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CHANGE MANAGEMENT
Change management is a structured approach to the change in individuals,
teams, organizations and societies that enables the transition from a current
state to a desired future state.
THEORIES OF CHANGE:
The evolution of the change management field stems from psychology,
business and engineering. Hence, some models are derived from an organization
development perspective whereas others are based on the individual behavioral
model. For this reason, this section is divided into two sub-categories: IndividualChange Management and Organizational Change Management.
DYNAMIC CONSERVATISM:
This model by Donald Schon explores the inherent nature of organizations to
be conservative and protect them from constant change. Schon recognizes the
increasing need, due to the increasing pace of change for this process to become
far more flexible. This process being one of 'learning'. Very early on Schon
recognized the need for what is now termed the 'learning organization'. These
ideas are further expanded on within his frame work of 'reflection-in-action', the
mapping of a process by which this constant change could be coped with.
INDIVIDUAL CHANGE MANAGEMENT:
An early model of change developed by Kurt Lewin described change as a
three-stage process.
The first stage he called "unfreezing". It involved overcoming inertia and
dismantling the existing "mindset". Defense mechanisms have to be bypassed.
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In the second stage the change occurs. This is typically a period ofconfusion
and transition. We are aware that the old ways are being challenged but we do
not have a clear picture to replace them with yet.
The third and final stage he called "refreezing". The new mindset is
crystallizing and one's comfort level is returning to previous levels. Rosch (2002)
argues that this often quoted three-stage version of Lewins approach is an
oversimplification and that his theory was actually more complex and owed more
to physics than behavioural science. Later theorists have however remained
resolute in their interpretation of the force field model.
This three-stage approach to change is also adapted by Hughes (1991) who
makes reference to: "exit" (departing from an existing state), "transit" (crossing
unknown territory), and entry" (attaining a new equilibrium).
Tannenbaum & Hanna (1985) suggest a change process where movement is
from "homeostasis and holding on", through "dying and letting go" to "rebirth and
moving on". Although elaborating the process to five stages, Judson (1991) still
proposes a linear, staged model of implementing a change:
(a) Analyzing and planning the change;
(b) Communicating the change;
(c) Gaining acceptance of new behaviors;
(d) Changing from the status quo to a desired state, and
(e) Consolidating and institutionalizing the new state.
The ADKARmodel for individual change management was developed by
Prosci with input from more than 1000 organizations from 59 countries. This
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model describes five required building blocks for change to be realized
successfully on an individual level. The building blocks of the ADKAR Model
include:
1. Awareness of why the change is needed
2. Desire to support and participate in the change
3. Knowledge of how to change
4. Ability to implement new skills and behaviors
5. Reinforcement to sustain the change
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ORGANIZATION CHANGE MANAGEMENT
Organizational change management includes processes and tools for
managing the people side of the change at an organizational level. These tools
include a structured approach that can be used to effectively transition groups or
organizations through change. When combined with an understanding of
individual change management, these tools provide a framework for managing the
people side of change. People who are confronted by change will experience a
form of culture-shock as established patterns of corporate life are altered, or
viewed by people as being threatened. Employees will typically experience a form
of "grief" or loss.
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THE ROLE OF MANAGEMENT:
Management's responsibility (and that of administration in case of political
changes) is to detect trends in the macro environment as well as in the
microenvironment so as to be able to identify changes and initiate programs. It is
also important to estimate what impact a change will likely have on employee
behaviors patterns, work processes, technological requirements, and motivation.
Management must assess what employee reactions will be and craft a change
program that will provide support as workers go through the process of accepting
change. The program must then be implemented, disseminated throughout the
organization, monitored for effectiveness, and adjusted where necessary.
Organizations exist within a dynamic environment that is subject to change
due to the impact of various change "triggers", such as evolving technologies. To
continue to operate effectively within this environmental turbulence, organizations
must be able to change themselves in response to internally and externally initiated
change. However, change will also impact upon the individuals within the
organization.
Effective change management requires an understanding of the possible
effects of change upon people, and how to manage potential sources of resistance
to that change. Change can be said to occur where there is an imbalance between
the current state and the environment.
The change management process in systems engineering is the process of
requesting, determining attainability, planning, implementing and evaluation of
changes to a system. It has two main goals: supporting the processing of changes
and enabling traceability of changes, which should be possible through proper
execution of the process.
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INTRODUCTION OF CHANGE MANAGEMENT
There is considerable overlap and confusion between change management,
change control and configuration management. The definition below does not yet
integrate these. Change management is an important process, because it can
deliver vast benefits (by improving the system and thereby satisfying customer
needs), but also enormous problems (by ruining the system and/or mixing up the
change administration). Furthermore, at least for the Information Technology
domain, more funds and work are put into system maintenance (which involves
change management) than to the initial creation of a system. In the same way
Hinley describes two of Lehmans laws of software evolution: the law of
continuing change (i.e. systems that are used must change or automatically
become less useful) and the law of increasing complexity (i.e. through changes the
structure of a system becomes ever more complex and more resources are needed
to simplify it).
