Inputs strategic plans target elements of change and outputs

16 MANAGING CHANGE AND STRESS How Can You Apply OB and Show What You’ve Learned? © 2014 Angelo Kinicki and Mel Fugate. All rights reserved. Reproduction prohibited without permission of the authors. MAJOR TOPICS I’LL LEARN AND QUESTIONS I SHOULD BE ABLE TO ANSWER 16.1FORCES FOR CHANGE MAJOR QUESTION: What are the common forces or drivers of change at work, and how can this knowledge improve my personal effectiveness? 16.2TYPES AND MODELS OF CHANGE MAJOR QUESTION: How can different approaches to change make me and my organization more effective managers of change? 16.3UNDERSTANDING RESISTANCE TO CHANGE MAJOR QUESTION: Why do people resist change and what can I do about it? 16.4THE GOOD AND BAD OF STRESS MAJOR QUESTION: How can stress affect my effectiveness—positively and negatively? 16.5EFFECTIVE CHANGE AND STRESS MANAGEMENT MAJOR QUESTION: How can OB knowledge and tools help me effectively manage change and stress? INTEGRATIVE FRAMEWORK FOR UNDERSTANDING AND APPLYING OB Leading change and managing stress are ultimate tests of your understanding and ability to apply OB knowledge and tools. As you’ll learn, effectively leading change processes requires you to consider both person and environmental inputs and outcomes across organizational levels. Because of the complexity and broad impact of organizational change, it also is a major source of stress at work. We therefore encourage you to use this final chapter as a test of the knowledge you’ve accumulated thoughout this book and course. Page 557 winning at work HOW TO W.I.N. AT STRESS AND CHANGE We chose this fitting acronym for the final Winning at Work in this book. Everybody has stress and everybody is confronted with change. And as you’ll learn in this chapter, change is often stressful. We therefore offer some simple and practical recommendations you can apply to school, work, and other arenas of your life. DETERMINE WHAT YOU CAN AND CANNOT CONTROL Many people, including a large number of researchers, find that the more control you have over your environment the less stress you’ll experience. This also applies to dealing with change. For example, changes at work are typically much less stressful if you are involved in the planning and have some say (control) over the processes and outcomes of the changes. Therefore, a good place to start when managing stress and change in the many arenas of your life is with determining what you can control and what you can’t. Once you’ve done this, then you’ll be well on your way to applying what Sharon Melnick, a noted stress researcher, calls W-I-N at Change.1 First, identify a change in some arena of your life—school, work, a relationship. Then follow the three steps below and see if you don’t reduce your stress and increase your success at managing change. Written Inventory. Make a three-column chart. Write the implications of the change for you personally in column one. In the second column, describe your reactions to these implications. Pay particular attention to your emotions (Chapter 3) and how they affect your reactions. Individual Responsibility. Describe in the third and final column what specific things you can do to address the implications and your reactions. Do you need to manage your emotions? Would it be helpful to seek some support from a classmate, colleague, or friend? It might be helpful to consider your attributions (Chapter 4), potential biases (Chapter 6), or the possibility of miscommunication (Chapter 9). Be sure to focus on the aspects that you can control, and don’t get distracted or bogged down in what you can’t. New Learning Plan. Situations that cause stress and/or require change are often excellent opportunities for learning. You can learn what triggered your stress and how to avoid or prevent it in the future. But we also encourage you to be purposeful and identify what specific skills you need to effectively manage the change. Then, describe what you need and can do to learn these skills. Consider finding a mentor or coach, as this can also help build your social capital (Chapter 1). Set goals, make a plan, and work the plan (Chapters 5 and 6). FOR YOUWHAT’S AHEAD IN THIS CHAPTER We know you’ve heard the statement: “The only constant in life is change.” But we want you now to think about what this might mean for your job and career. We created this chapter not only to help you answer this question, but also to give you practical knowledge and tools to help you manage change at different levels in the Integrative Framework of OB. To do this, we’ll explore common forces or drivers for change, as well as learn about some popular models for understanding and managing change. It also is common for people to resist change. It therefore is useful to learn about some of the causes of resistance and what you can do about it. Because change is a major cause of stress at work, and in your life as a whole, we then help you understand both the positive and negative aspects of stress. The chapter concludes with suggestions on how to manage resistance, stress, and change more generally. Page 558 16.1FORCES FOR CHANGE MAJOR QUESTION What are the common forces or drivers of change at work, and how can this knowledge improve my personal effectiveness? THE BIGGER PICTURE There are a great many potential causes or forces for