Department of Business Studies: ORGANIZATIONAL CHANGE

1.0 INTRODUCTION

Change is one of the most critical aspects of effective management.

Change is the coping process of moving from the present state to a desired state that individuals, groups and organizations undertake in response to dynamic internal and external factors that alter current realities.

Fortune magazine first published its list of America’s top 500 companies in 1956. Sadly, fewer than 30 companies from the top 100 on the original list remain today. The other 70 plus have disappeared through dissolution, merger, or downsizing. Survival, even for the most successful companies, cannot be taken for granted. In many sectors of the economy, organizations must have the capacity to adapt quickly in order to survive. Often the speed and complexity of change severely test the capabilities of managers and employees to adapt quickly and effectively. When organizations fail to change, the cost of failure may be quite high.

Increasingly, organizations that emphasis bureaucratic or mechanistic systems are ineffective. Organizations with rigid hierarchies, high degree of functional specialization, narrow and limited job descriptions, inflexible rules and procedures, and impersonal management can’t respond adequately to demands for change. Organizations need designs that are flexible and adaptive. They also need systems that both require and allow greater commitment and use of talent on the part of employees and managers.

Why is change important to managers and organizations? Simply stated, organizations that do not bring about timely change in appropriate ways are unlikely to survive. One reason that the rate of change is accelerating is that knowledge and technology feed on themselves, constantly creating innovations at exponential rates. Few business leaders would have envisioned in the mid-1990s, the revolutionary impact the Internet and World Wide Web would have on business practices in the early twenty-five century.

1.2 THE IMPORTANCE OF CHANGE

Change will not disappear or dissipate. Technology, an ever-expanding list of applications and the spontaneous combustion of

creative thoughts will maintain their ever-accelerating drive onwards. Managers, and the enterprises they serve, be the public or private, service or manufacturing, will continue to be judged by their ability to effectively and efficiently manage change. Unfortunately for the managers of the early twenty-first century, their ability to handle complex change situations will be judged over ever decreasing time scales.

The pace of change has increased dramatically; mankind wandered the plant on foot or in horseback for centuries before the invention of the wheel and its subsequent ‘technological convergence’ with the ox and horse. In other ‘short’ century man has flown a heavier-than-air aeroplane, piloted spacecraft, and walked on the moon. Satellites orbit the earth, the internal combustion engine has dominated transport and some would say society moves; robots are a reality and state-of-the-art manufacturing facilities resemble scenes from science fiction movies; your neighbour or competitor, technologically speaking, could be on the other side of the planet; and bio-technology is the science of the future.

Businesses and managers are now faced with highly dynamic and ever more complex operating environments. Technologies and products along with the industries they support and serve are converging. Is the media company in broadcasting, telecommunication, publishing or data processing– on indeed all of them? Is the supermaker chain in general retail, or is it a provider of financial services? Is the television set merely a receiving device for broadcasting messages or is it part of an integrated multimedia communication package? Is the airline a provider of transport or the seller of wines, spirit and fancy goods, or an agent of car hire and accommodation?

As industries and products converge, along with the markets they serve, there is a growing realization that a holistic approach to the marketing of goods and services is required, thus simplifying the

purchasing decisions. Strategic challenges, designed to maximize the ‘added value’ throughout a supply chain, while seeking to minimize costs of supply, are fast becoming the competitive weapons of the future. Control and exploitation of the supply chain make good commercial sense in a fiercely competitive global market. The packaging of what were once discrete products (or services) into what are effectively ‘consumer solutions’ will continue for the foreseeable future.

Producers no longer simply manufacture vehicles, they now distribute them through sophisticated dealer networks offering attractive servicing arrangements, and provide a range of financing options, many of which are linked to a variety of insurance packages. Utility enterprises now offer far more than their original core service. This, combined with the general ability to replicate both ‘hard’ and ‘soft’ innovations within ever diminishing time scales, places and creative and effective management of change well towards the top of the core competencies required by any public or private enterprises.

