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Organizational Change

LEARNING OBJECTIVES
After reading this chapter, you should be able to: 1. Describe the elements of Lewin’s force field analysis model. 2. Outline six reasons why people resist organizational change. 3. Discuss six strategies for minimizing resistance to change. 4. Outline the conditions for effectively diffusing change from a pilot project. 5. Describe the action research approach to organizational change. 6. Outline the “Four-D” model of appreciative inquiry and explain how this approach differs from action research. 7. Explain how parallel learning structures assist the change process. 8. Discuss three ethical issues in organizational change.

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Umpqua Bank’s transformation from a sleepy community bank to a regional leader illustrates many of the strategies and practices necessary to successfully change organizations. It reveals how CEO Ray Davis created an urgency to change, minimized resistance to change, built the new model from a pilot project that was later diffused throughout the organization, and introduced systems and structures that reinforced employee behaviors consistent with the new banking model and company culture. Although Umpqua’s transformation sounds as though it was a smooth transition, most organizational change is messy, requiring considerable leadership effort and vigilance. As we will describe throughout this chapter, the challenge of change is not so much in deciding which way to go; the challenge is in the execution of this strategy. “We had to pull the train back into the station a few times to make sure everyone was on board,” says Umpqua Bank executive Lani Hayward. “We’re trying to do something that’s never been done before and that’s to be a community bank at any size.”2 This chapter begins by introducing Lewin’s model of change and its component parts. This includes sources of resistance to change, ways to minimize this resistance, and ways to stabilize desired behaviors. Next, the chapter examines four approaches to organizational change—action research, appreciative inquiry, large-group interventions, and parallel learning structures. The last section of this chapter considers both cross-cultural and ethical issues in organizational change.

Learning Objectives

After reading the next three sections, you should be able to: 1. 2. 3. 4. Describe the elements of Lewin’s force field analysis model. Outline six reasons why people resist organizational change. Discuss six strategies for minimizing resistance to change. Outline the conditions for effectively diffusing change from a pilot project.

force field analysis Kurt Lewin’s model of systemwide change that helps change agents diagnose the forces that drive and restrain proposed organizational change.

Lewin’s Force Field Analysis Model
Social psychologist Kurt Lewin developed the force field analysis model to explain how the change process works (see Exhibit 15.1).3 Although it was developed more than 50 years ago, recent reviews conclude that Lewin’s force field analysis model remains one of the most widely respected ways of viewing this process.4 One side of the force field model represents the driving forces that push organizations toward a new state of affairs. These might include new competitors or technologies, evolving workforce expectations, or a host of other environmental changes. Corporate leaders also produce driving forces even when external forces for change aren’t apparent. For instance, some experts call for “divine discontent” as a key feature of successful organizations, meaning that leaders continually urge employees to strive for higher standards or new innovations even when the company outshines the competition. The other side of Lewin’s model represents the restraining forces that maintain the status quo. These restraining forces are commonly called “resistance to change” because they appear as employee behaviors that block the change process. Stability occurs when the driving and restraining forces are roughly in equilibrium, that is, they are of approximately equal strength in opposite directions. Lewin’s force field model emphasizes that effective change occurs by unfreezing the current situation, moving to a desired condition, and then refreezing the system so that it remains in the desired state. Unfreezing involves producing disequilibrium

unfreezing The first part of the change process, in which the change agent produces disequilibrium between the driving and restraining forces.

refreezing The latter part of the change process, in which systems and conditions are introduced that reinforce and maintain the desired behaviors.

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Exhibit 15.1
Lewin’s Force Field Analysis Model

Desired conditions
Restraining forces

Restraining forces

Driving forces

Restraining forces

Current conditions Driving forces

Driving forces

between the driving and restraining forces. As we will describe later, this may occur by increasing the driving forces, reducing the restraining forces, or having a combination of both. Refreezing occurs when the organization’s systems and structures are aligned with the desired behaviors. They must support and reinforce the new role patterns and prevent the organization from slipping back into the old way of doing things. Over the next few pages, we use Lewin’s model to understand why change is blocked and how the process can evolve more smoothly.

Restraining Forces
Robert Nardelli pushed hard to transform Home Depot from a loose configuration of fiefdoms to a more performance-oriented operation that delivered a consistent customer experience. Change did occur at the world’s largest home improvement retailer, but at a price. A large number of talented managers and employees left the company, and some of those remaining continued to resent Nardelli’s transformation. Disenchanted staff referred to the company as “Home Despot” because the changes took away their autonomy. Others named it “Home GEpot,” a cutting reference to the large number of former GE executives that Nardelli hired into top positions. After five years, the Home Depot board decided to replace Nardelli, partly because he made some unsuccessful strategic decisions and partly because of the aftereffects of Nardelli’s changes.5 Robert Nardelli, who is now CEO of Chrysler, experienced employee resistance to change when at Home Depot. Resistance to change takes many forms, ranging from overt work stoppages to subtle attempts to continue the “old ways.” One recent study of bank employees reported that subtle resistance is much more common than overt resistance. Some employees in that study avoided the desired changes by moving into different jobs. Others continued to perform tasks the old way as long as management didn’t notice. Even when employees complied with the planned changes, they engaged in resistance by performing their work without corresponding cognitive or emotional support for the change.6 In other words, they resisted by communicating nonverbally (and sometimes verbally!) to customers that they disliked the changes forced on them. Some experts point out that these subtle forms of resistance create

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the greatest obstacles to change because they are not as visible as overt resistance. In the words of one manager: “[Change efforts] never die because of direct confrontation. Direct confrontation you can work with because it is known. Rather, they die a death of a thousand cuts. People and issues you never confront drain the life out of important [initiatives] and result in solutions that simply do not have the performance impact that they should have.”7 John Thompson experienced this subtle resistance to change soon after he became CEO of Symantec Corporation. To reduce costs, Thompson suggested that the computer cable included in all Symantec software packages was an unnecessary expense because most customers already owned these cables. Everyone at the costcutting meeting agreed that the cables should no longer be shipped with the software but would be provided free to customers who requested them. Yet several weeks later Thompson discovered that computer cables were still being shipped with the software, so he reminded the executive responsible that the team makes these decisions only once. “If you’ve got a disagreement or a point of view, bring it up when we’re going through the discussion,” Thompson advised the executive. “Don’t hold back

Not Hoppy about Change Hoppy, a carbonated low-alcohol malt-and-hops beverage, was popular around Tokyo after World War II as a cheap alternative to expensive beer, but it fell out of favor as beer became affordable. Mina Ishiwatari (center in photo), granddaughter of Hoppy Beverage Co.’s founder, was determined to improve Hoppy’s image when she joined the company a decade ago. Unfortunately, the company’s 30 employees—mostly men in their fifties who were family members—didn’t want to disturb their cozy jobs. “It was a turbulent decade of eliminating evils from the company and rebuilding a new organization from scratch,” recalls Ishiwatari, who began as a rank-and-file employee and is now the company’s executive vice president. “I tried to take a new marketing approach to change the image of Hoppy . . . but no one would listen to me.” With limited support and budget, Ishiwatari developed a Web site that informed the public about the product, sold it online, and documented Ishiwatari’s views in an early Weblog. As the contemporary marketing caught the attention of health-conscious young people, Hoppy sales have doubled to about US$25 million annually, even though it is sold only around Tokyo. Most employees who opposed Ishiwatari’s radical changes have since left the company; almost all of the 43 current staff members were hired by Ishiwatari and support her vision of Hoppy’s future.8