organizational change. Therefore, to understand and manage them more effectively, we’ve organized them into two broad categories—internal and external forces. Making this distinction will enable you to better manage this important organizational-level process to achieve a variety of outcomes across levels in the Integrative Framework of OB. Before we dive into a general discussion of the forces for change, we think a good place to start is to assess your own general attitudes toward change. Remember from Chapter 2 that attitudes are tendencies to respond either favorably or unfavorably to a given object or situation. Complete Self-Assessment 16.1 to learn about your own predisposition toward change. Then use all of what you learn in this chapter to help you strengthen an already positive attitude, or improve one that is not. SELF-ASSESSMENT 16.1 What Are My General Attitudes Toward Change? Go to connect.mheducation.com and take Self-Assessment 16.1 to learn about your general attitudes toward changes at school or work. 1.What is your overall attitude? Are you surprised? 2.Think of three examples from your school or work life that are consistent with your score. 3.Now think of a personal example where you think you possessed a clearly negative attitude toward a particular change. What made this different from/similar to your general attitudes toward change? 4.Drawing on what you learned in Chapter 2 about attitudes, describe two specific ways you can improve your attitudes toward change. SOURCE: Adapted from Miller, V. D., Johnson, J. R., & Grau, J. “Antecedents and willingness to participate in a planned organizational change,” Journal of Applied Communication Research, 1994, 22: 59–80. Now that you have a sense of your own attitudes toward change, consider this question about organizations: How do they know when they should change? What cues should an organization look for? Although there are no clear-cut answers to these questions, one way we can find cues signaling the need for change is to monitor the forces for change. These forces often differ greatly, and to help make sense of the variety we categorize them into external and internal forces (see Figure 16.1). External Forces External forces for change originate outside the organization. Such forces often apply to your organization and its competitors or even entire industries. External forces therefore can dramatically affect why an organization exists, as well as which markets it participates in and how. For instance, external changes can either present new opportunities for organizations to realize and grow (e.g., smartphones for consumers and Apple’s iPhone), or they can cause the ultimate demise or failure of a business (e.g., smartphones for consumers and Blackberry). Let us now consider the four key external forces for change: demographic characteristics, technological advancements, market changes, and social and political pressures. Page 559 FIGURE 16.1EXTERNAL AND INTERNAL FORCES FOR CHANGE Lehman Brothers was the fourth largest investment bank to collapse in the wake of the Wall Street meltdown of 2008. The meltdown destroyed people’s lives and life savings, and its effects are still seen today. Lehman’s bankruptcy is considered the largest in U.S. history. Demographic CharacteristicsChapter 2 provided a detailed discussion of demographic changes occurring in the US workforce. You learned that organizations are changing benefits and aspects of the work environment in order to attract, motivate, and retain diverse employees. Organizations also are changing the way in which they design and market their products and services and design their store layouts based on generational differences. For example, Ken Romanzi, North American chief operating officer for Ocean Spray Cranberries Inc., told a Wall Street Journal reporter that “we don’t do anything to remind boomers that they are getting older.”2 Persistently high unemployment levels among young people around the world are creating a strong force for change by governments and organizations alike. Experts believe that much of the current unrest in the Middle East is being fueled by a younger population that cannot find meaningful employment opportunities.3 Page 560 Technological AdvancementsTechnology is a common and often cost-effective tool for improving productivity, competitiveness, and customer service. Recall our discussion of social media in Chapter 9, as it is one of the most notable technological changes to impact business over the past several years. EXAMPLELinkedIn is now used by more than 225 million people in 200 countries. What’s more astonishing is that one source reports that 77% of all jobs are posted on the site, and 48% of recruiters use it as their only recruiting tool! “Simply put,” writes Jamie Cifuentes, who covers technology for PC Magazine, “recruiters love LinkedIn. It simplifies their work, it costs less to use, and users can’t lie about their work experience when they have professional contacts who can view what they post.” Twitter and Facebook also are used extensively by recruiters, 54% and 66%, respectively.4 Other surveys report that 98% of recruiters use some form of social media to find employees. This one technology has changed how employees look for and find jobs, how companies recruit talent, and how companies make money facilitating these