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Business Studies

Strategic change is often a huge step for companies, requiring a lot of dedication and appropriate management. Change can often come with various types of resistance from employees. So, how can companies overcome this resistance? Through change management.

Change Management Theory

Change management is the process of making sure that the business responds correctly to changes in its internal and external environment.

Strategic change can be defined as "changes in the content of a firm's strategy as defined by its scope, resource deployments, competitive advantages, and synergy" (Hofer & Schendel, 1978).

In other words, strategic change can often lead to changes in the vision of the company to become more competitive or profitable. It is not guaranteed that strategic change will always be successful. Companies have to create and implement a specific plan correctly. It is the managers' role to convey this change to employees and the organisation in general.

Change Management in Organisations

Two different types of change can take place within the organisation.

  • Change can either be incremental, taking place in small steps over a long period of time.

    Coca-Cola releasing new flavours like cherry or vanilla.

  • Or disruptive (step-change), which is a more large-scale type of change that occurs rapidly, often throughout an entire industry.

    Smartphones replace digital cameras.

Key drivers of change

There are a couple of reasons as to why a business would consider a strategic change.

External influences

Some examples of external factors that could influence change are:

  • The competitive environment: the competitive environment of a business is likely to experience various changes (Porter's Five Forces).

    A competitor can easily gain increased market share due to a technological innovation that makes their production process more efficient or a competitor that can sell products for lower prices.

    When rivalry between competitors is intense, a company may have to consider a strategic change to keep up with competitors. In these cases, it is possible that a quick and dramatic response is necessary (disruptive change) otherwise the firm will lose its competitive edge.

  • First mover advantage: rather than reacting to its environment, a firm might consider being the first mover when it comes to new technology or innovation. First mover advantage comes from a business that is first (or one of the few first) organizations that address the new wants and needs of consumers - before most competitors follow. This usually requires radical changes and for the business to be very open in embracing new technology.

  • New regulations and legislation: could also lead a business to consider strategic change, as it could put pressure on certain functional aspects of the business.

    If new environmental regulations on emissions come into effect, the business might change its strategic direction to becoming a more environmentally conscious firm (reducing emissions and using sustainable energy).

Internal Influences

Some examples of internal factors that might influence the need for change are:

  • Issues with profitability: it could be that the business is not making enough money or even incurring losses. This would be a substantial reason why strategic change is necessary.

  • Weaknesses of the business: the need for change can come from a weakness the business has identified in a SWOT analysis. For example, inefficiencies like high waiting times during the production process, manufacturing costs or employee turnover.

  • Lack of internal innovation: Lack of innovation can be a reason why a business would consider change, as this can impact the competitiveness of the business.

Change Management Models and Process

Companies need to have an appropriate management tactic for embracing strategic change.

Managing Change and Organisational Culture

Organisational culture plays a huge role in strategic change. For strategic change to be effective, the change has to be integrated into the internal culture of the organization appropriately. Established firms can often have difficulty rethinking organizational culture, as shared organizational values and habits have been around for a long time - change will not happen overnight. This is why managers' leadership style is important to lead change. Managers need to understand that education, training and open communication are essential for leading effective change.

Effective management is also important as change can often come with an attitude of resistance. Resistance to change can show its forms through different ways, such as missing meetings and failing to deliver on commitments. Some of the reasons why employees could resist change include:

  • Fear of the unknown/change: the business has to be very transparent about the process of change. The more employees know about the change, the less likely they will feel fearful or neglected.

  • Misunderstanding: this can come from communication problems or mistrust due to the lack of two-way communication.

  • Organizational politics: some people may resist change to 'prove' that the organization has made a bad decision in their eyes, meanwhile others may resist change if they fear they will lose power within the organization.

  • Self-interest: when employees fear that change might lead them to lose their jobs.

For a business to manage change effectively, certain organizational structures that allow for a dynamic environment have to be in place.

A flexible organization is one that can respond quickly to changes in the external environment.

The characteristics of a flexible organization include:

  • A flexible workforce: flexible work contracts make it easier for the organization to increase and decrease capacity quickly.

