Oct 01, 2023
by Aisha

In order to grow and survive, nearly every business will go through some kind of transformation at some point. Hiring new workers, expanding an existing division, or combining with another company are all examples of developments that might significantly alter the course of your organization.

However, organizational change isn't always simple to adapt to, and it can be daunting for everyone on the team who is directly affected. Managers who are responsible for implementing or facilitating organizational change should be familiar with the steps involved and the outcomes that can be expected. If you know how to handle it, change can be a huge opportunity for personal development and professional achievement.

What is Organizational change?                                  

The term "organizational change" refers to the steps that a firm or other type of business takes in order to modify a significant aspect of its organization. These aspects can include the culture of the company, the underlying technology or infrastructure that it relies on in order to function, or its internal procedures. The process of guiding an organizational change to a successful conclusion is referred to as organizational change management, and it typically consists of three primary phases: planning, implementation, and follow-through.

The study of organizational change examines not only the process through which a firm or other organization modifies its operational methods, technology, organizational structure, overall structure, or strategy, but also the impact that these modifications have on the organization. Change in an organization typically occurs in reaction to demands from either the outside or the inside of the organization, or as a direct result of those pressures.

The only way for smaller business enterprises to thrive in the face of larger competitors is to adapt. They also need to learn how to flourish in the environment in which they will be living. When a new, smaller, and more innovative competitor enters the market, larger competitors have to make swift adjustments.

A company needs to look for ways to improve its operational efficiency if it wants to either avoid falling behind its competitors or keep one step ahead of them. In addition to this, it needs to work toward becoming less wasteful in its operations.

What causes Organizational Change?

Alterations to an organizational structure are required due to many different circumstances. The following are some of the most prevalent challenges that managers face:

  • There has been a change in corporate or divisional leadership.
  • Changes in the composition of work teams.
  • Adopting cutting-edge technological systems.
  • The use of novel business strategies.

There are other external factors as well that can cause organizational change. Let’s discuss them in detail:

1. Workforce demographics

Adapting to new circumstances often prompts organizations to alter how they operate. The average age of the American workforce, for instance, is increasing, according to surveys conducted by the Department of Labor and the Organization for Economic Co-operation and Development (OECD). For businesses, what does this mean? As the workforce ages, businesses may notice a shift in the preferred perks they receive. As more people continue working past traditional retirement age, alternatives like flexible work hours and job sharing may gain favor. Organizations may experience a sudden loss of knowledge and expertise as the workforce ages fast and workers who are dissatisfied with their jobs decide to retire. Therefore, businesses will need to come up with plans to keep these workers on staff and provide for their retirement. Finally, overcoming ageist preconceptions that get in the way of retaining these workers is a crucial issue.

2. Technology

The quick pace of technological progress can be one factor driving change. Moore's law states that the complexity of computer circuits will double every 18 months at no additional expense. This was predicted by Gordon Moore, cofounder of Intel Corporation. Companies are responding to this transition by making quick technological advancements. Companies often find it difficult to keep up with the rapid pace of technological change. The music business is a contemporary example. When compact discs were initially launched in the 1980s, they were a major improvement over record albums. Companies were able to increase prices by a factor of two, despite the fact that CD manufacturing was far cheaper than LP manufacturing. The record industry has benefited from this status quo for decades. Companies in the music industry were caught off guard by the disruptive nature of peer-to-peer file sharing when it was threatened by programs like Napster and Kazaa. The first thing they did was sue everyone who used file-sharing software, including minors. They also kept hunting for a technique that would render CDs and DVDs copy-proof, but nothing like that has appeared so far. No one thought people would pay for music that could be obtained for free (although illegally) until Apple Inc.'s iTunes introduced a new way to sell music online. Whether or not the industry is able to adjust to the changes that have been imposed on it remains to be seen.

3. Globalization

Depending on how well they adjust, businesses may either be threatened by or able to take advantage of globalization. Companies are learning that in some regions of the world, it is more cost-effective to manufacture products and provide services. As a result, many businesses began relying on factories in countries like China. While it was often believed that knowledge work was immune to outsourcing, many service operations are now being outsourced to regions with cheaper wages. In light of these shifts, it is crucial to learn how to lead a multicultural staff. When outsourcing, many businesses learn the hard way that they must adapt to an institutional setting that is very different from their native country. Companies are adapting to new realities, such as the stress of job relocation offshore, the need to retrain employees, and global competition for talent.

4. Market conditions

Companies' efforts to adapt to shifting market conditions could also lead to alterations. As this is being written, for instance, significant shifts are taking place in the American airline industry. After the terrorist attacks of September 11, demand for air travel dipped. Moreover, the proliferation of online booking for air travel has made it much easier to compare airline fares, encouraging carriers to compete primarily on price. With the huge rise in fuel prices, this tactic appears to have failed. That's why airlines are starting to exclude or charge more for services that passengers have come to expect, such as free food and drinks or the ability to check bags. To survive in this environment, several airlines have combined, such as Delta Air Lines Inc. and Northwest Airlines Inc., and discussions about further airline mergers are ongoing.

How can an external factor trigger internal shifts in a business? Keep in mind that a shift in circumstances does not necessitate a rethinking of business practices. The reactions of decision-makers to what is happening in the environment will determine whether or not the organization evolves in response to environmental challenges and risks.

