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    mikey talks about the difficulty of getting fabric manufacturers to create new fabrics. mikey describes the process by saying that when he goes to vendors and asks them for something new, they say no, and then he tells them how it should be done. for the fabric manufacturers, this is an example of a change driven by conditions.

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    Mikey talks about the difficulty of getting fabric manufacturers to create new from MNGT 105 at Community College of Baltimore County

    Mikey talks about the difficulty of getting fabric

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    Mikey talks about the difficulty of getting fabric manufacturers to create new fabrics. Mikey describesthe process by saying that when he goes to vendors and asks them for something new, they say no,

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    0 / 1Open ExplanationExplanation:Magna Co. used to have a strict hierarchy in its organization chart. Throughmanagerialinnovation, the company flattened the reporting process and encouraged employees of all levels toshare their ideas with even the top executives.

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    Solved Video: >> Well, definitely when Holden came out

    Answer to Solved Video: >> Well, definitely when Holden came out

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    Question: Video: ≫≫ Well, Definitely When Holden Came Out We Were The New And Improved Outerwear. For The First 5 Or 6 Years It Was People Just Waiting To See And They Still Do. I Mean A Lot Of Our Accounts Come In And Say "I Can't Wait To See The Collection. What Have You Done This Year? What New Fabrics, What New Designs Do You Have?" So, Yeah, It Really

    Video: >> Well, definitely when Holden came out we were the new and improved outerwear. For the first 5 or 6 years it was people just waiting to see and they still do. I mean a lot of our accounts come in and say "I can't wait to see the collection. What have you done this year? What new fabrics, what new designs do you have?" So, yeah, it really affected the industry as well. I mean we had competitors at our big shows showing pieces of their lines. This is our Holden piece, this is our Holdenesque garment. We've been kind of labeled as the person or the brand that pushes that, the style portion of technical [inaudible]. Hi, I'm Mikey LeBlanc. I'm the founder of Holden and I'm one of the guys that helps with marketing around here. >> I have a pretty solid background in both development and design. So I actually do really get excited about technology and working, you know, whether it's with the fabric mill or with a garment manufacturer on taking something that everyone does every day and doing it slightly different and how are we going to do it different and how are we going to present it to the market in a way that's still acceptable and functional. Hi, I'm Nikki. I'm the design and development manager at Holden Outwear. >> When we started the company in 2002, Scott and I wanted to make a natural fiber, waterproof, breathable fabric, which didn't exist. So, we had a ton of vendors. Every time we'd met with a fabric supplier we would say "Do you have anything natural, waterproof, breathable?" They're like "Okay, you're like, you're crazy". So, basically we had to put the pieces together. We developed the world's first natural fiber, waterproof, breathable fabric in 2005, which was a hemp poly mix fabric. We won a ton of awards for it and, you know, we had our major competitors again chasing us right after that. [ Music ] >> I think our denim that we're doing is really exciting. You know a lot of companies in the outer market are doing cheap nylons that are printed to look like denim and we're actually doing a true cotton 12 that is denim and, you know, laminated with the 20k water proofing and is performing on the mountain as, you know, high performance outerwear and also looking like a real true jean when someone wears it. >> Yeah, we're a small brand and we aren't able to, you know, have all pieces of the puzzle. We don't own factories, we don't own the fabric mills, we can't fill a factory so we've got to have really great relationships with all of our vendors. >> This is 100% polyester twill two layer. >> It's definitely getting harder and harder to be able to push our vendors to do new development. Costs are going up, you know, and they don't want to develop something that may in turn not get used. >> We may go in with a new design they've never seen and they're like, "Well, that's not possible". And then you say, "Yes", and they say "No", and you say "Yes, this is how". And then they're like "Wow, cool", and then their brains start working and they're like "Wow this is great. This is something new our factory can do and offer to other people". >> And that's how we do our business is to be able to, you know, push our manufacturers or our vendors in ways that they aren't pushed. That's how we come up with something new.

    Questions:

    1) Mikey talks about the difficulty of getting fabric manufacturers to create new fabrics. Mikey describes the process by saying that when he goes to vendors and asks them for something new, they say no, and then he tells them how it should be done. For the fabric manufacturers, this is an example of a change driven by _____conditions. (global, internal, external, or technical)

    2) In general, Mikey and Nikki are proactive, making planned changes at Holden Outerwear. Which of the following actions are consistent with this approach? Check all that apply.

    A) Mikey and Nikki see how the environment is changing, and they match their actions to environmental changes that have already occurred.B) Mikey and Nikki imagine what should be rather than working with what is.C) Mikey and Nikki actively analyze the environment and try to predict upcoming opportunities or threats.D) Mikey and Nikki look for problems in the organization. When they find one, they determine why the problem exists and what the most appropriate solution would be.

    3) Which of the following are related to characteristics Mikey must have in order to promote change at Holden? Check all that apply.

    A) Mikey cares about how his employees are treated, and he wants to do the right things for them.B) Mikey is always clearly in charge, and nobody is willing to question what he says.C) Mikey is known for his ability to think outside the box—he always has new ideas.D) Mikey has a sense of humor about himself and the things that happen at work.

    Expert Answer

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    1- external conditions 2- B) Mikey and Nikki imagine what should be rather than working with w…

    Source : www.chegg.com

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    Please do Q & A Chapter 07- Assignment- Organization Change and Innovation file and answer 5 questions correctly. If your answers are wrong, there is an another version to answer the question. I will upload another version for you if you are answers are wrong. I will not give you extra credit for another version. If you are answers are wrong, I will request refund from you. Because some tutors answered wrong questions. Please understand me. I need the correct answers. That's why please answer five questions correctly. You can look up chapter 7 notes if you need more informations. Please let me know if you have any questions.