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and give me this smiley kind of benign agreement. Go back and get it fixed. We’re not shipping cables any more.”9 Although Symantec’s CEO was probably frustrated by the executive’s passive resistance to change, change agents need to realize that resistance is a common and natural human response. As economist John Kenneth Galbraith once quipped, “In the choice between changing one’s mind and proving there’s no need to do so, most people get busy on the proof!”10 Even when people do support change, they typically assume that it is others—not themselves—who need to change. The problem, however, isn’t so much that resistance to change exists. The main problem is that change agents typically view resistance as an unreasonable, dysfunctional, and irrational response to a desirable initiative. They often form an “us versus them” perspective without considering that the causes of resistance may, in fact, be traced back to their own actions or inaction.11 The emerging view among change management experts is that resistance to change needs to be seen as a resource, rather than as an impediment to change. First, resistance incidents are symptoms of deeper problems in the change process. They are signals that the change agent has not sufficiently addressed the underlying conditions that support effective organizational change.12 In some situations, employees may be worried about the consequences of change, such as how the new conditions will take away their power and status. In other situations, employees show resistance because of concerns about the process of change itself, such as the effort required to break old habits and learn new skills. Second, resistance should be recognized as a form of constructive conflict. As you learned in Chapter 11, constructive conflict can potentially improve decision making, including identifying better ways to improve the organization’s success. However, constructive conflict is typically accompanied by dysfunctional relationship conflict. This appears to be the case when change agents see resistance to change as an impediment rather than a resource. They describe the people who resist as the problem, whereas their focus should be on understanding the reasons why these people resist. Thus, by viewing resistance as a form of constructive conflict, change agents may be able to improve the change strategy or change process. Finally, resistance should be viewed in the context of justice and motivation. Resistance is a form of voice, so, as described in Chapter 5, it potentially improves procedural justice. By redirecting initial forms of resistance into constructive conversations, change agents can increase employee perceptions and feelings of fairness. Furthermore, resistance is motivational; it potentially engages people to think about the change strategy and process. Change agents can harness that motivational force to ultimately strengthen commitment to the change initiative. Change management experts have developed a long list of reasons why people do not embrace change.13 Many of these reasons relate to a lack of motivation, such as exists when employees estimate that the negative consequences that the change might impose on them outweigh the benefits. Another factor is the inability to change due to lack of adequate skills and knowledge. Employees also resist change unwittingly because they lack a sufficiently clear understanding of what is expected of them (i.e., lack of role clarity). Six of the most commonly cited reasons why people resist change are summarized

Employee Resistance as a Resource for Change

Why Employees Resist Change

Connections 15.1
The FBI Meets Its Own Resistance
In 1993, following the first terrorist attack on the World Trade Center, the U.S. Federal Bureau of Investigation (FBI) was given a new mandate: refocus from a reactive law enforcement agency (solving crimes) to a proactive domestic intelligence agency (preventing terrorism). Eight years later, the FBI was still mainly a crime investigation organization with limited intelligence-gathering capabilities. This failure to change was identified as a factor in the FBI’s inability to prevent terrorist attacks on the same buildings as well as the Pentagon. One government report even stated that the FBI and the CIA “seem to be working harder and harder just to maintain a status quo that is increasingly irrelevant to the new challenges.” One source of resistance, according to government reports, is that FBI employees and managers are unable or unwilling to change because solving crimes (rather than intelligence gathering) is burned into their mindset, routines, career paths, and decentralized structure. Most FBI field managers were trained in law enforcement, so they continue to give preferential treatment and resources to enforcement rather than terrorist prevention initiatives. Even if FBI leaders were motivated to become more focused on intelligence gathering, the organization’s systems and structures undermine these initiatives. The FBI has been a decentralized organization, where field agents operate without much orchestration from headquarters. Until recently, the FBI also lacked a secure centralized information system (in fact, most of its records were still paper-based), which is essential for intelligence work but less important for criminal investigations. Furthermore, information is so closely guarded further down the ranks (called “close holds”) that an information access barrier called “the wall” isolates FBI intelligence officers from the mainstream criminal investigation staff. Overall, these structural characteristics effectively scuttled any attempt to transform the FBI into an intelligence agency. Resistance to change was also likely due in part to a historic rivalry between the FBI and the Central Intelligence Agency (CIA). Raising the profile and legitimacy of intelligence gathering at the FBI would have acknowledged that the CIA’s

The FBI experienced many sources of resistance in its mandate of transforming from a reactive law enforcement agency into a proactive domestic intelligence agency.

work was valuable, so some FBI leaders and staff were reluctant to move in that direction. The FBI is now taking concerted steps to address these barriers to change. But John Miller, the FBI’s assistant director of the office of public affairs, admits that the FBI continues to face challenges. “The FBI has no corner on the market of people being resistant to change,” he says. “We don’t recruit people from Planet Perfect; we recruit human beings.”14

below.15 Connections 15.1 describes how some of these sources of resistance existed at the FBI in spite of clear evidence that the law enforcement agency needed to develop a new mandate. • Direct costs. People tend to block actions that result in higher direct costs or lower benefits than those in the existing situation. Connections 15.1 describes how some FBI managers likely resisted the bureau’s new intelligence mandate because it would necessarily remove some of their resources, personal status, and career opportunities.

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•

Saving face. Some people resist change as a political strategy to “prove” that the decision is wrong or that the person encouraging change is incompetent. This not-invented-here syndrome is widespread, according to change experts. Says one consultant, “Unless they’re scared enough to listen, they’ll never forgive you for being right and for knowing something they don’t.”16 Fear of the unknown. People resist change out of worry that they cannot adjust to the new work requirements. This fear of the unknown increases the risk of personal loss. For example, even if many FBI managers and professionals recognized that the agency should change its mandate, they likely were reluctant to push the changes forward because it is difficult to anticipate how this mandate would affect them personally. Breaking routines. People typically resist initiatives that force them out of their comfort zones and require them to invest time and energy in learning new role patterns. Umpqua Bank CEO Ray Davis, who was introduced in the opening vignette to this chapter, acknowledged this source of resistance when describing the “rubber band” effect—employees tend to snap back into their comfort zones rather than stick with the new behaviors. Indeed, most employees in one survey admitted they don’t follow through with organizational changes because they “like to keep things the way they are” or the changes seem to be too complicated or time wasting.17 FBI agents likely resisted the organization’s new mandate because they were accustomed to working independently on investigations, so it would be a challenge to engage in more information sharing and collaboration across teams and departments. Incongruent team dynamics. Teams develop and enforce conformity to a set of norms that guide behavior. However, conformity to existing team norms may discourage employees from accepting organizational change. For example, Best Buy introduced the results-only work environment (ROWE), in which employees were evaluated by their results, not their face time. Yet, even though the program allowed employees to wander in to work at any time, deviations were often met with half-humorous barbs from co-workers, such as “Forgot to set your alarm clock again?” These rebukes, which were consistent with the team norms that previously governed face-time violations, undermined the ROWE program. Best Buy’s consultants eventually set up sessions that warned employees about these taunts, which they called “sludge.”18 Incongruent organizational systems. Rewards, information systems, patterns of authority, career paths, selection criteria, and other systems and structures are both friends and foes of organizational change. When properly aligned, they reinforce desired behaviors. When misaligned, they pull people back into their old attitudes and behavior. Even enthusiastic employees lose momentum after failing to overcome the structural confines of the past.

•

•

•

•

Unfreezing, Changing, and Refreezing
According to Lewin’s force field analysis model, effective change occurs by unfreezing the current situation, moving to a desired condition, and then refreezing the system so that it remains in this desired state. Unfreezing occurs when the driving forces are stronger than the restraining forces. This happens by making the driving forces stronger, weakening or removing the restraining forces, or doing a combination of both.