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The field of manufacturing is nowadays also confronted with many changes due
to increasing and worldwide competition, technological advances and demanding
customers. Therefore, (efficient and effective) change management is also of great
importance in this area.
It is not unthinkable that the above statements are true for other domains aswell, because usually, systems tend to change and evolve as they are used. Below,
a generic change management process and its deliverables are discussed, followedby some examples of instances of this process.
In the process below, it is arguable that the change committee should be
responsible not only for accept/reject decisions, but also prioritization, which
influences how change requests are batched for processing.
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THE PROCESS
For the description of the change management process, the meta-modeling
technique is used. Figure 1 depicts the process-data diagram, which is explained in
this section.
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ACTIVITIES:
There are six main activities, which jointly form the change management
process. They are: Identify potential change, Analyze change request, Evaluate
change, Plan change, Implement change and Review and close change.
These activities are executed by four different roles, which are discussed in
Table 1. The activities (or their sub-activities, if applicable) themselves are
described in Table 2.
Table 1: Role descriptions for the change management process
Role Description
Customer
The customer is the role that requests a change due to problems
encountered or new functionality requirements; this can be a person
or an organizational entity and can be in- or external to the company
that is asked to implement the change.
Project
manager
The project manager is the owner of the project that the CHANGEREQUEST concerns. In some cases there is a distinct change
manager, who in that case takes on this role.
Change
committee
The change committee decides whether a CHANGE REQUEST will
be implemented or not. Sometimes this task is performed by the
project manager as well.
Change
builder
The change builder is the person who plans and implements the
change; it could be argued that the planning component is (partially)
taken on by the project manager.
Activity Sub-activity Description
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Identify
potential
change
Require new
functionality
A customer desires new functionality and
formulates a REQUIREMENT.
Encounter
problem
A customer encounters a problem (e.g. a bug ) in
the system and this leads to a PROBLEMREPORT.
Request changeA customer proposes a change through creation of a
CHANGE REQUEST.
Analyze
change
request
Determine
technical
feasibility
The project manager determines the technicalfeasibility of the proposed CHANGE REQUEST,
leading to a CHANGE TECHNICAL
FEASIBILITY.
Determine costs
and benefits
The project manager determines the costs and
benefits of the proposed CHANGE REQUEST,
resulting in CHANGE COSTS AND BENEFITS.
Evaluate
change
Based on the CHANGE REQUEST, its CHANGE
TECHNICAL FEASIBILITY and CHANGECOSTS AND BENEFITS, the change committee
makes the go/no-go decision.
Plan changeAnalyze change
impact
The extent of the change (i.e. what other items the
change effects) is determined in a CHANGE
IMPACT ANALYSIS. It could be argued that this
activity leads to another go/no-go decision, or that
it even forms a part of the Analyze change requestactivity.
Create planning A CHANGE PLANNING is created for the
implementation of the change. Some process
descriptions illustrate that is also possible to save
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changes and process them later in a batch. This
activity could be viewed as a good point to do this.
Implement
changeExecute change
The change is programmed; this activity has astrong relationship with Propagate change, because
sometimes the change has to be adapted to otherparts of the system (or even other systems) as well.
Propagate
change
The changes resulting from Execute change have to
be propagated to other system parts that are
influenced by it. Because this and the above sub-
activity are highly dependent on each other, they
have been modeled as concurrent activities.
Test change
The change builder tests whether what he has built
actually works and satisfies the CHANGE
REQUEST.
Update
documentation
The DOCUMENTATION is updated to reflect the
applied changes.
Release changeA new SYSTEM RELEASE, which reflects theapplied change, is made public.
Review and
close
change
Verify change
The implementation of the change in the new
SYSTEM RELEASE is verified for the last time,
now by the project manager. Maybe this has to
happen before the release, but due to conflicting
literature sources and diagram complexity
considerations it was chosen to model it this wayand include this issue.
Close changeThis change cycle is completed, i.e. the CHANGE
LOG ENTRY is wrapped up.
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Examples:
A good example of the change management process in action can be found in
software development. Often users report bugs or desire new functionality from
their software programs, which leads to a change request. The product software
company then looks into the technical and economical feasibility of implementing
this change and consequently it decides whether the change will actually be
realized. If that indeed is the case, the change has to be planned, for example
through the usage offunction points.
The actual execution of the change leads to the creation and/or alteration of
softwarecode and when this change is propagated it probably causes other codefragments to change as well. After the initial test results seem satisfactory, the
documentation can be brought up to date and be released, together with the
software. Finally, the project manager verifies the change and closes this entry in
the change log.
CHANGE MANAGEMENT IN INDUSTRIAL PLANTS:
Since complex processes can be very sensitive to even small changes, proper
management of change to industrial facilities and processes is recognized as
critical to safety. In the US, OSHA has regulations that govern how changes are to
be made and documented.
The main requirement is that a thorough review of a proposed change be
performed by a multi-disciplinary team to ensure that as many possible viewpoints
are used as possible to minimize the chances of missing a hazard. In this context,change management is known as Management of Change, or MOC. It is just one
of many components of Process Safety Management.
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EFFECTIVE MANAGEMENT OF CHANGE
Organizational and personal change management, process, plans, change
management and business development tips:
Here are some rules for effective management of change. Managing
organizational change will be more successful if you apply these simple principles.
