The concept of organizational change is in regard to organization-wide change, as opposed to smaller changes such as hiring a new person, modifying a program, buying a new computer for the department etc. Examples of organization-wide change are a change in mission statement, restructuring operations (e.g., restructuring to self-managed teams, layoffs, etc.), new technologies, mergers, major collaborations, “rightsizing”, new programs such as Total Quality Management, Business Process Re-engineering, etc. Some experts refer to such change as “organizational transformation”. Organizational change means that there is a fundamental and radical reorientation in the way the organization operates.
What are the forces, which necessitate change?
Change should not be done for the sake of change – it is a strategy to accomplish the overall goal. Usually organizational change is provoked by some major outside driving force, e.g., substantial cuts in funding, address major new markets/clients, need for dramatic increases in productivity/services, etc. It may also be triggered by various internal factors. Organizations must undertake organization-wide change to evolve to a different level in their life cycle, e.g., going from a highly reactive, entrepreneurial organization to more stable and planned development. When a new chief executive is appointed, it can provoke organization-wide change when his or her new and unique personality pervades the entire organization.
“Organizations are systems that exist in the context of an external environment, in a dependent relationship and that interact with it in order to survive and grow.” Any factor in the environment that interferes with the organizations ability to attract the human, financial and material resources it requires, or to produce and market its services or products becomes a force of change. Some internal factors, which operate within the organization, may either support or hinder organizational functions, or processes. These internal and external factors have been variously referred to as the drivers of change or the forces of change.
External drivers of change
The external drivers of change are those forces of change, which prevail because of the external environment. They are: –
- Political Forces for e.g. Opening up of the economy of South East Asia, collapse of the USSR, the Gulf war and so on.
- Economic Forces: fluctuating interest rates, decrease in productivity, oil prices fluctuation
- Technological Forces: technological advancements like IT, Computer technology, etc
- Government Forces: Signing of the GATT, WTO regulations, foreign exchange regulations, Anti trust laws
- Increased Global Competition: relocating companies to developing countries to cut labor costs, outsourcing, etc
- Changing customer needs expectations and preferences: product innovation, customization to suit customer needs.
Internal drivers of change
The internal drivers of change are those forces, which exist inside an organization and trigger it to move from the current state to a desired state or sometimes even an unexpected state.
- Organization Dynamics: internal politics, group dynamics within the organization, formal and informal relationships within the organization.
- Administrative policies and rigidity: inadequate administrative processes, lack of autonomy, outdated rules and regulations
- Expectations of the internal customer: Career growth expectations, individual ambitions, insecurities, fears and frustrations, etc
- Structural inadequacy: structural changes to reduce costs increase productivity, like downsizing, delayering etc.
- Technological factors: change in work process, use of information technology in routine and non-routine tasks, automation
- Human Resource planning: acquisition of persons with advanced skill sets for expansion, need of different competencies
- Profitability Issues: loss of market share, fall in revenue Resource Constraints: shortage of money, material, machinery, manpower, information, etc