An Overview of Change Management Models

An Overview of Change Management Models ZINNOV WWW.ZINNOV.COM INFO@ZINNOV.COM FAX 1 419 844 2583 PHONE (US) 1 832 326 3854, 1 408 390 5797 (INDIA) + 91 80 227 3130

Table of contents 1.0 INTRODUCTION... 3 2.0 ORGANIZATION OF THIS PAPER... 3 3.0 DEFINITION OF CHANGE MANAGEMENT... 4 4.0 UNIQUE CHANGE MANAGEMENT CHALLENGES IN GLOBAL SOURCING... 5 5.0 OVERVIEW OF CHANGE MANAGEMENT MODELS... 6 5.1 THEORIES OF CHANGE BY MICHAEL BEER AND NITIN NOHRIA... 6 5.2 SPEED OF CHANGE MODEL BY DARYL R. CONNER... 6 5.3 THE BURKE-LITWIN MODEL OF ORGANIZATIONAL PERFORMANCE AND CHANGE... 8 6.0 CONCLUSION... 9 7.0 REFERENCES... 9 Zinnov 2

1.0 Introduction Change is one of the most important business issues of our day. The post-world War II period was characterized by steady and predictable economic growth that has since given way to a tumultuous phase characterized by a sharp increase in competition and technical innovation. In order to stay ahead of the game, it is now important and inevitable, for organizations to Change. It is safe to say that Change is the only constant in today s business world. In today s World of Global Sourcing, managers are faced with an ever increasing resistance to Change. Despite employees understanding the importance of Global Sourcing, fear of layoffs instill a lot of resistance to the process. 70 % of all Change initiatives fail. Source: Harvard Business Review It is fair to say that a good number of change initiatives fail. An article by Micheal Beer and Nitin Nohria in Harvard Business Review 1 cites a 70% failure rate for all change initiative programs. In a study of one hundred top management-driven corporate transformations, John Kotter found that more than half did not survive the initial phases with only a few being very successful. A majority of unsuccessful initiatives are a result of organization s failure to address the human component of change. Managing Change takes place at two different levels. - The Strategic Approach designed to deal with the technical issues, planning, budgeting, staffing of the anticipated change and the Tactical or Soft Approach designed to deal with the human perspective, the psychological impact of change. Organizations that have strong commitment-based psychological contracts with their employees have been found to be successful in dealing with the human component of Change. This is of great importance for organizations going through this process in order to have sustainable competitive advantage. The anxiety of employees undergoing corporate restructuring has a deleterious effect on the success of the program. The focus of the paper is to enable organizations understand the human aspects of change management and illustrate models around human aspects of change management. 2.0 Organization of this Paper This paper is organized in the following sections to enable the readers of the paper navigate easily through the components of Change Management. Definition of Change Management Unique Change Management Challenges in Global Sourcing Overview of Change Management models Zinnov 3

3.0 Definition of Change Management In a broad sense, Change Management means the continuous process of aligning an The emotional States organization with Change Triggers responsively and effectively 2. and psychological Change Management has many elements such as organization thought process that redesign, business plan development, leadership planning, people go through managing the human side etc. The authors of this paper would like when exposed to to define Change Management from the human aspect of change as change is the Human that is the focus of this paper. side of change Change Management from a human aspect is simply an efficient and effective process of managing the human Side of Change. The next challenge is to define what the human side of change is. When expose to change, people go through varying degrees of emotion. In his book After Shock, Harry Woodward and Steve Buchholz explain the mind state of the people : When Change occurs, something ends. Immediately then, people want something else to begin. They want something to fill the void that the ending has created. Unfortunately, this magic solution seldom occurs. Thus a transition is needed, a way to bridge the gap from the ending to the new beginning 3 This transition will create varying degrees of emotion such as fear, denial, shock, resentment, stress etc. These emotions and the psychological thought process constitute the human side of change An efficient change management technique should then help people pass through this transition phase and slowly convert these emotions into positive emotions such as hope, motivation and enthusiasm. A successful beginning depends on successful Ending and Transition. For this A dialogue from Hope for the Flowers How Does one become a Butterfly You Must want to fly so much that you are willing to give up being a caterpillar simple reason some authors refer to the Human Side of Change Management is referred to as Transition Management. The next section of this paper deals with some of the unique Change Management challenges in Global Sourcing Zinnov 4