Achieving personal change will be more successful too if you use the same
approach where relevant. Change management entails thoughtful planning and
sensitive implementation, and above all, consultation with, and involvement of,
the people affected by the changes. If you force change on people normally
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problems arise. Change must be realistic, achievable and measurable. These
aspects are especially relevant to managing personal change.
Before starting organizational change, ask yourself: What do we want to
achieve with this change, why, and how will we know that the change has been
achieved? Who is affected by this change, and how will they react to it? How
much of this change can we achieve ourselves, and what parts of the change do we
need help with? These aspects also relate strongly to the management of personal
as well as organizational change.
Instead, change needs to be understood and managed in a way that people can
cope effectively with it. Change can be unsettling, so the manager logically needs
to be a settling influence.
Check that people affected by the change agree with, or at least understand,
the need for change, and have a chance to decide how the change will be managed,
and to be involved in the planning and implementation of the change. Use face-to-
face communications to handle sensitive aspects of organizational change
management. Encourage your managers to communicate face-to-face with their
people too if they are helping you manage an organizational change. Email and
written notices are extremely weak at conveying and developing understanding.
If you think that you need to make a change quickly, probe the reasons - is the
urgency real? Will the effects of agreeing a more sensible time-frame really be
more disastrous than presiding over a disastrous change? Quick change prevents
proper consultation and involvement, which leads to difficulties that take time toresolve.
Involving and informing people also creates opportunities for others to
participate in planning and implementing the changes, which lightens your burden,
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spreads the organizational load, and creates a sense of ownership and familiarity
among the people affected.
Bad news needs even more careful management than routine change. Hiding
behind memos and middle managers will make matters worse. Consulting with
people, and helping them to understand does not weaken your position - it
strengthens it. Leaders who fail to consult and involve their people in managing
bad news are perceived as weak and lacking in integrity. Treat people with
humanity and respect and they will reciprocate.
RESPONSIBILITY FOR MANAGING CHANGE:
The employee does not have a responsibility to manage change - the
employee's responsibility is no other than to do their best, which is different for
every person and depends on a wide variety of factors (health, maturity, stability,
experience, personality, motivation, etc). Responsibility for managing change is
with management and executives of the organization - they must manage the
change in a way that employees can cope with it.
The manager has a responsibility to facilitate and enable change, and all that
is implied within that statement, especially to understand the situation from an
objective standpoint (to 'step back', and be non-judgmental), and then to help
people understand reasons, aims, and ways of responding positively according to
employees' own situations and capabilities. Increasingly the manager's role is to
interpret, communicate and enable - not to instruct and impose, which nobody
really responds to well.
Change must involve the people - change must not be imposed upon the
people
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Be wary of expressions like 'mindset change', and 'changing people's mindsets'
or 'changing attitudes', because this language often indicates a tendency towards
imposed or enforced change (theory x), and it implies strongly that the
organization believes that its people currently have the 'wrong' mindset, which isnever, ever, the case.
If people are not approaching their tasks or the organization effectively, then
the organization has the wrong mindset, not the people. Change such as new
structures, policies, targets, acquisitions, disposals, re-locations, etc., all create
new systems and environments, which need to be explained to people as early as
possible, so that people's involvement in validating and refining the changes
themselves can be obtained.
Whenever an organization imposes new things on people there will be
difficulties. Participation, involvement and open, early, full communication are the
important factors.
Workshops are very useful processes to develop collective understanding,
approaches, policies, methods, systems, ideas, etc. Staff surveys are a helpful way
to repair damage and mistrust among staff - provided you allow people to
complete them anonymously, and provided you publish and act on the findings.
Management training, empathy and facilitative capability are priority areas -
managers are crucial to the change process - they must enable and facilitate, not
merely convey and implement policy from above, which does not work.
You cannot impose change - people and teams need to be empowered to find
their own solutions and responses, with facilitation and support from
managers, and tolerance and compassion from the leaders and executives.
Management and leadership style and behavior is more important than clever
process and policy. Employees need to be able to trust the organization.
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The leader must agree and work with these ideas, or change is likely to be very
painful, and the best people will be lost in the process.
1. At all times involve and agree support from people within system (system =
environment, processes, culture, relationships, behaviors, etc., whether
personal or organizational).
2. Understand where you/the organization is at the moment.
3. Understand where you want to be, when, why, and what the measures will
be for having got there.
4. Plan development towards above No.3 in appropriate achievable
measurable stages.
5. Communicate, involve, enable and facilitate involvement from people, as
early and openly and as fully as is possible.
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SUCCESSFUL CHANGE
JOHN P KOTTERS EIGHT STEPS TO SUCCESSFUL CHANGE:
John Kotter's highly regarded books 'Leading Change' (1995) and the follow-
up 'The Heart of Change' (2002) describes a helpful model for understanding and
managing change. Each stage acknowledges a key principle identified by Kotter
relating to people's response and approach to change, in which people see, feel and
then change: Kotter's eight step change model can be summarized as:
1. Increase urgency - Inspire people to move, make objectives real and
relevant.2. Build the guiding team - Get the right people in place with the right
emotional commitment, and the right mix of skills and levels.