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With respect to the first option, driving forces must increase enough to motivate change. Change rarely occurs by increasing driving forces alone, however, because the restraining forces often adjust to counterbalance the driving forces. This is rather like the coils of a mattress. The harder corporate leaders push for change, the stronger the restraining forces push back. This antagonism threatens the change effort by producing tension and conflict within the organization. The preferred option is to both increase the driving forces and reduce or remove the restraining forces. Increasing the driving forces creates an urgency for change, whereas reducing the restraining forces minimizes resistance to change.

Creating an Urgency for Change
It is almost a cliché to say that organizations today operate in more dynamic, fast-paced environments than they did a few decades ago. The environmental pressures represent the driving forces that push employees out of their comfort zones. They energize people to face the risks that change creates. In many organizations, however, corporate leaders buffer employees from the external environment to such an extent that these driving forces are hardly felt by anyone below the top executive level. The result is that employees don’t understand why they need to change and leaders are surprised when their change initiatives do not have much effect. The change process therefore necessarily begins by ensuring that employees develop an urgency for change. This typically occurs by informing employees about competitors, changing consumer trends, impending government regulations, and other driving forces in the external environment.19

Firing Up Chrysler’s Urgency for Change Chrysler Corporation’s attempt to create a team-based organizational structure at its Belvidere assembly plant initially met with stiff resistance. “There is a need to change,” says plant manager Kurt Kavajecz. The problem, he explains, is that employees didn’t see the need for change. They knew that “we build cars pretty well. . . . So why do we have to change?” To develop a stronger urgency for change, Kavajecz told employees about the challenges the company faces. “If you show them what’s going on in the industry, if you give them the information, the data on why we are changing, at the end of the presentation, they get it,” he explains. “They see that plants are closing and jobs are going away. We talk very openly about those things, and they understand why we’re changing.” The Chrysler plant eventually introduced team-based work.20

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Customer-Driven Change

Some companies fuel the urgency to change by putting employees in direct contact with customers. Dissatisfied customers represent a compelling driving force for change because of the adverse consequences for the organization’s survival and success. Customers also provide a human element that further energizes employees to change current behavior patterns.21 Executives at Shell Europe applied customer-driven change when they discovered that middle managers seemed blissfully unaware that Shell wasn’t achieving either its financial goals or its customer needs. So, to create an urgency for change, the European managers were loaded onto buses and taken out to talk with customers and employees who work with customers every day. “We called these ‘bus rides.’ The idea was to encourage people to think back from the customer’s perspective rather than from the head office,” explains Shell Europe’s vice president of retailing. “The bus rides were difficult for a lot of people who, in their work history, had hardly ever had to talk to a customer and find out what was good and not so good about Shell from the customer’s standpoint.”22

Creating an Urgency for Change without External Forces Exposing employees to external forces can strengthen the urgency for change, but leaders often need to begin the change process before problems come knocking at the company’s door. “You want to create a burning platform for change even when there isn’t a need for one,” says Steve Bennett, CEO of financial software company Intuit.23 Creating an urgency for change when the organization is riding high requires a lot of persuasive influence that helps employees visualize future competitive threats and environmental shifts. For instance, Apple Computer’s iPod dominates the digital music market, but Steve Jobs wants the company to be its own toughest competitor. Just when sales of the iPod Mini were soaring, Jobs challenged a gathering of 100 top executives and engineers to develop a better product to replace it. “Playing it safe is the most dangerous thing we can do,” Jobs warned. Nine months later, the company launched the iPod Nano, which replaced the still-popular iPod Mini, before competitors could offer a better alternative.24 Experts warn, however, that employees may see the burning-platform strategy as manipulative, a view that produces cynicism about change and undermines trust in the change agent.25 Also, the urgency for change does not always need to be initiated from a problem-oriented perspective. Instead, as we will describe later in this chapter, effective change agents can adopt a positive orientation by championing a vision of a more appealing future state. By creating a future vision of a better organization, leaders effectively make the current situation less appealing. When the vision connects to employee values and needs, it can be a motivating force for change even when external “problems” are not strong.

Reducing the Restraining Forces
Employee resistance should be viewed as a resource, but its underlying causes—the restraining forces—need to be addressed. As we explained earlier using the mattresscoil metaphor, it is not enough to increase the driving forces because employees often push back harder to offset the opposing force. Exhibit 15.2 summarizes six strategies for addressing the sources of employee resistance. If feasible, communication, learning, employee involvement, and stress management should be attempted first.26 However, negotiation and coercion are necessary for people who will clearly lose something from the change and in cases where the speed of change is critical.

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Exhibit 15.2
Strategies for Minimizing Resistance to Change

Strategy Communication

Example Customer complaint letters are shown to employees.

When applied When employees don’t feel an urgency for change or don’t know how the change will affect them. When employees need to break old routines and adopt new role patterns. When the change effort needs more employee commitment, some employees need to save face, and/or employee ideas would improve decisions about the change strategy. When communication, training, and involvement do not sufficiently ease employee worries. When employees will clearly lose something of value from the change and would not otherwise support the new conditions. Also necessary when the company must change quickly. When other strategies are ineffective and the company needs to change quickly.

Problems Time-consuming and potentially costly.

Learning

Employees learn how to work in teams as company adopts a team-based structure. Company forms task force to recommend new customer service practices.

Time-consuming and potentially costly.

Employee involvement

Very time-consuming. Might lead to conflict and poor decisions if employees’ interests are incompatible with organizational needs.

Stress management

Employees attend sessions to discuss their worries about the change. Employees agree to replace strict job categories with multiskilling in return for increased job security.

Time-consuming and potentially expensive. Some methods may not reduce stress for all employees. May be expensive, particularly if other employees want to negotiate their support. Also tends to produce compliance but not commitment to the change. Can lead to more subtle forms of resistance, as well as long-term antagonism with the change agent.

Negotiation

Coercion

Company president tells managers to “get on board” the change or leave.

Sources: Adapted from J. P. Kotter and L. A. Schlesinger, “Choosing Strategies for Change,” Harvard Business Review 57 (1979), pp. 106–114; P. R. Lawrence, “How to Deal with Resistance to Change,” Harvard Business Review, May–June 1954, pp. 49–57.

Communication As Connections 15.1 described, the FBI experienced a high level of resistance to changing into an intelligence-gathering organization. One of the first strategies the FBI leaders are now applying to address that resistance is communicating in every way possible and to as many audiences as possible that the FBI must change, why it must change, and what the new bureau will look like. “The word is out. Terrorism is the No. 1 priority, and intelligence is what the bureau is about,” says former assistant attorney general Paul R. Corts, who has worked closely with the FBI during the change process. “You’ve got to say it, say it, and say it again.” Communication is the highest priority and first strategy required for any organizational change. According to one recent survey, communication (together with involve-

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ment) is considered the top strategy for engaging employees in the change process.27 Communication improves the change process in at least two ways. First, as mentioned earlier, leaders develop an urgency to change by candidly telling employees about the driving forces for change. Whether through town hall meetings with senior management or by directly meeting with disgruntled customers, employees become energized to change. Second, communication can potentially reduce fear of the unknown. The more corporate leaders communicate their vision of the future, the more easily employees can understand their own role in that future. This effort may also begin the process of adjusting team norms to be more consistent with the new reality.

