Organisational Change: Needs, Factors, Types, Process

  • Post last modified:12 May 2022
  • Reading time:25 mins read

What is Organisational Change?

Organisational change is when an organizational system is disturbed by some internal or external force, change frequently occurs. Change as a process, is simply a modification of the structure or process of a system. It may be good or bad, the concept is descriptive only.

Organisations across the globe have to implement changes in the processes, structures, policies, etc., for improving their operations. The changing demands of customers and environmental uncertainty compel organisations to evolve and improve their way of looking at things.

To recognise possible changes, organisations perform an analysis of their internal and external environment critically. Accordingly, the organisations bring changes in the mission, vision and processes, which strongly impact individual employees as well as organisations.

For example, when polythenes were banned by the government, the organisations changed their methods of packaging products.


Need for Change in Organizations

Let us understand the need for change in organizations: ‰

  1. Changes are needed because they bring hope for the betterment and growth of the organisation. ‰

  2. Changes are natural, permanent and on-going processes that pressurise organisations, education systems and governments to initiate modification, replacement or alteration in the old methods over time.

  3. Changes in an organisation are required to empower the workforce so that it can explore new avenues and opportunities, upgrade skills and enhance creativity.

  4. Changes in the strategies or systems are needed when the performance or overall result is unsatisfactory. If an organisation does not perform well, there will be no profits, delay in the payments of salaries and bills, collapse from the market position, etc. Therefore, an organisation needs to update its methods, if old methods are not giving satisfactory results.

  5. Changes in an organisation are required because of the changes in the internal and external environment. The internal factors could be from the employees, trade unions and management. The external factors could be from customers, government, competitors, society and economy.

  6. Changes are needed when an organisation decides to do merger and acquisition. In merger and acquisition, the organisation has to change its existing organisational structure, hierarchy, policies, system, methods, etc., because in the process of merger and acquisition, two organisations combine into one. These changes can have a positive or negative impact on the employees of the organisation.

  7. Changes in an organisation take place due to the advent of new technologies that help in making the organisation more advance, efficient and competitive.

  8. Changes within an organisation help employees to learn new things, target new customers for selling products, increase creativity, etc.

Factors of Organisational Change

Changes are implemented by an organisation for improving the quality of products or services rendered. Let us understand the factors responsible for the change in an organisation. These are factors of organisational change:

  1. Change in Management
  2. Inadequacies at the Workplace
  3. Nature of the Workforce
  4. Internal Stagnation and Pressures
  5. Changes in the Macro-environment

Change in Management

Change in management has been a factor in initiating changes in an organisation. The management could change due to mergers and acquisitions, the retirement of the board members, transfer, dismissal or promotions of the management personnel, etc. New managers or top-level executives will have a different style of leading people with different ideas and experiences of working.

In the case of merger and acquisition, there is a consolidation of organisations which changes the overall objective, vision and structure of the organisation. Because of these changes, organisations modify and replace old policies and processes with new ones.

Inadequacies at the Workplace

Changes in the workplace are initiated by the management when the current methods of production are not giving the expected results. The inadequacies could be related to several managerial levels, the span of control, unclear responsibilities, lack of coordination, ineffective communication levels, unclear objectives and policies, etc.

Nature of the Workforce

Changes are also implemented because of the nature of the workforce. An organisation needs dedicated and hardworking employees who understand the values of the organisation. Young employees have a different working styles. They have a different outlook in terms of their career, commitment and goals.

Some employees are rigid or adamant and do not want to change their perspectives or ways of performing work. An organisation needs to bring changes in the perspective of employees through its policies and decisions to increase employee loyalty and commitment.

Internal Stagnation and Pressures

Changes within an organisation take place when there is stagnation in the organisation because of conflict between employees and management, inactive employees, personal relationships in the organisation, job dissatisfaction because of pay structures and poor working conditions. Due to these reasons, the managers are forced to change their policies, approach and working strategies.

Changes in the Macro-environment

Changes in the macro-environment also force organisations to bring changes in their style of working. The macro-environment is the external environment that cannot be controlled by an organisation. External forces have a direct and indirect impact on the organisation.

The various external or macro-environmental factors are:

  • Changes in technology: Technological changes have a major impact on an organisation. Adopting new technologies, manufacturing operations and telecommunication systems can help an organisation to improve productivity, and market competitiveness- ness and eliminate the chance of becoming outdated.

  • Changes in the market and the economy: The changes in the economy and the markets have a wide impact on the industries since the needs, expectations and requirements of consumers keep on changing frequently. The competitive environment has flooded the market with new products and services.

    Organisations use different innovative marketing techniques for attracting customers. Organisations are becoming more creative in their marketing style, advertising and promotional methods to influence and attract customers.

  • Socio-cultural changes: Social and cultural changes in the environment are due to the changes in the perspective, desires and beliefs of the people. These changes require organisations to make adjustments in their working procedures.

    The social and cultural changes are due to fast urbanisation, increasing literacy rate, women empowerment and other social causes. These socio-cultural changes also change the perspective of society for men and women, equal opportunities to women, child labour, etc.

  • Political and legal conditions: Changes in the political and legal conditions within and outside the country have a major impact on the organisations. The politics of the country, changes in government policies and legislations are also responsible for organisational change.

    Industry operations are regulated by government laws and the organisations need to follow and adapt to the changes due to the political and legal conditions; otherwise, organisations have to pay fines and heavy penalties.

Types of Organisational Change

Changes in an organisation create a considerable impact on the organisation, its operations and the people. There are different areas within the domain of an organisation where changes can be brought about for enhancing the working of the organisation.