3. Get the vision right - Get the team to establish a simple vision and strategy
focus on emotional and creative aspects necessary to drive service and
efficiency.
4. Communicate for buy-in -Involve as many people as possible,
communicate the essentials, simply, and to appeal and respond to people's
needs. De-clutter communications - make technology work for you rather
than against.
5. Empower actions - Remove obstacles, enable constructive feedback and
lots of support from leaders - reward and recognize progress and
achievements.
6. Create short-term wins - Set aims that are easy to achieve - in bite-size
chunks. Manageable numbers of initiatives. Finish current stages before
starting new ones.
7. Don't let up - Foster and encourage determination and persistence -
ongoing change - encourage ongoing progress reporting - highlight
achieved and future milestones.
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8. Make change stick - Reinforce the value of successful change via
recruitment, promotion, and new change leaders. Weave change into
culture.
IDEAS ON ILLUSTARTING CHANGE MANAGEMENT ISSUES:
When people are confronted with the need or opportunity to change,
especially when its 'enforced', as they see it, by the organization, they can become
emotional. So the managers who try to manage the change, Diffusing the
emotional feelings, taking a step back, encouraging objectivity, is important to
enabling sensible and constructive dialogue. To this end, managers and trainers
can find it helpful to use analogies to assist themselves and other staff to look at
change in a more detached way.
On this site there are several illustrations which can be used for this purpose,
depending on the type of change faced, and the aspect that is to be addressed. Here
are a few examples, useful for team meetings, presentations, one-to-one
counseling or self-reminder, particularly to help empathize with others facing
change:
Just as the state of 'unconscious incompetence', needs to be developed into
'conscious competence' to provide a basis for training, so a person's subjective
emotion needs to be developed into objectivity before beginning to help them
handle change. None of us is immune from subjectivity, ignorance or denial. The
lessons and reminders found in stories and analogies can help to show a new clear
perspective.
OTHER POINTS ABOUT PEOPLE AND CHANGE:
Strong resistance to change is often rooted in deeply conditioned or
historically reinforced feelings. Patience and tolerance is required to help people in
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these situations to see things differently. Bit by bit. There are examples of this sort
of gradual staged change everywhere in the living world.
Also, certain types of people - the reliable/dependable/steady/habitual/process-
oriented types - often find change very unsettling.
People who welcome change are not generally the best at being able to work
reliably, dependably and follow processes. The reliability/dependability
capabilities are directly opposite character traits to mobility/adaptability
capabilities.
Certain industries and disciplines have a high concentration of staff who needa strong reliability/dependability personality profile, for example, health services
and nursing, administration, public sector and government departments, utilities
and services; these sectors will tend to have many staff with character profiles who
find change difficult.
Be mindful of people's strengths and weaknesses. Not everyone welcomes
change. Take the time to understand the people you are dealing with, and how and
why they feel like they do, before you take action.
BUSINESS DEVELOPMENT DRIVEN CHANGE
Business development potentially includes everything involved with the
quality of the business or the organization. Business development planning
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first requires establishing the business development aims, and then
formulating a business development strategy, which would comprise some or
all of the following methods of development.
Sales development.
New product development.
New market development.
Business organization, shape, structure and processes development (e.g.,
outsourcing, e-business, etc).
Tools, equipment, plant, logistics and supply-chain development.
People, management and communications (capabilities and training)
development.
Strategic partnerships and distribution routes development.
International development.
Acquisitions and disposals.
Generally business development is partly scientific, and partly subjective,
based on the feelings and wishes of the business owners or CEO. There are so
many ways to develop a business which achieve growth and improvement, and
rarely is just one of these a single best solution. Business development is what
some people call a 'black art', i.e., difficult to analyze, and difficult to apply a
replicable process.
FAST CHANGING ENVIRONMENT:
Planning, implementing and managing change in a fast-changing environmentis increasingly the situation in which most organizations now work.
Dynamic environments such as these require dynamic processes, people,
systems and culture, especially for managing change successfully, notably
effectively optimizing organizational response to market opportunities and threats.
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Key elements for success:
Plan long-term broadly - a sound strategic vision, not a specific detailed
plan (the latter is impossible to predict reliably). Detailed five years plans
are out of date two weeks after they are written. Focus on detail for
establishing and measuring delivery of immediate actions, not medium-to-
long-term plans.
Establish forums and communicating methods to enable immediate review
and decision-making. Participation of interested people is essential. This
enables their input to be gained, their approval and commitment to be
secured, and automatically takes care of communicating the actions and
expectations.
Empower people to make decisions at a local operating level - delegate
responsibility and power as much as possible (or at least encourage people
to make recommendations which can be quickly approved).
Remove (as far as is possible) from strategic change and approval processes
and teams (or circumvent) any ultra-cautious, ultra-autocratic or
compulsively-interfering executives. Autocracy and interference are thebiggest obstacles to establishing a successful and sustainable dynamic
culture and capability.
Encourage, enable and develop capable people to be active in other areas of
the organization via 'virtual teams' and 'matrix management'.