4.0 Unique Change Management Challenges in Global Sourcing Global Sourcing provides unique challenges to the company that makes Change Management a very complicated task. Some of the factors that complicate Change Management in Global Sourcing are: Global Sourcing Change is just not any other Change; it has A. Emotional Challenges broader, deeper o Global Sourcing triggers varying degrees of emotions among change implications people; fear of job loss, feelings of unfairness in exploiting cheaper offshore countries etc. o The need to deal with a new culture, new country triggers stress o Global Sourcing sends a very unique feeling in the company which the authors of this paper would like to define as Fear of Domino Effect. In large organizations, even when Global Sourcing happens in one small department, the employees of the whole company feeling that their department is next. The magnitude of propagation of this fear in the company is not seen in other change management problems. o In large companies, visionaries/leaders and the change sponsors do not share the same passion for Global Sourcing because the Change Sponsors do not see all the components of Global Sourcing as seen by the visionaries/leaders. So the change sponsors foster a shade of doubt. So when their employees confront them with questions, they may not able to explain the Global Sourcing path of the company. This triggers loss of credibility among employees. o Global Sourcing discussions/negative comments often take place in the cafeteria/elevators and there is a danger of people with the same cultural identity as the offshore country being targets of these comments. So companies face a big challenge of managing their diversity values B. Communication Challenges o The timing of the Global Sourcing communication to employees is very critical- yet companies seem to delay a formal communication to the employees on their Global Sourcing efforts. Employees start getting their information through grapevine, this information is often distorted creating unnecessary panic in the company o The media is very focused on highlighting work being moved back from offshore countries to the US. For example the recent reports on Dell, Lehman Brothers moving a portion of their work, back from India to the US. While these reports provide some perspective, the task masters of Global Sourcing in different companies are faced with constant bombardment of these reports and are having to explain their model behind Global Sourcing based on these reports C. Execution Challenges o The typical tolerance people have during any big project execution is much reduced when it comes to Global Sourcing execution. So for any small issues during execution, people question the very basics of Global Sourcing. Developing the acceptance of the offshore entity as part of the company is a big puzzle in front of the change management task masters o Large companies usually have Change Management departments and have tremendous experience managing change. While this experience can really help in Global Sourcing change management, some companies try to view Global Sourcing as any other change and use the typical change management solutions leading to potential failure. Zinnov 5

5.0 Overview of Change Management Models An Overview of Change Management Models We take a look at two different models: Theories of Change, and Speed of Change. 5.1 Theories of Change by Michael Beer and Nitin Nohria In the article Cracking the Code of Change Michael Beer and Nitin Nohria describe two theories of change 4. Model Description: Theory E Change focuses on the economic value as dictated by the share holder returns. This is a drastic theory of change focusing only on the bottom line through financial incentives, Theory E- Change Al Dunlop s firing 11,000 Scott paper employees is a stunning example restructuring and layoffs Theory O Change is a softer, tactical approach that focuses on developing corporate culture and capability of the human resources. The main focus of this theory is trust building and achieving emotional commitment through team work and communications Theory O- Change Companies that subscribe to Theory- O as Hewlett-Packard did when performance flagged typically have psychological contracts with employees Source: Cracking the code of Change Applicability of the Model It is very difficult to subscribe to just one theory of change. Most companies use a mix of both. Though companies want to use both theories, as the theories are so drastically different, combining them can potentially take the trust away from the employees. While the theories give a good directional sense of what route the organizations could take, they are limited in offering tools/solutions to enable the organization conduct the change smoothly 5.2 Speed of Change Model by Daryl R. Conner The speed of change model is explained by Daryl R. Conner in his book Managing at the Speed of Change 5. Model Description: The Speed of Change model states that each of us is designed by nature to move through life most effectively and efficiently at a unique pace that will allow us to face changes. The author refers to this speed as the speed of change. The model suggests that it is very critical for organizations to be aware of this inherent nature of people. Some people will be able to absorb change much more easily than others. When one is faced with changes at a rate much higher than what one can absorb, there are undesirable effects. These undesirable effects could vary in severity such as emotional burn out, inefficiency, sickness, destructive behavior in the campus, chronic absenteeism etc. Zinnov 6