How can we manage change in such a fast moving environment, without losing control of the organization and existing core competencies? There are, as one would expect, no easy answers and certainly no blueprints detailing the best practices. Designing, evaluating and implementing successful change strategies largely depend upon the quality of the management team, in particular the team’s ability to design the organization in such a way as to facilitate the change process in a responsive and progressive manner.

1.3 TYPES OF CHANGE

To change is to move from the present to the future, from a known state to a relatively unknown state. To be able to adapt to or deal with the impact of change forces, organizations may plan for, experience or undergo change. The possible types of change do not suggest a watertight

compartmentalization in view of the complexity and dynamics of the change process.

(i) Happened Change: This type of change is rather unpredictable and takes place naturally due to external factors. It is profound and traumatic for it is out of direct control and produces a future state that is largely unknown. This type of change occurs when an organization reaches a plateau in its lifecycle and falls prey unwisely to demand from the environment. For example, currency devaluation, over which it has no control, adversely affects the business of a company that has to import its raw materials. Some political and social changes are also unpredictable, as was the case in India during Indira Gandhi’s years of Emergency.

(ii) Reactive Change: Changes that are clearly in response to an event or a series of events are termed reactive changes. Generally, most companies are engaged in reactive, often incremental change. These changes are attempted when the demand for a company’s products/services registers an increase or decrease, or a problem/crisis occurs or develops. Technological changes, for example, force the organization to invest in modern technologies. The incorporation of the latest technology could be in reaction to the increased demand for the product. Incremental changes, made in response to external forces and limited to a subsystem or a part of the subsystem, are adaptive in nature. Recreation is also a reactive change, but it involves the organization in its entirety, and occurs when the organization is undergoing severe crises.

(iii) Anticipatory Change: Change carries out in expectation of an event or a series of events is called anticipatory change. Pepsi recently announced that it would invest $750 million over the next five years for its operations in Mexico. Pepsi, which began its operations in Mexico in 1938, had a 31% market share of Mexican cola sales and plans to

improve this figure. Organisations, in terms of their anticipation, may tune in or reorient themselves to future demands. Tuning-in would involve making incremental changes (dealing with a subsystem or a part of the system) in anticipation of external events. Reorientation is moving from ‘here’ to ‘there’ in anticipation of a changing environment. It involves changing the organization from the existing state towards a desired future state, and managing the transition process.

(iv) Planned Change: Planned change or developmental change is undertaken to improve upon the current way(s) of operating. It is a calculated change, initiated to achieve a certain desirable output/performance and to make the organization more responsive to internal and external demands. Enhancing employees’ communication skills and technical expertise, building teams, restructuring the organization, introducing new technologies, introducing new products and services, challenging the incentive system, improving employee welfare measures, and the like fall into this category.

This type of change, where the future state is being consciously chosen, is not as threatening. However, it does require system/subsystem level (techno-social) support to survive.

(v) Incremental Change: Change directed at the micro level and focused on units/subunits/components within an organization are termed as incremental changes. Changes are brought in gradually and are usually adaptive in nature. It is assumed that those small changes will set in process the large change and lead the system slowly in a healthier direction. It also provides the organization an opportunity to learn from its own experience. A failed incremental change will cause less damage to the total system than an unsuccessful large-scale change.

The benefits that employees all over the world enjoy today could be cited as an example of incremental change. It has been a long journey

indeed from the days of Taylor’s Scientific Management when the role of the worker was perceived to be that of a mere cog in the wheel, to the various perks and facilities employees currently enjoy. These changes have evolved over a long period of time and have not happened overnight.

(vi) Operational Change: This is necessitated when an organization needs to improve the quality of its products or services due to external competition, customers’ changing requirements and demands, or internal organizational dynamics. Improvement of production and service capabilities could center on quantity, quality, timeliness, cost savings and other such factors. The organisation’s goals remaining the same intended change forces organizations to consider how to improve existing operations in order to perform better. Operational changes include bringing in new technology, re-engineering the work processes, quality management, better distribution and delivery of products and enhancing interdepartmental coordination.