5. Poor performance

Poor performance and the perception of external threats both increase the likelihood of change within an organization. Companies with low performance frequently find it easier to make changes than those with high performance. Why? High achievement often results in complacency and a lack of initiative. Therefore, it's not uncommon for thriving businesses to stick with the strategies that brought them success in the first place. The adage "nothing fails like success" may be appropriate when discussing the connection between firm performance and organizational reform. In 1994, for instance, instant film and camera production were dominated by the Polaroid Corporation. Inability to respond to the explosive growth of the 1-hour photo developing and digital photography industries led to the company filing for bankruptcy in under a decade. Companies that successfully adapt to new circumstances have procedures in place to keep the entire organization flexible. One of the main drivers of organizational change is turnover in the company's upper management; however, business success is also a factor. Studies have shown that CEOs who have been in their positions for a long time are unlikely to alter their methods. Instead, a company's culture and structure shift when a new CEO or top executive team is brought in.

Types of Organizational Change

There are two major types of organizational change. One is adaptive change, and the other is transformational change.

Adaptive change

Adaptive alterations are the subtle adjustments that businesses make to meet their customers' ever-evolving demands. Managers often make subtle but significant alterations in order to put their business goals into action. Processes can be added, removed, or improved upon as needed by the leadership.

A company's decision to upgrade from Windows 8 to Windows 10 is an example of an adaptive transition.

Transformational change

Changes that undergo transformation are more extensive and far-reaching than those that merely adapt. It's not uncommon for them to necessitate a reorientation of goals and strategies as well as a reorganization of organizational structures, personnel practices, and operational procedures. These transformations can be massive, requiring a lot of time and effort to implement. Oftentimes, companies undergo radical makeovers because they are forced to do so by external factors like the appearance of a new, disruptive rival or supply chain problems.

A customer relationship management system (CRM) is an example of a transformative change because it requires all departments to understand and use the system.

On the spectrum between adaptive and transformative, many future shifts will occur. Managers must realize that the process of change must be adapted to meet the specific requirements of each circumstance.

The further division of types of organizational change takes a deeper look into the various kinds of changes and the tailor-made strategies used in each one.

Strategic change

Strategic business changes are implemented by companies in order to meet objectives, increase competitive advantage, or address risks and opportunities in the market. Changing the company's policies, structure, or processes falls under the category of a strategic change. Strategic shifts are often the responsibility of high management and the CEO.

People-centric organizational change

The introduction of a parental leave policy or new recruits are examples of people-centric organizational reform. Leadership must keep in mind that employees will oppose change while launching a people-centric initiative. A people-centered shift calls for openness, dialogue, strong leadership, and compassion.

Structural change

Alterations to an organization's structure, whether caused by internal or external forces, can have far-reaching effects on day-to-day operations and management. Modifications to the management structure, the structure of teams, the roles and duties of individual departments, the organizational chart, and the framework of individual jobs are all examples of structural alterations.

Examples of events that result in structural shifts are mergers and acquisitions, job duplication, shifts in the market, and adjustments to operational procedures and policies. Because they have an impact on the majority, if not all, of the workforce, these shifts frequently overlap with people-centered shifts.

Technological change

Competition in the marketplace is rising, and so is the rate at which technology is developing. New software or systems are frequently implemented as part of technological shifts in order to enhance operational efficiency. Unfortunately, the goals of technology projects are not always well defined and conveyed, which can cause anxiety and frustration among your staff and, in the end, resistance.

Identifying new technologies and adopting a digital strategy to boost productivity and profits are at the heart of technology change management.

Unplanned change

The term "unplanned change" refers to an action that must be taken as a result of unforeseen occurrences. An unexpected change is something that cannot be predicted but can be managed effectively through the use of change management.

Remedial change

Modifications made in response to a problem. Such a shift takes place when a problem has been recognized and a new plan of action is being developed. These adjustments are time-sensitive since they are meant to fix a problem.

Reactive change is unavoidable, even if it isn't always desirable. The positive side of the corrective action is that determining whether or not it was successful only requires answering one question: was the issue resolved?

Why is Organizational Change Management important?

Transformation in the workplace is inevitable. Businesses must constantly adapt to the changing marketplace by replacing retiring workers with fresh recruits, expanding into new areas, and incorporating cutting-edge technologies.

How you handle organizational change is the single most important factor in its success or failure. It is critical to keep workers informed and make sure they comprehend the alterations and how they will be impacted.

Maintaining company continuity over a period of organizational change is possible with careful planning and execution. Providing good training, for instance, can speed up the process by which workers pick up new technologies. By doing so, they are more likely to embrace the technology and prevent the organizational change from being slowed down by user complaints and help desk tickets. Without proper organizational change management, a company's transformations can be both time-consuming and resource-intensive. They can also have an adverse effect on morale and training in the workplace.

Key stakeholders, such as investors, suppliers, and prospective workers, take a company's responsiveness and adaptation to change into account when making business decisions. Because of this, a company's demise may arise from ineffective change management.

Planning for employee communication about upcoming organizational changes requires knowing what kinds of changes will be made. So that your team gets the support they need to keep morale up and facilitate the change from their end, you can ask for input as you implement the change and then make adjustments to your change management strategy.

Embrace the Change!

Change is something that ought to be welcomed with open arms rather than resisted with trepidation. Businesses are unable to lay the groundwork for long-term success unless they are willing to embrace change.

It is possible for organizations to successfully cement the changes and embed them within the organization's core, provided they maintain a supportive environment and make internalization a priority in their operations. This establishes a solid foundation for performance over the long run and helps the organization successfully react to the opportunities and challenges that lie ahead in the future.