How Does Change Impact on an Organisation’s Strategy and Operations?
Managers are faced with the challenge to maintain stability and achieve some level of predictability. This seeks to resist change as much as possible. However, change is now the only reality that should be expected always since organisations are facing a complex and turbulent business environment. Maintaining the status quo through rigid structures is no longer a winning formula for organisations. This article aims at discussing how change impacts an organisation’s strategy and operations. This is done through describing what change is, discussing categories of change, external drivers of change, and perception of change initiatives as negative or positive.
What Is Organisational Change?
Organisational change refers to a shift in the current state of an organisation aimed at achieving improved performance. Such change can include: improvement in an organisation’s processes and routines; restructuring operational hierarchy; or making a major shift in organisation’s systems. This implies that organisational change attempts to improve its performance in either the short-term or long-term. The shift must thus follow certain steps and attempt to achieve certain objectives and goals. This requires a clear strategy and resource allocation mechanism to implement the change process and attain the required state/outcomes.
Categories of Change Initiatives
Change as small or large. A change initiative can occur to a small part of the organisation, for example, shifting a general manager’s office space or large change such as discontinuing a certain product line. This categorisation as small versus large is subjective since what looks small may be considered as big depending on the size of the organisation.
Strategic and structural change. Change can be categorised based on the organisational level impacted by the change process. Strategic change affects the entire organisation and brings about a shift in the organisation’s character and culture. An example of such a change is an alteration in the organisation’s values, beliefs and assumptions which guide the organisation’s strategy processes and operations. Such a change can be transformational and is very challenging since it involves a lot of people and organisation’s systems and processes. On the other hand, structural change involves a shift in an organisation’s processes and procedures. This can affect a small part of the organisation such as a department, for example, when an organisation changes the reporting hierarchy in a marketing department.
Purpose of change. Change can be of different types: developmental change—incremental shift in the state of the organisation such as improving assessment procedures of an educational institution; transitional change—gradually shifting the current state of an organisation such as moving from giving manual academic performance reports to giving automatically generated reports to students especially to keep with the current trends; and transformational change—shifting an organisation’s systems and operations significantly such as changing the overall competitive strategy.
Planned or emergent change. Planned change aims at maintaining stability and achieving some level of predictability. This shows that change will be resisted by people at all levels of the organisational structure. This is because change is still considered as disruptive and having negative consequences. Emergent change evolves over time and it requires the organisation to recognise the need for adaptability and flexibility. It occurs without the organisational members’ conscious effort.
What Are External Drivers to Change?
External drivers of change can include Political, Economic, Social, and Technological issues (PEST factors) which an organisation may have little or negative influence about. The factors are potential sources of strategic risk thus need to be considered carefully by any management practitioner and academic.
Political factors include government policies, rules and regulations, and restrictions about trade, production, and the environment. For example, the US’s restrictions on goods from China and Chinese companies during the Trump administration are significant drivers of change among Chinese companies and their stakeholders. Several companies and individuals that were partnering with such companies whose goods and services are restricted in the US have to consider planning for changes in their competitive strategies and operations. Similarly, in countries where there is political uncertainty, such as Libya and Syria, organisations cannot maintain rigid structures amidst such immense uncertainty. They have to embrace flexibility and this paves way for emergent change in its strategy and operations.
Economic factors such as corporate taxation, foreign exchange rates, and inflation determine an organisation’s profitability and overall financial performance. Economic uncertainty causes volatility of exchange rates especially in times of presidential elections and big political projects such as Brexit. Such volatility makes individuals and organisations either lose or gain economic value depending on whether the foreign exchange movements are against them or are in their favour. Such uncertainty and volatility of exchange rates makes organisations have no option but to be flexible and embrace emergent change and thus implementing emergent strategies and operations. Otherwise, sticking to planned changes and planned strategies can lead to strategic drift where the organisation’s operations become irrelevant to the current competitive environment.
Social factors include demographics, people’s lifestyles, and consumer purchasing behaviour. These influence consumers’ demand for services and products. This forces organisations to change their strategies and operations such that they meet the changing consumer tastes and preferences. Without such changes, the organisation’s products and services will be outcompeted and its current customers will be dissatisfied. This can threaten the organisation’s survival. This is more possible in the current competitive environment where social media platforms enable information and misinformation to flow globally within seconds.
Technological factors include the internet, growth of ecommerce, and innovations in product designs. COVID-19 has shown the need to embrace change enhanced by technological advancement. The pandemic has shown that traditional classrooms and lecture rooms are less safe and less feasible as learning spaces than online learning. Universities and other institutions that were reluctant to embrace online learning found themselves forced by the wave of change resulting from the risk of being infected with coronavirus when traditional learning spaces are used. Institutions of learning have now changed their competitive strategies and operations to cope with the need for blended learning.
What Shapes Perception of Change Process and Initiatives?
Change will bring different challenges to different people depending on their location in the organisation’s hierarchy. People can be categorised as change strategists and external consultants, supervisors and managers, and subordinates.
Change strategists and external consultants are top in the organisational hierarchy regarding change process. They are usually concerned about communicating and justifying the need for change and possible inconsistences in management actions and decision making. Supervisors and managers are in the middle of the organisational hierarchy and are concerned about challenges of implementation and decision making. They tend to seek for management support from higher levels as they are in direct contact with subordinates that they supervise. Recipients or subordinates are concerned about role ambiguity and overload which may be the source of low levels of satisfaction with the change process. These usually are worried about costs of the change process as they anxiously wait to see the benefits that the change initiative will bring.
Depending on the position held by an individual, change can be perceived positively or negatively. Subordinates perceive change positively when there are some benefits expected from the change process. Such benefits can include: possibility of being promoted; chance for innovation and creativity; and opportunities for skill development. On the contrary, subordinates will perceive change negatively if they expect to incur some costs. For example, if they expect conflict and division to result from the change and there is high possibility of downsizing. Change strategists, managers and supervisors will have a negative perception of the change initiative if they expect planning challenges and potential negative outcomes. In addition, if they expect lack of employee participation and some high level resistance to change, they will perceive change negatively.
In sum, change can be categorised as strategic and structural change; developmental change, transitional change and transformational change; and planned or emergent change. External drivers of change include political, economic, social and technological factors. Whereas these factors and the resulting change can bring challenges to individuals, perception of the change initiative is influenced by power enjoyed by an individual; degree of autonomy to make decisions and choices; and influence that can be exercised by the individual.
You can also learn more about organisational strategy development in our various business management courses offered in partnership with Chartered Management Institute (CMI UK) such as “Reviewing organisational strategy plans and performance”
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