(vii) Strategic Change: Change that is addressed to the organization as a whole or to most of the organisation’s components including strategy may be called strategic change. An example could be a change in the organisation’s management style. Toyota has recently taken steps to change its overall corporate management philosophy in an attempt to create an organization which is less hierarchical, is leaner, flexible, decentralized, and which allows itself a considerable degree of autonomy. This move by Toyota will affect the entire organization and will influence its performance.

(viii) Directional Change: A change in direction may become imperative for an organization due to severe competition or regularly shifts in government policy and control (for example, on pricing, import/export restriction, etc.). Directional change is also critical when the organization is developing a new strategy or is incapable of executing

effectively its current strategy. R & D activities, competitive analysis, information management and adequate management control system could facilitate the question of ‘quo vadis’ or where the organization is headed.

(ix) Fundamental Change: This entails a redefinition of the current purpose or mission of the organization. It may be necessitated by drastic changes in the business environment, the failure of the current corporate leadership, problems with employee morale, or a sharp fall in turnover.

(x) Total Change: For total change, the organization is constrained to develop a new vision, and a strong link between its strategy, employees and business performance. The organization has to achieve a turnaround or perish. Total change is necessary to extricate the organization from the rot that has set in due long-term failure of business, employee-organisation value incongruence, estrangement of operators from the reality of the business environment, and concentration of power in the hands of a few people who could be furthering their personal interests at the cost of the organization. A new vision and drastic surgery could be the only way out for the organization. The dramatic debacle of Arthur Anderson is a case in point.

1.4 FORCES OF CHANGE

Organizations are systems that exist in the context of an external environment, an interdependent relationship, and interact with its in order to survive and grow. Any factor in the environment that interferes with the organisation’s ability to attract the human, financial and material resources it needs, or to produce and market its services/products becomes a force of change. Internal to itself, a number of forces operate in the organization that could facilitate or hinder its functions, processes and actions. An organization is thus subject to two

sets of forces: those of the external political, social, economic and competitive environment and those internal to the organization.

A. Forces of Change Stemming From External Environment

1. Political Forces

The transition of the East-European nations to democracy and a market economy, the opening up of the economy of South-East Asia, the collapse of the erstwhile Soviet Union, the unification of Germany, the Gulf War, the Iraq war are some examples of the political upheavals that have had widespread repercussion around the world, bringing a plethora of changes in their wake.

2. Economic Forces

The uncertainty about future trends in the economy is a major cause of change. For example, fluctuating interest rates, declining productivity, uncertainties arising from inflation or deflation, low capital investments, the fluctuating prices of oil (petrol), recession, and the lowering of consumer confidence have a marked impact on different economies, and therefore, an organization. The national financial systems of countries are so interrelated that a change in one produces a ripple effect on the others- for example, the economic crisis in Thailand affecting markets across South-East Asia. Changes in the capital markets arise out of change in the accessibility of many of the banking systems of different economies.

3. Technological Forces

The world is presently characterized by dramatic technological shifts. Technological advancements, particularly in communication and computer technology, have revolutionized the workplace and have helped to create a whole new range of products/services. For example, a super-

communication system is one the anvil in which about 20 Japanese companies will join a Motorola Inc. led project to set up a satellite cellular telephone system that can be used from anywhere on earth, an idea that services the defunct Iridium global telephony venture. The companies include Sony Corporation, Mitsubishi Corporation, Kyocera Corporation and long distance telephone carriers whose interests include Sony and Kyocera. They plan to form a fifteen billion Yen (US $ 132 million) joint venture to coordinate the investment and policy in the US chip and Telecom Company’s ‘Iridium’ projects. Iridium facilitates worldwide voice paging, fax and data services.

