Why do employees resist organizational change

Why Do Employees Resist Change?

Written by:

Business Administration Students

SMGT 4470: Selected Topics in Business

Northern Alberta Institute of Technology

Prepared for:

Pan Zhang

Business Administration Instructor

Northern Alberta Institute of Technology

Friday, August 14, 2020

Table of Contents

Introduction 1 Analysis of the Article 1 Viewing Change Differently 4 How to Make Changes Effective 6 Conclusion 7 References 9 Appendix A: Discussion Template 10

WHY DO EMPLOYEES RESIST CHANGE?

Introduction
Initiating organizational change can be tough; it is difficult to get employees to accept change, which is often why it can fail. The executives and employees of a company can see change differently. Major initiatives often fail because employees are opposed to making a change. In the article “Why Do Employees Resist Change?”, Paul Strebel (1996) discusses how managers and employees can view change in an organization differently. From a manager’s perspective, it can be an excellent way to further a company; however, employees might view change as disruptive and unnecessary. Strebel also explains how “Senior managers consistently misjudge the effect of this gap on their relationships with subordinates and on the effect required to win acceptance to change'' (Strebel, 1996, p. 86). Employees do not seek change, so executives must look at change initiatives through the perspectives of their employees.

To minimize the gap between them, managers must consider their employees’ “personal compacts” (Strebel, 1996, p. 87). Throughout this analysis of Strebel’s “Why Do Employees Resist Change?”, concepts such as viewing change differently and how to make changes effective are further elaborated. When initiating a change, it is important to understand there is a gap between employees with different seniority levels. To effectively initiate a change, one must ensure personal compacts are realigned and revised–this then can help close that gap. A change is implemented to better the organization and its employees. In order to ensure that changes last, it is important to consider every employee and how to get them on board with change.

Analysis of the Article
In the article “Why Do Employees Resist Change?”, Paul Strebel (1996) emphasizes the differences between managers and employees in how they view changes to their organization. The premise of the article is that the revision of all three dimensions of personal compacts is key to implementing change successfully. The revision of personal compacts allows for employees to commit to the new goals of the company; thus, both managers and employees would be committed to the vision for corporate change (Strebel, 1996, p. 92). Personal compacts are the agreements of mutual commitments and obligations between organizations and employees (Strebel, 1996, p. 87). The three dimensions of personal compact are formal, psychological, and social.

Strebel (1996) explains that there are three phases of personal compact revision (p. 89). The first phase is where the leaders recognize the need for change and set the foundation for compact revisions. The next phase is where the leaders lead the process for employees to revise the compact and to accept the new terms. Lastly, the new formal and informal terms are cemented. Strebel details the processes of how leaders such as Jan Timmer of Philips Electronics and Haruo Naito of Eisai were successful in their different approaches and reasons in leading the process of altering personal compacts for employees.

Based in the Netherlands, Philips Electronics was an esteemed company that was having problems of slow market time, slow product development, and expensive manufacturing costs. In the 1980s, CEO Wisse Dekkers followed by CEO Cor van der Klugt both failed in their attempts at fixing those company problems, with van der Klugt’s leadership ending with the largest operating loss in the company’s history (p. 88). The principal reason for unsuccessful changes at Philips was due to their culture of lifelong employment (p. 89). The tradition of job security for employee loyalty led to limits on responsibilities and employees were affected negatively by the culture of seniority being the only factor considered for career advancements and compensations.

In mid-1990, Jan Timmer became CEO and led Philips Electronics away from bankruptcy with Operation Centurion (p. 90). The purpose of Operation Centurion was to implement revisions to the personal compacts among the employees of Philips. Timmer began the process with the discussion amongst employees about the needs and wants to improve and how to achieve the desired status for lifting up the firm towards new heights. For new ambitious goals, the staff was oriented towards adapting to the changes suggested by Timmer where employees were suggested two paths–one path was the adopting and leading towards change management and the other was leaving the firm for not willing to give up the old habits.

As a result, approximately 28% of the employees left the firm and the rest were engaged towards leading the joyful change of betterment, where accountability was one of the concerns (p. 90). The firm engaged employees in responsibilities, assigned tasks, measured and controlled the progress and finally achieved the desired vision and mission for the firm where progress was celebrated. After facing a bad time in the early nineties, Philips fluctuated its sales by 1.9% in four years, which was a huge success for the organisation. This could only be achieved after there were personal commitments by the employees to the change and employees were being accountable for their roles and responsibilities.

