Organization Transformation and Strategic Change

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Chapter 15

• Organization Transformation and Strategic Change

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Learning Objectives (part 1 of 2)

• Identify and define organization transformation
  in relation to change process.
• Understand basic strategy-culture matrix and
  other approaches to changing culture to fit the
  strategy.

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Learning Objectives (part 2 of 2)

• Recognize importance of corporate culture and its
  relation to strategy.
• Experience these concepts in management
  simulation.

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The Revolution at Home Depot that Left Some
Behind (part 1 of 2)

• Home Depot is number-one home-improvement retail
  chain in U.S.
• It had unstructured and entrepreneurial culture.
• Competitor Lowes began taking market share.
• CEO Bob Nardelli was brought in to turn around
  dysfunctional culture.

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The Revolution at Home Depot that Left Some
Behind (part 2 of 2)

• Lack of support for changes from lower levels.
• Changes resulted in unintended consequences.
• Nardelli brought in new top management team.
• Innovation and sense of ownership declined.
• HR manager said it was revolution, not evolution.

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Strategy and Transformation

• Success can work against a company when it looses
  touch with customers.
• Radical changes may be only choice for
  organization in desperate need of change.

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Organizational Transformation (part 1 of 3)

• Refers to drastic changes in how organization
  functions and relates to its environment.
• OD strategies represent more gradual approaches
  to strategic change.
• OT approaches are drastic and abrupt change.

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Organizational Transformation (part 2 of 3)

• OT may or may not be developmental.
• OT tends to use directive, not participative,
  approaches to change.
• Usually top-down, top-management driven.

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Organizational Transformation (part 3 of 3)

• Requires shared vision, willingness to clean
  house, restructure, tackle many problems.
• OT tends to be shaped by use of power rather than
  collaborative approaches.
• Due to immediate threat, this may be only way for
  organization to survive.

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Possible Large-Scale Change Strategies

• Large-scale change approaches are
• Incremental - long-term planned change.
• Transformative - immediate, drastic change.

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Large-Scale Change Model

• Model based on 3 key dimensions
• Time frame of changeshort or long.
• Level of support of organizational culture.
• Degree of discontinuity with environment.

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Figure 15.1Strategies for Planned Change
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Four Change Strategies (part 1 of 2)

• Participative evolution - incremental
  anticipates change support of culture through
  collaborative means.
• Charismatic transformation - radical change in
  short time with support of culture.

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Four Change Strategies (part 2 of 2)

• Forced evolution - incremental adjustments over
  longer period without support of culture.
• Dictatorial transformation - used in times of
  crisis major restructuring running counter to
  internal culture.

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OD in Practice Masters of Transformation (part 1
of 3)

• Vince Lombardi, coach of Green Bay Packers, and
  Jack Welch, CEO of GE, provide insight into 2
  successful change agents.

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OD in Practice (part 2 of 3)

• Lombardi Were not just going to start with a
  clean slate, were going to throw the old slate
  away.
• Welch I tell people, if this place is stifling
  you shake it, shake it, break it. Check the
  system, because it wants to be a bureaucracy.

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OD in Practice (part 3 of 3)

• Lombardi Got rid of players, even those he
  liked, when they did not perform.
• Welch No leader enjoys making the tough
  decisions. Keeping people around who arent
  going to grow and prosper is false kindness.

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The Corporate Culture

• Culture includes shared values and behaviors
  formed by members of organization.
• CEO and managers actions, not words, produce
  culture.
• A culture is organizations major strength when
  consistent with strategies.

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Strategy-Culture Fit

• Strategy
• Course of action used to achieve objectives.
• Relates resources of organization to
  opportunities in environment.
• Culture
• Set of values for setting priorities.
• Critical factor in implementation of strategy.

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Definition of Culture

• System of shared values held by members that
  distinguishes one organization from another.