Learning Learning is an important process in most change initiatives because employees require new knowledge and skills to fit the organization’s evolving requirements. The FBI is now addressing past resistance to change through heavy investment in training staff in counterterrorism and counterintelligence. In addition, hundreds of FBI executives have been sent to weeklong courses to learn how to coach employees during the change process. Coaching and other forms of learning are time-consuming, but they help employees break routines by teaching them new role patterns.

Employee Involvement Unless the change must occur quickly or employee interests are highly incompatible with the organization’s needs, employee involvement is almost an essential part of the change process. Chapter 7 described several potential benefits of employee involvement, all of which are relevant to organizational change. Employees who participate in decisions about the change tend to feel they have more personal responsibility for its successful implementation, rather than being disinterested agents of someone else’s decisions.28 This sense of ownership also minimizes the problems of saving face and fear of the unknown. Furthermore, the complexity of today’s work environment demands that more people provide ideas regarding the best direction of the change effort. Employee involvement is such an important component

Employee Involvement Sizzles at Lopez Foods With blue-chip clients such as McDonald’s and Wal-Mart, Lopez Foods, Inc. has built an impressive business over the past 15 years. And with annual sales of $500 million, the Oklahoma City–based beef patty and sausage manufacturer has become the 10th-largest Hispanic-owned company in America. To ensure that the next 15 years will be equally successful, CEO Eduardo Sanchez recently introduced a major organizational change initiative aimed at making “a quantum leap” in the company’s efficiency and performance. Employee involvement has been a critical component of the change process. The company held several “brown paper” sessions in which the current production process was mapped out on a large wall of brown paper and employees were asked to verify that process and to figure out how to improve it. “We got everyone involved, got sticky [notes], and said, ‘Here’s the process as-is, and we want to work on the to-be—what’s it going to be?’“ says assistant vice president Dave Lopez. Sanchez was surprised at the employees’ high level of enthusiasm for improving efficiency. “Things we thought would be a hard sell on the employees, they themselves have come up to us and said, ‘We can do this better,’ or ‘We don’t need five people here, we only need three,’“ says Sanchez.29

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of organizational change that special initiatives have been developed to allow participation in large groups. These change interventions are described later in the chapter.

Stress Management

Organizational change is a stressful experience for many people because it threatens self-esteem and creates uncertainty about the future.30 Communication, learning, and employee involvement can reduce some of the stressors. However, research indicates that companies also need to introduce stress management practices to help employees cope with the changes.31 In particular, stress management minimizes resistance by removing some of the direct costs and fear of the unknown of the change process. Stress also saps energy, so minimizing stress potentially increases employee motivation to support the change process.

Negotiation As long as people resist change, organizational change strategies will require some influence tactics. Negotiation is a form of influence that involves the promise of benefits or resources in exchange for the target person’s compliance with the influencer’s request. This strategy potentially activates those who would otherwise lose out from the change. However, it merely gains compliance rather than commitment to the change effort, so it might not be effective in the long term. Coercion If all else fails, leaders rely on coercion to change organizations. Coercion can include persistently reminding people of their obligations, frequently monitoring behavior to ensure compliance, confronting people who do not change, and using threats of sanctions to force compliance. Replacing people who will not support the change is an extreme step, but it is fairly common. The opening story to this chapter described how three of the original six branch managers at Umpqua Bank left the company when Ray Davis introduced a radically different model of banking. Similarly, within one year after Robert Nardelli was hired as CEO of Home Depot, most of the retailer’s top management team had voluntarily or involuntarily left the company. Replacing staff is a radical form of organizational unlearning because replacing executives removes knowledge of the organization’s past routines. This potentially opens up opportunities for new practices to take hold.32 At the same time, coercion is a risky strategy because survivors (employees who do not leave) may have less trust in corporate leaders and engage in more political tactics to protect their own job security.

Refreezing the Desired Conditions
Unfreezing and changing behavior won’t produce lasting change. People are creatures of habit, so they easily slip back into past patterns. Therefore, leaders need to refreeze the new behaviors by realigning organizational systems and team dynamics with the desired changes.33 For instance, recall that the FBI experienced resistance to change because organizational structures interfered with the desired future of intelligence gathering. Now the FBI is not only changing; it is institutionalizing these changes through new systems and structures. New career paths have been established for intelligence officers as well as for criminal investigation agents. The compensation system has been redesigned to reward staff who succeed in intelligence work rather than just criminal investigations. The FBI is also slowly developing information systems so that agents can share knowledge quickly with each other and with other agencies.

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Change Agents, Strategic Visions, and Diffusing Change
Kurt Lewin’s force field analysis model is a useful template to explain the dynamics of organizational change. But it overlooks three ingredients in effective change processes: change agents, strategic visions, and diffusing change.

Change Agents and Strategic Visions
The opening vignette to this chapter described several ways that Umpqua Bank CEO Ray Davis supported organizational change. Perhaps the most important of these was Davis’s own skills and behaviors as a transformational leader. He developed an appealing vision of the desired future state, communicated that vision in ways that were meaningful to others, made decisions and acted in ways that were consistent with that vision, and built commitment to that vision.34 Change agents come in different forms, and more than one person is often required to fulfill these different roles.35 In most situations, however, transformational leaders are the primary agents of change. A key element of leading change is a strategic vision. A leader’s vision provides a sense of direction and establishes the critical success factors against which the real changes are evaluated. Furthermore, vision provides an emotional foundation to the change because it links the individual’s values and self-concept to the desired change.36 A strategic vision also minimizes employee fear of the unknown and provides a better understanding about what behaviors employees must learn for the desired future.

Diffusion of Change
In Chapter 4, as well as earlier in this chapter, we described Best Buy’s results-only work environment (ROWE) initiative, which was introduced to support work–life balance and employment expectations of a younger workforce. ROWE evaluates employees by their results, not their face time. This new arrangement gives employees at the Minneapolis-based retailer the freedom to come to work when it suits them. ROWE is a significant departure from the traditional employment relationship, so Best Buy wisely introduced an early version of it as a pilot project. Specifically, the program was first tested with a retail division of 320 employees that suffered from low morale and high turnover. Only after employee engagement scores increased and turnover fell over several months was the ROWE program expanded to other parts of the organization.37 As at Best Buy, change agents often test the transformation process with a pilot project and then diffuse what has been learned from this experience to other parts of the organization. Unlike centralized, systemwide changes, pilot projects are more flexible and less risky.38 The pilot project approach also makes it easier to select organizational groups that are most ready for change, thus increasing the pilot project’s success. But how do we ensure that the change process started in the pilot project is adopted by other segments of the organization? The MARS model introduced in Chapter 2 offers a useful template for organizing the answer to this question. First, employees are more likely to adopt the practices of a pilot project when they are motivated to do so.39 This occurs when they see that the pilot project is successful and people in the pilot project receive recognition and rewards for changing their previous work practices. Diffusion also requires supervisor support and reinforcement of the desired behaviors. More generally, change agents need to minimize the sources of resistance to change that we discussed earlier in this chapter.

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Second, employees must have the ability—the required skills and knowledge—to adopt the practices introduced in the pilot project. According to innovation diffusion studies, people adopt ideas more readily when they have an opportunity to interact and learn from others who have already applied the new practices.40 Thus, pilot projects get diffused when employees in the original pilot are dispersed to other work units as role models and knowledge sources. Third, pilot projects get diffused when employees have clear role perceptions, that is, when they understand how the practices in a pilot project apply to them even though they are in a completely different functional area. For instance, accounting department employees won’t easily recognize how they can adopt quality improvement practices developed by employees in the production department. The challenge here is for change agents to provide guidance that is neither too specific, because it might not seem relevant to other areas of the organization, nor too abstract, because this makes the instructions too vague. Finally, employees require supportive situational factors, including the resources and time necessary to adopt the practices demonstrated in the pilot project.