Advances in technology have contributed to the development of economies. A case in point is Singapore, which, with almost no natural resources, has created a powerful economic advantage by exploiting the use of information technology in its overall planning. It is poised to become the world’s first fully networked society– one in which all homes, schools, businesses and government agencies will be electronically interconnected.

4. Government Forces

Governmental interventions in the form of regulation also lead to change. A few examples for government regulated change are:

Deregulation: This is lessening of governmental rules and increasing decentralization of economic interventions at the level of the state. What previously used to be essentially government sector services and industries are now being handed over to private companies for operation maintenance.

Foreign Exchange: Foreign exchange affects international trade transactions. In these transactions, payments are often made in terms of a country’s own currency, in US dollars, or the currency of a third

country. The exchange rate variations determine the currency payments. Prediction of exchange rate movements depends upon a number of factors such as a country’s balance of payments, interest rates, and supply and demand, making it often difficult to forecast. Constraints of foreign exchange prompt many governments to impose restrictions on the import of selected items along with measures to deregulate their economies to attract foreign exchange for investment purposes. Some of the examples of success are India and China.

Anti-trust Laws: Most governments follows anti-trust in one form or the other to restrict unfair trading practices. In India, the government has restricted the unfair movements of business houses by enacting the Monopolies and Restrictive Trade Practices (MRTP) in 1971.

Suspension Agreements: These are the agreements between governments to waive anti-dumping duties. The recent suspension agreement reached between the United States and Japan stipulates that Tokyo must keep price and volume records of all chip shipments to the United States.

Protectionism: While most countries profess free trade, the reality is often otherwise. Intense competition has forced governments to put into place measures that protect some of their threatened industries and business firms. Unites States, for example, has tried to protect its motorcycle industry from Japanese competition, while Japan (its local markets), Canada (lumber industry) and Mexico (cement and oil industries) have all tried to shield domestic enterprise from foreign competition. Trade barriers to protect local industries many take various forms, such as tariffs or import duties, quantity quotas, anti-dumping laws and government subsidies.

5. Increased Global Competition

In order to survive and grow, companies are increasingly making their presence felt globally. The case of the global automobile industry highlights this concept. Japanese automakers Toyota, Nissan, and Mitsubishi have continuously been relocating their manufacturing and assembling operations to South-East Asia where the cost of labour is much cheaper compared to that in Japan. They have also established their plants all over Europe and America to get past import restrictions and in the process have been able to retain a competitive edge in catering to the world automobile market.

6. Changing Customer Needs and Preferences

Customer needs and preferences are always changing. Organisations are forced to adapt and constantly innovate their product offerings to meet these changing needs. For example, Sony Corporation, Japan, known throughout the world for its technological innovations in tune with changing customer preferences, has developed a 2.5” hard disk drive for a laptop computer that could hold as much as 1.5 billion bytes of data costs less than the current disk drive holding 80 mega bytes.

B. Internal Forces for Change

A variety of forces inside an organization also cause changes that relate to system dynamics, inadequacy of existing administrative process, individual/group expectations, technology, structures, profitability issues and resources constraints.

1. System Dynamics

An organization is made up of subsystems similar to that of the sub-personalities in the human brain. The sub-personalities in the brain are in constant interaction with each other creating changes in human

behaviour. Similarly, subsystems within an organization are in creating changes in human behaviour. Similarly, subsystems within an organization are in constant and dynamic interaction. The factors that influence the alignment and relationships among the various subsystems in the context of an organization are, for example technology, internal politics, dominant groups/cliques, and the formal and informal relationships within.

2. Inadequacy of Administrative Processes

An organization functions through a set of procedures, rules and regulations. With changing times and the revision of organizational goals and objectives, some of the existing rules, procedures and regulations could be at variance with the demands of reality. To continue with such functionally autonomous processes can lead to organizational ineffectiveness. Realisation of their inadequacy is a force that induces change.

