Change Management

Chapter 1
The dimension of change
Before getting into the details of managing change, it’s useful to overview the
types of change programs used by organizations and the different approaches to
change that can be taken. This broad view will help you later as we get into the
nitty-gritty of managing change.
Types of Change
Organizations typically respond to the challenges of new technologies, new
competitors, new markets, and demands for greater performance with various
programs, each designed to overcome obstacles and enhance business
performance. Generally, these programs fall into one of the following categories:
• Structural change.–These programs treat the organization as a set of functional
parts—the “machine” model. During structural change, top management, aided
by consultants, attempts to reconfigure these parts to achieve greater overall
performance.
Mergers, acquisitions, consolidations, and divestiture of operating units are all
examples of attempts at structural change.
• Cost cutting.–Programs such as these focus on the elimination of nonessential
activities or on other methods for squeezing costs out of operations.Activities
and operations that get little scrutiny during profitable years draw the attention
of cost cutters when times are tough.
• Process change.–These programs focus on altering how things get done.You’ve
probably been involved with one or more of these. Examples include
reengineering a loan approval process, the company’s approach to handling
customer warranty claims, or even how decisions are made. Process change
typically aims to make processes faster, more effective, more reliable, and/or
less costly.
• Cultural change.–These programs focus on the “human” side of the organization,
such as a company’s general approach to doing business or the relationship
between its management and employees. A shift from command-and-control
management to participative management is an example of cultural change, as
is any effort to reorient a company from an inwardly focused “product push”
mentality to an outward-looking customer focus.
Two Different Approaches to Change

While there are many types of change programs, two very different goals
typically drive a change initiative: near-term economic improvement or an
improvement in organizational capabilities. Harvard Business School professors
Michael Beer and Nitin Nohria coined the terms “Theory E” and “Theory O” to
describe these two basic goals.
Theory E: An Economic Approach
The explicit goal of Theory E change is to dramatically and rapidly increase
shareholder value, as measured by improved cash flow and share price. Popular
notions of employee participation and the “learning organization” take a back
seat to this overarching goal. Financial crisis is usually the trigger for this
approach to change. Driven to increase shareholder value,Theory E proponents
rely heavily on mechanisms likely to increase short-term cash flow and share
price: performance bonuses, headcount reductions, asset sales, and strategic
reordering of business units. According to Theory E, all implicit contracts
between the company and its employees, such as lifetime employment, are
suspended during the change effort. Individuals and units whose activities fail to
demonstrate tangible value creation—for example, corporate planning or R&D—
are particularly vulnerable.
Theory O: An Organizational Capabilities Approach
The goal of Theory O change is to develop an organizational culture that
supports learning and a high performance employee base. Companies that
follow this approach attempt to invigorate their cultures and capabilities through
individual and organizational learning. And that requires high levels of employee
participation.
Which Is Best—Or Most Appropriate?
If your organization is considering a major change program, you are probably
wondering which is best. Unfortunately, the record shows that neither approach
is a guarantee of success.Theory E, aiming for rapid improvements in
profitability, often succeeds in the short run, but does so at the expense of
future vitality. By decimating employee ranks, it leaves survivors demoralized
and disloyal.Any commitmentthey had to the company and its goals evaporates.
Ironically, the people the organization hopes to retain—the brightest and most
marketable employees—are among the first to snap up severance packages and
look for greener pastures.
Nor do Theory E’s draconian measures always produce the desired results. A
survey conducted after the last wave of corporate downsizings (late 1980s
through early 1990s) found that only 45 percent of downsizers reported higher
operating profits. Theory O is not an ideal solution either. Reorienting corporate
culture around employee commitment and learning is a noble endeavor, but it is
a multiyear proposition. A successful program may produce a smarter,more
adaptive employee base in four to five years, but companies that really need
change cannot wait that long for results. Managers and employees, not to
mention analysts and shareholders, simply aren’t that patient.
TABLE 1 - 1
Key Factors in Theory E and Theory O Change
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Waraabe 859.85- shiidaal garaadka, aadan shuuriye, cuqaasha
Name: _______________________________________ ID.No.____________
Part 1. Write true if the statement is correct and false if the

statement is incorrect (1 pt each). Write complete TRUE/FALSE.
1. Theory E of change is to develop an organizational culture that
supports learning and a high performance employee base ( F
)
2. Top-driven change doesn’t create people problems ( F )
3. Describing desirable future for labor increases labor acceptance for
change ( T )
4. The goal of theory E change is to maximize shareholder value ( T
)
5. Theory E change aims at rapid improvements in profitability ( T
)
Part 2. Choose the correct answer from the given alternative (1.5pts
each)
1. In making change organizations should focus one
A. Results
B. Activities
C. Shared goals
D. None of the above
2. Focus of theory E lies on
A. Manage change from the top
B. Emphasize structure and system
C. Build up corporate culture
D. All of the above
3. We can expect a greater probability of success if the change
contemplated has the following features
A. Clear advantages over the status quo;
B. Compatibility with peoples’ deeply-held values,
C. Requirements that are understandable
D. All of the above
4. Problem identification without its _______ identification is nothing
A. Common sense
B. Solution
C. Idea generation
D. None of the
5. In communicating the vision, be very specific about how the change
will
A. Improve the business
B. How those improvements will benefit employees
C. Improve customer satisfaction
D. All of the above
6. These programs treat the organization as a set of functional parts—the
“machine” model
A. Cost cutting
B. Structural change
C. Process change
D. Cultural change
Part 3. Short answer (2pts each)
1. Differentiate between theory O and theory E of change?
2. List at least steps of change?
3. List and elaborate two types change?

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Chapter 1

The dimension of change

Two Different Approaches to Change

Name: ___________________________ ID.No.

Part 1. Write true if the statement is correct and false if the

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