Learning Objectives

After reading the next two sections, you should be able to: 5. Describe the action research approach to organizational change. 6. Outline the “Four-D” model of appreciative inquiry and explain how this approach differs from action research. 7. Explain how parallel learning structures assist the change process. 8. Discuss three ethical issues in organizational change.

Four Approaches to Organizational Change
So far, this chapter has examined the dynamics of change that occur every day in organizations. However, organizational change agents and consultants also apply various structured approaches to organizational change. This section introduces four of the leading approaches: action research, appreciative inquiry, large-group interventions, and parallel learning structures.

Action Research Approach action research A problem-focused change process that combines action orientation (changing attitudes and behavior) and research orientation (testing theory through data collection and analysis).

Along with introducing the force field model, Kurt Lewin recommended an action research approach to the change process. Action research maintains that meaningful change is a combination of action orientation (changing attitudes and behavior) and research orientation (testing theory).41 On the one hand, the change process needs to be action-oriented because the ultimate goal is to bring about change. An action orientation involves diagnosing current problems and applying interventions that resolve those problems. On the other hand, the change process is a research study because change agents apply a conceptual framework (such as team dynamics or organizational culture) to a real situation. As with any good research, the change process involves collecting data to diagnose problems more effectively and to systematically evaluate how well the theory works in practice.42 Within this dual framework of action and research, the action research approach adopts an open-systems view. It recognizes that organizations have many interdependent parts, so change agents need to anticipate both the intended and the unintended consequences of their interventions. Action research is also a highly participative

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Exhibit 15.3

The Action Research Process Diagnose need for change Introduce intervention Evaluate and

Form client– consultant relationship.

Disengage consultant’s services.

process because open-systems change requires both the knowledge and the commitment of members within that system. Indeed, employees are essentially co-researchers as well as participants in the intervention. Overall, action research is a data-based, problem-oriented process that diagnoses the need for change, introduces the intervention, and then evaluates and stabilizes the desired changes. The main phases of action research are illustrated in Exhibit 15.3 and described below:43 1. Form client-consultant relationship. Action research usually assumes that the change agent originates outside the system (such as a consultant), so the process begins by forming the client-consultant relationship. Consultants need to determine the client’s readiness for change, including whether people are motivated to participate in the process, are open to meaningful change, and possess the abilities to complete the process. 2. Diagnose the need for change. Action research is a problem-oriented activity that carefully diagnoses the problem through systematic analysis of the situation. Organizational diagnosis identifies the appropriate direction for the change effort by gathering and analyzing data about an ongoing system, such as through interviews and surveys of employees and other stakeholders. Organizational diagnosis also includes employee involvement in agreeing on the appropriate change method, the schedule for the actions involved, and the expected standards of successful change. 3. Introduce intervention. This stage in the action research model applies one or more actions to correct the problem. It may include any of the prescriptions mentioned in this textbook, such as building more effective teams, managing conflict, building a better organizational structure, or changing the corporate culture. An important issue is how quickly the changes should occur.44 Some experts recommend incremental change, in which the organization fine-tunes the system and takes small steps toward a desired state. Others claim that quantum change is often required, in which the system is overhauled decisively and quickly. Quantum change is usually traumatic to employees and offers little opportunity for correction. But incremental change is also risky when the organization is seriously misaligned with its environment, thereby facing a threat to its survival. 4. Evaluate and stabilize change. Action research recommends evaluating the effectiveness of the intervention against the standards established in the diagnostic stage. Unfortunately, even when these standards are clearly stated, the effectiveness of an intervention might not be apparent for several years or might be difficult to separate from other factors. If the activity has the desired effect, the change agent and participants need to stabilize the new conditions. This refers to the refreezing process that was described earlier. Rewards, information systems, team norms, and other conditions are redesigned so that they support the new values and behaviors.

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The action research approach has dominated organizational change thinking ever since it was introduced in the 1940s. However, some experts complain that the problem-oriented nature of action research—in which something is wrong that must be fixed—focuses on the negative dynamics of the group or system rather than its positive opportunities and potential. This concern with action research has led to the development of a more positive approach to organizational change, called appreciative inquiry.45

Appreciative Inquiry Approach appreciative inquiry An organizational change strategy that directs the group’s attention away from its own problems and focuses participants on the group’s potential and positive elements.

Appreciative inquiry tries to break out of the problem-solving mentality of traditional change management practices by reframing relationships around the positive and the possible. It searches for organizational (or team) strengths and capabilities and then adapts or applies that knowledge for further success and well-being. Appreciative inquiry is therefore deeply grounded in the emerging philosophy of positive organizational behavior, which suggests that focusing on the positive rather than negative aspects of life will improve organizational success and individual well-being. In other words, this approach emphasizes building on strengths rather than trying to directly correct problems.46 Appreciative inquiry typically directs its inquiry toward successful events and successful organizations or work units. This external focus becomes a form of behavioral modeling, but it also increases open dialogue by redirecting the group’s attention away from its own problems. Appreciative inquiry is especially useful when participants are aware of their “problems” or already suffer from negativity in their relationships. The positive orientation of appreciative inquiry enables groups to overcome
BBC Takes the Appreciative Journey The British Broadcasting Corporation (BBC) needed more innovative programming to reverse declining audience numbers, but employees complained that the radio, television, and Internet broadcaster did not provide a creative work environment. To discover how to become more creative, the company sponsored an appreciative inquiry process of employee consultation, called Just Imagine. More than 10,000 employees (about 40 percent of BBC’s workforce) participated in 200 meetings held over six months. At each meeting, employees were paired to ask each other three questions: (1) What has been the most creative/valued experience in your time at the BBC? (2) What were the conditions that made that experience possible? (3) If those experiences were to become the norm, how would the BBC have to change? The pairs then discussed their interview results in teams of 10 people, and the most powerful stories were shared with others at the meeting. These meetings produced 98,000 ideas, which boiled down to 15,000 unique suggestions and ultimately 35 concrete initiatives. The BBC’s executive publicized the results and immediately implemented several recommendations, such as a job swapping and a newcomer orientation program. Greg Dyke, BBC’s respected director-general at the time, commented that the appreciative inquiry process provided valuable guidance. “It gave me a powerful mandate for change,” he stated. “I could look staff in the eye and say, ‘This is what you told us you wanted.’“47

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Exhibit 15.4

The Four-D Model of Appreciative Inquiry 2. Dreaming 3. Designing 4. Delivering

1. Discovery

Identifying the best of “what is.”

Envisioning “what might be.”

Engaging in dialogue about “what should be.”

Developing objectives about “what will be.”

