Management A Practical Introduction Third Edition Angelo Kinicki & Brian K Williams Kinicki/Williams, Management: A Practical Introduction 3e ©2008, McGraw-Hill/Irwin Chapter 10: Organizational Change & Innovation Lifelong Challenges for the Exceptional Manager The nature of change in organizations Organizational development Promoting innovation Managing employee fear & resistance Kinicki/Williams, Management: A Practical Introduction 3e ©2008, McGraw-Hill/Irwin 10.1 The Nature Of Change In Organizations WHAT DO MANAGERS NEED TO KNOW ABOUT CHANGE? Managers need to be aware of five current trends that will shape the future of business: Customer groups are being segmented into ever smaller groups that demand specialized messages Marketing niches are now more important Speed is becoming a key competitive weapon Kinicki/Williams, Management: A Practical Introduction 3e ©2008, McGraw-Hill/Irwin 10.1 The Nature Of Change In Organizations It can be difficult for traditional companies to take advantage of a massive industry change For these companies, it can be more successful to establish a new division to incorporate change Workers in nations like China and India are willing to work twice as hard for half the pay as American workers Companies that outsource to these countries free up domestic employees to work in other areas Knowledge is becoming the new competitive advantage Kinicki/Williams, Management: A Practical Introduction 3e ©2008, McGraw-Hill/Irwin 10.1 The Nature Of Change In Organizations Managers have to deal with two types of change: Reactive change involves making changes in response to problems or opportunities as they arise Managers have less time to get the information necessary to make decisions when they deal with reactive change Proactive change or planned change involves making carefully thought-out changes in anticipation of possible or expected problems or opportunities Kinicki/Williams, Management: A Practical Introduction 3e ©2008, McGraw-Hill/Irwin 10.1 The Nature Of Change In Organizations HOW DO MANAGERS KNOW THEIR ORGANIZATIONS NEED TO CHANGE? Managers can monitor forces inside and outside the firm to identify areas of change There are four types of external forces: demographics - the U.S workforce is now more diverse market changes - companies are having to change the way they business and build new relationships with employees, suppliers, and competitors; global economy Kinicki/Williams, Management: A Practical Introduction 3e ©2008, McGraw-Hill/Irwin 10.1 The Nature Of Change In Organizations technological advancements - managers must deal with the realities of information technology social & political pressures - social events create new pressures for managers There are two types of internal forces: employee problems - job dissatisfaction can be a signal for change managers’ behavior - excessive conflict between managers and employees can signal the need for change Kinicki/Williams, Management: A Practical Introduction 3e ©2008, McGraw-Hill/Irwin 10.1 The Nature Of Change In Organizations Figure 10.1: Forces For Change Outside And Inside The Organization Kinicki/Williams, Management: A Practical Introduction 3e ©2008, McGraw-Hill/Irwin Chapter 10: Organizational Change & Innovation CLASSROOM PERFORMANCE SYSTEM Which of the following is not an example of outside forces? A) mergers & acquisitions B) office automation C) structural organization D) values Kinicki/Williams, Management: A Practical Introduction 3e ©2008, McGraw-Hill/Irwin 10.1 The Nature Of Change In Organizations Change is most likely to be needed in four areas: changing people - perceptions, attitudes, performance, and skills are all areas where change may be needed changing technology - technology (any machine or process that enables an organization to gain a competitive advantage in changing materials used to produce a finished product) is a major area of change for many organizations changing structure - there is a trend toward flattening the traditional hierarchical structure in firms by eliminating layers of middle managers and creating teams that are linked electronically changing strategy - marketplace changes can cause companies to change their strategies Kinicki/Williams, Management: A Practical Introduction 3e ©2008, McGraw-Hill/Irwin 10 10.2 Organizational Development: What It Is, What It Can Do HOW DOES OD WORK? OD managers: Diagnose problems - surveys, questionnaires, interviews, and meetings are used to identify problems Intervene to make changes - attempts to correct diagnosed problems is intervention Evaluate the results - once a plan has been put into place, it must be evaluated for effectiveness Kinicki/Williams, Management: A Practical Introduction 3e ©2008, McGraw-Hill/Irwin 13 10.2 Organizational Development: What It Is, What It Can Do OD is most successful in the following cases: Multiple interventions - combined interventions work better than single interventions Management support - when there is the commitment of top executives and the proposed changes are realistic Goals geared to both short- & long-term results change should only be implemented if it will produce positive results toward the organization’s goals OD is affected by culture - what works in one country might not work in another Kinicki/Williams, Management: A Practical Introduction 3e ©2008, McGraw-Hill/Irwin 14 10.3 Promoting Innovation Within The Organization HOW CAN MANAGERS PROMOTE INNOVATION? Innovation is important to keeping an organization vital and maintaining a competitive advantage Only four percent of U.S executives surveyed felt their organizations were doing a good job in promoting innovation in their organizations Instead of focusing on what their customers want and then using that information to drive innovation, companies are taking insular approaches to innovation Kinicki/Williams, Management: A Practical Introduction 3e ©2008, McGraw-Hill/Irwin 15 10.3 Promoting Innovation Within The Organization Innovation can occur by design or by accident, and it can come from a profit or non-profit organization Both a country’s culture and an organization’s culture are important to innovation Both types of culture must be conducive to the development of new ideas The U.S has the