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    1. Nature of organization change (Connect, Perform) Read this article about a management change at Twitter, and then answer the questions that follow. Management in the News Twitter, the popular micro-blogging site, has faced serious declines in its stock value. This decline in stock values has occurred despite the company’s top line growing by 74% and 111% in the latest quarterly and annual results, respectively. The service is free for users, with revenues instead generated primarily by ad sales. Why has Twitter has lost favor with investors? Twitter’s user base of 302 million users is much smaller than Facebook’s user base of 1.4 billion users. Instagram has experienced rapid growth, bringing the size of its user base near that of Twitter. Even Snapchat is gaining users at a much faster pace than Twitter. The rate of change is increasing in that new social networks are launching every day. Thus, investors are concerned about competitive pressures. In comparison, while Twitter continues to add new users, its pace of growth is slow. This is due to Twitter’s inability to make a clear value proposition to new users. Though hundreds of millions more users have signed up on the Twitter platform, a large number of them have not converted into active users on the platform. To combat these challenges, Twitter has initiated changes in its platform features and in its corporate leadership. Twitter has introduced new features for users, including instant timelines, logged-out homepages, and enhanced messaging features. Perhaps even more significant is the change in leadership at the top of the organization. Jack Dorsey, cofounder and chairman of the board, will replace Dick Costolo as CEO, at least until a more permanent successor is identified. Source: Trefis Team. (2015, June 12). Twitter announces change in leadership as challenges continue. Forbes. Retrieved from http://www.forbes.com/sites/greatspeculations/2015/06/12/twitter-announces-change-inleadership-as-challenges-continue/ The table lists several forces that could incite organization change at Twitter. For each item, categorize the force as an internal or external force. Force Internal Pessimistic forecasts by industry analysts ??? Externa l ??? Force Internal Regulations affecting the industry, such as “net neutrality” rules ??? Innovation that improves user experience ??? Externa l ??? ??? Twitter’s organizational changes were___________ (a. proactive b. planned c. reactive) because they came in response to forces inside and outside the organization. Which of the following are possible reasons Twitter changed the roles of its executive leadership? Check all that apply. a. Twitter needed new leadership to better establish a strong value proposition for users. b. Twitter needed to respond to the concerns of investors. c. Twitter wanted a more streamlined decision-making process. d. Twitter’s past leadership wanted to earn revenues from user fees. How could Twitter maximize its effectiveness? a. Proactively change to keep up with changes in its environment b. Change frequently at the top levels of the company, but keep the bottom levels of the company the same c. Frequently change its strategies, but rarely change the way employees do their work d. Minimize the number of changes it makes overall 2. Managing change in organizations (Connect, Perform) Imagine you are conducting a force-field analysis for a company undergoing change. Categorize each force listed in the table below as either promoting or resisting change. Against Change Force For Change Customer anxiety about functional reliability ??? Feelings of ambiguity toward changes at work ??? ??? Concern about the logistics of making the change ??? ??? Desire for outcomes associated with change ??? ??? ??? Read the following case about eBay and PayPal. Then use your knowledge about managing change in organizations to answer the questions that follow. Management in the News In 2001, eBay acquired PayPal, the Internet-payment provider. PayPal was initially conceived as a way for acquaintances to manage transactions like paying babysitter fees or paying back a friend for dinner, but the service caught on quickly on eBay, where it freed anonymous buyers and sellers from the hassles of sending checks or money-order payments. The acquisition enabled eBay to decrease transaction times and have oversight over functions directly related to revenue generation. Then in 2015, eBay’s board of directors decided to separate PayPal from eBay. PayPal and eBay will function as two separate, individual, publicly traded companies. John Donahoe, president and CEO of eBay, said that the split will allow PayPal and eBay to “have a sharper focus and greater flexibility to pursue future success in their respective global commerce and payments markets.” eBay will make a change in leadership as well. Donahoe has indicated that he will step down from the role of CEO once the separation is complete. PayPal exists in an environment that is more competitive than that facing eBay, and the marketplace for online payment systems is rapidly changing. Apple’s own online payments system, Apple Pay, will compete with PayPal. It may gain users rapidly because it enables people to leave their credit cards at home, paying for everything with a wave of their smartphone. eBay hopes that spinning PayPal off into a separate business will give the company the focus it needs to stay ahead of this new competitor. Carl Icahn, who owns 2.5% of the online auction house, ran an attack campaign calling for the separation of the two companies. He successfully influenced the perceptions of other investors, describing PayPal as a “jewel” whose value was being “covered up” by eBay. eBay and PayPal are very different businesses, operating in very different markets, each with their own set of strategic priorities. The spin-off should allow each business to focus on what is best for them. Source: Rushton, K. (2014, October 1). The five reasons behind Paypal’s split from eBay. The Telegraph. Retrieved from http://www.telegraph.co.uk/finance/newsbysector/mediatechnologyandtelecoms/digitalmedia/11134139/The-five-reasons-behind-PayPals-split-from-eBay.html Which factors neutralized potential forces for or against change in this situation? Check all that apply. a. eBay signed a noncompete agreement that it will not develop its own digital payment system. b. Icahn owns shares in several unrelated industries. c. PayPal signed a noncompete agreement stating that it will not develop its own online marketplace. d. The identity of the next CEO of eBay is unknown. Donahoe, eBay's CEO, wants guidance on managing the process of spinning off PayPal. By deciding to separate the companies, the board has selected what change will be made. Using a comprehensive approach to change, which step should the board have completed before making this decision? a. Evaluate the results of the change. b. Analyze the variables relevant to the need for change. c. Establish goals for the change. Which techniques would you recommend that eBay’s leadership utilize to overcome resistance to change in this situation? Check all that apply. a. Leak good news about the company to the press to garner external buzz in support of the change. b. Threaten those who do not support the change. c. Use a force-field analysis to show that the forces for change outweigh those against change in objective terms. d. Offer opportunities for employees to have some control over the changes that impact them, such as whether they remain at eBay or separate with PayPal. e. Actively avoid conflict and be defensive when questions arise about the change. 3. Areas of change and organization development (Connect, Perform) Read the scenario below and then, using your knowledge of the areas of organization change and organization development, answer the questions that follow. © Shutterstock Images Management at Work Compass Automation, a small manufacturer of robotic automation, is shaking up an industry traditionally dominated by established technology companies. Companies like yours, with longstanding reputations for innovation and excellence, regularly won client business and the best and brightest employee talent. During the past year, a decline in new contracts has alerted executives at your company to a potential threat. A competitive analysis showed that Compass Automation, despite having fewer than 50 employees and fewer than 10 years in the business, is positioning itself as a lean and nimble innovator in the robotic automation industry. The startup has won contracts from several industry clients, including Caterpillar and Raytheon. It was ranked 55 on Inc. magazine’s list of most innovative business models of 2014. What’s more, Compass Automation is going after new employee talent. It has been the choice of many of the top MIT graduates in the field. Fortunately, the executive team has realized that this competitive threat calls for change. A group of managers has been assembled to generate ideas. As an expert in organization change, you’ve been asked to facilitate the process. The first brainstorming session resulted in many ideas. You know that organizational change can involve almost any part of the organization, although change interventions often fall into three broad categories: 1) organization structure and design, 2) technology and operations, and 3) people. Thus, you want to organize the managers’ ideas into these categories to determine whether the company might start by focusing on just one category. Source: Krasny, J. (2014, August 20). The most innovative business models of the 2014 Inc. 5000. Inc. Retrieved from http://www.inc.com/jill-krasny/5-most-innovative-business-modelsinc-500.html Which of the following types of ideas relate to changes in your company’s organizational structure and design? Check all that apply. a. Enterprise resource planning b. Line-staff structure c. Authority distribution d. Work sequences e. Reporting relationships f. Culture Proposed change interventions related to your company’s technology and operations include which of the following? Check all that apply. a. Overall design b. Enterprise resource planning c. Control systems d. Work processes e. Work sequences f. Human resource management The other major area of organizational change addresses people, attitudes, and behavior. Changes to which of the following would relate to this category? Check all that apply. a. Human resource management b. Values c. Expectations d. Overall design e. Perceptions f. Attitudes Now that you’ve considered the areas in which change can occur, it’s time to make your recommendations. On what area of organization change should your company focus? a. Technology and operations b. People c. Organization structure and design Your CEO is considering using organization development (OD) to promote change in the organization’s people. Which of the following are OD techniques? Check all that apply. a. Team building b. Survey feedback c. Process consultation d. Conflict avoidance 4. Innovation (Connect) Identify the step in the innovation process at which the following actions are most likely to occur. Actions Kenji started selling a mixtape on street corners. Once it got play time on a local radio station, thousands of people downloaded it from online sites. Within a few years of their introduction, flat screens were incorporated into most televisions, Developmen t Applicatio n Launc h Growt h Maturit y Declin e Actions and the cost had dropped dramatically. A concert venue books some of the most popular acts in the country for the first week its doors are open to raise public consciousnes s of the venue as a destination. After a workflow redesign, a single loan officer handles a customer’s