Sources: Based on F. J. Barrett and D. L. Cooperrider, “Generative Metaphor Intervention: A New Approach for Working with Systems Divided by Conflict and Caught in Defensive Perception,” Journal of Applied Behavioral Science 26 (1990), p. 229; D. Whitney and C. Schau, “Appreciative Inquiry: An Innovative Process for Organization Change,” Employment Relations Today 25 (Spring 1998), pp. 11–21; J. M. Watkins and B. J. Mohr, Appreciative Inquiry: Change at the Speed of Imagination (San Francisco: Jossey-Bass, 2001), pp. 25, 42–45.

these negative tensions and build a more hopeful perspective of their future by focusing on what is possible.48 The “Four-D” model of appreciative inquiry (named after its four stages) shown in Exhibit 15.4 begins with discovery—identifying the positive elements of the observed events or organization.49 This might involve documenting positive customer experiences elsewhere in the organization. Or it might include interviewing members of another organization to discover its fundamental strengths. As participants discuss their findings, they shift into the dreaming stage by envisioning what might be possible in an ideal organization. By directing their attention to a theoretically ideal organization or situation, participants feel safer revealing their hopes and aspirations than they would if they were discussing their own organization or predicament. As participants make their private thoughts public to the group, the process shifts into the third stage, called designing. Designing involves the process of dialogue, in which participants listen with selfless receptivity to each other’s models and assumptions and eventually form a collective model for thinking within the team. In effect, they create a common image of what should be. As this model takes shape, group members shift the focus back to their own situation. In the final stage of appreciative inquiry, called delivering (also known as destiny), participants establish specific objectives and direction for their own organization on the basis of their model of what will be. Appreciative inquiry was developed 20 years ago, but it really gained popularity only within the past few years. Several success stories of organizational change from appreciative inquiry have emerged in a variety of organizational settings, including British Broadcasting Corporation, Castrol Marine, Canadian Tire, Avon México, American Express, Green Mountain Coffee Roasters, and Hunter Douglas.50 However, experts warn that appreciative inquiry is not always the best approach to changing teams or organizations, and, indeed, it has not always been successful. Appreciative inquiry requires participants who are willing to let go of the problemoriented approach and leaders who are willing to accept appreciative inquiry’s less structured process.51 Another concern is that research has not yet examined the contingencies of this approach.52 In other words, we don’t yet know under what conditions appreciate inquiry is a useful approach to organizational change and under what conditions it is less effective. Overall, appreciative inquiry has much to offer the organizational change process, but we are just beginning to understand its potential and limitations.

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Large-Group Interventions
Appreciative inquiry can occur in small teams, but it is often designed to involve a large number of people, such as the 10,000 employees who participated in the process at the British Broadcasting Corporation. As such, appreciative inquiry is often identified as one of several large-group organizational change interventions. Another large-group intervention, known as future search (and its variations—search conferences and open-space technology) “puts the entire system in the room,” meaning that the process tries to involve as many employees and other stakeholders as possible associated with the organizational system.53 Future-search conferences are typically multiday events at which participants are asked to identify trends or issues and establish strategic solutions for those conditions. For example, Emerson & Cuming’s chemical manufacturing facility in Canton, Massachusetts, relied on a future-search conference in which managers, supervisors, and production employees were organized into five stakeholder teams to identify initiatives that would improve the plant’s safety, efficiency, and cooperation. Lawrence Public Schools in Kansas conducted a future-search conference involving parents, teachers, students, community partners, and other stakeholders to help the board allocate resources more effectively. “The goals that were developed at the future search conference reflect what the community envisioned for its school district,” says superintendent Randy Weseman. Those goals have since become the foundation of the board’s strategic decision making.54 Future-search meetings and similar large-group change events potentially minimize resistance to change and assist the quality of the change process, but they also have limitations.55 One problem is that involving so many people invariably limits the opportunity to contribute and increases the risk that a few people will dominate the process. Another concern is that these events focus on finding common ground, and this may prevent the participants from discovering substantive differences that interfere with future progress. A third issue is that these events generate high expectations about an ideal future state that are difficult to satisfy in practice. Employees become even more cynical and resistant to change if they do not see meaningful

future search An organizational change strategy that consists of systemwide group sessions, usually lasting a few days, in which participants identify trends and establish ways to adapt to those changes.

IKEA Future Searches for the Perfect Sofa IKEA held a three-day future-search event involving more than four dozen stakeholders, including the company president, product design staff, sales and distribution staff, information technology, retail managers, suppliers from three countries, and six customers. The Swedish furniture company, which was growing rapidly, wanted to “build a quicker, leaner, and simpler” pipeline for its product development and distribution. Focusing on a single product (the Ektorp sofa), participants overcame the immense complexity of the system, the language barriers (for most, English was a second language), and apprehension and suspicions about change to map out a new product development process. One year later, IKEA launched a new sofa line (the Fixhult) based on further iterations of the process designed in the future-search workshop.56

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decisions and actions resulting from these meetings. The State of Washington Department of Corrections held a future-search event that tried to minimize these problems. The event involved a representation of 75 employees and managers, who reached a consensus on the department’s future direction. Department executives were then assigned specific recommendations to ensure that the conference results were put into place.57

Parallel Learning Structure Approach parallel learning structure A highly participative arrangement composed of people from most levels of the organization who follow the action research model to produce meaningful organizational change.

Parallel learning structures are highly participative arrangements composed of people from most levels of the organization who follow the action research model to produce meaningful organizational change. They are social structures developed alongside the formal hierarchy with the purpose of increasing the organization’s learning.58 Ideally, participants in parallel learning structures are sufficiently free from the constraints of the larger organization so that they can more effectively solve organizational issues. Royal Dutch/Shell relied on a parallel learning structure to introduce a more customer-focused organization.59 Rather than try to change the entire organization at once, executives held weeklong “retail boot camps” with six country teams of frontline people (e.g., gas station managers, truck drivers, marketing professionals). Participants learned about competitive trends in their regions and were taught powerful marketing tools to identify new opportunities. The teams then returned home to study their market and develop proposals for improvement. Four months later, boot camp teams returned for a second workshop, at which each proposal was critiqued by Royal Dutch/Shell executives. Each team had 60 days to put its ideas into action; then the teams returned for a third workshop to analyze what worked and what didn’t. This parallel learning process did much more than introduce new marketing ideas. It created enthusiasm in participants that spread contagiously to their co-workers, including managers above them, when they returned to their home countries.

Cross-Cultural and Ethical Issues in Organizational Change
One significant concern with some organizational change interventions is that they originate in the United States and other Western countries and may conflict with cultural values in some other countries.60 A few experts point out that this Western perspective of change is linear, as is Lewin’s force field model, discussed earlier. It also assumes that the change process is punctuated by tension and overt conflict. But these assumptions are incompatible with cultures that view change as a natural cyclical process with harmony and equilibrium as the objectives.61 This dilemma suggests that we need to develop a more contingency-oriented perspective concerning the cultural values of participants. Some organizational change practices also face ethical issues.62 One ethical concern is the risk of violating individual privacy rights. The action research model is built on the idea of collecting information from organizational members, yet this requires that employees provide personal information and emotions that they may not want to divulge.63 A second ethical concern is that some change activities potentially increase management’s power by inducing compliance and conformity in organizational

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members. For instance, action research is a systemwide activity that requires employee participation rather than allowing individuals to get involved voluntarily. A third concern is that some organizational change interventions undermine the individual’s self-esteem. The unfreezing process requires that participants disconfirm their existing beliefs, sometimes including their own competence at certain tasks or interpersonal relations. Organizational change is usually more difficult than it initially seems. Yet the dilemma is that most organizations operate in hyperfast environments that demand continuous and rapid adaptation. Organizations survive and gain competitive advantage by mastering the complex dynamics of moving people through the continuous process of change as quickly as the external environment is changing.

Organizational Behavior: The Journey Continues
Nearly 100 years ago, American industrialist Andrew Carnegie said: “Take away my people, but leave my factories, and soon grass will grow on the factory floors. Take away my factories, but leave my people, and soon we will have a new and better factory.” Carnegie’s statement reflects the message woven throughout this textbook: Organizations are not buildings or machinery or financial assets; rather, they are the people in them. Organizations are human entities—full of life, sometimes fragile, always exciting.