relationships. And given that millions of people are looking for jobs on any given day, many established (e.g., Facebook and Google) and yet-to-be-known companies are trying to cash in on the opportunities.5 A recent McKinsey Global Survey of CEOs and other senior executives revealed the five most significant digital enterprise trends in business:6 1.Digital engagement of customers 2.Big data and advanced analytics 3.Digital engagement of employees and external partners 4.Automation 5.Digital innovation Each of these may present job and career opportunities for you. To be sure, OB will play a central role in the level of success individuals and organizations have with each. Put another way, it is people who design and use such technological tools, interpret the data, and then ultimately formulate and apply them effectively. “[D]espite the host of technical challenges in implementing digital [approaches],” McKinsey notes, “. . . success (or failure) of these programs ultimately relies on organization and leadership, rather than technology considerations.”7 To the right of President Obama, US Senators Chris Dodd and Barney Frank watch the signing of the Wall Street Reform and Consumer Protection Act in 2010. Shareholder, Customer, and Market ChangesShareholders have become more involved with pressing for organizational change in response to ethical lapses from senior management and anger over executives’ compensation packages. For instance, since 2011 public companies are required to allow shareholders to vote on executive compensation. These are referred to as “say on pay” provisions and are part of the Dodd-Frank Act. Although the votes are nonbinding, which means the company is not obligated to comply with the vote, the policy has indeed resulted in changes. In 2012 approximately 50 out of 3,000 companies received no votes, such as Citigroup, McKesson, and Abercrombie & Fitch. Nabors Industries, an oil services company, failed all three years such votes have been required. Many companies are now hiring firms (well-known examples include Institutional Shareholder Services and Glass, Lewis, & Co.) to advise them on changes to their compensation practices, all in efforts to win future approval and support from shareholders.8 Customers also are increasingly sophisticated and demand the companies with whom they do business to deliver higher value products and services. If they don’t get what they want, then they will shop elsewhere. This has led more and more companies to seek customer feedback about a wide range of issues in order to attract and retain customers because “turning a potential negative situation into visible positive sentiment is social media’s biggest potential advantage,” writes Lauren McCrea of the Ignite Social Media Agency.9 Page 561 EXAMPLEWalmart collects feedback from millions of customers to help improve service and merchandising. EXAMPLEUPS takes customer service to another level. It not only includes the names and pictures of its customer service representatives on its Facebook page—so you can “see” who you’re dealing with—but it also provides direct e-mail and phone contact info! Yes, you can contact a person directly!10 Social and Political PressuresThese forces are created by social and political events. For example, widespread concern about the impact of climate change and rising energy costs have been important forces for change in almost every industry around the world. Companies have gone “green,” looking for ways to use less energy themselves and to sell products that consume less energy and are safer to use. For example, Esquel, one of the world’s largest producers of premium cotton shirts, received pressure from retail customers such as Nike and Marks & Spencer to improve its environmental and social performance. These retailers pressed Esquel to produce more cotton organically. This is very difficult to do because most of Esquel’s cotton comes from Xinjiang, “an arid province in northwestern China that depends mainly on underground sources of water,” according to Stanford’s Hua L. Lee. “The traditional method of irrigation there was to periodically flood the fields—an inefficient approach that created a perfect breeding ground for insects and diseases. Heavy pesticide use was a necessity.” This pressure ultimately caused Esquel to closely work with farms to implement sustainable farming techniques. “For example, it assisted them in adopting drip irrigation to decrease their water use and in establishing natural pest- and disease-control programs such as breeding disease-resistant strains of cotton, to reduce reliance on pesticides. (The new variety of cotton plants also produced stronger fiber, resulting in less scrap during fabric manufacturing than conventional cotton did.)”11 Political events, such as the wars and unrest in the Middle East, also can create substantial change. Many defense contractors and infrastructure companies find opportunities due to such events. Events aside, governments can apply political pressures that can force or block changes. French pharmaceutical company Sanofi has been restructuring its research and development facilities around the world. Part of these changes included closing a lab in Toulouse that was not producing enough new drug discoveries to continue operating. However, the French government intervened and blocked