The different types of changes that can have a considerable impact on the organisation are:

  1. Individual Level Change
  2. Group Level Change
  3. Organisational Level Change
  4. Structural Change
  5. Process-oriented Change
  6. People-oriented Change
  7. Strategic Change

Individual Level Change

This change takes place on an individual level due to modification in the job assignment of the individual, transfer of the individual to a different location, or retirement of an individual that happens over some time. Some organisations think that changes at the individual level will normally not have any important implications on the working of the organisation.

However, this opinion is incorrect because any important change at the individual level will impact the working of the organisation and other people working in the organisation. The management of the organisation wanting to implement changes at the individual level by transferring employees must understand that the change will influence the working of the system. For example, the promotion or transfer of an employee is an individual-level change.

Group Level Change

Organisational changes have an impact on working at the group level. Normally, the activities and tasks in an organisation are organised within groups. The tasks could be assigned to a team of people, units, or departments, or could be some form of informal working group.

Any changes at the group level can impact the flow of work, and job design, influence various social groups, affect the communication systems, and other systems of the organisation. Before implementing any changes, the management should keep in mind the factors that can have repercussions on the different levels of the organisation.

For example, the reorganisation of different departments or the establishment of temporary project teams on the basis of changing needs is group-level change.

Organisational Level Change

Changes at the organisational level N or restructuring have an impact on the procedures and workings of the system. These involve significant plans and programmes that affect both individuals and groups. These strategic decisions within the organisations are normally made by senior management and are rarely implemented by a single individual.

The decisions are for a long duration of time and they need a considerable amount of planning and direction from the managers for implementing changes. This could be in terms of changing the organisational structure, revamping the financial systems, changing the responsibilities and duties of the people or changing the objectives of the organisation.

These changes could be due to newer technologies, knowledge or changes in the global environment which eventually help in organisational development. For example, a merger or takeover is an organisational level change.

Structural Change

Organisational change makes it necessary to redesign the organisational system and structure of the company since these structural changes bring in changes in the authority and responsibilities of the people and the management.

Due to influences from the external environment, the organisation needs to change its administrative procedures, systems of management, hierarchy, authority, goals and other structural characteristics in regard to the operations of the organisation.

Process-oriented Change

These changes relate to automation, technological innovations, and information processing in the industrial world. It is becoming very important for organisations to upgrade their technology and their processes to achieve optimum workflow for productivity. The process-oriented change could be new technological knowledge that is connected to replacing heavy equipment and machines.

Process-oriented change is necessary to keep pace with competitors and to periodically replace existing machines and equipment with newer models. For example, when a supermarket that used to have a manual checkout pro- cess starts using laser-scanning checkouts, it is a process-oriented change. ‰

People-oriented Change

People-oriented changes are in terms of changes in employee skills, attitudes, behaviour, and knowledge which help in improving the performance of the employees. It requires the organisations to be consistent with the employee’s related policies and the mission of the organisation. These changes bring in a level of self-actualisation amongst the people and are directed towards group cohesion, communication, motivation, loyalty and performance within the groups.

The changes can be brought by closer interaction with employees and by the process of training and other modification sessions. The focus of this training can help in problem-solving, employees learning new skills and the changing perception of the people in regards to their jobs and the organisation. For example, introducing training programmes directed at the attitude and behavioural changes in employees are people-oriented changes.

Strategic Change

Changing competition level in the business makes it necessary for organisations to relook at their plans, systems, resources and strategies for achieving their objectives. It would also mean that the organisation needs to change its vision and the mission statement as per the demands of the external environment and competitors’ moves.

A change in strategy would be to change their approach towards conducting their business, consumer satisfaction and other strategic changes within the operations of the company. They would need to look into their external partnerships, global activities and joint business ventures that are important for the growth and profitability of the organisation.

For example, when a product-centric organisation shifts its focus to being a product-cum-service organisation, it is a strategic change. Or, if an organisation introduces a new product line, it is also a strategic change.


Process of Organisational Change

Many change management models help in providing the processes that are needed for supporting the changes in the organisation. Kurt Lewin, a physicist and social psychologist, has identified three stages of organisational change. These are the main steps in process of organisational change:

  1. Unfreezing
  2. Changing
  3. Refreezing

Unfreezing

It is the method of identifying the old behaviour that needed to be altered with the new one. This involves breaking down the existing status quo before the organisation can build up a new way of operating. It is the stage that involves bringing an awareness of the present state and the problems associated with the present conditions that are hampering the organisation in certain ways.

The problems could be old processes, behaviour and thinking processes which need to be altered along with the change in the organisational structure and educating the employees on the changes required.

Changes are necessary to keep up with the trends and for gaining a competitive edge in the economy. It is important to communicate with the workforce and make them aware of the changes that would benefit them in the long run.

Changing

It is the process of implementing the changes for moving to the new stage and involves the process of transition. The changes get implemented and the new process is being followed by the workforce. The people start accepting the new transition and learn to adapt to the new stage. The changes can be large or small and are dependent on the size of the company.

The stage is followed by the realisation of uncertainty and insecurity among the people. It is not an easy phase and takes time to get prepared for this phase. It is a slow process and people learn to accept the new behaviour and the processes. Therefore, it is essential to communicate with employees about the change process and the benefits of implementing change. The process of change should be well planned and executed carefully.

Refreezing

The last stage of the change model is refreezing. Refreezing is stabilising or fixing the changes made as a normal way of doing things. The people learn to accept and follow the changes made to organisational structure, systems and processes and the new objectives of the enterprise with the new norms.

This is the most important step for the organisation that ensures that the impact of the change is not lost and the people do not find reasons for going back to their old methods for executing the changes. Efforts are needed for the people to understand the positive effects of the change so that the new processes get firmly integrated into the system and the culture of the organisation.


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