Chapter Summary
Lewin’s force field analysis model states that all systems have driving and restraining forces. Change occurs through the process of unfreezing, changing, and refreezing. Unfreezing produces disequilibrium between the driving and restraining forces. Refreezing realigns the organization’s systems and structures with the desired behaviors. Restraining forces are manifested as employee resistance to change. Resistance to change should be viewed as a resource, not an inherent obstacle to change. The main reasons why people resist change are direct costs, saving face, fear of the unknown, breaking routines, incongruent team dynamics, and incongruent organizational systems. Resistance to change may be minimized by keeping employees informed about what to expect from the change effort (communicating); teaching employees valuable skills for the desired future (learning); involving them in the change process; helping employees cope with the stress of change; negotiating trade-offs with those who will clearly lose from the change effort; and using coercion (sparingly and as a last resort). Organizational change also requires driving forces. This means that employees need to have an urgency for change by becoming aware of the environmental conditions that demand change in the organization. The change process also requires refreezing the new behaviors by realigning organizational systems and team dynamics with the desired changes. Every successful change also requires change agents with a clear, well-articulated vision of the desired future state. The change process also often applies a diffusion process in which change begins as a pilot project and eventually spreads to other areas of the organization. Action research is a highly participative, open-systems approach to change management that combines an action orientation (changing attitudes and behavior) with research orientation (testing theory). It is a data-based, problemoriented process that diagnoses the need for change, introduces the intervention, and then evaluates and stabilizes the desired changes. Appreciative inquiry embraces the positive organizational behavior philosophy by focusing participants on the positive and possible. It tries to break out of the problemsolving mentality that dominates organizational change through the action research model. The four stages of appreciative inquiry include discovery, dreaming, designing, and delivering. Large-group interventions, such as future-search conferences, are highly participative events that typically try to get the entire system into the room. A fourth organizational change approach, called parallel learning structures, relies on social structures developed alongside the formal hierarchy with the purpose of increasing the organization’s learning. They are highly participative

arrangements, composed of people from most levels of the organization who follow the action research model to produce meaningful organizational change. One significant concern is that organizational change theories developed with a Western cultural orientation potentially conflict with cultural values in some other

countries. Also, organizational change practices can raise one or more ethical concerns, including increasing management’s power over employees, threatening individual privacy rights, undermining individual selfesteem, and making clients dependent on the change consultant.

Key Terms action research, p. 456 appreciative inquiry, p. 458 force field analysis, p. 444 future search, p. 460 parallel learning structure, p. 461 refreezing, p. 444 unfreezing, p. 444

Critical Thinking Questions
1. Chances are that the school you are attending is currently undergoing some sort of change to adapt more closely to its environment. Discuss the external forces that are driving the change. What internal drivers for change also exist? Use Lewin’s force field analysis to describe the dynamics of organizational change at Umpqua Bank (opening vignette to this chapter). Employee resistance is a symptom, not a problem, in the change process. What are some of the real problems that may underlie employee resistance? Senior management of a large multinational corporation is planning to restructure the organization. Currently, the organization is decentralized around geographic areas so that the executive responsible for each area has considerable autonomy over manufacturing and sales. The new structure will transfer power to the executives responsible for different product groups; the executives responsible for each geographic area will no longer be responsible for manufacturing in their area but will retain control over sales activities. Describe two types of resistance senior management might encounter from this organizational change. Discuss the role of reward systems in organizational change. Specifically, identify where reward systems relate to Lewin’s force field model and where they undermine the organizational change process. 6. Web Circuits is a Malaysian-based custom manufacturer for high-technology companies. Senior management wants to introduce lean management practices to reduce production costs and remain competitive. A consultant has recommended that the company start with a pilot project in one department and, when successful, diffuse these practices to other areas of the organization. Discuss the advantages of this recommendation, and identify three ways (other than the pilot project’s success) to make diffusion of the change effort more successful. Suppose that you are vice president of branch services at the Bank of East Lansing. You notice that several branches have consistently low customer service ratings even though there are no apparent differences in resources or staff characteristics. Describe an appreciative inquiry process in one of these branches that might help to overcome this problem. This chapter suggests that some organizational change activities face ethical concerns. Yet several consultants actively use these processes because they believe they benefit the organization and do less damage to employees than it seems on the surface. For example, some activities try to open up the employee’s hidden area (review the Johari Window discussion in Chapter 3) so that there is better mutual understanding with co-workers. Discuss this argument, and identify where you think organizational change interventions should limit this process.

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Case Study 15.1

TRANSACT INSURANCE CORPORATION

Steven L. McShane, University of Western Australia, and Terrance Bogyo, WorkSafeBC
TransAct Insurance Corporation (TIC) provides automobile insurance throughout the southeastern United States. Last year, a new president was hired by TIC’s board of directors to improve the company’s competitiveness and customer service. After spending several months assessing the situation, the new president introduced a strategic plan to strengthen TIC’s competitive position. He also replaced three vice presidents. Jim Leon was hired as vice president of claims, TIC’s largest division, with 1,500 employees, 50 claims center managers, and 5 regional directors. Jim immediately met with all claims managers and directors, and he visited employees at TIC’s 50 claims centers. As an outsider, this was a formidable task, but his strong interpersonal skills and uncanny ability to remember names and ideas helped him through the process. Through these visits and discussions, Jim discovered that the claims division had been managed in a relatively authoritarian, topdown manner. He could also see that morale was very low and employee-management relations were guarded. High workloads and isolation (adjusters work in tiny cubicles) were two other common complaints. Several managers acknowledged that the high turnover among claims adjusters was partly due to these conditions. Following discussions with TIC’s president, Jim decided to make morale and supervisory leadership his top priority. He initiated a divisional newsletter with a tear-off feedback form for employees to register their comments. He announced an open-door policy in which any claims division employee could speak to him directly and confidentially without going first to the immediate supervisor. Jim also fought organizational barriers to initiate a flextime program so that employees could design work schedules around their needs. This program later became a model for other areas of TIC. One of Jim’s most pronounced symbols of change was the “Claims Management Credo” outlining the philosophy that every claims manager would follow. At his first meeting with the complete claims management team, Jim presented a list of what he thought were important philosophies and actions of effective
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managers. The management group was asked to select and prioritize items from this list. They were told that the resulting list would be the division’s management philosophy and all managers would be held accountable for abiding by its principles. Most claims managers were uneasy about this process, but they also understood that the organization was under competitive pressure and that Jim was using this exercise to demonstrate his leadership. The claims managers developed a list of 10 items, such as encouraging teamwork, fostering a trusting work environment, setting clear and reasonable goals, and so on. The list was circulated to senior management in the organization for their comments and approval and sent back to all claims managers for their endorsement. Once this was done, a copy of the final document was sent to every claims division employee. Jim also announced plans to follow up with an annual survey to evaluate each claims manager’s performance. This concerned the managers, but most of them believed that the credo exercise was a result of Jim’s initial enthusiasm and that he would be too busy to introduce a survey after settling into the job. One year after the credo had been distributed, Jim announced that the first annual survey would be conducted. All claims employees would complete the survey and return it confidentially to the human resource department where the survey results would be compiled for each claims center manager. The survey asked the extent to which the manager had lived up to each of the 10 items in the credo. Each form also provided space for comments. Claims center managers were surprised that a survey would be conducted, but they were even more worried about Jim’s statement that the results would be shared with employees. What results would employees see? Who would distribute these results? What happens if a manager gets poor ratings from his or her subordinates? “We’ll work out the details later,” said Jim in response to these questions. “Even if the survey results aren’t great, the information will give us a good baseline for next year’s survey.” The claims division survey had a high response rate. In some centers, every employee completed and returned a form. Each report showed the claims

