, a company may have to lay off workers, this requires restructuring. A merger or takeover also means total reorganization and changes in corporate culture.
– Consumer demand & behavior: people’s lifestyles and how they shop, work and spend their leisure times are forever changing. Since the advent of the Internet, these changes have been occurring at significantly faster rates.
If you run a business today and hope that the pace of change will slow down, you will be in for a huge disappointment. Without change, your company will lose its competitive edge and fail to meet the requirements of what most of us hope will be a growing base of loyal customers.
– New technologies: new hi-tech systems and devices have completely changed how commercial enterprises do business and interact with other entities in the marketplace. New business models such as virtual collaboration and outsourcing are only possible today thanks to the Internet and ultra-high-speed communications.
Without technological change, our business leaders would still be dictating correspondence to human beings, who would then type them out and arrange for them to be distributed to the relevant people – wasting an incredible amount of time and resources.
– The competitive marketplace: if a new rival comes onto the scene with completely different commercial behaviors, the other players may have to adapt, especially if that competitor is successful in gaining market share.
– Rules and regulations (government policy): when companies are faced with new legislation or rules imposed by the relevant regulatory authorities, they need to do two things: 1. Comply with them. 2. Adapt so that they may continue to thrive.
Types of organizational change
What type of organizational change a company requires or is going through varies, depending on the person’s point of view. A manager in technology may see it in terms of systems, tools, software, hardware, etc., the CEO will invariably perceive change in terms of structure and strategy, an operations manager will mainly see it in terms of processes, etc.
In the majority of cases, the change is so complex and intricate that nobody can really define it fully from a specific standpoint.
Below are some of the common common types of organizational change – bear in mind that there is some or significant overlap between them:
– Mission and Strategy: a company’s aims and goals and how it plans to accomplish them. Hardly any change in an organization is not related to its mission and strategy. Mission and strategy affects every part of a business, therefore any change in this area has a company-wide impact.
– Policies and Legal Agreements: changing these may be highly unpopular with customers and the workforce. Any type of change in this area, even a minor one, may have a significant impact on a company.
– Organizational Structure: the hierarchy within an organization, which defines each job and department, their function and where they report to. When two commercial enterprises merge, or one takes over another, there are major structural changes. Sometimes the change may be minor, such as when a new team is established.
– Processes: a collection of linked tasks which find their end in the delivery of a product or service to a consumer. Processes and tasks are commonly altered during organizational change. In some organizations, changing or upgrading processes is ongoing or done on a regular basis.
– Personnel: including hiring, firing, training, roles, responsibilities, and other changes related to the workforce.
– Culture: refers to the pervasive beliefs, values and attitudes that characterize a firm and guide its practices. Any change in these areas can have a profound impact on every aspect of the organization, including innovation, compliance, and productivity.
– Products: changes to products, and everything related to encouraging consumers to buy them – marketing and sales – are an essential focus for most organizations.
– Knowledge: supports every product, process, initiative, project and program. Change here refers to the knowledge assets of the company. Knowledge asset are the information or skills within an organization that make it more competitive or valuable.
– Technology: today, virtually every commercial enterprise is some kind of tech company. Sometimes a company makes changes to its technology infrastructure, automations, systems, hardware, software, etc.
– Integration: synchronizing IT (information technology) and business cultures and objectives, aligning technology with company strategy and goals. In a company, integration is a reflection of how IT is being absorbed as a function of the organization. Virtually every change requires integration. Everything in a company needs to be aligned so that they support, compliment and add value to each other.
Integration is usually the most complex type of change. When carried out successfully, the whole of a company is clearly much more valuable than the sum of its parts.
Experts say that a fundamental aspect of introducing planned changes into any environment is to gain insights into how well they will be received by employees and customers and implemented by the management, and how accurately the economic climate today and tomorrow is perceived and forecast. Integrating technology across every component of the company and responding adequately to any new rules and regulations are crucial.
The study of organizational change
The study of organizational change, because of its very nature, covers a number of different disciplines, including psychology, management, economics, political science and sociology.
There is no all-encompassing theory of organizational change that all experts refer or adhere to. Rather, it consists of a number of distinct theories that so far have not really been integrated.
“The study of organizational change is interdisciplinary in nature and draws from the fields of psychology, sociology, political science, economics, and management.”
“You will not find a grand, unified theory of organizational change. Instead, you will find distinct theories that have not really been integrated to date.”
Organizational change tends to fail
Perhaps this is why, in most cases, when organizational change is implemented it usually fails.
The key conclusion of a study – ‘Where Change Management Fails‘ – by Robert Half Management Resources, published earlier this year, which included 300 senior managers at US companies with at least 20 workers, was that organizational change usually fails.
The study found that in the majority of cases the failure occurs in the executional phase – due mainly to broken or inadequate communication.
Forty-six percent of respondents in the study survey said that most change-management efforts commonly failed at execution, while only 10% claimed it occurred during the strategy development stage.
When asked what they thought was most important when leading their team or company through a major organizational change, the respondents said:
– Communicating clearly and often: 65%
– Clearly outlining the goals: 16%
– Delegating effectively: 9%
Executive Director of Robert Half Management Resources, Tim Hird, explained:
“Whether major or incremental, many companies are initiating changes, from transforming their business models to updating business systems and looking for ways to enhance productivity. While change is never easy for a company, it’s even harder for employees.”
Video – What is organizational change?
This video explains what organizational change is and why it is necessary and important in today’s marketplace.