Notes - Managing Change and Crisis in Organisations PDF

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Organisations in Time (1) Oldest Organisations in the World  The average age of contemporary firms used to be listed on the S&P stock index at 35 years in 1960 and has since dropped to 24 years – this is predicted to fall to 12 years by 2027.- The lifespan of a contemporary organisations ca...

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Managing Change and Crisis in Organisations – Notes Organisations in Time (1) Oldest Organisations in the World  The average age of contemporary firms used to be listed on the S&P stock index at 35 years in 1960 and has since dropped to 24 years – this is predicted to fall to 12 years by 2027. - The lifespan of a contemporary organisations can contract for a number of reasons – e.g. declining performance. What is an Organisation?  Organisations include workplaces, educational institutions, professional bodies, sports teams etc. - Equally non-organisational groups include friendships, family, hobby groups, social categories etc.  An organisation can be defined as a system of coordinated action among individuals and groups whose preferences, information , interests or knowledge differ. - This suggests an organisation includes a number of distinguishable members. - On the other hand, other definitions suggest ideas about goals, authority and performance control etc.  Organisations generally have a general primary goal which everyone works towards, but agents may have personal and more specific goals in order to eventually reach the end goal.  Nadler and Tushman (1989) emphasise strategy (pattern of decisions over time about resource deployment in response to environmental opps and threats) and organisation (mechanism that is development to turn strategy into output).

- They claim that effective output production is determined by congruence –

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consistency between strategy and environmental conditions and organisational components. - When things become incongruent, change may be necessary to regain congruence. Nadler and Tushman highlight organisations exist in time rather than being of a static state. Puranam et al. (2014) view organisations as a concrete form of organising – a process. This involves solving the following fundamental problems:

Managing Change and Crisis in Organisations – Notes

- Issue of division of labour: Task division (mapping goals to tasks) and task

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allocation (mapping tasks to agents). - Issue of integration of effort: Cooperation (mapping rewards to agents) and coordination (mapping information to agents). Puranam suggests any systems that achieves the problems listed below are successfully classified as an organisation. - Again, the concept of organisations existing in time prevails as problems and means of solving these shift with time/as markets change.

What is Organisational Change?  Organisations experience natural changes as they age, as well as change that people do to organisations in an attempt to achieve various organisational goals.  Organisational change can be defined as the empirical observation of a different in form, quality or state over time in an organisational entity (job, work group, product, strategy or organisation as a whole). - This could involve one or more elements of the system but also realignment of the whole system to affect key elements. - Other definitions suggest whenever there is change to problems, change and new solutions are needed. - NOTE: each definition differs and prioritises different elements of the definition. Evolution  Tushman and O’Reilly (1996) argue that all organizations grow in accordance with an S-curve, reflecting 3 stages of growth. NOTE: The y-axis refers to the size of the organisation and types of complexity it has:1. Innovation – small groups of people informally attempting to do something 2. Differentiation – when innovation succeeds, products now need formal structures to ensure task division is able to occur with coordination. 3. Cost – organisations enter a maturity phase of less innovation and more bureaucracy, reaching a plateau.

- They also draw on the idea of evolution (on y-axis), in which successful variations 

are selected and retained. Evolution is a key metaphor used to describe organisations in time and forms the foundation of most theories about organisations in time.

Managing Change and Crisis in Organisations – Notes NOTE: Dip in the black line suggests the notion that over time and with size and complexity organisations may become less fitting in an environment (as suggested in the evolution of species and survival of the fittest). Here, more successful variations and adaptations are necessary. 

The theory of evolution suggests organisational change is triggered by the external environment – environment asserts selection pressure on organisations and better fitting firms succeed while others fail. - Other environmental factors include technological advances, introduction and removal of government regulations, changes in societal values = shifting political dynamics, changes in demographics and growing international independence.

Biological Lifecycle  Theories of organisations in time are also based on the notion of a biological lifecycle. NOTE: Unlike evolution and the notion of complexity, the life cycle suggests there is a natural lifespan and process of development and growth for anytime of organisation. There is thus an optimal point in an organisation’s lifespan followed by a natural decline that leads to death.

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Miller and Friesen (1984) criticise the biological life cycle analogy as overly deterministic. - They highlighted many exceptions to the linear lifespan, where some organisations were stuck in one phase for a long time. - They also suggest movement between the phases, both backwards and forwards. These metaphors are useful when thinking about organisational change by influencing our ideas about why and when organisations change and whether organisations should be built to last. - NOTE: These metaphors are imperfect representations of the complex social systems that are organisations.

Industry Change  Industry change is also significant for managers – industry change must align with an organisations strategy or else success will not be long term.  McGahan (2004) argues there are 4 types of change trajectories, categorised by threats to core activities (become less relevant to suppliers/consumers) and threat to core assets (resources, knowledge, brand capital etc. fail to generate value).

