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Chapter Ten Organizationa l Change & Innovation Lifelong Challenges for the Exceptional Manager McGraw-Hill/Irwin Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.

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Page 1: Chapter Ten Organizational Change & Innovation Lifelong Challenges for the Exceptional Manager McGraw-Hill/Irwin Copyright © 2011 by The McGraw-Hill Companies,

Chapter Ten

Organizational Change &

InnovationLifelong Challenges for the Exceptional

Manager

McGraw-Hill/Irwin Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.

Page 2: Chapter Ten Organizational Change & Innovation Lifelong Challenges for the Exceptional Manager McGraw-Hill/Irwin Copyright © 2011 by The McGraw-Hill Companies,

Major Questions You Should Be Able to Answer

10.1 Since change is always with us, what should I understand about it?

10.2 What are the uses of OD, and how effective is it?

10.3 What do I need to know to encourage innovation?

10.4 How are employees threatened by change, and how can I help them adjust?

10-2

Page 3: Chapter Ten Organizational Change & Innovation Lifelong Challenges for the Exceptional Manager McGraw-Hill/Irwin Copyright © 2011 by The McGraw-Hill Companies,

Ways to Deal With Change and Innovation

Allow room for innovationGive one consistent explanation for the changeLook for opportunities in unconventional waysHave the courage to follow your ideasAllow grieving, then move on

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Page 4: Chapter Ten Organizational Change & Innovation Lifelong Challenges for the Exceptional Manager McGraw-Hill/Irwin Copyright © 2011 by The McGraw-Hill Companies,

Fundamental Change: What Will You Be Called Upon to Deal With?

1. The marketplace is becoming more segmented & moving toward more niche products

2. There are more competitors offering targeted products, requiring faster speed-to-market

3. Some traditional companies may not survive radically innovative change

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Page 5: Chapter Ten Organizational Change & Innovation Lifelong Challenges for the Exceptional Manager McGraw-Hill/Irwin Copyright © 2011 by The McGraw-Hill Companies,

Fundamental Change: What Will You Be Called Upon to Deal With?

4. China, India, & other offshore suppliers are changing the way we work

5. Knowledge, not information, is becoming the new competitive advantage

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Page 6: Chapter Ten Organizational Change & Innovation Lifelong Challenges for the Exceptional Manager McGraw-Hill/Irwin Copyright © 2011 by The McGraw-Hill Companies,

Two Types of Change

Reactive change making changes in response to problems or opportunities as they arise

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Page 7: Chapter Ten Organizational Change & Innovation Lifelong Challenges for the Exceptional Manager McGraw-Hill/Irwin Copyright © 2011 by The McGraw-Hill Companies,

Two Types of Change

Proactive change involves making carefully thought-out changes in anticipation of possible or expected problems or opportunitiesalso called planned change

10-7

Page 8: Chapter Ten Organizational Change & Innovation Lifelong Challenges for the Exceptional Manager McGraw-Hill/Irwin Copyright © 2011 by The McGraw-Hill Companies,

Forces For Change Outside and Inside the Organization

10-8

Figure 10.1

Page 9: Chapter Ten Organizational Change & Innovation Lifelong Challenges for the Exceptional Manager McGraw-Hill/Irwin Copyright © 2011 by The McGraw-Hill Companies,

The Forces for Change: Outside the Organization

1. Demographic characteristics2. Market changes3. Technological advancement4. Social & political pressures

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Page 10: Chapter Ten Organizational Change & Innovation Lifelong Challenges for the Exceptional Manager McGraw-Hill/Irwin Copyright © 2011 by The McGraw-Hill Companies,

Question?

Tony, the owner of Ciro di Pasta restaurant on Cape Cod is open during the “high season” from May until October. He has always hired college students on summer vacation. In recent years, the number of workers who quit mid-summer has risen significantly. When he asks, they say they are quitting because they “have enough money” or “want the time off”. This is probably an example of a(n) ________ change.

A.Market B. Social or political C. Economic D.Technological

10-10

Page 11: Chapter Ten Organizational Change & Innovation Lifelong Challenges for the Exceptional Manager McGraw-Hill/Irwin Copyright © 2011 by The McGraw-Hill Companies,

Forces Originating Inside the Organization

1. Employee problems2. Managers’ behavior

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Page 12: Chapter Ten Organizational Change & Innovation Lifelong Challenges for the Exceptional Manager McGraw-Hill/Irwin Copyright © 2011 by The McGraw-Hill Companies,

Areas in Which Change is Often Needed

1. Changing peoplePerceptions, attitudes, performance, skills

2. Changing technology3. Changing structure4. Changing strategy

10-12

Page 13: Chapter Ten Organizational Change & Innovation Lifelong Challenges for the Exceptional Manager McGraw-Hill/Irwin Copyright © 2011 by The McGraw-Hill Companies,