the closing in French courts. The labor laws in the country make it easier for the government to prevent profitable companies from cutting jobs, particularly in high-tech industries that French politicians want to foster. This is challenging for Sanofi, which wants to consolidate specific operations to particular cities around the globe, like early drug research in Boston and infectious diseases in Lyon (another French city).12 Internal Forces Internal forces for change come from inside the organization. These forces may be subtle, such as low job satisfaction, or can manifest in outward signs, such as low productivity, conflict, or strikes. Internal forces for change come from both human resource problems and managerial behavior and decisions. Human Resource Problems or ProspectsThese problems stem from employee perceptions about how they are treated at work and the match between individual and organization needs and desires. Chapter 2 highlighted the relationship between an employee’s unmet needs and job dissatisfaction. Dissatisfaction is a symptom of an underlying employee problem that should be addressed. Page 562 EXAMPLEEmployees at Foxconn, one of Apple’s major Chinese suppliers, went on strike after managers required harsh production demands for the iPhone 5. Workers slowed production to a halt and even had violent clashes with management and inspectors. Tensions with the incredibly stringent quality standards were intensified when the company disallowed vacation time during the holidays to meet production goals. Apple has since taken a more active role in assuring higher wages and better working conditions at Foxconn and other suppliers.13 It also is common for new executives to “clean house.” When new CEOs take charge they often bring in their own people. About a quarter of CFOs, for example, are gone within one year of a new chief executive taking the reins. CFOs that have survived such changes in leadership offer three pieces of advice that executives and others can benefit from: 1.Communicate. “It’s better to err on the side of over communication . . . there’s so much [the incoming CEO] needs to learn.” Share both job-critical details and information about the culture, people, and customers. 2.Identify the CEO’s strengths and compensate for the weaknesses. It can be helpful to learn the knowledge and skill gaps and do what you can to cover them. This will prevent the new executive from being blindsided. Complement his or her skills and knowledge. 3.Don’t be an obstacle or resister. Embrace the change. “If you don’t believe in the direction the boss is going, and you don’t say why, and you sit there and simmer with resentment, that’s not a good place to be.”14 Unusual or high levels of absenteeism and turnover also represent forces for change. Organizations might respond to these problems by using the various approaches to job design discussed in Chapter 5, and by removing the different stressors discussed later in this chapter. To help combat these challenges, leaders and managers of change are well served to encourage employee participation and suggestions. Managerial Behaviors and DecisionsExcessive interpersonal conflict between managers and their subordinates or the board of directors is a sign that change is needed. “After four and a half intense and wonderful years as CEO of Groupon, I’ve decided that I’d like to spend more time with my family. Just kidding—I was fired today.” Farewell memo to Groupon employees from Andrew Mason, its founder and former CEO.15 EXAMPLEAndrew Mason, founder and former CEO of Groupon, was fired due to his strategy and underperformance. He decided to take the firm aggressively into selling goods and not just coupons for discounts with local merchants. These actions, combined with underperforming international expansion, led the board to conclude that his decisions and direction were not right for the company. (See the Problem-Solving Application Case at the end of Chapter 11.) BP not only changed is senior leadership but also its practices related to safety, motivated by the disastrous spill in the Gulf of Mexico in 2010 and previous explosion in a Texas facility in 2005. Current CEO Bob Dudley knows all aspects of the oil business and has spent $14 billion on cleanup efforts and another $11 billion for settlements. Dudley is determined “not to let unethical and potentially criminal behavior worm its way into the final settlements.” His attitude—and the company’s approach—is “instead of stressing the safety for the sake of complying with regulatory guidelines or passing an audit, BP’s goal is to build a behavior-based safety culture, one in which everyone on the job is committed to performing their work safely, even when no one is looking over their shoulder.” He brought in retired admiral Frank Bowman, of the U.S. Navy’s nuclear fleet, to oversee the safety program. And to be sure he has adequate influence, Mr. Bowman is also on the BP board of directors.16 Page 563 16.2TYPES AND MODELS OF CHANGE MAJOR QUESTION How can different approaches to change make me and my organization more effective managers of change? THE BIGGER PICTURE Researchers and managers alike have tried to identify effective ways to manage the change process, given its importance for organizational survival. This section provides insights into general types of organizational