application throughout the process, rather than Developmen t Applicatio n Launc h Growt h Maturit y Declin e Actions having each step completed by a different bank employee. Network television shows are losing viewers and advertising dollars as many people subscribe to Internetbased services. Musashi sends a survey to customers to better understand their level of interest in two features that may be Developmen t Applicatio n Launc h Growt h Maturit y Declin e Actions Developmen t Applicatio n Launc h Growt h Maturit y Declin e added to his company’s product. Apple’s Swift, a programming language for iOS, OS X, tvOS, and watchOS introduced in 2014, is a _________ (a. product b. process) innovation; on the other hand, when Toyota implemented just-in-time manufacturing in the 1970s, this was a _________ (a. process b. product) innovation. Consider the common impediments to innovation noted in the summary below. The Innovator’s Dilemma: When New Technologies Cause Great Firms to Fail by Clayton Christensen (Harvard Business School Press 1997), explains the common organizational impediments to innovation. These include a lack of resources or failure to allocate resources strategically, inability to act quickly due to bureaucracy, risk aversion, and an inability to recognize opportunities to innovate. The failure to recognize opportunities could be caused by the organization’s structure, culture, complacency, and confidence. Eastman Kodak had been a great innovator in film photography and had grown to be one of the largest US firms, but the company remained entrenched in film-related products in the 1990s despite the innovation of digital images. On the Fortune 500 list, it slid from No. 18 in 1990 to No. 124 in 2000. What were the likely reasons for its failure to innovate? Check all that apply. A. Complacency b. Failure to recognize opportunity c. Lack of financial resources d. Lack of expertise Which of the following statements describe an organization’s use of organization structure and design to promote innovation? Check all that apply. a. Google has a “20% Time” policy. A fifth of an employee’s time at work can be spent working on ideas and projects of personal interest. b. All of Google’s work facilities incorporate snack and beverage stations within 150 feet of employee work spaces. c. DreamWorks Animation offers employees fully paid sabbaticals. d. GradyWhite Boats offers a financial bonus company-wide when revenue goals are met. 5. Organization change and innovation: Holden Outerwear case study(Lead) The following short video introduces you to change at Holden Outerwear.Watch the video and use your knowledge of organizational change and innovation to answer the questions that follow. Transcript Mikey talks about the difficulty of getting fabric manufacturers to create new fabrics. Mikey describes the process by saying that when he goes to vendors and asks them for something new, they say no, and then he tells them how it should be done. For the fabric manufacturers, this is an example of a change driven by________ (a. technical b. internal c. external d. global) conditions. In general, Mikey and Nikki are proactive, making planned changes at Holden Outerwear. Which of the following actions are consistent with this approach? Check all that apply. a. Mikey and Nikki actively analyze the environment and try to predict upcoming opportunities or threats. b. Mikey and Nikki look for problems in the organization. When they find one, they determine why the problem exists and what the most appropriate solution would be. c. Mikey and Nikki see how the environment is changing, and they match their actions to environmental changes that have already occurred. d. Mikey and Nikki imagine what should be rather than working with what is. Which of the following are related to characteristics Mikey must have in order to promote change at Holden? Check all that apply. a. Mikey is known for his ability to think outside the box—he always has new ideas. b. Mikey is always clearly in charge, and nobody is willing to question what he says. c. Mikey cares about how his employees are treated, and he wants to do the right things for them. d. Mikey allows employees to work in only one part of the company. He doesn’t want to hear their ideas about what should be happening in other departments or divisions. Chapter 7: Organization Change and Innovation 7-1The Nature of Organization Change Organization change is any substantive modification to some part of the organization. Thus, change can involve virtually any aspect of an organization: work schedules, bases for departmentalization, span of management, machinery, organization design, people themselves, and so on. It is important to keep in mind that any change in an organization may have effects extending beyond the actual area where the change is implemented. For example, when General Motors recently installed a new automated production system at one of its plants, employees were trained to operate new equipment, the compensation system was adjusted to reflect new skill levels, the span of management for supervisors was altered, and several related jobs were redesigned. Selection criteria for new employees were also changed, and a new quality control system was installed. In addition, it is quite common for multiple organization change activities to be going on simultaneously. 7-1aForces for Change Why do organizations find change necessary? The basic reason is that something relevant to the organization either has changed or is likely to change in the foreseeable future. The organization therefore may have little choice but to change as well. Indeed, a primary reason for the problems that organizations often face is failure to anticipate or respond properly to changing circumstances. The forces that compel change may be external or internal to the organization. External Forces External forces for change come from the organization’s general and task environments. For example, two energy crises, an aggressive Japanese automobile industry, floating currency exchange rates, and floating international interest rates—all manifestations of the international dimension of the general environment—profoundly influenced U.S. automobile companies. New rules of production and competition forced them to dramatically alter the way they do business. In the political area, new laws, court decisions, and regulations affect organizations. The technological dimension may yield new production techniques that the organization needs to explore. The economic dimension is affected by inflation, the cost of living, and money supplies. The sociocultural dimension, reflecting societal values, determines what kinds of products or services will be accepted in the market. Because of its proximity to the organization, the task environment is an even more powerful force for change. Competitors influence an organization through their price structures and product lines. When Dell lowers the prices it charges for computers, Hewlett-Packard may have little choice but to follow suit. Because customers determine what products can be sold at what prices, organizations must be concerned with consumer tastes and preferences. Suppliers affect organizations by raising or lowering prices or changing product lines. Regulators can have dramatic effects on an organization. For example, if OSHA rules that a particular production process is dangerous to workers, it can force a firm to close a plant until it meets higher safety standards. Unions can force change when they have the clout to negotiate for higher wages or if they go on strike. Internal Forces A variety of forces inside the organization may cause change. If top management revises the organization’s strategy, organization change is likely to result. A decision by an electronics company to enter the home computer market or a decision to increase a ten-year product sales goal by 3 percent would occasion many organization changes. Other internal forces for change may be reflections of external forces. As sociocultural values shift, for example, workers’ attitudes toward their job may also shift—and workers may demand a change in working hours or working conditions. In such a case, even though the force is rooted in the external environment, the organization must respond directly to the internal pressure it generates. 7-1bPlanned Versus Reactive Change Some change is planned well in advance; other change comes about as a reaction to unexpected events. Planned change is designed and implemented in an orderly and timely fashion in anticipation of future events. Reactive change is a piecemeal response to circumstances as they develop. Because reactive change may be hurried, the potential for poorly conceived and executed change is increased. Planned change is almost always preferable to reactive change. Georgia-Pacific, a large forest products business, is an excellent example of a firm that went through a planned and wellmanaged change process. When A. D. Correll became CEO, he quickly became alarmed at the firm’s high accident rate—9 serious injuries per 100 employees each year, and 26 deaths during the most recent 5-year period. Although the forest products business is inherently dangerous, Correll believed that the accident rate was far too high and set out on a major change effort to improve things. He and other top managers developed a multistage change program intended to educate workers about safety, improve safety equipment in the plant, and eliminate a long-standing part of the firm’s culture that made injuries almost a badge of courage. As a result, Georgia-Pacific achieved the best safety record in the industry, with relatively few injuries. On the other hand, Caterpillar was caught flat-footed by a worldwide recession in the construction industry, suffered enormous losses, and took several years to recover. Had managers at Caterpillar anticipated the need for change earlier, they might have been able to respond more quickly. The importance of approaching change from a planned perspective is reinforced by the frequency of organization change. Most companies or divisions of large companies implement some form of moderate change at least every year and one or more major changes every four to five years. Managers who sit back and respond only when they have to are likely to spend a lot of time hastily changing and rechanging things. A more effective approach is to anticipate forces urging change and plan ahead to deal with them. 7-2Managing Change in Organizations Animation-Implementing Change Watch this animation to gain further knowledge of this concept. Volume 91% Copyright © Cengage Learning. All Rights Reserved Organization change is a complex phenomenon. A manager cannot simply wave a wand and implement a planned change like magic. Instead, any change must be systematic and logical to have a realistic opportunity to succeed. To carry this off, the manager needs to understand the steps of effective change and how to counter employee resistance to change. 