  • Information management systems in place: to increase the speed at which information and knowledge are shared within the organization. This can improve internal communication and customer service.

  • Flexible work options: like offering employees the option to work from home and working flexible hours. This can remove the time spent travelling to work and improve employees' work-life balance.

  • Cost savings: having a flexible workforce can decrease labour costs and so can remote working options.

Lewin's Force Field Analysis

Kurt Lewin proposed a model, the Force Field Analysis, which provides an overview of the different factors and issues that influence change within an organization.

Lewin argued that there are forces that drive change and forces that hinder change and in order to create effective change within the organization, there have to be more driving forces than restraining forces. If the number of forces is the same, meaning they are in equilibrium, no change will be made, which is why an organization has to disturb the equilibrium to bring about change.

Figure 1 (See below) provides an example of the application of the force field analysis for a company that wants to upgrade its factory with new equipment.

Here, we can see that there are ten total driving forces (forces for a change) and eleven total restraining forces (forces against change). The strength of each force is measured on a scale from 1-4 (see the top of the diagram). To create effective change, however, the organization needs an increased number of driving forces.

Managing Change, Change Management Models and Processes, Lewin's Force Field Analysis, StudySmarterFigure 1. Lewin's Force Field Analysis Example, StudySmarter

Kotter and Schlesinger's Overcoming Resistance to Change Model

Kotter and Schlesinger (1979) developed a model for overcoming resistance to change.² The model includes six methods for managing resistance:

  • Education can be used when employees lack information or have wrong information about the changing process and its implications. Management should communicate the changes effectively to overcome this issue.

  • Participation includes involving resistors in the change design and implementation process. In this case, people will have a sense of ownership and commitment to making the change happen.

  • Facilitation can be used when people are resistant to change because they feel like they will not be able to make sufficient adjustments. To overcome resistance, management could provide training and emotional support.

  • Negotiation includes offering incentives for people to make the change. Negotiation could include a compromise leading to a slightly different type of change than originally intended.

  • Manipulation is when people are offered rewards if they agree to change.

  • Coercion is usually used when other methods are not viable. Coercion can include threatening employees with either job loss, transfer or promotion opportunities. This method is usually used when it is important to make the change quickly.

Change Management - key takeaways

  • Change management is the process of making sure that the business responds correctly to changes in its internal and external environment.


¹M.A. Naghibi & H. Baban, Strategic change management: The challenges faced by organizations. In international conference on economics and finance research, 2011.

²J.P. Kotter & LA Schlesinger, Choosing Strategies for Change, 1979.

Frequently Asked Questions about Change Management

Organizational culture plays a huge role in strategic change. For strategic change to be effective, the change has to be integrated into the internal culture of the organization appropriately. This is why managers' leadership style is important in leading change. Managers need to understand that education, training and open communication are essential for leading effective change. 

Strategic change can be defined as "changes in the content of a firm's strategy as defined by its scope, resource deployments, competitive advantages, and synergy" (Hofer & Schendel, 1978). In other words, strategic change can often lead to changes in the vision of the company to become more competitive or profitable. It is not guaranteed that strategic change will always be successful. Companies have to create and implement a specific plan correctly.

An example of strategic change would be evolution; This is a type of transformational change that happens by small, incremental changes. This form of change is implemented gradually through inter-related initiatives. It can either be planned or happen naturally throughout the development of the organization.

Change management is the process of making sure that the business responds correctly to changes in its internal and external environment.

For change to be effective, it has to be integrated into the internal culture of the organization appropriately. Additionally, effective management is important as change can often come with an attitude of resistance. Resistance to change can show its forms through different ways, such as missing meetings and failing to deliver on commitments. This is why managers' leadership style is important to lead change. Managers need to understand that education, training and open communication are essential for leading effective change. 

Change management involves evaluating the factors and forces that drive change, meanwhile mitigating resistance to change. It is the manager's role to communicate effectively, educate and provide support to all members of the organization undergoing change.

Final Change Management Quiz

Question

What is strategy implementation?

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Answer

As the name suggests, the strategy implementation is simply implementing the strategy. It is a process of turning plans into action. It includes all the activities designed to manage the activities associated with the delivery of the plan.