3. Individual/Group Speculations

The organization as an entity is a confluence of people, each one raring to satisfy his/her needs and aspirations. In an anthropological context, man is a social animal whose needs and desires keep changing. This creates differing expectations among individuals and groups as to the needs they intend satisfying in the organizational context. Positive factors such as one’s ambitions, need to achieve, capabilities, career growth, and negative aspects such as one’s fears, insecurities, and frustrations operate as complex inter-individual and inter-group processes inducing change in an organisation’s functioning and performance (which may or may not be to the organisation’s best interests).

4. Structure Focused Change

It’s a change that alters any of the basic components of an organisation’s structures or overall designs. Organisations make structural changes to reduce costs and increase profitability. Structural change can take the form of downsizing, decentralization, job-redesign, etc. For example, IBM, the global computer conglomerate has been trying to downsize. While many people were asked to leave, IBM is now very selective about hiring new personnel. In the process of downsizing, IBM has also changed the firm’s strategy and operational procedures.

5. Technological Changes

Changes that impact the actual process of transforming input into outputs are referred to as technological changes. Examples include the change in equipment, work process, work sequence, information-processing systems, and degree of automation.

Using new technology influences the subsystems in the organization. For example, the technological advancement in computers has revolutionized the design, development and manufacture (e.g. CAD/CAM, robotics) of products. The electronic point of sales system for instance, that permits improved stock control by instantaneously updating records and assessing the actual effects of price change, has improved the sales and marketing of goods.

6. Persons Focused Change

This is the change concerned with human resources planning and with enhancing employee competence and performance. Redefining organsational strategy and goods; structural change in terms of expansion, contracting technological inputs– al these have implications for human resources management. For example, introduction of new

technologies result in person focused change such as: replacement (when an employee cannot be trained further), replacement (to where an employee’s current skills are best suited), and employee training and development. It may also lead to laying down new recruitment and selection policies in tune with changing technologies and their requirements. The availability or non-availability of employees with the required skills also influences an organisation’s plan for expansion, of venturing into new products/services and of profitability.

7. Profitability Issues

A significant change form that has obliged a number of organizations to restructure (downsize, resize) and re-engineer themselves related to profitability issues such of loss of revenues, market share, and low productivity.

8. Resource Constraints

Resources refer to money, material, machinery, personnel, information and technology. Depletion, inadequacy or non-availability of these can be a powerful change force for any organization.

1.5 ORGANISATIONAL CHANGE: SOME DETERMINING

FACTORS

A few decades ago, advances in machine technology made farming so highly efficient that fewer hands were needed to plant and reap the harvest. The displaced labourer fled to nearby cities, seeking jobs in newly opened factories, opportunities created by some of the same technologies that sent them from the farm. The economy shifted from agrarian to manufacturing, and the Industrial Revolution was underway. With it came drastic shifts in where people lived, how they worked, how they spent their leisure time, how much money they made and how they

spent. Today’s business analysts claim that we are currently experiencing another industrial revolution– one driven by a new wave of economic and Technological Forces.

Interestingly, the forces for organisational change are not isolated to any one area, they are global in nature. To illustrate this point, we can cite the case of a survey that was conducted of 12,000 managers in twenty-five different countries. When asked to identify the changes they have experienced in the past two years, respondents reported that major restructurings, mergers, acquisitions, divestitures and acquisitions, reduction in employment, and international expansion had occurred in their countries. Although some form of change was more common in some countries than others, organizations in all countries were actively involved in each of these change efforts– especially major restructuring. Clearly, the evidence suggests that organizational change is occurring throughout the world.

In recent years, just about all companies, large and small, have made adjustments in the ways they operate, some more pronounced than others. They have radically altered the way they function, their culture, the technology they use, their structure, and the nature of their relations with the employees. With many companies making such drastic changes, the message is clear: either adapt to changing conditions or shut your doors.