7-2aSteps in the Change Process Researchers have over the years developed a number of models or frameworks outlining steps for change. The Lewin model was one of the first, although a more comprehensive approach is usually more useful in today’s complex business environment. The Lewin Model Kurt Lewin, a noted organizational theorist, suggested that every change requires three steps. The first step is unfreezing—individuals who will be affected by the impending change must be led to recognize why the change is necessary. The second step is the implementation of the change itself. The third step is refreezing, which involves reinforcing and supporting the change so that it becomes a part of the system. For example, one of the changes that Caterpillar faced in response to the recession noted earlier involved a massive workforce reduction. The first step (unfreezing) was convincing the United Auto Workers (UAW) to support the reduction because of its importance to long-term effectiveness. After this unfreezing was accomplished, 30,000 jobs were eliminated (implementation). Then it worked to improve its damaged relationship with its workers (refreezing) by guaranteeing future pay hikes and promising no more cutbacks. As interesting as the Lewin model is, it unfortunately lacks operational specificity. Thus, a more comprehensive perspective is often needed. A Comprehensive Approach to Change The comprehensive approach to change takes a systems view and delineates a series of specific steps that often leads to successful change. This expanded model is illustrated in Figure 7.1. The first step is recognizing the need for change. Reactive change might be triggered by employee complaints, declines in productivity or turnover, court injunctions, sales slumps, or labor strikes. Recognition may simply be managers’ awareness that change in a certain area is inevitable. For example, managers may be aware of the general frequency of organizational change undertaken by most organizations and recognize that their organization should probably follow the same pattern. The immediate stimulus might be the result of a forecast indicating new market potential, the accumulation of a cash surplus for possible investment, or an opportunity to achieve and capitalize on a major technological breakthrough. Managers might also initiate change today because indicators suggest that it will be necessary in the near future. Figure 7.1Steps in the Change Process Managers must understand how and why to implement change. A manager who, when implementing change, follows a logical and orderly sequence like the one shown here is more likely to succeed than a manager whose change process is haphazard and poorly conceived. © Cengage Learning Second, managers must set goals for the change: to increase market share, to enter new markets, to restore employee morale, to settle a strike, and to identify investment opportunities—all might be goals for change. Third, managers must diagnose what brought on the need for change. Turnover, for example, might be caused by low pay, poor working conditions, poor supervisors, or employee dissatisfaction. Thus, although turnover may be the immediate stimulus for change, managers must understand its causes to make the right changes. The next step is to select a change technique that will accomplish the intended goals. If turnover is caused by low pay, a new reward system may be needed. If the cause is poor supervision, interpersonal skills training may be called for. (Various change techniques are summarized later in this chapter.) After the appropriate technique has been chosen, its implementation must be planned. Issues to consider include the costs of the change, its effects on other areas of the organization, and the degree of employee participation appropriate for the situation. If the change is implemented as planned, the results should then be evaluated. If the change was intended to reduce turnover, managers must check turnover after the change has been in effect for a while. If turnover is still too high, other changes may be necessary. 7-2bUnderstanding Resistance to Change Another element in the effective management of change is understanding the resistance that often accompanies change. Managers need to know why people resist change and what can be done about their resistance. When Schlumberger first provided all its managers with smartphones, most people responded favorably. One manager, however, resisted the change to the point where he maintained two telephone numbers, one on his new smartphone (which he left with his assistant) and his old standard cell phone that he continued to use. Such resistance is common for a variety of reasons. The “Leading the Way” feature illustrates resistance to change. Uncertainty Perhaps the biggest cause of employee resistance to change is uncertainty. In the face of impending change, employees may become anxious and nervous. They may worry about their ability to meet new job demands, they may think that their job security is threatened, or they may simply dislike ambiguity. Nabisco was once the target of an extended and confusing takeover battle, and during the entire time, employees were nervous about the impending change. The Wall Street Journal described them this way: “Many are angry at their leaders and fearful for their jobs. They are swapping rumors and spinning scenarios for the ultimate outcome of the battle for the tobacco and food giant. Headquarters staffers in Atlanta know so little about what’s happening in New York that some call their office ‘the mushroom complex,’ where they are kept in the dark.” More recently, 13,500 British Airways cabin crew members voted to participate in a strike over a heavily traveled holiday season. The action against the airlines was spurred by high levels of uncertainty as British Airways planned to merge with another airline and proposed cutting 1,700 jobs and freezing employee wages in the process. Threatened Self-Interests Many impending changes threaten the self-interests of some managers within the organization. A change might diminish their power or influence within the company, so they fight it. Managers at Sears once developed a plan calling for a new type of store. The new stores would be somewhat smaller than a typical Sears store and would not be located in large shopping malls. Instead, they would be located in smaller strip centers. They would carry clothes and other “soft goods,” but not hardware, appliances, furniture, or automotive products. When executives in charge of the excluded product lines heard about the plan, they raised such strong objections that the plan was cancelled. Different Perceptions A third reason that people resist change is due to different perceptions. A manager may make a decision and recommend a plan for change on the basis of her own assessment of a situation. Others in the organization may resist the change because they do not agree with the manager’s assessment or perceive the situation differently. Executives at 7-Eleven battled this problem as they attempted to enact a major organizational change. The corporation wanted to take its convenience stores a bit “upscale” and begin selling fancy fresh foods to go, the newest hardcover novels, some gourmet products, and higher-quality coffee. But many franchisees balked because they saw this move as taking the firm away from its core blue-collar customers. Feelings of Loss Many changes involve altering work arrangements in ways that disrupt existing social networks. Because social relationships are important, most people resist any change that might adversely affect those relationships. Other intangibles threatened by change include power, status, security, familiarity with existing procedures, and self-confidence. Leading the Way Charting a “New” Old Course Lenovo is a leading Chinese technology products company best known for the line of ThinkPad personal computers it purchased from IBM. For years, the company has struggled with balancing traditional Chinese approaches to management with contemporary management practices more widely practiced in global businesses. Lenovo’s founder, Liu Chuanzhi, recently took back control of the firm in an effort to improve its competitiveness. Doug Kanter/Bloomberg/Getty Images Lenovo was started in Beijing by Liu Chuanzhi in 1984. Initially, Lenovo made computers for other companies. In 1990, the firm launched its own brand of PC and by 1997 Lenovo was the top-selling PC in its home country. Unfortunately, however, the company was not successful in gaining market share outside China. One reason for this was the lack of brand recognition. Another was that Lenovo simply did not have many top managers with global experience. But that changed in 2005. When IBM decided to sell its PC operation that year, Lenovo was quick to jump on the opportunity and bought IBM’s entire PC business for $1.75 billion. Lenovo was allowed to continue using the IBM name through 2007 but then started to brand all of its PCs with the Lenovo name. Along with the PC business itself, Lenovo also got a team of skilled top managers well-versed in global PC markets. Senior IBM executives were quickly integrated throughout the top management structure, and one of them, Stephen Ward, was appointed chief executive officer (CEO) of Lenovo. Liu Chuanzhi, meanwhile, moved into the background but remained a director—he felt that Lenovo’s best opportunity for the firm to gain international market share would be under the leadership of a seasoned global manager like Ward. But almost from the start, problems began to surface. Ward was extremely autocratic and believed that Lenovo should function in a highly centralized, command-and-control fashion. This alienated his new Chinese colleagues who assumed that their roles were being diminished because they spent less time with the CEO. Chuanzhi, for instance, had relied on a senior leadership team that worked together to make decisions, whereas Ward made most of the major decisions by himself. And at a more general level, the U.S. managers tried to impose a rigid, centralized, and bureaucratic structure throughout the new Lenovo. The Chinese, meanwhile, were highly resistant to these efforts, strongly preferring the more consensus-style structure that they had used previously. Within a matter of months, things came to a head. Among other changes, Ward was pushed out and replaced with William Amelio, a senior executive recruited from Dell Computer’s Asia/Pacific operations. Amelio immediately indicated his intent to try to move Lenovo back toward the traditional Chinese structure. He also thought that the firm could benefit from an infusion of additional perspectives, so he began to aggressively recruit new executives from other hightech firms such as Dell, Motorola, Samsung, and Toshiba. He also softened the rigid functional structure and tried building more coordination across areas by creating cross-functional teams. Unfortunately, though, Amelio never carried through on his plan to change how decisions were made, retaining much of the decision-making authority himself and continuing the command-and-control approach that had been Ward’s downfall. Lenovo also began to lose market share and profits began to drop. Finally, Chuanzhi decided that he had to take action. He pushed Amelio to resign and took control of the firm himself. He then quickly restructured the upper ranks of Lenovo to fall more in line with the traditional Chinese approach. Chuanzhi formed the eight top managers at Lenovo into a close-knit team and then brought them together regularly to make decisions and formulate plans. After decisions and plans were made by consensus, the team continued to work together to ensure that they were implemented effectively and with buy-in from others throughout the organization. Today Lenovo is headquartered in Hong Kong but has major operations in Beijing, Singapore, and Morrisville, North Carolina. The firm’s products include PCs, workstations, servers, storage devices, and information technology (IT) services. Lenovo has also entered the mobile phone business, citing increased convergence between the PC and handheld wireless technologies. In 2012, Lenovo generated profits of $273 million on revenues of $21.6 billion and employed more than 27,000 workers. Right now, it’s still too soon to know if the changes at Lenovo will improve its fortunes or not. But Chuanzhi believes that his new approach, which he calls a “blend of old Chinese thinking and modern global thinking,” will soon carry the day. References: “Lenovo’s Legend Returns,” Time, May 10, 2010, pp. 65–68; “Lenovo: A Company Without a Country,” Businessweek, January 23, 2010, pp. 49–50; “Lenovo’s Turnaround Man,” Forbes, May 4, 2010, p. 88; Hoover’s Handbook of World Business 2013, Austin: Hoover’s Business Press, 2013, pp. 236–237; “IBM Shows Secret to Corporate Longevity,” USA Today, June 16, 2011, pp. 1B, 3B; Miguel Helft, “Can Lenovo Do It?” Fortune, June 10, 2013, pp. 100– 111. 