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What is SIP?


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Strategic Implementation Plan. It outlines the activities and decisions essential to implement the strategy.

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What are the steps of strategic implementation? 


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Defining the goals, doing the research, creating a strategy, implementing the strategy and evaluating and controlling.

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What is meant by defining the goals?


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It is simply identifying the goals that the new strategy should achieve.

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Why is it important to evaluate the strategy?


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To draw conclusions and find out what could have been done better in order to perform better in the future.

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Give an example of strategy implementation.


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Answer

It might be for example developing a new marketing plan to help increase sales of the company's products to consumers.

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Question

What are the key strategic problems?


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Answer

Weak strategy, lack of clarification and skills and lack of control and progress tracking.

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What is meant by weak strategy?


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It is a strategy that simply does not work because the goals which are to be achieved are set wrong. Strategic goals tend to be large, complex and complicated. Also, very often strategies are simply impossible to be achieved and fail despite all the hard work put into them.

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How to solve a problem of lack of clarification and skills?


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Make sure that all the employees and people associated with the strategy are made clear of their responsibilities and able to fulfill their obligations. They should be familiar with the entire strategy plan and aware of the next steps.

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Question

Why should a strategy be controlled?


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Sometimes the strategy needs to be slightly changed in order to achieve the goal.

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Question

What is organization structure?

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Organisation structure is a system that outlines how activities are managed in order to achieve the objectives of a business.

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What does the organization structure determine? 


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  • Responsibilities and authorities of employees

  • Job roles and titles

  • Way of communication flows

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What is organization breakdown structure?


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Organization breakdown structure (OBS) describes an organization framework for project planning, resource management, time and expense tracking, cost allocation, revenue/profit reporting and work management.

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How to make an organization breakdown structure? 


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  • Make a hierarchy of the entire firm

  • Recognize all departments and teams within the firm

  • Specify functional groups

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What are the types of organization structure?


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There are centralized and decentralised organization structures, flat and tall organisation structures, and functional, product-based and matrix structures.

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What is a centralized organization structure?


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Centralized organisation structure is where decisions are made at the top of an enterprise or in a head office and then passed on to the rest of the employees.

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What are the advantages of the centralized organisation structure?


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Companies using this structure characterize consistency and clear direction. Moreover, their activities are carefully controlled and managed.

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Give an example of an enterprise using a centralised organization structure.

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Answer

For example, Apple.

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What is a decentralized organisation structure?


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Decentralized organisation structure is when lower levels in a business have the decision power.

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When is the decentralized organization structure usually used?


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It is usually where the business has many locations and therefore the head office is reasonably unable to control or make decisions for all the locations.​​​​

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What are the advantages of decentralized organization structure?


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Employees in companies using this type of organization structure are typically more motivated since they have a sense of responsibility. Additionally, managers are able to make decisions suitable to their local area and customers.

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Which of these companies is the more likely to use the decentralized organization structure?


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Pret

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What is the difference between flat and tall organisation structures?


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The flat organization structure has few or even no levels of management between management and staff level employees whereas the tall organisation structure has many.

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What is a different name for a flat organisation structure?


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Horizontal organisation structure

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What is a different name for a tall organisation structure?


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Hierarchical structure

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Question

What is the definition of organisational culture?

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 Organisational culture is the collection of organisational shared values and practices that guides employees’ actions and behaviours in the organisation.

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Who in the organisation usually creates or shapes organisational culture?

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Answer

Organisational leaders

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What is the difference between strong and weak organisational culture?

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If the organisational culture is strong employees are most likely to be aware of how to behave in most situations at work. On the other hand, if the organisational culture is weak, employees may not have a clear understanding of how to behave in certain situations.



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What are the benefits of a strong organisational culture?

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The benefits of a strong organisational culture are:

  • Improvement of unity and teamwork between employees, by working well together employees will create more output. 
  • The establishment of clear guidance on how to behave will lead employees to perform a more consistent behaviour that will assist them in performing a better service quality, especially if employees’ duties involve dealing with clients.

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Why the organisational cultural models are important?

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Organisational cultural models are important because they provide organisations with foundations and key principles regarding the development of an effective organisational culture.