Scrutinize and optimize ICT (information and communications technology)
systems to enable effective information management and key activity team-
working.
Use workshops as a vehicle to review priorities, agree broad medium-to-
long-term vision and aims, and to agree short term action plans and
implementation method and accountabilities.
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Adjust recruitment, training and development to accelerate the development
of people who contribute positively to a culture of empowered dynamism.
TROUBLESHOOTING TIPS FOR INVESTIGATING APPARENT
POOR PERFORMANCE:
If you are ever give the job of 'troubleshooting' or investigating (apparent)
poor performance, perhaps in another location or business belonging to your own
organization, or perhaps as a consultancy project, here are some simple tips:
Actually 'troubleshooting' isn't a great word - it scares people. Use 'facilitator'
or 'helper' instead. It sets a more helpful and cooperative tone.
On which point, you could well find that the main issue will be people's
resistance and defensiveness to someone coming in to their organization do what
you are doing. When you overcome that challenge, then you can start comparing
what's happening with what the organization sets out to do (mission, values, goals,
priorities, targets, key performance indicators, processes, measures); how the
people feel about things (staff turnover, retention, morale, attitudes); and how
customers and suppliers feel about things too (actually go out and visit customers,
and ex-customers particularly).
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You must observe protocols very diligently - introduce yourself properly to
people and explain who you are and what you are doing. Don't assume that your
task gives you the right to be secretive, or to have access to anyone or anything
without permission. Ask for help. Ask for introductions. Ask for permission. Be
polite and courteous. Respect people more than you would do normally, because
they will be sensitive, understandably so.
And then be led by the people there as to what can be improved. You should
adopt the role of a researcher and enabler rather than a problem solver. Plan lots of
questions that will help people to tell you how they feel about things - customersand staff and suppliers - and what they think can be done to improve things.
Avoid asking 'why' unless they're really trusting you and working with you.
Used early, 'why' puts people on the defense and you'll not find out anything. Look
at the customer relationship materials as well - customers will tell you what's best
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to focus on, and will give you an early opportunity to facilitate some improvement
responses. Also look at the employee motivation survey material.
It's likely that you'll have to write a report and recommendations afterwards,
in which case try wherever possible to involve the people in what you say about
them. Let there be no surprises. Be constructive. Accentuate the positive. Be
straight and open with people.
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PRINCIPLES OF CHANGE MANAGEMENT
No single methodology fits every company, but there is a set of practices,
tools, and techniques that can be adapted to a variety of situations. What follows is
a Top 10 list of guiding principles for change management. Using these as a
systematic, comprehensive framework, executives can understand what to expect,
how to manage their own personal change, and how to engage the entire
organization in the process.
1. Address the human side systematically. Any significant transformation
creates people issues. New leaders will be asked to step up, jobs will be
changed, new skills and capabilities must be developed, and employees will be
uncertain and resistant. Dealing with these issues on a reactive, case-by-case basis
puts speed, morale, and results at risk.
A formal approach for managing change beginning with the leadership
team and then engaging key stakeholders and leaders should be developed
early, and adapted often as change moves through the organization. This demands
as much data collection and analysis, planning, and implementation discipline as
does a redesign of strategy, systems, or processes.
The change-management approach should be fully integrated into program
design and decision making, both informing and enabling strategic direction. It
should be based on a realistic assessment of the organizations history, readiness,
and capacity to change.
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2. Start at the top. Because change is inherently unsettling for people at all levels
of an organization, when it is on the horizon, all eyes will turn to the CEO and the
leadership team for strength, support, and direction.
The leaders themselves must embrace the new approaches first, both to
challenge and to motivate the rest of the institution. They must speak with one
voice and model the desired behaviors. The executive team also needs to
understand that, although its public face may be one of unity, it, too, is composed
of individuals who are going through stressful times and need to be supported.
Executive teams that work well together are best positioned for success. They
are aligned and committed to the direction of change, understand the culture and
behaviors the changes intend to introduce, and can model those changes
themselves. At one large transportation company, the senior team rolled out an
initiative to improve the efficiency and performance of its corporate and field staff
before addressing change issues at the officer level. The initiative realized initial
cost savings but stalled as employees began to question the leadership teams
vision and commitment. Only after the leadership team went through the process
of aligning and committing to the change initiative was the work force able to
deliver downstream results.
3. Involve every layer. As transformation programs progress from defining
strategy and setting targets to design and implementation, they affect different
levels of the organization. Change efforts must include plans for identifying
leaders throughout the company and pushing responsibility for design and
implementation down, so that change cascades through the organization.
At each layer of the organization, the leaders who are identified and trained
must be aligned to the companys vision, equipped to execute their specific
mission, and motivated to make change happen.
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A major multiline insurer with consistently flat earnings decided to change
performance and behavior in preparation for going public. The company followed
this cascading leadership methodology, training and supporting teams at each
stage. First, 10 officers set the strategy, vision, and targets. Next, more than 60senior executives and managers designed the core of the change initiative. Then
500 leaders from the field drove implementation.
The structure remained in place throughout the change program, which
doubled the companys earnings far ahead of schedule. This approach is also a
superb way for a company to identify its next generation of leadership.