7-2cOvercoming Resistance to Change Of course, a manager should not give up in the face of resistance to change. Although there are no surefire cures, there are several techniques that at least have the potential to overcome resistance. Participation Participation is often the most effective technique for overcoming resistance to change. Employees who participate in planning and implementing a change are better able to understand the reasons for the change. Uncertainty is reduced, and self-interests and social relationships are less threatened. Having had an opportunity to express their ideas and assume the perspectives of others, employees are more likely to accept the change gracefully. A classic study of participation monitored the introduction of a change in production methods among four groups in a Virginia pajama factory. The two groups that were allowed to fully participate in planning and implementing the change improved significantly in their productivity and satisfaction, relative to the two groups that did not participate. 3M Company recently attributed several million dollars in cost savings to employee participation in several organization change activities. Education and Communication Educating employees about the need for and the expected results of an impending change should reduce their resistance. If open communication is established and maintained during the change process, uncertainty can be minimized. Caterpillar used these methods during many of its cutbacks to reduce resistance. First, it educated UAW representatives about the need for and potential value of the planned changes. Then management told all employees what was happening, when it would happen, and how it would affect them individually. Facilitation Several facilitation procedures are also advisable. For instance, making only necessary changes, announcing those changes well in advance, and allowing time for people to adjust to new ways of doing things can help reduce resistance to change. One manager at a Prudential regional office spent several months systematically planning a change in work procedures and job design. He then became too impatient, coming in over the weekend with a work crew and rearranging the office layout. When employees walked in on Monday morning and saw what he had done, they were hostile, anxious,and resentful. What was a promising change became a disaster, and the manager had to scrap the entire plan. Force-Field Analysis Although force-field analysis may sound like something out of a Star Trek movie, it can help overcome resistance to change. In almost any change situation, forces are acting for and against the change. To facilitate the change, managers start by listing each set of forces and then trying to tip the balance so that the forces facilitating the change outweigh those hindering the change. It is especially important to try to remove or at least minimize some of the forces acting against the change. Suppose, for example, that General Motors (GM) is considering a plant closing as part of a change. As shown in Figure 7.2, three factors are reinforcing the change: GM needs to cut costs, it has excess capacity, and the plant has outmoded production facilities. At the same time, there is resistance from the UAW, concern for workers being put out of their jobs, and a feeling that the plant might be needed again in the future. GM might start by convincing the UAW that the closing is necessary by presenting profit-and-loss figures. It could then offer relocation and retraining to displaced workers. And it might shut down the plant and put it in “mothballs” so that it can be renovated later. The three major factors hindering the change are thus eliminated or reduced in importance. Figure 7.2Force-Field Analysis for Plant Closing at General Motors A force-field analysis can help a manager facilitate change. A manager who is able to identify forces acting both for and against a change can see where to focus efforts to remove barriers to change (such as offering training and relocation to displaced workers). Removing the forces against the change can at least partially overcome resistance. 7-3Areas Change of Organization We noted earlier that change can involve virtually any part of an organization. In general, however, most change interventions involve organization structure and design, technology and operations, or people. The most common areas of change within each of these broad categories are listed in Table 7.1. In addition, many organizations have gone through massive and comprehensive business process change programs. Table 7.1 Areas of Organization Change Organization change can affect any part, area, or component of an organization. Most change, however, fits into one of three general areas: organization structure and design, technology and operations, and people. Organization Structure and Design Technology and Operations People Job design Information technology Abilities and skills Departmentalization Equipment Performance Reporting relationships Work processes Perceptions Authority distribution Work sequences Expectations Coordination mechanisms Control systems Attitudes Organization Structure and Design Technology and Operations People Line-staff structure Enterprise resource planning Values Overall design Culture Human resource management 7-3aChanging Organization Structure and Design 7-3bChanging Technology and Operations Organization change might be focused on any of the basic components of organization structure or on the organization’s overall design. Thus, the organization might change the way it designs its jobs or its bases of departmentalization. Likewise, it might change reporting relationships or the distribution of authority. For example, we noted in Chapter 6 the trend toward flatter organizations. Coordination mechanisms and line-andstaff configurations are also subject to change. On a larger scale, the organization might change its overall design. For example, a growing business could decide to drop its functional design and adopt a divisional design. Or it might transform itself into a matrix. Changes in culture usually involve the structure and design of the organization as well (recall that we discussed changing culture back in Chapter 2). Finally, the organization might change any part of its human resource management system, such as its selection criteria, its performance appraisal methods, or its compensation package. Technology is the conversion process used by an organization to transform inputs into outputs. Because of the rapid rate of all technological innovation, technological changes are becoming increasingly important to many organizations. Table 7.1 lists several areas where technological change is likely to be experienced. One important area of change today revolves around information technology. The adoption and institutionalization of information technology innovations are almost constant in most firms. Sun Microsystems, for example, adopted a very short-range planning cycle to be best prepared for environmental changes. Another important form of technological change involves equipment. To keep pace with competitors, firms periodically find that replacing existing machinery and equipment with newer models is necessary. A change in work processes or work activities may be necessary if new equipment is introduced or new products are manufactured. In manufacturing industries, the major reason for changing a work process is to accommodate a change in the materials used to produce a finished product. Consider a firm that manufactures battery-operated flashlights. For many years, flashlights were made of metal, but now most are made of plastic. A firm might decide to move from metal to plastic flashlights because of consumer preferences, raw materials’ costs, or other reasons. Whatever the reason, the technology necessary to make flashlights from plastic differs importantly from that used to make flashlights from metal. Work process changes may occur in service organizations as well as in manufacturing firms. As traditional barbershops and beauty parlors are replaced by hair salons catering to both sexes, for example, the hybrid organizations have to develop new methods for handling appointments and setting prices. A change in work sequence may or may not accompany a change in equipment or a change in work processes. Making a change in work sequence means altering the order or sequence of the workstations involved in a particular manufacturing process. For example, a manufacturer might have two parallel assembly lines producing two similar sets of machine parts. The lines might converge at one central quality-control unit, where inspectors verify tolerances. The manager, however, might decide to change to periodic rather than final inspection. Under this arrangement, one or more inspections are established farther up the line. Work sequence changes can also be made in service organizations. The processing of insurance claims, for example, could be changed. The sequence of logging and verifying claims, requesting checks, getting countersignatures, and mailing checks could be altered in several ways, such as combining the first two steps or routing the claims through one person while another handles checks. Organizational control systems may also be targets of change. For example, a firm attempting to improve the quality of its products might develop and implement a set of more rigorous and comprehensive qualitycontrol procedures. Finally, many businesses have been working to implement technological and operations change by installing and using complex and integrated software systems. Such systems— called enterprise resource planning (ERP)—link virtually all facets of the business, making it easier for managers to keep abreast of related developments. ERPis a large-scale information system for integrating and synchronizing the many activities in the extended enterprise. In most cases, these systems are purchased from external vendors who then tailor their products to the client’s unique needs and requirements. Companywide processes—such as materials management, production planning, order management, and financial reporting—can all be managed through ERP. In effect, these are the processes that cut across product lines, departments, and geographic locations. Developing the ERP system starts by identifying the key processes that need critical attention, such as supplier relationships, material flows, or customer order fulfillment. The system could result, for instance, in sales processes being integrated with production planning and then integrating both of these into the firm’s financial accounting system. For example, a customer in Rome can place an order that is to be produced in Ireland, schedule it to be shipped through air cargo to Rome, and then have it picked up by a truck at the airport and delivered to the customer’s warehouse by a specified date. All of these activities are synchronized by activities linkages in one massive database. The ERP integrates all activities and information flows that relate to the firm’s critical processes. It also keeps updated realtime information on their current status, reports recent past transactions and upcoming planned transactions, and provides electronic notices that action is required on some items if planned schedules are to be met. It coordinates internal operations with activities by outside suppliers and notifies business partners and customers of current status and upcoming deliveries and billings. It can integrate financial flows among the firm, its suppliers, its customers, and commercial bank deposits for up-to-the-minute status reports that can be used to create real-time financial reports at a moment’s notice, rather than in the traditional one-month (or longer) time span for producing a financial statement. ERP’s multilanguage capabilities also allow real-time correspondence in various languages to facilitate international transactions. 