changes, as well as reviews of Lewin’s change model, a systems model of change, Kotter’s eight steps for leading organizational change, and the organizational development approach. Each serves as an organizational-level tool that affects many outcomes across the levels of our Integrative Framework of OB. Given the incredible variety of changes that occur, how are you supposed to manage them effectively? Do you just “wing it” and do whatever you feel in the moment? Or do you develop a particular approach and manage any and all changes the same way? The contingency approach in Chapter 1 suggests that you’d be wise to have a variety of approaches or change management tools and use the one best suited for a particular change. We provide such knowledge and tools in this section. Let’s start our discussion by looking at general types of changes. Three General Types of Change A useful way to organize and think about change is displayed in Figure 16.2. You’ll notice that this is similar to the common types of innovation you learned in Chapter 15—product, process, core, or transformational. These similarities make sense, as innovation requires change. Therefore, the common types of change differ in degree of change much like the types or degrees of innovation. With this in mind, many if not most organizational changes can be put into one of these three categories. 1.Adaptive change is the least complex, costly, and uncertain. It involves reimplementation of a change in the same organizational unit at a later time or imitation of a similar change by a different unit. For example, an adaptive change for a department store would be to rely on 12-hour days during the annual inventory week. The store’s accounting department could imitate the same change in work hours during tax preparation time. Adaptive changes are not particularly threatening to employees because they are familiar. FIGURE 16.2A GENERIC TYPOLOGY OF ORGANIZATIONAL CHANGE Page 564 2.Innovative change falls midway on the continuum of complexity, cost, and uncertainty. Many companies now utilize flextime and flexspace work arrangements (recall our discussion from Chapter 10). If other companies in their industry already utilize such practices, then this would qualify as an innovative change. Intel, for example, is embarking on innovative changes as they try to compete in the smartphone and tablet markets. While these are quite different from the PC markets where Intel made its name, many of its competitors (e.g., ARM Holdings) are doing the same.17 Innovative changes are therefore more complex, as organizations need to learn new behaviors, as well as create, implement, and enforce new policies and practices. These situations both have more uncertainty and cause more fear than adaptive changes. 3.Radically innovative change is at the high end of the continuum of complexity, cost, and uncertainty. Changes of this sort are the most difficult to implement and tend to be the most threatening to managerial confidence and employee job security. At the same time, however, radically innovative changes potentially realize the greatest benefits. Radical changes must also be supported by an organization’s culture. Organizational change is more likely to fail if it is inconsistent with any of the three levels of organizational culture: observable artifacts, espoused values, and basic assumptions (see the discussion in Chapter 14). Now that you’ve learned how to categorize types of change, let’s turn our attention to specific models of how to manage change. Lewin’s Change Model Most models of organizational change originated from the landmark work of social psychologist Kurt Lewin. Lewin developed a three-stage model of planned change that explained how to initiate, manage, and stabilize the change process.18 The three stages are unfreezing, changing, and refreezing. Before reviewing each stage, it is important to highlight some key assumptions underlying this model and many of the others:19 1.Learn and unlearn. The change process involves learning something new, as well as discontinuing or unlearning current attitudes, behaviors, or organizational practices. 2.Motivation. Change will not occur unless there is motivation to change. This is often the most difficult part of the change process. 3.People make or break. People are the key to all organizational changes. Any change, whether in terms of structure, group process, reward systems, or job design, requires individuals to change. Organizations don’t change if employee behaviors don’t change. 4.Resistance. Resistance to change is found even when the goals of change are highly desirable. 