4. Make the formal case. Individuals are inherently rational and will question to
what extent change is needed, whether the company is headed in the right
direction, and whether they want to commit personally to making change happen.
They will look to the leadership for answers. The articulation of a formal case for
change and the creation of a written vision statement are invaluable opportunities
to create or compel leadership-team alignment.
Three steps should be followed in developing the case: First, confront reality
and articulate a convincing need for change. Second, demonstrate faith that the
company has a viable future and the leadership to get there . Finally, provide a
road map to guide behavior and decision making. Leaders must then customize
this message for various internal audiences, describing the pending change in
terms that matter to the individuals.
A consumer packaged-goods company experiencing years of steadilydeclining earnings determined that it needed to significantly restructure its
operations instituting, among other things, a 30 percent work force reduction
to remain competitive. In a series of offsite meetings, the executive team built a
brutally honest business case that downsizing was the only way to keep the
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7. Assess the cultural landscape. Successful change programs pick up speed and
intensity as they cascade down, making it critically important that leaders
understand and account for culture and behaviors at each level of the organization.
Companies often make the mistake of assessing culture either too late or not at all.Thorough cultural diagnostics can assess organizational readiness to change, bring
major problems to the surface, identify conflicts, and define factors that can
recognize and influence sources of leadership and resistance.
These diagnostics identify the core values, beliefs, behaviors, and perceptions
that must be taken into account for successful change to occur. They serve as the
common baseline for designing essential change elements, such as the new
corporate vision, and building the infrastructure and programs needed to drive
change.
8. Address culture explicitly. Once the culture is understood, it should be
addressed as thoroughly as any other area in a change program. Leaders should be
explicit about the culture and underlying behaviors that will best support the new
way of doing business, and find opportunities to model and reward those
behaviors. This requires developing a baseline, defining an explicit end-state or
desired culture, and devising detailed plans to make the transition.
Company culture is an amalgam of shared history, explicit values and beliefs,
and common attitudes and behaviors. Change programs can involve creating a
culture (in new companies or those built through multiple acquisitions), combining
cultures (in mergers or acquisitions of large companies), or reinforcing cultures
(in, say, long-established consumer goods or manufacturing companies).
Understanding that all companies have a cultural center the locus of thought,
activity, influence, or personal identification is often an effective way to jump-
start culture change.
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9. Prepare for the unexpected. No change program goes completely according to
plan. People react in unexpected ways; areas of anticipated resistance fall away;
and the external environment shifts. Effectively managing change requires
continual reassessment of its impact and the organizations willingness and abilityto adopt the next wave of transformation. Fed by real data from the field and
supported by information and solid decision-making processes, change leaders can
then make the adjustments necessary to maintain momentum and drive results.
A leading U.S. health-care company was facing competitive and financial
pressures from its inability to react to changes in the marketplace. A diagnosis
revealed shortcomings in its organizational structure and governance, and the
company decided to implement a new operating model. In the midst of detailed
design, a new CEO and leadership team took over. The new team was initially
skeptical, but was ultimately convinced that a solid case for change, grounded in
facts and supported by the organization at large, existed. Some adjustments were
made to the speed and sequence of implementation, but the fundamentals of the
new operating model remained unchanged.
10. Speak to the individual. Change is both an institutional journey and a very
personal one. People spend many hours each week at work; many think of their
colleagues as a second family. Individuals (or teams of individuals) need to know
how their work will change, what is expected of them during and after the change
program, how they will be measured, and what success or failure will mean for
them and those around them. Team leaders should be as honest and explicit as
possible.
People will react to what they see and hear around them, and need to be
involved in the change process. Highly visible rewards, such as promotion,
recognition, and bonuses, should be provided as dramatic reinforcement for
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embracing change. Sanction or removal of people standing in the way of change
will reinforce the institutions commitment.
Most leaders contemplating change know that people matter. It is all too
tempting, however, to dwell on the plans and processes, which dont talk back and
dont respond emotionally, rather than face up to the more difficult and more
critical human issues. But mastering the soft side of change management
neednt be a mystery.
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CASE STUDY
ICICI BANK
"What role is I supposed to play in this ever-changing entity? Has anyone worked
out the basis on which roles are being allocated today?"
- A middle level ICICI manager, in 1998.
"We do put people under stress by raising the bar constantly. That is the only wayto ensure that performers lead the change process."
- K. V. Kamath, MD & CEO, ICICI, in
1998.
THE CHANGE LEADER:
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In May 1996, K.V. Kamath replaced Narayan Vaghul, CEO of India's leading
financial services company Industrial Credit and Investment Corporation of India
(ICICI). Immediately after taking charge, Kamath introduced massive changes in
the organizational structure and the emphasis of the organization changed - from a
development bank mode to that of a market-driven financial conglomerate.
Kamath's moves were prompted by his decision to create new divisions to tap
new markets and to introduce flexibility in the organization to increase its ability
to respond to market changes. Necessitated because of the organization's new-
found aim of becoming a financial powerhouse, the large-scale changes caused
enormous tension within the organization. The systems within the company soon
were in a state of stress. Employees were finding the changes unacceptable as
learning new skills and adapting to the process orientation was proving difficult.