Obviously, ever-changing conditions pose a formidable challenge to organizations, which must learn to be flexible and adapt to them. However, not all organizational changes are planned and quite intentional. The large variety of determinants of organizational change– forces dictating change– can be organized into 4 major categories. These categories are created by combining two key distinctions: (1) whether the organizational change is planned or unplanned by the organization, and

(2) whether it derives from factors internal or external to the organization. The taxonomy that results from combining these two dimensions, as shown in Table 1.1, are planned internal change, planned external change, unplanned internal change and unplanned external change.

TABLE 1.1: SOME DETERMINING FACTORS OF CHANGE

	Planned	Unplanned

Internal	Planned internal change	Unplanned internal change

External	Planned external change	Unplanned external change

This classification is used to summarise the major determinants of organizational change.

A. Planned Internal Change

A great deal of organizational change comes from the strategic decision to alter the way one does business or the very nature of the business itself. Three examples of planned internal organizational change can be identified– changes in products or services, changes in administrative systems and change in organizational size and structure.

1. Change in Products or Services: A planned decision to change the company’s line of service necessitates organizational change. A company which has established itself successfully in cosmetic products, decides to diversify into healthcare products, too. This decision to give a new direction to the business, to add a new, specialized service, will require a fair amount of organizational change. Some new equipment and supplies will be needed, new personnel will have to be secured. In short, the planned decision to change the company’s line of service necessitates organizational change.

2. Changes in Administration System: Although an organization may be formed to change its policies, reward structure, goals, and

management style in response to outside competition, governmental regulation and economic changes, it is also quite common for change in administrative systems to be strategically planned in advance. Such change may stem from a desire to improve efficiency, to change the company’s image, or to gain a political power advantage within the organization.

3. Typically, the pressure to bring about changes in the administration of an organization (e.g. to coordinate activities, set goals and priorities) comes from upper management– that is from the top down. In contrast, pressure to change the central work of the organization (i.e., the production of goods and services) comes from the technical side of the organization; from the bottom upward. This is the idea behind the dual-core model of organization. Many, organizations, especially medium-sized ones, may be characterized by potential conflicts between the administrative and technical core– each factor wishing to change the organization according to its own vested interests. Which side usually wins? Research suggests that the answer depends upon the design of the organization in question. Organisations that are mechanistic as opposed to organic in their approach (i.e., ones that are highly formal and centralized) tend to be more successful in introducing administrative change. The high degree of control wielded by the administrative core paves the way for introducing administrative changes.

4. Changes in Organisational Size and Structure: Just as organizations change their products, services, or administrative systems to stay competitive, so too do they alter the size and basic configurations of their organizational chart- that is, they restructure. In many cases, this has meant reducing the number of employees needed to operate effectively– a process known as downsizing.

B. Planned External Change

In addition to planning changes in the ways organizations are run, it is often possible to plan which change variables originating outside the organization will be incorporated into it. Introduction of new technology and advances in information processing and communication fall into this category. Both of these advances typically originate outside the organization and are introduced into it in some planned fashion.

1. Introduction of New Technologies: From Slide Rules to Computers: Advances in technology have produced changes in the way organizations operate. Senior scientists and engineers, for example, can probably tell you how their work was drastically altered in the mid-1970s, when their ubiquitous plastic slide-rules gave way to powerful pocket calculators. Things changed again only a decade later, when calculators were supplanted by powerful desk microcomputers, which have revolutionized the way documents are prepared, transmitted and filed in an office. For example, over a decade ago, Siemens (Germany) created the world’s first paperless office. Manufacturing plants have also seen a great deal of growth recently in the use of computer-automate technology and robotics, for instance, in the automobile industry, where a significant part of design and manufacture is automated and IT-dependent. Each of these examples represents an instance in which technology has altered the way people do their jobs.

2. The use of computer technology has been touted as one of the major revolutions occurring in the business world today. During the earliest years in which computes were used in the workplace, they failed to fulfill the promise of increased productivity that was used to usher them in. The hardware and software technology was not only too primitive, but also the users were too unprepared. Today, however, this has finally changed. According to William Wheeler, a consultant at

Coopers and Lybrand, “For the first time, the computer is an enabler of productivity improvement rather than a cause of lack of productivity”.