5.Reinforce. Effective change requires reinforcing new behaviors, attitudes, and organizational practices. Let us now consider the three stages of change described by Lewin. Refer to Figure 16.3. UnfreezingThe focus of this stage is to create the motivation to change. Individuals are encouraged to replace old behaviors and attitudes with new ones (desired by management). The initial challenge in the unfreezing process is creating and communicating a convincing reason to change. The most common, but not necessarily the most effective, way of doing this is to present data or compelling arguments highlighting how current practices are now obsolete or less than ideal, such as low employee or customer satisfaction data, or market share gains made by competitors. This approach is exactly the same as the rational persuasion influence tactic you learned about in Chapter 12, and it helps employees understand the need for change. Page 565 FIGURE 16.3LEWIN MODEL OF CHANGE EXAMPLEFacebook had less than two dozen engineers working on mobile applications in 2012. The fact that it now has hundreds is a strong signal that mobile is at the center of the company’s new strategy. This change was motivated in part by the company being public and needing to please shareholders, as well as the desire to monetize or make revenue from its immense user base.20 The company thus needed to reallocate many of the resources (human and financial) from building its business around desktop computers to smartphones and tablets. To unfreeze the organization, CEO Mark Zuckerberg and others shared growing criticisms that Facebook’s app on iPhones didn’t function well—it was slow and frequently crashed. The situation was made worse by other companies gaining enormous popularity in the mobile space. This led Mike Shaver, Facebook’s director of mobile engineering, to say, “If we are going to be a mobile company at scale, we needed to do something qualitatively different . . . we needed a nuclear option.”21 After attempting to compete with Instagram’s photo-sharing service, Facebook decided instead to buy the company for $1 billion in 2012. ChangingThis is where the rubber meets the road and change occurs. Because change involves learning and doing things differently, this stage entails providing employees with new information, new behavioral models, new processes or procedures, new equipment, new technology, or new ways of getting the job done. How does management know what to change? There is no simple answer to this question. Organizational change can be aimed at improvement or growth, or it can focus on solving a problem such as poor customer service or low productivity. The Example box provides an excellent illustration of how Jin Zhiguo, former chairman of Tsingtao Beer, responded to serious production difficulties at a newly acquired brewery. EXAMPLEJump-Starting a Sluggish Company22 Tsingtao (ching-dow) is the #1 selling Chinese beer in America. In the mid-1990s the company acquired another brewery, and Jin Zhiguo, who at the time was an assistant managing director, learned that the new facility was producing 1,000 per day—bottles not cases! This was undesirable to say the least, as the company had about 1,000 employees (1 bottle per day per employee). What did he do? 1.Gathered data. He gathered not only production, cost, and profit data, but also customer insights. In the mid- 1990s Chinese companies still were not all that concerned with such metrics, particularly customer insights. Jin himself, along with his salespeople, went out into the communities and learned why people drank which beers and with which types of food. Page 566 2.Changed products and practices. They learned that consumers liked one competitor because it was lighter but didn’t like the other because it had sediment. Jin changed the processes and product to produce a lighter beer without sediment. They also decided to chill their beer after it was brewed and deliver it cold. At the time, all producers delivered beer warm and expected the sellers and consumers to chill it. 3.Reinforced changes with results. Enormous success flowed from these changes, both in the short and long term. For instance, that first facility went from 1,000 bottles per day to 790,000. After becoming CEO in 2001 and spreading these changes across the entire company, Tsingtao is now the fifth largest beer producer in the world and has double-digit profit growth annually. Zhiguo Jin spent his entire career at Tsingtao and retired as a director in 2012. YOUR THOUGHTS? 1.What are your impressions of Mr. Jin’s approach? 2.What do you think were his biggest challenges? 3.Which of the three actions do you think was the most important? Change also can be targeted at different levels in an organization. Sending managers to leadership training programs can improve many individuals’ job satisfaction and productivity. EXAMPLESafelite Autoglass designed and implemented a training program for 1,000 of its managers to equip them to implement a wholesale culture change at the company. The dramatic changes were intended to focus every employee on customer satisfaction and double the business in four years.23 In contrast, installing new information technology can be the change required to increase work group productivity and overall corporate profits. The point to keep in mind is that change should be targeted at some type of desired end result. The systems model of change, which is the next model to be discussed, provides managers with a framework to diagnose the target of change. RefreezingThe goal of this stage is to support and reinforce the change. Change is supported by helping employees integrate the changed behavior or attitude into their normal way of doing things. This is accomplished by first giving employees the chance to exhibit the new behaviors or attitudes. Once this happens, positive reinforcement is used to encourage the desired change. More specifically, early in the change process it is especially helpful to use continuous reinforcement with extrinsic rewards (e.g., recognition, feedback, bonuses), as