7-3cChanging People, Attitudes, and Behaviors A third area of organization change has to do with human resources. For example, an organization might decide to change the skill level of its workforce. This change mightbe prompted by changes in technology or by a general desire to upgrade the quality of the workforce. Thus, training programs and new selection criteria might be needed. The organization might also decide to improve its workers’ performance level. In this instance, a new incentive system or performance-based training might be in order. Reader’s Digest recently eliminated 17 percent of its employees, reduced retirement benefits, and took away many of the “perks” (perquisites, or job benefits) that employees once enjoyed. Part of the reason for the changes was to instill in the remaining employees a sense of urgency and the need to adopt a new perspective on how they do their jobs. Similarly, Saks Fifth Avenue changed its entire top management team as a way to breathe new life into the luxury retailer. Perceptions and expectations are also a common focus of organization change. Workers in an organization might believe that their wages and benefits are not as high as they should be. Management, however, might have evidence that shows the firm is paying a competitive wage and providing a superior benefit package. The change, then, would be centered on informing and educating the workforce about the comparative value of its compensation package. A common way to do this is to publish a statement that places an actual dollar value on each benefit provided and compares that amount to what other local organizations are providing their workers. Change might also be directed at employee attitudes and values. In many organizations today, managers are trying to eliminate adversarial relationships with workers and to adopt a more collaborative relationship. In many ways, changing attitudes and values is perhaps the hardest thing to do. 7-3dChanging Business Processes Many organizations today have also gone through massive and comprehensive change programs involving all aspects of organization design, technology, and people. Although various descriptions are used, the terms currently in vogue for these changes are business process change, or reengineering, which is the radical redesign of all aspects of a business to achieve major gains in cost, service, or time. ERP, as described earlier, is a common platform for changing business processes. However, business process change is a more comprehensive set of changes that goes beyond software and information systems. Corning, for example, has undergone major reengineering. Whereas the 150-year-old business once manufactured cookware and other durable consumer goods, it has transformed itself into a high-tech powerhouse making products such as the ultra-thin screens used in products such as smartphones and laptops. Similarly, the dramatic overhauls of Yellow into a sophisticated freight delivery firm and of UPS into a major international delivery giant all required business process changes throughout these organizations. Tough Times, Tough Choices To Offshore or Not to Offshore Many businesses today have offshored various operations to foreign countries. These offshoring initiatives often involve call centers, and many businesses have found this approach to be very effective. But others, like 1-800-FLOWERS, have experienced problems with offshoring and some have even moved operations back to their home country. ZUMA Press/Alamy From computer programmers in the Philippines and molecular biologists in Russia to customer-service agents in India, the practice of offshoring is bringing workers from around the world into the workforces of U.S. corporations in a broad range of industries. When U.S. firms “offshore,” they’re hiring foreign firms and foreign personnel to perform their business functions. In so doing, they’re not only increasing the diversity of their workforces but also altering the processes by which they conduct organizational business. At Penske Truck Leasing, for instance, drivers submit their paper logs for data entry to a facility in Mexico, which forwards them to Hyderabad, India, where they’re analyzed, and the results are reported to Penske management back in the United States. How does a company function with far-flung operations? As in most other decisions, companies choose operational partners according to the value-creation capabilities that they bring to the overall process. Ideally, of course, offshoring should benefit the contractor as well as the contracting firm. Take, for example, the case of Wisconsin-based PCMC, which designs and makes paper packaging. PCMC had a problem with its engineering function: Although it had a large base of potential customers, it often lost them because its engineering group was too small to create new designs fast enough to keep pace with customer needs. Nor could the company afford to expand its engineering department. To solve the problem, PCMC entered into an offshoring contract with an Indian company that agreed to provide a 160-member staff to support PCMC’s engineering function. The result? Not only 160 new jobs in India but more orders and more jobs in Wisconsin as well. Obviously, offshoring arrangements don’t always work out as well as the one established by PCMC and its Indian partner. For one thing, language and culture differences can make communication difficult, especially when it’s conducted by e-mail or phone. When 1-800-FLOWERS tried to expand its customer-service operation by outsourcing customer calls to India, the results were disastrous. Why? When customers call, florists have to do more than merely process orders: They’re often called upon to offer interior-design tips and relationship counseling and even to console the grieving. Indian workers could neither fully understand the psychology of U.S. flower buyers nor communicate the nuances necessary to serve their needs. After a few weeks, 1-800-FLOWERS terminated the experiment. “The folks were difficult to understand,” admitted one company executive. “We were afraid that we would lose sales, and we couldn’t risk that.” The decision made sense: Typically, it costs six times as much to replace a customer as to keep one. Fortunately, the company had a plan B—homeshoring, or hiring in-country contract workers. Homeshoring employees are more expensive than overseas contractors, but they’re less expensive than full-time on-site employees. They connect with American customers, and they also alleviate the concerns that some U.S. consumers have about their private data being shipped overseas. References: Michelle Conlin, “Call Centers in the Rec Room,” Businessweek, www.businessweek.com, accessed on November 15, 2013; Pete Engardio, “The Future of Outsourcing,” Businessweek, www.businessweek.com, accessed on November 15, 2013; and Manjeet Kripalani with Brian Grow, “Offshoring: Spreading the Gospel,” Businessweek, www.businessweek.com, accessed on November 15, 2013. The Need for Business Process Change Why are so many organizations finding it necessary to undergo business process change? We noted in Chapter 1 that all systems, including organizations, are subject to entropy—a normal process leading to system decline. An organization is behaving most typically when it maintains the status quo, does not change in synch with its environment, and starts consuming its own resources to survive. In a sense, that is what happened to Kmart. In the early and mid-1970s, Kmart was in such a highflying growth mode that it passed first J. C. Penney and then Sears to become the world’s largest retailer. But then the firm’s managers grew complacent and assumed that the discount retailer’s prosperity would continue and that they need not worry about environmental shifts, the growth of Walmart, and so forth—and entropy set in. The key is to recognize the beginning of the decline and immediately move toward changing relevant business processes. Major problems occur when managers either do not recognize the onset of entropy until it is well advanced or are complacent in taking steps to correct it. Approaches to Business Process Change Figure 7.3 shows general steps in reengineering. The first step is setting goals and developing a strategy for the changes. The organization must know in advance what new business processes are supposed to accomplish and how those accomplishments will be achieved. Next, top managers must begin and direct the reengineering effort. If a CEO simply announces that business process change is to occur but does nothing else, the program is unlikely to be successful. But, if the CEO is constantly involved in the process, underscoring its importance and taking the lead, business process change stands a much better chance of success. Figure 7.3The Reengineering Process Reengineering is a major redesign of all areas of an organization. To be successful, reengineering requires a systematic and comprehensive assessment of the entire organization. Goals, top management support, and a sense of urgency help the organization re-create itself and blend both top-down and bottom-up perspectives. © Cengage Learning Most experts also agree that successful business process change is usually accompanied by a sense of urgency. People in the organization must see the clear and present need for the changes being implemented and appreciate their importance. In addition, most successful reengineering efforts start with a new, clean slate. In other words, rather than assuming that the existing organization is a starting point and then trying to modify it, business process change usually starts by asking questions such as how customers are best served and competitors best neutralized. New approaches and systems are then created and imposed in place of existing ones. Finally, business process change requires a careful blend of topdown and bottom-up involvement. On the one hand, strong leadership is necessary, but too much involvement by top management can make the changes seem autocratic. On the other hand, employee participation is also important, but too little involvement by leaders can undermine the program’s importance and create a sense that top managers do not care. Thus, care must be taken to carefully balance these two countervailing forces. Our next section explores more fully one related but distinct approach called organization development (OD). 