center manager’s average score for each of the 10 items, as well as how many employees rated the manager at each level of the 5-point scale. The reports also included every comment made by employees at that center. No one was prepared for the results of the first survey. Most managers received moderate or poor ratings on the 10 items. Very few managers averaged above 3.0 (out of the 5 points) on more than a couple of items. This suggested that, at best, employees were ambivalent about whether their claims center manager had abided by the 10 management philosophy items. The comments were even more devastating than the ratings. Comments ranged from mildly disappointed to extremely critical of the claims managers. Employees also described their long-standing frustration with TIC, high workloads, and isolated working conditions. Several people bluntly stated that they were skeptical about the changes that Jim had promised. “We’ve heard the promises before, but now we’ve lost faith,” wrote one claims adjuster. The survey results were sent to each claims manager, the regional director, and employees at the claims center. Jim instructed managers to discuss the survey data and comments with their regional manager and directly with employees. The claims center managers, who thought employees would see only the average scores, went into shock when they realized that the reports included individual comments. Some managers went to their regional director, complaining that revealing the personal comments would ruin their careers. Many directors sympathized, but the results were already available to employees. When Jim heard about these concerns, he agreed that the results were lower than expected and that the

comments should not have been shown to employees. After discussing the situation with his directors, he decided that the discussion meetings between claims managers and their employees should proceed as planned. To delay or withdraw the reports would undermine the credibility and trust that Jim was trying to develop with employees. However, the regional director attended the meeting in each claims center to minimize direct conflict between the claims center manager and employees. Although many of these meetings went smoothly, a few created harsh feelings between managers and their employees. The sources of some comments were easily identified by their content, and this created a few delicate moments in several sessions. A few months after the meetings, two claims center managers quit and three others asked for transfers back to nonmanagement positions in TIC. Meanwhile, Jim wondered how to manage this process more effectively, particularly since employees expected another survey the following year.

Discussion Questions
1. What symptom(s) exist in this case to suggest that something has gone wrong? 2. What are the root causes that have led to these symptoms? 3. What actions should the company take to correct these problems?
Copyright © 2000 Steven L. McShane and Terrance J. Bogyo. This case is based on actual events, but names, the industry, and some characteristics have been changed to maintain anonymity.

Case Study 15.2

INSIDE INTEL

For years, Intel thrived on a business model that cofounder Andy Grove perfected and reinforced under his leadership and the leadership of his successor, Craig Barrett. But Intel’s latest CEO,

Paul Otellini, has different plans. Rather than continuing to build faster chips just for PC computers, Otellini sees bigger opportunities in new “platforms.” Otellini also wants to raise the profile of marketing, rather than let engineers determine
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which products are developed. Even the famous Intel logo (with a lowered “e”) is being ditched for a more contemporary design. This BusinessWeek case study reviews the changes that Paul Otellini is introducing at Intel and explains how he is building momentum toward these changes. The article also describes how employees are responding to the changes. Read through this BusinessWeek article at www.mhhe.com/mcshane5e, and prepare for the discussion questions that follow.

Discussion Questions
1. What change management strategies has Paul Otellini used to help introduce the various changes at Intel? 2. Discuss evidence that some employees are resisting the changes. What, if anything, can Otellini do to minimize this resistance?
Source: C. Edwards, “Inside Intel,” BusinessWeek, 9 January 2006, p. 46.

Team Exercise 15.3

STRATEGIC CHANGE INCIDENTS action and be publicly successful. Consequently, the managing director wants to significantly reduce paper usage, refuse, and other waste throughout the company’s many widespread offices. Unfortunately, a survey indicates that employees do not value environmental objectives and do not know how to “reduce, reuse, recycle.” As the executive responsible for this change, you have been asked to develop a strategy that might bring about meaningful behavioral change toward this environmental goal. What would you do? SCENARIO 2: GO FORWARD AIRLINE A major airline had experienced a decade of rough turbulence, including two bouts of bankruptcy protection, 10 managing directors, and morale so low that employees had removed company logos from their uniforms out of embarrassment. Service was terrible, and the airplanes rarely arrived or left the terminal on time. This was costing the airline significant amounts of money in passenger layovers. Managers were paralyzed by anxiety, and many had been with the firm so long that they didn’t know how to set strategic goals that worked. One-fifth of all flights were losing money, and the company overall was near financial collapse (just three months to defaulting on payroll obligations). You and the newly hired managing director must get employees to quickly improve operational efficiency and customer service. What actions would you take to bring about these changes in time?

PURPOSE This exercise is designed to help you identify strategies for facilitating organizational change in various situations. INSTRUCTIONS 1. The instructor will place students into teams, and each team will be assigned one of the scenarios presented below. 2. Each team will diagnose its assigned scenario to determine the most appropriate set of change management practices. Where appropriate, these practices should (a) create an urgency to change, (b) minimize resistance to change, and (c) refreeze the situation to support the change initiative. Each of these scenarios is based on real events. 3. Each team will present and defend its change management strategy. Class discussion regarding the appropriateness and feasibility of each strategy will occur after all teams assigned the same scenario have presented. The instructor will then describe what the organizations actually did in these situations. SCENARIO 1: GREENER TELCO The board of directors at a large telephone company wants its executives to make the organization more environmentally friendly by encouraging employees to reduce waste in the workplace. Government and other stakeholders expect the company to take this

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Self-Assessment 15.4
ARE YOU TOLERANT OF CHANGE?
PURPOSE This exercise is designed to help you understand how people differ in their tolerance of change. INSTRUCTIONS Read each of the statements on page 468 and circle the response that best fits your personal belief. Then use the scoring key in Appendix B at the end of this book to calculate your results. This self-assessment should be completed alone so that you can rate yourself honestly without concerns of social comparison. Class discussion will focus on the meaning of the concept measured by this scale and its implications for managing change in organizational settings.

After reading this chapter, if you feel that you need additional information, see www.mhhe.com/ mcshane5e for more in-depth information and interactivities that correspond to this chapter.

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Tolerance of Change
To what extent does each statement describe you? Indicate your level of agreement by marking the appropriate response on the right.

Strongly agree

Moderately agree

Slightly agree

Neutral

Slightly disagree

Moderately disagree

Strongly disagree

1. An expert who doesn’t come up with a definite answer probably doesn’t know too much. 2. I would like to live in a foreign country for a while. 3. There is really no such thing as a problem that can’t be solved. 4. People who fit their lives into a schedule probably miss most of the joy of living. 5. A good job is one where it is always clear what is to be done and how it is to be done. 6. It is more fun to tackle a complicated problem than to solve a simple one. 7. In the long run, it is possible to get more done by tackling small, simple problems rather than large, complicated ones. 8. Often the most interesting and stimulating people are those who don’t mind being different and original. 9. What we are used to is always preferable to what is unfamiliar. 10. People who insist on a yes or no answer just don’t know how complicated things really are. 11. A person who leads an even, regular life in which few surprises or unexpected happenings arise really has a lot to be grateful for. 12. Many of our most important decisions are based on insufficient information. 13. I like parties where I know most of the people more than ones where all or most of the people are complete strangers. 14. Teachers or supervisors who hand out vague assignments give people a chance to show initiative and originality. 15. The sooner everyone acquires similar values and ideals, the better. 16. A good teacher is one who makes you wonder about your way of looking at things.
Source: Adapted from S. Budner, “Intolerance of Ambiguity as a Personality Variable,” Journal of Personality 30 (1962), pp. 29–50.