Changing Technology

Technologyany machine or process that enables an organization to gain a competitive advantage in changing materials used to produce a finished productnot just computer technology

10-13

Page 14: Chapter Ten Organizational Change & Innovation Lifelong Challenges for the Exceptional Manager McGraw-Hill/Irwin Copyright © 2011 by The McGraw-Hill Companies,

Organization Development

Organization development (OD) set of techniques for implementing planned change to make people and organizations more effective

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Page 15: Chapter Ten Organizational Change & Innovation Lifelong Challenges for the Exceptional Manager McGraw-Hill/Irwin Copyright © 2011 by The McGraw-Hill Companies,

Organization Development

Change agent a consultant with a background in behavioral sciences who can be a catalyst in helping organizations deal with old problems in new ways

10-15

Page 16: Chapter Ten Organizational Change & Innovation Lifelong Challenges for the Exceptional Manager McGraw-Hill/Irwin Copyright © 2011 by The McGraw-Hill Companies,

What Can OD Be Used For?

1. Managing conflict2. Revitalizing organizations3. Adapting to mergers

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Page 17: Chapter Ten Organizational Change & Innovation Lifelong Challenges for the Exceptional Manager McGraw-Hill/Irwin Copyright © 2011 by The McGraw-Hill Companies,

The OD Process

Figure 10.2 10-17

Page 18: Chapter Ten Organizational Change & Innovation Lifelong Challenges for the Exceptional Manager McGraw-Hill/Irwin Copyright © 2011 by The McGraw-Hill Companies,

How OD Works

1. Diagnosis: What is the problem?2. Intervention: What shall we do about it?

Intervention – attempt to correct the diagnosed problem

3. Evaluation: How well has the intervention worked?

10-18

Page 19: Chapter Ten Organizational Change & Innovation Lifelong Challenges for the Exceptional Manager McGraw-Hill/Irwin Copyright © 2011 by The McGraw-Hill Companies,

Question?

Fred, an OD consultant, is designing a survey of employee attitudes to be given to workers at the Lemon Automobile Company. Fred is in the _________ stage of OD.

A.Intervention B.Diagnosis C.Evaluation D.Process consultation

10-19

Page 20: Chapter Ten Organizational Change & Innovation Lifelong Challenges for the Exceptional Manager McGraw-Hill/Irwin Copyright © 2011 by The McGraw-Hill Companies,

Example: Patagonia Tries to Become Greener

Patagonia has long been a supporter of the environmental movementCompany wondered how “green” the origins and handling of if products wereTransportation took little energy, but manufacturing sometimes produced ecologically unfriendly by-productsPatagonia did not want to sacrifice quality for environmental reasons

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Page 21: Chapter Ten Organizational Change & Innovation Lifelong Challenges for the Exceptional Manager McGraw-Hill/Irwin Copyright © 2011 by The McGraw-Hill Companies,

The Effectiveness of OD

1. Multiple interventions2. Management support3. Goals geared to both short and long term

results4. OD is affected by culture

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Page 22: Chapter Ten Organizational Change & Innovation Lifelong Challenges for the Exceptional Manager McGraw-Hill/Irwin Copyright © 2011 by The McGraw-Hill Companies,

Two Myths about Innovation

Myth No. 1: Innovation happens in a “Eureka!” momentMyth No. 2: Innovation can be systematized

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Page 23: Chapter Ten Organizational Change & Innovation Lifelong Challenges for the Exceptional Manager McGraw-Hill/Irwin Copyright © 2011 by The McGraw-Hill Companies,

Seeds of Innovation

1. Hard work in a specific direction2. Hard work with direction change3. Curiosity4. Wealth & money5. Necessity6. Combination of seeds

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Page 24: Chapter Ten Organizational Change & Innovation Lifelong Challenges for the Exceptional Manager McGraw-Hill/Irwin Copyright © 2011 by The McGraw-Hill Companies,

Types of Innovation

Product innovation change in the appearance or performance of a product or the creation of a new one

Process innovation change in the way a product is conceived, manufactured, or disseminated

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Page 25: Chapter Ten Organizational Change & Innovation Lifelong Challenges for the Exceptional Manager McGraw-Hill/Irwin Copyright © 2011 by The McGraw-Hill Companies,

Types of Innovation

Incremental innovation

creation of products, services, or technologies that modify existing ones

Radical innovation creation of products, services, or technologies that replace existing ones

10-25

Page 26: Chapter Ten Organizational Change & Innovation Lifelong Challenges for the Exceptional Manager McGraw-Hill/Irwin Copyright © 2011 by The McGraw-Hill Companies,

Celebrating Failure: Factors Encouraging Innovation

Organizations can make innovation happen by providing 1) the right organizational culture, 2) the appropriate resources, and 3) the correct reward system