The changes also brought in a lot of confusion among the employees, with media
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reports frequently carrying quotes from disgruntled ICICI employees. According
to analysts, a large section of employees began feeling alienated.
The discontentment among employees further increased, when Kamath
formed specialist groups within ICICI like the 'structured projects' and
'infrastructure' group.
Doubts were soon raised regarding whether Kamath had gone 'too fast too
soon,' and more importantly, whether he would be able to steer the employees and
the organization through the changes he had initiated.
BACKGROUND NOTE:
ICICI was established by the Government of India in 1955 as a public limited
company to promote industrial development in India. The major institutional
shareholders were the Unit Trust of India (UTI), the Life Insurance Corporation of
India (LIC) and the General Insurance Corporation of India (GIC) and its
subsidiaries. The equity of the corporation was supplemented by borrowings from
the Government of India, the World Bank, the Development Loan Fund (now
merged with the Agency for International Development), Kreditanstalt fur
Wiederaufba (an agency of the Government of Germany), the UK government and
the Industrial Development Bank of India (IDBI).
The basic objectives of the ICICI were to
Assist in creation, expansion and modernization of
enterprises.
Encourage and promote the participation of private capital,
both internal and external.
Take up the ownership of industrial investment.
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Expand the investment markets.
Since the mid 1980s, ICICI diversified rapidly into areas like merchant
banking and retailing. In 1987, ICICI co-promoted India's first credit rating
agency, Credit Rating and Information Services of India Limited (CRISIL), to rate
debt obligations of Indian companies. In 1988, ICICI promoted India's first
venture capital company - Technology Development and Information Company of
India Limited (TDICI) - to provide venture capital for indigenous technology-
oriented ventures.
In the 1990s, ICICI diversified into different forms of asset financing such as
leasing, asset credit and deferred credit, as well as financing for non-project
activities. In 1991, ICICI and the Unit Trust of India set up India's first screen-
based securities market, the over-the-counter Exchange of India (OCTEI). In 1992
ICICI tied up with J P Morgan of the US to form an investment banking company,
ICICI Securities Limited.
In line with its vision of becoming a universal bank, ICICI restructured its
business based on the recommendations of consultants McKinsey & Co in 1998.
In the late 1990s, ICICI concentrated on building up its retail business through
acquisitions and mergers. It took over ITC Classic, Anagram Finance and merged
the Shipping Credit Investment Corporation of India (SCICI) with itself. ICICI
also entered the insurance business with prudential plc of UK.
ICICI was reported to be one of the few Indian companies known for its quick
responsiveness to the changing circumstances. While its development bankcounterpart IDBI was reportedly not doing very well in late 2001, ICICI had major
plans of expanding on the anvil. This was expected to bring with it further
challenges as well as potential change management issues. However, the
organization did not seem to much perturb by this, considering that it had
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successfully managed to handle the employee unrest following Kamath's
appointment.
CHANGE CHALLENGES - PART I:
ICICI was a part of the club of developmental finance institutions (DFIs -
ICICI, IDBI and IFCI) who were the sole providers of long-term funds to the
Indian industry. If the requirement was large, all three pooled in the money.
However, the deregulation beginning in the early 1990s, allowed Indian corporate
to rise long-term funds abroad, putting an end to the DFI monopoly. The
government also stopped giving DFIs subsidized funds. Eventually in 1997, the
practice of consortium lending by DFIs was phased out.
It was amidst this new found independent status that Kamath, who had been
away from ICICI for eight years working abroad, returned to the helm. At this
point of time, ICICI had limited expertise, with its key activity being the
disbursement of eight-year loans to big clients like Reliance Industries and Telco
through its nine zonal offices.
In effect, the company had one basic product, and a customer orientation,
which was largely regional in nature. Kamath, having seen the changes occurring
in the financial sector abroad, wanted ICICI to become a one-stop shop for
financial services. He realized that in the deregulated environment ICICI was
neither a low-cost player nor was it a differentiator in terms of customer service.
The Indian commercial banks' cost of funds was much lower, and the foreign
banks were much savvier when it came to understanding customer needs and
developing solutions. Kamath identified the main problem as the company's
ignorance regarding the nuances of lending practices in newly opened sectors like
infrastructure.
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The change program was initiated within the organization, the first move
being the creation of the 'infrastructure group (IIG),' 'oil & gas group (O&G),'
'planning and treasury department (PTD)' and the 'structured products group
(SPG)', as the lending practices were quite different for all of these. Kamathpicked up people from various departments, who he was told were good, for these
groups.
The approach towards creating these new skill sets, however, led to one
unintended consequence. As these new groups took on the key tasks, a majority of
the work, along with a lot of good talent, shifted to the corporate center. While the
zonal offices continued to do the same work - disbursing loans to corporate in the
same region - their importance within the organization seemed to have diminished.
An ex-employee remarked, "The way to get noticed inside ICICI after 1996 has
been to attach you to people who were heading these (IIG, PTD, SPG, O&G)
departments. These groups were seen as the thrust areas and if you worked in the
zones it was difficult to be noticed.