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Core Characteristics of Culture

• Individual autonomy.
• Sensitivity to customers and employees needs.
• Support and assistance provided by managers.
• Interest in having employees initiate new ideas.
• Openness of communication channels.
• Risk-seeking encouraged.

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Sharing the Vision

• Many management theorists feel vision is essence
  of leadership.
• Vision involves several stages
• Share the vision.
• Empower the individual.
• Acknowledge performance.
• Reward performance.

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Figure 15.2Sharing the Vision
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Strong Versus Weak Cultures

• Strong culture characterized by basic values
  intensely held and widely shared.
• Weak culture may be seen in young company or one
  with high turnover.
• Culture product of key components structure,
  systems, people, and style.

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Figure 15.3Relative Strength of Cultures
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Strategy-Culture Matrix (part 1 of 3)

• Four basic alternatives in determining strategy
  changes
• Manage change (manageable risk)
• Change important and compatible with culture.
• Use cultural reinforcement as strategies.

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Strategy-Culture Matrix (part 2 of 3)

• Reinforce culture (negligible risk)
• Forge vision that emphasizes shared values.
• Reinforce existing culture.
• Manage around culture (manageable risk)
• Change important and incompatible with present
  culture.
• Reinforce value system, reshuffle power, use
  leverage in the organization.

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Strategy-Culture Matrix (part 3 of 3)

• Change strategy to fit culture (unacceptable
  risk)
• Change important but incompatible with culture.
• Changing culture is explosive, long-term process
  that may be impossible.
• Determine if strategic change is viable
  alternative or if strategy should be modified to
  fit more closely with existing culture.

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Figure 15.4Strategy-Culture Matrix
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Our Changing World All the Information at
Google (part 1 of 2)

• Google managed by CEO Schmidt and the two
  founders, Page and Brin.
• Decisions made by 3-way discussions.
• Engineers migrate to projects that interest them.

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Our Changing World (part 2 of 2)

• The VP of engineering, Were encouraging
  creativity and tolerating chaos.
• Googles strategic moves set them apart from
  competition.
• One goal is to put all of worlds information
  into Google.

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Strategic Change Management

• Seeks to align organizations strategy,
  structure, and human resources to fit with
  environment.
• Organizations composed of 3 systems
• Technical Political
  Cultural
• These systems in perpetual interaction with
  environmental change and uncertainty.

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Three Steps to Strategic Change

• Step 1 Develop image of desired organization.
• Step 2 Separate systems and intervene separately
  in each one.
• Step 3 Plan for reconnecting three systems.

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Figure 15.5Environmental Forces and
Organizational Systems
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Reasons for Large-Scale Cultural Changes

• Company has strong values that do not fit
  changing environment.
• Industry very competitive and changes quickly.
• Company mediocre or worse.
• Firm about to join ranks of very largest.
• Firm small but growing rapidly.

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Cautions in Cultural Change

• Cultural change can be difficult and time
  consuming.
• Culture change should be attempted only after
  less-difficult solutions have been ruled out.

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Key Words And Concepts

• Culture - reflects organizations past and is
  rooted in firms history.
• Incremental approach - long-term planned change
  that relies on collaboration.
• Organization transformation (OT) - drastic,
  abrupt change to structure, management, and
  culture.

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• Strategic change management - focuses on
  alignment with strategy, structure and human
  resources systems and a fit with environment.
• Strategy - course of action used to achieve major
  objectives.
• Strategy-culture matrix - assess readiness of
  culture for strategic changes.

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• Technical, political, and cultural systems -
  Organizational systems of strategic change
  management model.
• Transformational change - immediate drastic
  change accomplished by directive methods.
• Vision - a mental image of a possible and
  desirable future state of organization.

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Preparations for Next Chapter

• Read Chapter 16.
• Complete Profile Survey and Profile Form in
  Simulation 16.1, Part A, Step 1.
• Complete Step 1 of OD Skills Simulation 16.2.