The author of this model explains that there exists a point at which humans can no longer assimilate change without displaying dysfunctional behavior. Conner defines this point as the Future Shock Future Shock. A point at which Humans can no The model recommends that the single most factor necessary for longer assimilate individuals to increase their speed of change is human resilience. change without Human Resilience is the ability to absorb higher levels of changes negative effects while maintaining equilibrium. The model recommends that in order Source: Managing at for change management efforts to be successful, resilient individuals the Speed of Change should lead the change management efforts. There are powerful guidelines for the traits of resilient people defined by Conner. Resilient people have the following traits: Display a sense of security and self assurance that is based on their view of life (Positive) Have a clear vision of what they want to achieve (Focused) Demonstrate special pliability (Flexibility) Develop structured approaches (Organized) Engage change rather than defend against it (Proactive) Positive Focused Flexibility Organized Proactive Resilience Figure 3.0 Resilience Components Applicability of the Model This model is a very popular model in the Change Management world and the works associated this theory are widely used by Change Management consultants in developing leadership traits among individuals. This model also provides a set of guidelines for individuals wanting to excel in organizations. However, this model is not intended to provide the blue print or techniques to handle emotions when people have reached their After Shock point and how that will impact the organization s change management initiatives. It is not always easy for the After Shock Point to be gauged without actually exposing people to change initiatives, however resilient they might appear to be. Zinnov 7

5.3 The Burke-Litwin Model of Organizational Performance and Change In the book The Change Management Handbook A Road Map to Corporate Transformation W. Warner Burke describes the Burke-Litwin Model of Organizational Performance and Change 6. Model Description: This complex model considers the organizational phenomena with different variables affecting change. These variables are grouped into two: British Airways implementation of the Burke-Litwin model resulted in it having significantly improved service as passengers would call it from bloody awful to bloody awesome. Source: The Change Management Handbook A Road Map to Corporate Transformation The Transformational factors: Transformational factors include External environment, Mission and Strategy, Leadership and Organizational culture. These refer to areas in which organizational alteration is caused by the interaction of the customer and competitor forces with internal capabilities and require an entirely new behavior pattern on the part of organizational members. The Transactional factors: Transactional factors include Management practices, Structure, Work unit climate, Policies and Procedures, Task requirements & individual skills and abilities Motivation and Individual needs and values. These are relatively short term changes among people and groups within the organization. For this model to be effective, it is important to distinguish between transformational and transactional factors. At the same time, it is important to remember that both are linked and both contribute towards the success of this model by affecting individual and organizational performance as can be seen from Fig.4.0 External Environment Mission and Strategy Leadership Organizational Culture Management Practice Feedback Structure Work unit climate Systems (policies and procedures Task requirements and individual skills/abilities Motivation Individual and Organizational performance Individual needs and values Figure 4.0 The Burke-Litwin Model Zinnov 8

Transformational issues call for a survey that probes mission and strategy, leadership, culture and performance. Transactional issues need to focus on structure, systems management practices, climate and performance. Other transactional issues might include job-person match, motivation and individual needs and values. Applicability of the Model This model is very effective if employed correctly. It is, however, a very complex model that requires several different issues to be addressed separately yet in an inter linked manner. It calls for several hours of interviews with employees collecting feedback and also requires a very strong leadership backing for complete execution. 6.0 Conclusion Change Management is a very complex task. Global Sourcing adds unique challenges to Change Management. The various change management models developed by the thought leaders provide a good insight and understanding of the key variables that need to be addressed for successful change management. Zinnov has developed a Change Management Model called Strategize-Execute-Maintain (SEM) TM aimed at helping clients manage change during Global Sourcing. The model consists of 3 modules o Strategy Module that enables companies proactively plan and prepare for change o Execution Module that enables companies to manage the different emotions and convert those emotions into positive emotions o Maintain module that enables companies to make ongoing improvements to managing change Our comprehensive change management model enables us to efficiently integrate Global Sourcing change management efforts for our clients 7.0 References 1. Micheal Beer and Nitin Nohria. Cracking the Code of Change. Harvard Business Review, May-June, 2000, pp 133. 2. Peter Senge et al. The Dance of Change. Doubleday, 1999. 3. Harry Woodward and Steve Buchholz. Aftershock: Helping People through Corporate Change. John Wiley & Sons, 1987 4. Micheal Beer and Nitin Nohria. Cracking the Code of Change. Harvard Business Review, May-June, 2000, pp 134. 5. Daryl R. Conner. Managing at the Speed of Change. Villard Books, 1993. 6. Lance A. Berger, Martin J. Sikora and Dorothy R. Berger. The Change Management Handbook: A Roadmap to Corporate Transformation. Richard D. Irwin, Inc., 1994. Zinnov 9