Refuting this, Kamath remarked, "This may be said by people who did notmake it. And there will always be such people." Some of the people who did not
fit in this set-up were quick to leave the organization.
However, this was just the beginning of change-resistance at ICICI.
The basic objectives of the ICICI were to another change management problem
surfaced as a result of ICICI's decision to focus its operations much more sharply
around its customers. In the system prevailing, if a client had three different
requirements from ICICI, he had to approach the relevant departments separately.
The process was time consuming, and there was a danger that the client would
take a portion of that business elsewhere. To tackle this problem, ICICI set up
three new departments: major client group (MCG), growth client group (GCG)
and personal finance group. Now, the customer talked only to his representative in
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MCG or GCG. And these representatives in turn found out which ICICI
department could do the job.
CHANGE CHALLENGES - PART II
ICICI had to face change resistance once again in December 2000, when
ICICI Bank was merged with Bank of Madura (BoM). Though ICICI Bank was
nearly three times the size of BoM, its staff strength was only 1,400 as against
BoM's 2,500. Half of BoM's personnel were clerks and around 350 were
subordinate staff.
There were large differences in profiles, grades, designations and salaries ofpersonnel in the two entities. It was also reported that there was uneasiness among
the staff of BoM as they felt that ICICI would push up the productivity per
employee, to match the levels of ICICI. BoM employees feared that their positions
would come in for a closer scrutiny. They were not sure whether the rural
branches would continue or not as ICICI's business was largely urban-oriented.
The apprehensions of the BoM employees seemed to be justified as the
working culture at ICICI and BoM were quite different and the emphasis of the
respective management was also different. While BoM management concentrated
on the overall profitability of the Bank, ICICI management turned all its
departments into individual profit centers and bonus for employees was given on
the performance of individual profit center rather than profits of whole
organization.
ICICI not only put in place a host of measures to technologically upgrade the
BoM branches to ICICI's standards, but also paid special attention to facilitate a
smooth cultural integration. The company appointed consultants Hewitt
Associates to help in working out a uniform compensation and work culture and to
take care of any change management problems.
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ICICI conducted an employee behavioral pattern study to assess the various
fears and apprehensions that employees typically went through during a merger.
(Refer Table I).
TABLE I
'POST-MERGER' EMPLOYEE BEHAVIORAL PATTERN
PERIOD EMPLOYEE BEHAVIOR
Day 1Denial, fear, no improvement
After a month Sadness, slight improvement
After a YearAcceptance, significant improvement
After 2 YearsRelief, liking, enjoyment, business development activities
Based on the above findings, ICICI established systems to take care of the
employee resistance with action rather than words. The 'fear of the unknown' was
tackled with adept communication and the 'fear of inability to function' was
addressed by adequate training. The company also formulated a 'HR blue print' toensure smooth integration of the human resources. (Refer Table II).
TABLE II
MANAGING HR DURING THE ICICI-BoM MERGER
THE HR BLUEPRINTAREAS OF HR INTEGRATION
FOCUSSED ON A data base of the entire HR structure
Road map of career
Determining the blue print of HR
Employee communication
Cultural integration
Organization structuring
Recruitment, Compensation
Performance management
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moves
Communication of milestones
IT Integration - People Integration
- Business Integration.
Training
Employee relations
To ensure employee participation and to decrease the resistance to the change,
management established clear communication channels throughout to avoid any
kind of wrong messages being sent across. Training programmes were conducted
which emphasized on knowledge, skill, attitude and technology to upgrade skills
of the employees. Management also worked on contingency plans and initiated
direct dialogue with the employee unions of the BoM to maintain good employee
relations.
By June 2001, the process of integration between ICICI and BoM was started.ICICI transferred around 450 BoM employees to ICICI Bank, while 300 ICICI
employees were shifted to BoM branches. Promotion schemes for BoM employees
were initiated and around 800 BoM officers were found to be eligible for thepromotions. By the end of the year, ICICI seemed to have successfully handled the
HR aspects of the BoM merger. According to a news report, The win-win
situation created by.HR initiatives has resulted in high level of morale among
all sections of the employees from the erstwhile BoM."
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Even as the changes following the ICICI-BoM merger were stabilizing, ICICI
announced its merger with ICICI Bank in October 2001. The merger, to beeffective from March 2002, was expected to unleash yet another series of changes
at the organization. With Kamath still heading ICICI, analysts were hopeful that
the bank would come out successfully in the task of integrating the operations ofboth the entities this time as well.
SUMMARY
The goal of this document is to provide change management information that
can be beneficial both personally and professionally. Change refers to any
alteration that occurs in total work environment. Generally people are accustomed
to a well established way of life.
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Ashwathappa K., Organizational Behavior, published by Himalaya
Publication, Mumbai, India, 7th edition, 2007.
WEBLIOGRAPHY
http://www.wikipedia.org/wiki/Change_management
http://www.CartoonStock.com
http://www.etu.org.za/toolbox/docs/building/change
http://www.drbalternatives.com
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http://www.wikipedia.org/wiki/Change_managementhttp://www.wikipedia.org/wiki/Change_management
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