7-3eOrganization Development We noted in several places the importance of people and change. Beyond those change interests discussed earlier, a special area of interest that focuses almost exclusively on people is OD. OD Assumptions OD is concerned with changing attitudes, perceptions, behaviors, and expectations. More precisely, organization development is a planned effort that is organization-wide, managed from the top, and intended to increase organizational effectiveness and health through planned interventions in the organization’s process, using behavioral science knowledge. The theory and practice of OD are based on several very important assumptions. The first is that employees have a desire to grow and develop. Another is that employees have a strong need to be accepted by others within the organization. Still another critical assumption of OD is that the total organization and the way it is designed will influence the way individuals and groups within the organization behave. Thus, some form of collaboration between managers and their employees is necessary to 1. take advantage of the skills and abilities of the employees and 2. eliminate aspects of the organization that retard employee growth, development, and group acceptance. Because of the intense personal nature of many OD activities, many large organizations rely on one or more OD consultants (either full-time employees assigned to this function or outside experts hired specifically for OD purposes) to implement and manage their OD program. OD Techniques Several kinds of interventions or activities are generally considered part of OD. Some OD programs may use only one or a few of these; other programs use several of them at once. • Diagnostic activities. Just as a physician examines patients to diagnose their current condition, an OD diagnosis analyzes the current condition of an organization. To carry out this diagnosis, managers use questionnaires, opinion or attitude surveys, interviews, archival data, and meetings to assess various characteristics of the organization. The results of this diagnosis may generate profiles of the organization’s activities, which can then be used to identify problem areas in need of correction. • Team building. Team-building activities are intended to enhance the effectiveness and satisfaction of individuals who work in groups or teams and to promote overall group effectiveness. Given the widespread use of teams today, these activities have taken on increased importance. An OD consultant might interview team members to determine how they feel about the group; then an off-site meeting could be held to discuss the issues that surfaced and iron out any problem areas or member concerns. Caterpillar used team building as one method for changing the working relationships between workers and supervisors from confrontational to cooperative. One interesting new approach to team building involves having executive teams participate in group cooking classes to teach them the importance of interdependence and coordination. • Survey feedback. In survey feedback, each employee responds to a questionnaire intended to measure perceptions and attitudes (for example, satisfaction and supervisory style). Everyone involved, including the supervisor, receives the results of the survey. The aim of this approach is usually to change the behavior of supervisors by showing them how their subordinates view them. After the feedback has been provided, workshops may be conducted to evaluate results and suggest constructive changes. • Third-party peacemaking. Another approach to OD is through third-party peacemaking, which is most often used when substantial conflict exists within the organization. Third-party peacemaking can be appropriate on the individual, group, or organizational level. The third party, usually an OD consultant, uses a variety of mediation or negotiation techniques to resolve any problems or conflicts among individuals or groups. • Process consultation. In process consultation, an OD consultant observes groups in the organization to develop an understanding of their communication patterns, decisionmaking and leadership processes, and methods of cooperation and conflict resolution. The consultant then provides feedback to the involved parties about the processes he or she has observed. The goal of this form of intervention is to improve the observed processes. A leader who is presented with feedback outlining deficiencies in his or her leadership style, for example, might be expected to change to overcome them. • Life and career planning. Life and career planning helps employees formulate their personal goals and evaluate strategies for integrating their goals with the goals of the organization. Such activities might include specification of training needs and plotting a career map. General Electric has a reputation for doing an outstanding job in this area. • Coaching and counseling. Coaching and counseling provide nonevaluative feedback to individuals. The purpose is to help people develop a better sense of how others see them and learn behaviors that will assist others in achieving their work-related goals. The focus is not on how the individual is performing today; instead, it is on how the person can perform better in the future. Animation-Organizational Devlopment Watch this animation to gain further knowledge of this concept. Volume 91% Copyright © Cengage Learning. All Rights Reserved The Effectiveness of OD Given the diversity of activities encompassed by OD, it is not surprising that managers have reported mixed results from various OD interventions. Organizations that actively practice some form of OD include American Airlines, Texas Instruments, Procter & Gamble, and BF Goodrich. Goodrich, for example, has trained 60 persons in OD processes and techniques. These trained experts have subsequently become internal OD consultants to assist other managers in applying the techniques. Many other managers, in contrast, report that they have tried OD but discarded it. OD will probably remain an important part of management theory and practice. Of course, there are no sure things when dealing with social systems such as organizations, and the effectiveness of many OD techniques is difficult to evaluate. Because all organizations are open systems interacting with their environments, an improvement in an organization after an OD intervention may be attributable to the intervention, but it may also be attributable to changes in economic conditions, luck, or other factors. 7-4Organizational Innovation A final element of organization change that we address is innovation, which is the managed effort of an organization to develop new products or services or new uses for existing products or services. Innovation is clearly important because, without new products or services, any organization will fall behind its competition. 7-4aThe Innovation Process The organizational innovation process consists of developing, applying, launching, growing, and managing the maturity and decline of creative ideas. This process is depicted in Figure 7.4. Figure 7.4The Innovation Process Organizations actively seek to manage the innovation process. These steps illustrate the general life cycle that characterizes most innovations. Of course, as with creativity, the innovation process will suffer if it is approached too mechanically and rigidly. © Cengage Learning Innovation Development Innovation development involves the evaluation, modification, and improvement of creative ideas. It can transform a product or service with only modest potential into a product or service with significant potential. Parker Brothers, for example, decided during innovation development not to market an indoor volleyball game but instead to sell separately the appealing little foam ball designed for the game. The firm will never know how well the volleyball game would have sold, but the Nerf ball and numerous related products generated millions of dollars in revenues. Innovation Application Innovation application is the stage in which an organization takes a developed idea and uses it in the design, manufacturing, or delivery of new products, services, or processes. At this point, the innovation emerges from the laboratory and is transformed into tangible goods or services. Business incubators and similar concepts are often used to facilitate innovation application. Application Launch Application launch is the stage at which an organization introduces new products or services to the marketplace. The important question is not “Does the innovation work?” but “Will customers want to purchase the innovative product and service?” History is full of creative ideas that did not generate enough interest among customers to be successful. Some notable innovation failures include a portable seat warmer from Sony, “New” Coke, the revival of the Ford Thunderbird, and the Flip video recorder. Thus, despite development and application, new products and services can still fail at the launch phase. Application Growth Once an innovation has been successfully launched, it then enters the stage of application growth. This is a period of high economic performance for an organization because demand for the product or service is often greater than supply. Organizations that fail to anticipate this stage may unintentionally limit their growth, as Apple did by not anticipating demand for the first iPhones. At the same time, overestimating demand for a new product can be just as detrimental to performance. Unsold products can sit in warehouses for years. Innovation Maturity After a period of growing demand, an innovative product or service often enters a period of maturity. Innovation maturity is the stage at which most organizations in an industry have access to an innovation and are applying it in approximately the same way. The technological application of an innovation during this stage of the innovation process can be very sophisticated. Because most firms have access to the innovation, however, as a result of either developing the innovation on their own or copying the innovation from others, it does not provide competitive advantage to any one of them. The time that elapses between innovation development and innovation maturity varies notably depending on the particular product or service. Whenever an innovation involves the use of complex skills (such as a complicated manufacturing process or highly sophisticated teamwork), moving from the growth phase to the maturity phase will take longer. In addition, if the skills needed to implement these innovations are rare and difficult to imitate, then strategic imitation may be delayed, and the organization may enjoy a period of sustained competitive advantage. Innovation Decline Every successful innovation bears its own seeds of decline. Because an organization does not gain a competitive advantage from an innovation at maturity, it must encourage its creative scientists, engineers, and managers to begin looking for additional innovations. This continued search for competitive advantage usually leads new products and services to move from the creative process through innovation maturity, and finally to innovation decline. Innovation decline is the stage during which demand for an innovation decreases and substitute innovations are developed and applied. 