type of culture that is essential to innovation Kinicki/Williams, Management: A Practical Introduction 3e ©2008, McGraw-Hill/Irwin 16 10.3 Promoting Innovation Within The Organization There are two types of innovation: A product innovation is a change in the appearance or the performance of a product or a service, or the creation of a new one A process innovation is a change in the way a product or service is conceived, manufactured, or disseminated Innovation that replaces existing products is called radical innovation Innovation that modifies a current product is called incremental innovation Kinicki/Williams, Management: A Practical Introduction 3e ©2008, McGraw-Hill/Irwin 17 10.3 Promoting Innovation Within The Organization Innovation has four characteristics: Innovation is uncertain - progress is difficult to predict, and success is always a question mark People closest to the innovation know the most about it managers who are removed from the innovation process have difficulty understanding it Innovation may be controversial - since innovation requires company resources, it may become controversial since it is not clear that it will be a success Innovation can be complex - because innovation may involve multiple departments, managers need strong communication skills to manage its complexity Kinicki/Williams, Management: A Practical Introduction 3e ©2008, McGraw-Hill/Irwin 19 10.3 Promoting Innovation Within The Organization HOW CAN ORGANIZATIONS ENCOURAGE INNOVATION? Organizations can encourage innovation by providing: the right organizational culture – celebrate failure the appropriate resources – considerable resources should be devoted to the innovation process the correct reward system - experimentation (and failure) are part of the innovation process Kinicki/Williams, Management: A Practical Introduction 3e ©2008, McGraw-Hill/Irwin 20 10.3 Promoting Innovation Within The Organization HOW CAN MANAGERS FOSTER INNOVATION? The three steps to making innovation happen are: recognizing problems that need solving and opportunities that are presented communicating your vision to get support for innovation removing obstacles that might prevent employees from executing a vision Kinicki/Williams, Management: A Practical Introduction 3e ©2008, McGraw-Hill/Irwin 21 10.3 Promoting Innovation Within The Organization Figure 10.3: Three Steps For Fostering Innovation Kinicki/Williams, Management: A Practical Introduction 3e ©2008, McGraw-Hill/Irwin 22 10.4 The Threat Of Change: Managing Employee Fear & Resistance HOW SHOULD ORGANIZATIONAL CHANGE BE MANAGED? The degree to which employees feel threatened by change depends on whether it is adaptive, innovative, or radically innovative The reintroduction of a familiar practice is known as adaptive change Since the change has been experienced in the past by the organization, it is not particularly threatening to employees Kinicki/Williams, Management: A Practical Introduction 3e ©2008, McGraw-Hill/Irwin 23 10.4 The Threat Of Change: Managing Employee Fear & Resistance The introduction of a practice that is new to the organization is called innovative change This type of change tends to create some anxiety in people Introducing a practice that is new to the industry is radically innovative change This type of change is costly, complex, and uncertain, and so triggers considerable anxiety in employees Kinicki/Williams, Management: A Practical Introduction 3e ©2008, McGraw-Hill/Irwin 24 10.4 The Threat Of Change: Managing Employee Fear & Resistance The top ten reasons for resisting change are: -people’s predispositions toward change -surprise and fear of the unknown -climate of mistrust -fear of failure -loss of status or job security -peer pressure -disruption of cultural traditions or group relationships -personality conflicts -lack of tact or poor timing -non-reinforcing reward systems Kinicki/Williams, Management: A Practical Introduction 3e ©2008, McGraw-Hill/Irwin 26 10.4 The Threat Of Change: Managing Employee Fear & Resistance Kurt Lewin developed a three stage model to explain how to initiate, manage, and stabilize planned change Stage 1: unfreezing- managers encourage employees to become more open to innovation – creating the motivation to change Stage 2: changing - learning new ways of doing things - managers convey that change is a learning process that continues, it is not a one-time event Stage 3: refreezing - managers encourage employees to make the new ways part of their normal way of doing things Kinicki/Williams, Management: A Practical Introduction 3e ©2008, McGraw-Hill/Irwin 27 Lewin’s Change Model: Initiate, Manage, and Stabilize Planned Change Unfreezing Managers try to instill in employees the motivation to change (let go) Changing Employees need to be given the tools for change Need to be dissatisfied with old ways – “Benchmarking” Refreezing Employees need to be helped to integrate the changed attitudes and behavior into their normal behavior McGraw-Hill/Irwin Kinicki/Williams, Management: A Practical Introduction 3e ©2008, McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc All rights rese 28 10.4 The Threat Of Change: Managing Employee Fear & Resistance John Kotter claims that organizational change should follow eights steps: -establishing a sense of urgency -creating the guiding coalition -developing a vision and strategy -communicating the change vision -empowering broad-based action -generating short-term wins -consolidating gains and producing more change -anchoring new approaches in the organization’s culture Kinicki/Williams, Management: A Practical Introduction 3e ©2008, McGraw-Hill/Irwin 29 ... changing strategy - marketplace changes can cause companies to change their strategies Kinicki/Williams, Management: A Practical Introduction 3e ©2008, McGraw-Hill/Irwin 10 10.2 Organizational... competitive advantage Kinicki/Williams, Management: A Practical Introduction 3e ©2008, McGraw-Hill/Irwin 10. 1 The Nature Of Change In Organizations Managers have to deal with two types of change: Reactive... technology (any machine or process that enables an organization to gain a competitive advantage in changing materials used to produce a finished product) is a major area of change for many organizations