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Page 27: Chapter Ten Organizational Change & Innovation Lifelong Challenges for the Exceptional Manager McGraw-Hill/Irwin Copyright © 2011 by The McGraw-Hill Companies,

Celebrating Failure: Factors Encouraging Innovation

1. Culture: Is innovation viewed as a benefit or a boondoggle?

2. Resources: Do managers put money where their mouths are?

3. Rewards: Is experimentation reinforced in ways that matter?

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Page 28: Chapter Ten Organizational Change & Innovation Lifelong Challenges for the Exceptional Manager McGraw-Hill/Irwin Copyright © 2011 by The McGraw-Hill Companies,

Four Steps For Fostering Innovation

Figure 10.3

10-28

Page 29: Chapter Ten Organizational Change & Innovation Lifelong Challenges for the Exceptional Manager McGraw-Hill/Irwin Copyright © 2011 by The McGraw-Hill Companies,

Four Steps For Fostering Innovation

1. Recognize problems & opportunities & devise solutions

2. Gain allies by communicating your vision3. Overcome employee resistance, & empower

& reward them to achieve progress4. Execute well

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Page 30: Chapter Ten Organizational Change & Innovation Lifelong Challenges for the Exceptional Manager McGraw-Hill/Irwin Copyright © 2011 by The McGraw-Hill Companies,

Gain Allies by Communicating Your Vision

Showing how the product or service will be madeShowing how potential customers will be reachedDemonstrating how you’ll beat your competitorsExplaining when the innovation will take place

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Page 31: Chapter Ten Organizational Change & Innovation Lifelong Challenges for the Exceptional Manager McGraw-Hill/Irwin Copyright © 2011 by The McGraw-Hill Companies,

Question?

Wendy's created display screens at its drive-thru windows that show customers their orders and prices. This is an example of a(n) _________ innovation.

A.Product B.Process C.Adaptive D.Reactive

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Page 32: Chapter Ten Organizational Change & Innovation Lifelong Challenges for the Exceptional Manager McGraw-Hill/Irwin Copyright © 2011 by The McGraw-Hill Companies,

A Model of Resistance to Change

10-32Figure 10.4

Page 33: Chapter Ten Organizational Change & Innovation Lifelong Challenges for the Exceptional Manager McGraw-Hill/Irwin Copyright © 2011 by The McGraw-Hill Companies,

The Causes of Resistance to Change

Resistance to change an emotional/behavioral response to real or imagined threats to an established work routine.

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Page 34: Chapter Ten Organizational Change & Innovation Lifelong Challenges for the Exceptional Manager McGraw-Hill/Irwin Copyright © 2011 by The McGraw-Hill Companies,

The Degree to Which Employees Fear Change

Least threatening: Adaptive changeReintroduction of a familiar practice

Somewhat threatening: Innovative changeIntroduction of a practice that is new to the organization

10-34

Page 35: Chapter Ten Organizational Change & Innovation Lifelong Challenges for the Exceptional Manager McGraw-Hill/Irwin Copyright © 2011 by The McGraw-Hill Companies,

The Degree to Which Employees Fear Change

Very threatening: Radically innovative changeInvolves introducing a practice that is new to the industry

10-35

Page 36: Chapter Ten Organizational Change & Innovation Lifelong Challenges for the Exceptional Manager McGraw-Hill/Irwin Copyright © 2011 by The McGraw-Hill Companies,

Question?

At the Big Peaches Department Store, employees generally know that during annual inventory, they are required to work overnight shifts. This is an example of a(n) __________ change.

A.Adaptive B.Reactive C.Innovative

D.Proactive 10-36

Page 37: Chapter Ten Organizational Change & Innovation Lifelong Challenges for the Exceptional Manager McGraw-Hill/Irwin Copyright © 2011 by The McGraw-Hill Companies,

Reasons Employees Resist Change

Individual’s predisposition toward changeSurprise and fear of the unknownClimate of mistrustFear of failureLoss of status or job security

10-37

Page 38: Chapter Ten Organizational Change & Innovation Lifelong Challenges for the Exceptional Manager McGraw-Hill/Irwin Copyright © 2011 by The McGraw-Hill Companies,

Reasons Employees Resist Change

Peer pressureDisruption of cultural traditions or group relationshipsPersonality conflictsLack of tact or poor timingNon-reinforcing reward system

10-38

Page 39: Chapter Ten Organizational Change & Innovation Lifelong Challenges for the Exceptional Manager McGraw-Hill/Irwin Copyright © 2011 by The McGraw-Hill Companies,

Lewin’s Change Model

Unfreezing creating the motivation to change

Changing learning new ways of doing things

Refreezing making the new ways normal

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Page 40: Chapter Ten Organizational Change & Innovation Lifelong Challenges for the Exceptional Manager McGraw-Hill/Irwin Copyright © 2011 by The McGraw-Hill Companies,

Steps to Leading Organizational Change

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Table 10.2