7-4bForms of Innovation Each creative idea that an organization develops poses a different challenge for the innovation process. Innovations can be radical or incremental, technical or managerial, and product or process innovations. Radical Versus Incremental Innovations Radical innovations are new products, services, or technologies developed by an organization that completely replace the existing products, services, or technologies in an industry. Incremental innovations are new products, services, or processes that modify existing ones. Firms that implement radical innovations fundamentally shift the nature of competition and the interaction of firms within their environments. Firms that implement incremental innovations alter, but do not fundamentally change, competitive interaction in an industry. Over the last several years, organizations have introduced many radical innovations. For example, compact disc (CD) technology replaced long-playing vinyl records in the recording industry and now digital downloading is replacing CDs, DVDs have replaced videocassettes but are now being supplanted by Bluray DVDs and online downloading, and high-definition television is replacing regular television technology. Whereas radical innovations like these tend to be very visible and public, incremental innovations actually are more numerous. For instance, each new generation of the iPhone and the iPad represents relatively minor changes over previous versions. The original iPhones and iPads were in many ways radical innovations in that they redefined product categories. Each subsequent generation of these products, however, such as the iPad Air shown here, are incremental innovations that take previous versions and introduce relatively minor improvements and/or new design features. © iStockphoto.com/Saturated Technical Versus Managerial Innovations Technical innovations are changes in the physical appearance or performance of a product or service or of the physical processes through which a product or service is manufactured. Many of the most important innovations over the last 50 years have been technical. For example, the serial replacement of the vacuum tube with the transistor, the transistor with the integrated circuit, and the integrated circuit with the microchip have greatly enhanced the power, ease of use, and speed of operation of a wide variety of electronic products. Not all innovations developed by organizations are technical, however. Managerial innovations are changes in the management process by which products and services are conceived, built, and delivered to customers. They do not necessarily affect the physical appearance or performance of products or services directly. In effect, reengineering, as we discussed earlier, represents a managerial innovation. Product Versus Process Innovations Perhaps the two most important types of technical innovations are product innovations and process innovations. Product innovations are changes in the physical characteristics or performance of existing products or services or the creation of brand-new products or services. Process innovations are changes in the way products or services are manufactured, created, or distributed. Whereas managerial innovations generally affect the broader context of development, process innovations directly affect manufacturing. The implementation of robotics is a process innovation. The effect of product and process innovations on economic return depends on the stage of the innovation process that a new product or service occupies. At first, during development, application, and launch, the physical attributes and capabilities of an innovation mostly affect organizational performance. Thus, product innovations are particularly important during these beginning phases. Later, as an innovation enters the phases of growth, maturity, and decline, an organization’s ability to develop process innovations, such as fine-tuning manufacturing, increasing product quality, and improving product distribution, becomes important to maintaining economic return. Japanese organizations have often excelled at process innovation. The market for SLR cameras was dominated by German and other European manufacturers when, in the early 1960s, Japanese organizations such as Canon and Nikon began making cameras. Some of these early Japanese products were not very successful, but these companies continued to invest in their process technology and eventually were able to increase quality and decrease manufacturing costs. The Japanese organizations came to dominate the worldwide market for SLR cameras, and the German companies, because they were not able to maintain the same pace of process innovation, struggled to maintain market share and profitability. And as film technology gave way to digital photography, the same Japanese firms effectively transitioned to leadership in this market as well. 7-4cThe Failure to Innovate To remain competitive in today’s economy, organizations must be innovative. And yet many organizations that should be innovative are not successful at bringing out new products or services, or they do so only after innovations created by others are very mature. Organizations may fail to innovate for at least three reasons. Lack of Resources Innovation is expensive in terms of money, time, and energy. If a firm does not have sufficient money to fund a program of innovation or does not currently employ the kinds of employees it needs to be innovative, it may lag behind in innovation. Even highly innovative organizations cannot become involved in every new product or service its employees think up. For example, numerous other commitments in the electronic instruments and computer industry forestalled HewlettPackard (HP) from investing in Steve Jobs and Steve Wozniak’s original idea for a personal computer. With infinite resources of money, time, and technical and managerial expertise, HP might have entered this market early. Because the firm did not have this flexibility, however, it had to make some difficult choices regarding in which innovations to invest. Failure to Recognize Opportunities Because firms cannot pursue all innovations, they need to develop the capability to carefully evaluate innovations and to select the ones that hold the greatest potential. To obtain a competitive advantage, an organization must usually make investment decisions before the innovation process reaches the mature stage. The earlier the investment, however, the greater the risk. If organizations are not skilled at recognizing and evaluating opportunities, they may be overly cautious and fail to invest in innovations that later turn out to be successful for other firms. Resistance to Change As we discussed earlier, many organizations tend to resist change. Innovation means giving up old products and old ways of doing things in favor of new products and new ways of doing things. These kinds of changes can be personally difficult for managers and other members of an organization. Thus, resistance to change can slow the innovation process. Promoting Innovation in Organizations A wide variety of ideas for promoting innovation in organizations has been developed over the years. Three specific ways for promoting innovation are through the reward system, through the organizational culture, and through a process called intrapreneurship. The Reward System A firm’s reward system is the means by which it encourages and discourages certain behaviors by employees. Major components of the reward system include salaries, bonuses, and perquisites. Using the reward system to promote innovation is a fairly mechanical but nevertheless effective management technique. The idea is to provide financial and nonfinancial rewards to people and groups who develop innovative ideas. Once the members of an organization understand that they will be rewarded for such activities, they are more likely to work creatively. With this end in mind, Monsanto gives a $50,000 award each year to the scientist or group of scientists who develop the biggest commercial breakthrough. It is important for organizations to reward creative behavior, but it is vital to avoid punishing creativity when it does not result in highly successful innovations. It is the nature of the creative and innovative processes that many new-product ideas will simply not work out in the marketplace. Each process is fraught with too many uncertainties to generate positive results every time. An individual may have prepared herself to be creative, but an insight may not be forthcoming. Or managers may attempt to apply a developed innovation, only to recognize that it does not work. Indeed, some organizations operate according to the assumption that, if all their innovative efforts succeed, then they are probably not taking enough risks in research and development. At 3M, nearly 60 percent of the creative ideas suggested each year do not succeed in the marketplace. Managers need to be very careful in responding to innovative failure. If innovative failure is due to incompetence, systematic errors, or managerial sloppiness, then a firm should respond appropriately, for example, by withholding raises or reducing promotion opportunities. People who act in good faith to develop an innovation that simply does not work out, however, should not be punished for failure. If they are, they probably will not be creative in the future. A punitive reward system will discourage people from taking risks and therefore reduce the organization’s ability to obtain competitive advantages. Organization Culture As we discussed in Chapter 2, an organization’s culture is the set of values, beliefs, and symbols that help guide behavior. A strong, appropriately focused organizational culture can be used to support innovative activity. A well-managed culture can communicate a sense that innovation is valued and will be rewarded and that occasional failure in the pursuit of new ideas is not only acceptable but even expected. In addition to reward systems and intrapreneurial activities, firms such as Apple, Google, LG Electronics, Tata, Amazon, and HP are all known to have strong, innovation-oriented cultures that value individual creativity, risk taking, and inventiveness. Amazon.com is known for its innovative business practices. The firm’s culture helps promote individual creativity, risk taking, and inventiveness. This Amazon.comdistribution center, for example, was developed using new methods devised by Amazon employees. Bernhard Classen/Alamy Intrapreneurship in Larger Organizations In recent years, many large businesses have realized that the entrepreneurial spirit that propelled their growth becomes stagnant after they transform themselves from a small but growing concern into a larger one. To help revitalize this spirit, some firms today encourage intrapreneurship. Intrapreneurs are similar to entrepreneurs except that they develop a new business in the context of a large organization. There are three intrapreneurial roles in large organizations. To successfully use intrapreneurship to encourage creativity and innovation, the organization must find one or more individuals to perform these roles. The inventor is the person who actually conceives of and develops the new idea, product, or service by means of the creative process. Because the inventor may lack the expertise or motivation to oversee the transformation of the product or service from an idea into a marketable entity, however, a second role comes into play. A product champion is usually a middle manager who learns about the project and becomes committed to it. He helps overcome organizational resistance and convinces others to take the innovation seriously. The product champion may have only limited understanding of the technological aspects of the innovation. Nevertheless, product champions are skilled at knowing how the organization works, whose support is needed to push the project forward, and where to go to secure the resources necessary for successful development. A sponsor is a top-level manager who approves of and supports a project. This person may fight for the budget needed to develop an idea, overcome arguments against a project, and use organizational politics to ensure the project’s survival. With a sponsor in place, the inventor’s idea has a much better chance of being successfully developed. Several firms have embraced intrapreneurship as a way to encourage creativity and innovation. Colgate-Palmolive has created a separate unit, Colgate Venture Company, staffed with intrapreneurs who develop new products. General Foods developed Culinova as a unit to which employees can take their ideas for possible development. S.C. Johnson & Son established a $250,000 fund to support new-product ideas, and Texas Instruments refuses to approve an innovative project unless it has an acknowledged inventor, champion, and sponsor.

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