Managing Change and Crisis in Organisations – Notes

- Radical industry evolution: When mass introduction of some new technology or

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when there is substantial government/policy changes. - Intermediating change: when buyers and suppliers have new options having unprecedently gain access to information. Core assets retain most of their value if used in new ways. - Creative change: Describes a stable relationship between the buyer and seller but one in which assets turn over constantly – e.g. film companies producing new films, pharmaceuticals more drugs. - Progressive change: Describes a situation in which buyers and sellers are incentivised to preserve the status quo as neither core assets nor activities are threatened. These trajectories unfold over decades and there is a lot of time for organisations to understand their industry specific trajectories and develop strategic options. - Typically, industries start with creative and progressive trajectories, then face pressure from customer demands and new technologies which push the industry onto radical or intermediating trajectories.

Internal factors in organisational change  Likewise the biological lifecycle suggests internal factors are key to change – here natural and predictable pressures that build as an organisation grows are identified and must be addressed to maintain growth.  Organisations move through 4 stages: - Entrepreneurial stage: Founders and initial managers develop ideas, acquire financial capital and take actions to enter a niche in the marketplace. Processes are introduced to select, train and coordinate staff. Informal real-time decision making. - Collectivity stage: Product development continues, and great focus is given to the acquisition of financial capital. Strong commitment among growing pool of managers and associates, low pay and long hours. - Formalisation and control stage: managers and associates are guided by formal processes and rules – efficiency of operations, strict division of labour. Increase in professional managers, greater formal departments etc.

Managing Change and Crisis in Organisations – Notes

- Elaboration stage: Focus on efficiency and innovation. Formal rules and 

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procedures exist alongside empowered lower-level managers and associates. Efficiency concerns coexist with concerns for innovation and renewal. Another key internal factor important for change is people characteristics, including new entrants with new skills and expectations; retirement of baby boomers; new CEO/leadership; and increased cultural diversity (following international strategy e.g.). - As the characteristics of the workforce change this puts pressure on the organisation to change aspects of its system (tasks, strategy etc.). - The people component needs to be congruent with the other organisational components for the organisation to succeed. Another key internal factor is failing to achieve aspirations – these centres around an organisation’s perception of a discrepancy between where it is and where it aspires to be; both the level of the individual, unit or whole organisation. - Aspirations are affected and determined by past aspirations, past performance, and social comparisons with other similar organisations. - When an individual. work group, division or organisation fail to meet its own aspirations; changes in tactics/strategies/processes follow.

Conclusion  Both external (environmental) and internal (lifecycle, aspirational) factors are important to change.  Organisations need to maintain congruence and find solutions to 4 fundamental organisational challenges associated with the division of labour and integration of effort.  Efforts to main congruence mean that with any change in the organisational inputs, strategy, or components; other changes are likely to be required.  Efforts to solve the 4 fundamental organisational challenges likewise mean that different forms of challenges and different potential solutions will lead to change.  The plethora of reasons for organisational change are reflective of one factor that contributes to the great challenges of management. Organisations in Crisis (2) Organisations in Crisis – COVID  The industries hit hardest by pandemic are labour intensive and rely on an army of low-paid works – these people are most likely to lose their jobs.  COVID has meant the economy now operates at 90% capacity and so this is expected to lead to a large number of bankruptcies. - Organisations with liabilities that exceed their assets are technically insolvent, which provides strong indication of financial difficulties. - Insolvent companies can enter into administration, a legal procedure that appoints an administrator who runs the company of behalf of creditors. The administrator may then decide to liquidate the company or pursue options that increase its viability – restructuring, demerging, recapitalisation etc.

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Although the number of companies entering administration has risen since last year, the number of insolvencies is lower – this is reflective of government responsive measures put in place to aid post-COVID recovery.

What is organisational decline?  Cameron et al (1998) defines organisational decline as a period of substantial decrease in an organisations resource base. - Occurs when an organisation’s adaptation or alignment with its niche or domain deteriorates (external causes). Can also occur when the firm’s resources constrict resulting in the deterioration of performance (internal causes). - This definition focuses on an organisations resource base – when base shrinks organisation declines. 

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McMillan and Overall (2017) define organisational decline as a time-based gap between actual performance and ideal performance. - This approach is much broader as it includes any occasion when performance is less than ideal. McMillan and Overall (2017) also identify 3 different patterns of decline:

Classic life cycle models of decline: Assume that organisations go through the same linear stages of birth/growth/maturity/decline. - Stages progress slowly but inevitably. - Source of decline is mostly internal and natural. Precipitous decline: Situations where specific issues cause a chain of consequences that are hard for managers to control. - Organisations move from boom to bust quickly and unexpectedly. - Source of decline is generally external shock. Slow decline: Circumstances where decline is very slow and irregular but that nonetheless leads to eventual failure. - Can stem from both external and internal misalignments.

Managing Change and Crisis in Organisations – Notes 

Organisations can also decline as a result of exogenous (external) factors, including intense competition between companies, technological change, processes that over time erode the congruence between an organisation and its environment etc.