we discussed in Chapter 6. This helps establish clear links between the desired new behaviors and the reinforcing reward or recognition. And don’t forget role modeling. Walking the talk of change is arguably the most powerful way to get others to follow. A Systems Model of Change A systems approach to change is based on the notion that any change, no matter how large or small, has a cascading effect throughout an organization. For example, promoting an individual to a new work group affects the group dynamics in both the old and new groups. Similarly, creating project or work teams may necessitate the need to revamp compensation practices. These examples illustrate that change creates additional change. A systems model of change is similar to the systems framework used in the Integrative Framework of OB. However, it is a bit more complex, as shown in Figure 16.4. This model includes inputs, strategic plans, target elements of change, and outputs. It is a very practical approach and can be used to diagnose what to change and to determine how to evaluate the success of a change effort. Let’s explore the individual components. Page 567 FIGURE 16.4A SYSTEMS MODEL OF CHANGE SOURCE: Adapted from D. R. Fuqua and D. J. Kurpius, “Conceptual Models in Organizational Consultation,” Journal of Counseling and Development, July–August 1993, 602–618; and D. A. Nadler and M. L. Tushman, “Organizational Frame Bending: Principles for Managing Reorientation,” Academy of Management Executive, August 1989, 194–203. InputsThe starting point for organizational change should be asking and answering the question: “Why change?” Leaders need to get clear on the overarching motive or reason for change. It then is essential to assure that the intended changes align with the organization’s mission, vision, and resulting strategic plan.24 Mission statements represent the “reason” organizations exist. Some examples of clear and effective missions: •Instagram, the photo-sharing service, has a simple mission—”To capture and share the world’s moments.”25 •Southwest Airline’s is legendary—”To give people the freedom to fly.” •Charles Schwab—”A relentless ally for the individual investor.” •Interface—”To be the first company that, by its deeds, shows the entire industrial world what sustainability is in all its dimensions: People, process, product, place and profits—by 2020—and in doing so we will become restorative through the power of influence.” Page 568 While each of these is interesting, you and most people in business wonder—how does an organization create an effective mission? Sally Jewell, the CEO of REI, the outdoor clothing and equipment retailer, provides an excellent description of how she and her team of 150 leaders went about formulating a mission for the company. The details are in the Example box. EXAMPLEHow to Formulate a Meaningful Mission Sally Jewell, CEO of REI, the retailer of outdoor gear and clothing. Missions are big-picture, long term, and existential. These qualities mean they are often quite general. But it is important that they are not too general, which would make them abstract and meaningless. Sally Jewell, the CEO of outdoor clothing and adventure retailer REI, followed a very useful and repeatable process when refining the company’s mission. She began by assembling a representative team of leaders. It’s best to be inclusive rather than exclusive. Involving people in the process will help assure that their interests are reflected in the mission and that they will be more likely to “live it.” Then ask the members: 1.Why does our organization exist? Ask this question three to five times to get a deeper, richer view. 2.What would happen if our organization went away? 3.Why do I devote my creative energies to this organization? 4.Compile and consolidate the answers to these questions.26 This process resulted in REI’s mission: “To inspire, stewardship.” YOUR THOUGHTS? 1.This approach was successful for REI, but how successful do you think it would be for an organization to which you belong? 2.What are the benefits of this approach? 3.What are the shortcomings or ways to improve it? As you learned in Chapter 14, a vision is a compelling future state for an organization, and it also is another important input in the systems model of change. Consider how the difference between mission and vision affects organizational change. Missions typically imply little or nothing about change, but instead simply define the organization’s overall purpose, like those of Instagram, Southwest, and Charles Schwab noted above. In contrast, effective visions describe a highly desirable future and outline how the organization will get there; which markets, services, products, and people will be involved; and how all of these elements align with the organization’s values. Interface Inc., a world leader in sustainability and commercial interiors, captures all of these and more in its vision: Page 569 Interface® will become the first name in commercial and institutional interiors worldwide through its commitment to people, process, product, place and profits. We will strive to create an organization wherein all people are accorded unconditional respect and dignity; one that allows each person to continuously learn and develop. We will focus on product (which includes service) through constant emphasis on