Table of Contents:

Organizational Change

Overview

In this era of digitization and automation, change is difficult to avoid. It is about adapting an organization to embrace continuing change based on opportunities to improve operational effectiveness and efficiency as well as customer satisfaction to increase competitiveness. The mindset of we always did it this way never worked. In today’s environment, this fallacy is exposed very quickly by global competitors. Change is about changing people’s attitudes in an environment where opportunities evolve, and solutions depend on organizational creativity.

Organizations need to adapt and change to satisfy new customer preferences, and to utilize new technology and other disruptive trends that change the competitive landscape. Organizations change to embrace new attitudes and behaviors by employees and other stakeholders. As an example, a culture might be focused on activities that helped drive the organization’s past success but have little current value. At one time, these activities were valued from customer and organizational perspectives. These were competitive strengths that now are no longer aligned with the organization’s strategic direction needed to meet customer expectations and increase productivity. Competitive organizations focus on the usefulness of their actions and their beneficial impact to productivity. Adaptable organizations do not resist change, rather they embrace it with a willingness to learn and apply new thinking to solve old problems. They have a motivation to change behaviors because experience has taught them that competitiveness comes from leading rather than following. Change is all about relationships and consensus building by collaborative teams empowered to apply best practices for improved operational performance. Improved operational performance drives business benefits that increase productivity by increasing sales, cash flow, and reducing operating income. Higher customer satisfaction results from a more seamless experience. There also fewer product returns and other customer dissatisfaction expenses.

Change initiatives should be especially focused on those parts of the organization that need refreshing relative to people, process, policy, or technology. The tools and methods that are applied need to be integrated into a framework with the right sponsorship, goals and resources. Sustaining the long-term effectiveness of change initiatives requires incorporating new behaviors into an organization. These must become the way people work. To be widely adopted, they must be built on a firm basis and be impactful to be sustainable. Relationship building is also important. Real change that is impactful and sustainable helps build collaboration and relationships between stakeholders.

Change is also about expectations, so employees know the purpose for the change. Asking people to change habits must make sense and be important for them, their organization, customers, or other groups. To be purposeful, changes should directly impact current operations and improve them. They should be based on a deep understanding of the underlying process relative to how it works, including its inputs and the outputs it supplies to the successive operations. Change recommendations need to be based on a current baseline assessment as well as the desired state. The desired state should be achievable with available resources and knowledge. This implies an organization’s work must be transparent and embrace factual discussion and informed action.

Corporate culture significantly impacts an organization’s operational performance, either positively or negatively. Culture is difficult to change for various reasons. A problem with asking organizations to change the way they do things is that they achieved success based on current paradigms and culture. Unless an organization can see value in changing its “way of doing things,” they will not undertake a major change initiative. To complicate matters, the most successful people in an organization are often the most isolated from information showing the necessity of change. Sometimes those who control the organizational power structure and resources stand to lose the most from a dramatic change within their organization. This situation, if it exists, may place the proponents of change on the defensive. As Machiavelli stated in 1513, “The innovator has for enemies all who have done well under the old and lukewarm defenders in those who may do well under the new.” Unfortunately, this observation is remains true today.

Reactive and slow-to-change organizational cultures may fail to achieve their full potential, and, in today’s competitive environment, problems with launching new products, getting to market late, and other aspects of poor strategy and strategic execution can put an organization out of business. Change is difficult to implement in any organization, but success can be measured. There are common metrics used to manage and evaluate the effectiveness of change initiatives. The first is the percentage of people using the new tools and methods. But this simple conversion percentage needs additional context to accurately measure the effectiveness of an improvement initiative. If the conversion percentage is low, an analysis needs to be made to identify which tools and methods are being used and which ones are not. Deployed initiatives that do not create observable business benefits usually fall into general disuse. For this reason, it is important to also measure the cumulative net business benefits of an initiative by benefit type, project type, and location across an organization. An initiative should also produce benefits greater than its cost.

Business benefits include revenue enhancement, cost reduction, asset conversion, cost avoidance, and increases in customer, suppler, or employee satisfaction. They should be measured at a project level and aggregated up through an organization to demonstrate where the initiative is successful in achieving its goals and objectives. Another useful approach when measuring the effectiveness of an initiative is to identify key success factors specific for the organization to reinforce these success factors in subsequent projects. Barriers that prevent a successful deployment should also be identified with plans to remove them. It is important to obtain periodic feedback from key stakeholders to identify ways to improve and accelerate projects. Finally, to the extent senior management takes a hands-off approach to an initiative, it will fail. A stakeholder analysis should be done after completing the initial project charter to enable the team to obtain approvals, periodic feedback, sponsorship, information, resources, or other help.

Academic studies show that one of the most important characteristics of successful organizations is an ability to develop and execute their strategic vision at a tactical level through core competencies. This was discussed in the previous chapter as a strategic flow down. Integration of operational capability across an organization is enhanced with an empowered and diverse workforce. This helps create an “execution culture.” Important characteristics of execution culture are an ability to set and achieve year-over-year strategic goals and increase productivity. Proper strategic execution enables organizations to dominate their markets. In contrast, unsuccessful organizations fail to effectively articulate or align operational systems behind their strategic vision. These organizations become less competitive unless protected by barriers to market entry such as favorable laws and regulations, geographical isolation, or other advantages or by possessing unique advantages such as intellectual property.

In summary, competitive organizations align operational strategy with core competencies. If new competences are needed to execute competitive strategy, then plans are made to deploy initiatives to develop new ways to work. These are learning organizations that embrace diversity and empower their workforce to effect change. These changes require some risk, but it is managed based on the organization’s risk tolerance. The goal is to leverage disruptive technologies, digitization, automation, and other new methods to accelerate productivity growth and improve customer experience.

 
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