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What are the key organisational cultural models?

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The key models are: 

  • Handy’s task culture
  • Hofstede’s national cultures model

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What types of organisational culture are suggested in Handy’s task culture model?

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The four types are:

  1. Role culture

  2. Power culture

  3. Task culture 

  4. Person culture

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Question

What is meant by the role culture?

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The Role culture is a formal culture in which employees tasks and responsibilities have written clear procedures, and employees are aware of their place in the hierarchy. This cultural model is most appropriate for large enterprises or medium-sized businesses in a steady environment.

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Question

What are the key elements of Hofstede’s national cultures model?

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The key elements are:

  • Individualism and collectivism (IDV) 

  • Power and distance index (PDI) 

  • Uncertainty and avoidance index (UAI)

  • Masculinity (MAS)

  • Long-term orientation (LTO)

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 What is meant by the masculinity index?

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Masculinity index refers to the values that dominate in the organisation. They can be either masculine which means that organisations main focus is finances and individual employees’ confidence. Or feminine which focuses on being altruistic which means to be more concerned for others than themselves. Additionally, the focus is on developing quality relationships with co-workers.

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 What is meant by strategic management?

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Strategic management is the process of developing organisational goals, objectives, missions and visions that will lead to organisational success. The strategy helps employees to understand their roles and responsibilities dedicated towards the goal achievement.  To put it simply organisational strategy gives direction to employees.

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How can the organisational culture and strategic management work together effectively?

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 Organisations should aim to align their strategic management and organisational culture. This means that a strategic plan should be constantly in line with the organisational culture so that these elements work together and contribute to organisational success.

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What should organisations aim to achieve regarding organisational culture and strategic management?

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​ Organisations should aim to achieve alignment. That means that organisations should aim to align their strategic management and organisational culture with each other.

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What are the important reasons regarding the organisational culture in strategic management?

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 The important reasons are:

  • Creates unified goals

  • Culture positively influences people’s behaviours

  • Assists in gaining a competitive advantage

  • Culture replaces written rules and regulations



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What is change management?

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Change management is the process of guiding organisations to achieve desired outcomes by making changes in the organisation. The change management follows a process of taking the organisation from its current state to undergo the transition and achieve its desired future state.

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 What is the impact that the organisational culture has on change management?

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The organisational culture has an impact on change management as when an organisation is planning on implementing any changes in its practices organisation will have to ensure that these changes align with the organisational culture. 

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Question

Should the organisational culture go through changes to implement the change management process effectively?

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Yes, the organisation should make a few changes in its culture to go through successful change and respond to the external environment successfully. Most importantly, change management and organisational culture should be aligned with each other and change when needed as it will result in success in the organisation’s performance.

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 Why it is important to understand the organisational culture?

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The understanding of the organisational culture is crucial especially for leaders or managers as their organisational cultural knowledge will help them to make better strategic decisions.

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Question

What are the key steps of managing an organisational culture change effectively?

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Answer

  • The key steps are:

    • Measure current organisational cultural values
    • Ensure to align the organisational culture with strategy and structure
    • Ensure that staff and stakeholders are involved in proposing ideas and suggestions regarding the changes in the organisational culture 
    • Ensure organisational culture change is demonstrated and communicated to the employees frequently
    • Manage the emotions of employees, emphasise with them and help staff to adapt to recent changes in the organisation.

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Question

What is the functional organisation structure?

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Functional organisation structure is when employees are grouped based on their specific skills and knowledge. They are divided into departments such as marketing, finance, IT, R&D etc.

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What are employees based on in a product-based organisation structure?


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A particular product they work on, customers they deal with, geographical area they serve.

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What are the three types of the matrix organisation structure?


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Functional, product-based and matrix structures.

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Give a definition of strategic implementation.

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Answer

Strategic implementation is a process of turning plans into action using a specified strategy.

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Question

What are the five steps of the strategic implementation process?


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Answer

  • define your goals 

  • do the research

  • create a strategy

  • implement the strategy

  • evaluate and control

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Question

What does network analysis include?


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order of activities, their estimated duration and the earliest date of later stages to start

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