process quality and engineering, which we will combine with careful attention to our customers’ needs so as always to deliver superior value to our customers, thereby maximizing all stakeholders’ satisfaction. We will honor the places where we do business by endeavoring to become the first name in industrial ecology, a corporation that cherishes nature and restores the environment. Interface will lead by example and validate by results, including profits, leaving the world a better place than when we began, and we will be restorative through the power of our influence in the world.27 Readiness for change is defined as beliefs, attitudes, and intentions regarding the extent to which changes are needed and the capacity available to successfully implement those changes. Defined in this way, you can see how readiness can be both an individual- and/or an organizational-level input.28 Put another way, effective change at work requires both the employees and the employer to be willing and able to change (i.e., have high readiness). Readiness has four components: 1.Necessity for change 2.Top management support for change efforts 3.Personal ability to cope with changes 4.Perceived personal consequences of change Self-Assessment 16.2 will help you determine your own readiness for change. It also can be used to determine the readiness of an organization to which you belong. SELF-ASSESSMENT 16.2 What Is Your Readiness for Change? Think of a change at school, work, or another arena of your life. Then go to connect.mheducation.com and take Self-Assessment 16.2 to learn the extent of your readiness for change, or that of the organization in which the change needs to occur. 1.Of the four components which is the lowest? 2.How do you think this will affect the success of the particular change? Be specific. 3.Who seems to be “most ready,” you (components 1 and 2) or the organization (components 3 and 4)? 4.Given what the readiness measure tells you, what do you recommend to improve the readiness for both you and the organization? Strategic PlansA strategic plan outlines an organization’s long-term direction and the actions necessary to achieve planned results. Among other things, strategic plans are based on results from a SWOT—strengths, weaknesses, opportunities, and threats—analysis. This analysis aids in developing an organizational strategy to attain desired goals, such as profits, customer satisfaction, quality, adequate return on investment, and acceptable levels of turnover and employee satisfaction. Target Elements of ChangeTarget elements of change are the components of an organization that may be changed. They essentially represent change levers that managers can push and pull to influence various aspects of an organization. The choice of which lever to use, however, is based on a diagnosis of a problem, or problems, or the actions needed to accomplish a goal. A problem exists when managers are not obtaining the results they desire—when a gap exists, as explained in Chapter 1 and used in the 3-Stop Problem-Solving Approach. The target elements of change are used to diagnose problems and to identify change-related solutions. As shown in Figure 16.4, there are four targeted elements of change: Page 570 1.Organizational arrangements 2.Social factors 3.Methods 4.People Each target element of change contains a subset of more detailed organizational features. For instance, the “social factors” component includes consideration of an organization’s culture, group processes, interpersonal interactions, communication, and leadership. (All of these are OB topics discussed in this book and included in the Integrative Framework of OB.) There are two final issues to keep in mind about the target elements. First, the double-headed arrows in the figure connecting each target element of change convey the message that change ripples across an organization. For example, changing a reward system to reinforce team rather than individual performance (an organizational arrangement) is likely to impact organizational culture (a social factor). Second, the “people” component is placed in the center of the target elements of change box because all organizational change ultimately impacts employees and vice versa. Organizational change is more likely to succeed when managers proactively consider the impact of change on employees. OutputsOutputs represent the desired end results or goals of a change. Once again, these end results should be consistent with an organization’s strategic plan. Figure 16.4 indicates that change may be directed at the individual, group, or organizational level. Change efforts are more complicated and difficult to manage when they are targeted at the organizational level. This occurs because organizational-level changes are more likely to affect multiple target elements of change shown in the model. Now that you’ve learned the details of the systems approach to change, we shift our focus to one of the most popular approaches to organizational change since the 1990s—Kotter’s Eight Steps. Kotter’s Eight Steps for Leading Organizational Change John Kotter, an expert in leadership and change management, believes that organizational change most often fails not because of inadequate planning but because of ineffective implementation. To help overcome this, he proposed an eight-step process for leading change