3. Advances in Information Processing and Communication: Although we now easily take for granted everyday events such as television transmission and long-distance telephone calls, these things were merely exotic dreams not too many years ago. Of course, with today’s sophisticated satellite transmission systems, fibre-optic cables crisscrossing the planet, fax machines, mobile telephones, teleconferencing facilities and the like, it is easier than ever for businesses to communicate with each other and with their clients. One main point is that as such communication systems improve, opportunities for organizational growth and improvement follow.

C. Unplanned Internal Changes

Not all the forces for change are the results of strategic planning. Indeed organizations often are responsive to changes that are unplanned-especially those derived from factors internal to the organization. Two such forces are changes in the demographic composition of the workforce and performance gaps.

1. Changing Employee Demographic: It is easy to see, even within our lifetimes, how the composition of the workforce has changed. The percentage of women in the workforce is greater than ever before. More and more women with professional qualifications are joining the organization at the junior and the middle management levels. In addition to these, the workforce is getting older. Many of the old retired employees from government and public sector are joining the private sector thereby changing the employee demographics. With the opening up of the economy and globalisation, the workforce is also continually becoming more diverse.

2. To people concerned with the long-term operation of organisations: These are not simply curious sociological trends, but shifting conditions will force organizations to change. Questions regarding the number of people who will be working, what skills and attitudes they will bring to the job and what new influences they will bring to the workplace are of key interest to human resource managers.

3. Performance Gaps: If you have ever heard the phrase, “If it isn’t broken, don’t fix it,” you already have a good ides of one of the potent sources of Unplanned Internal Changes in organizations– performance gaps. A product line that isn’t moving, a vanishing profit margin, a level of sales that is not upto corporate expectations– these are examples of gaps between real and expected levels of organizational performance. Few things force change more than sudden unexpected information about poor performance. Organisations usually stay with a winning course of action and change in response to failure; in other words, they follow a win-stay/lose-change rule. Indeed, several studies have shown that a performance gap is one of the key factors providing an impetus for organizational innovations. Those organizations that are best prepared to mobilize change in response to unexpected downturns are expected to be the ones that succeed.

D. Unplanned External Changes

One of the greatest challenges faced by an organization is its ability

to respond to changes from outside, something over which it has little or no control. As the environment changes, organizations must follow the suit. Research has shown that organizations that can best adapt to changing conditions tend to survive. Two of the most important unplanned external factors are governmental regulation and economic competition.

1. Government Regulation: One of the most commonly witnessed unplanned organisational changes results from government regulation. With the opening up of the economy and various laws passed by the government about delicensing, full or partial convertibility of the currency, etc., the ways in which organizations need to operate change swiftly. These activities greatly influence the way business is to be conducted in organizations. With more foreign players in the competitive market, Indian industries have to find ways and mechanism to safely and profitably run their businesses.

2. Economic Competition in the Global Arena: It happens every day, someone builds a better mousetrap– or at least a cheaper one. As a result, companies must often fight to maintain their share of market, advertise more effectively, and produce products more inexpensively. This kind of economic competition not only forces organizations to change, but also demands that they change effectively if they are to survive. On some occasions, competition can become so fierce that the parties involved would actually be more effective if they buried the harchet and joined forces. It was this ‘If you can’t beam ‘em, joint ‘em’ reasoning that was responsible for the announced alliance between arch rivals IBM and Apple Computer in the summer of 1991, an alliance dubbed “the deal of the decade” by one financial analyst.

Although competition has always been crucial to organizational success, today competition comes from around the globe. As it has become increasingly less expensive to transport materials throughout the world, the industrialized nations have found themselves competing with each other for shares of the international marketplace.

Extensive globalisation presents a formidable challenge to all organizations wishing to compete in the world economy. The primary challenge is to meet the ever-present need for change, to be innovative.

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Thursday, 29 September 2016

ORGANIZATIONAL CHANGE