Why do organisations fail?  Once organisations enter a period of decline, few are able to reverse the decline, and thus the majority of organisations tend to fail.  McMillan and Overall (2017) define organisational failure as a state with scarcity of resource slack (more than you need to get things done), unstable goal preferences, and poverty of strategic. - Organisations are rigid and lack capacity to be adaptive. - Lack of clarity or what an organisation should be doing lead to unstable goal preferences. - Lack of new strategies may prevent an organisation from securing the congruence it needs to be successful.  Decline can ultimately prevent an organisations ability to respond and hence lead to failure.  Starbuck and Nystrom (1997) argue that organisational crises are due to two factors: 1. The properties of the firm (internal) 2. The properties of the environment (external) - While crises/decline may be sparked by external factors, they only lead to failure when those inside the organisation fail to respond appropriately. - They specifically point to the way in which patterns that were previously successful lead to downfall because these prevent managers from seeing the world as it truly is – they feel reluctant to change what were once successful strategies – strong patterns of assumptions/behaviours and cultures that have previously lead to success may not be congruent when the environment shifts.  McMillan and Overall (2017) advance a framework for understanding 3 levels of organisational failure. - Emphasise the important of internal factors to create a culture and learning structure to protect themselves against failures. NOTE: When simple failures are tolerated, this can lead to subsequent more severe failures – simple failures are opportunities to improve processes. An organisation must be attentive to simple failures. Complex failures are caused by a lack of organisational planning. When organisations aren’t sufficiently agile this can lead to catastrophic failures.

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Key to organisational agility is having effective knowledge dissemination through the organisation so people can cooperate and collaborate but also organisational platforms that have resource slack (able to tolerate errors. Probst and Raisch (2005) argue that failure is generally regarded as a natural life stage and found that some companies fail prematurely at their peak. This failure is characterised by the following. - Burnout syndrome, excessive growth, uncontrolled change, autocratic leadership (leader doesn’t listen) and excessive success culture (aren’t willing to acknowledge and share mistakes). - Premature aging syndrome, stagnating growth, tentative change (stable), weak leadership and lack of success culture.

- They say for organisations to avoid failing prematurely they should pay attention 

to the early warnings of failure and think about whether the organisation is balanced in terms of these dimensions. Failure happens when the crises organisations face and challenge them are not matched by an appropriate respond. - Failure is caused by internal factors.

Who wants to live forever?  The social costs of organisational failure, including loss of employment, worker pensions and life, can be enormous. - This does not mean that organisations have to last forever.  The issue is less whether or not organisations eventually reach the end of their life but whether this happens prematurely – when an organisation still has a great deal of value to offer the world.  Countries need to compare the opportunities of investment held in different sectors and prioritise spending accordingly. - Investment change in green-orientated programs as appose to long-lasting fossil fuel infrastructure will still provide jobs, but benefits of more sustainable and equitable economic growth, as well as merits for the climate, also become available.

Managing Change and Crisis in Organisations – Notes Episodic Change (3) What is Episodic Change?  Greiner (1998) identifies 5 stages of organisational growth, with a dominant management style at each stage. - To reach the next stage it is necessary to overcome a specific management challenge.  Delegation is the breaking down of tasks.  Coordination requires people to coordinate once tasks have been delegated.  Collaboration overcomes competition between individuals. NOTE: Organisational growth here is distinguished as evolutionary (steady growth) growth and revolutionary (disruptions/management challenges) growth.

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Weick and Quinn (1999) also argue there are two main kinds of change, episodic and continuous. Episodic change (revolutionary/radical change) is: - Driven by external factors - Is discontinuous - Is infrequent - This change is characterised by inertia (a system will continue as in the same direction until an external force comes into play and changes its direction), triggers, and replacement. - Inertia is a force to contend with – when inertia builds, some trigger (incongruence) usually precipitates an episode of replacement. Continuous change (evolutionary change) is: - Driven by internal collective sense making – people adapt to what’s going on in their environment. - Is constant - Is cumulative Romanelli and Tushman (1994) examined the frequency of episodic (revolutionary) change in the US supercomputer industry: - For them, a revolution is a change in strategy/structure/power distributions (authority structures); all of which occur within 2 years.

Managing Change and Crisis in Organisations – Notes

- In 25 minicomputer producers – 61 strategy changes, 53 power distribution 

changes, 35 structural changes, and 23 cases of revolutionary change. They found these changes were triggered by change in environment or CEO succession and happened in a compressed period of time – episodic change is generally separated by periods of stability. This industry is relatively new and unstable and changes in another industry could be lower.

Nadler and Tushman (1989) distinguish between 4 kinds of episodic change: NOTE: The kinds of changes are as a result of reacting to 4 dimensions.

- Strategic change makes it incongruent initially in hope to re-shape it and make it more congruent in the future.

- Incremental change involves changes to the elements of an organisation to -

increase and maintain congruence. Anticipatory recognises changes can be made in anticipation of future events. Reactive changes are made as and when change occurs.

Content of episodic change  Episodic change is characterised as change in response to external events, that is discrete (clear start and ...