Another company that went through change management was Eisai. A Japanese pharmaceutical company discovered that their operations were not sustainable long-term (p. 91). Eisai’s mission was to improve the overall quality of life by supplying drug treatments for specific illnesses. They needed new products and services to offer, but wanted them to be developed by the employees directly. Eisai initiated a training program to help managers create proposals for change based on their own experience (p. 91). The training program consisted of managers going into traditional and non-traditional health care facilities to gain patient care practises (p. 91). This gave managers first-hand knowledge and inspired ideas for change management strategies. The new products and programs produced from this knowledge created widespread participation with the support of senior management (p. 92). Eisai stuck to their cultural norms, while being able to successfully complete change management with the support of managers and employees.

Viewing Change Differently
Paul Strebel states in the article that "Although each company's particular circumstances account for some of the problems, the widespread difficulties have at least one common root: Managers and employees view change differently. Both groups know that vision and leadership drive successful change, but far too few leaders recognize the ways in which individuals commit to change to bring it about" (Strebel, 1996, p. 86). From these statements, Strebel shows that managers see changes as a challenge with aspects of risk. Managers also have the bigger vision by which implementing these changes can improve or strengthen the company and aligning its operations with the global corporate strategy. Also, managers view changes as opportunities to advance their personal careers. The employees, including middle management, view these changes as more disruptive. Some employees may even feel that the proposed changes are intrusive.

In the article “How Productivity Killed American Enterprise”, we can see a similar viewpoint where the author and management theorist Henry Mintzberg (2007) claims that American corporations have become unduly focused on growing stock price and that this trend, is underpinned by heroic leadership, which over-emphasizes the role of chief executives, who are often adversely incentivized to prioritize short-term gains. The author talks about how the “senior management is firmly focused on measurable performance, instead of on products and services and customers” (Mintzberg, 2007, pp. 2-3) and how firms are likely to adopt strategies that generate “results today instead of a better sustenance tomorrow” (p. 3).

Strebel discusses the three dimensions of personal compact. The three dimensions are formal, psychological, and social. Managers have a tendency when dealing with employees and company changes to address only the formal dimension aspect with employees. This dimension deals with basic responsibilities and conditions for the position with the added changes. The psychological and social dimensions are how the changes affect the employees. Psychological dimensions highlight the relationship between employees and managers. This is where the employees identify the core values of the team. This is what Strebel describes as “expectations and reciprocal commitment” (Strebel, 1996, p. 87). To attain commitment from employees to adhere to the organizational changes, managers need to be sensitive to the psychological dimensions of the employees affected by the changes. Social dimensions are how employees determine the organization's culture. Strebel states that “in this dimension, the company’s values and mission statement is compared to how the managers relate to the values and mission statement (do they practice what they preach?)” (Strebel, 1996, p. 88).

For employees to invest into an organisation's values and vision, it must come from the top management. Employees want to work in an environment that has values and a vision that they can believe in. A question an employee may ask themselves is whether their coworkers have the same values. For management to succeed with implementing organizational changes, Strebel determines that personal compact would need to be altered to focus on change effectively.

How to Make Changes Effective
Change is perceived differently between managers and employees. Strebel states that managers view change as an opportunity (Strebel, 1996, p. 86). Unfortunately, change is viewed as a nuisance and a disruption for employees; therefore, it is commonly unwelcomed (Strebel, 1996, p. 86). It is crucial for leaders to realize the gap that exists between managers and employees. The organization’s leaders need to “examine the ‘personal compacts’ between employees and the company” (Strebel, 1996, p. 87).

Strebel has identified the key ways to make effective changes through the revision of personal compacts. The three key parts of personal compacts include formal, psychological, and social. To help increase effectiveness using the formal dimension, organizations should have job descriptions, contracts, and performance agreements (Strebel, 1996, p. 87). In order to increase effectiveness through psychological compacts, a manager should always maintain a mutual understanding of the employee’s goals and standards (Strebel, 1996, p. 88). This can be done through regular performance reviews, clarifying tangible and intangible rewards, and maintaining open communication with employees. To increase effectiveness through the social dimension of personal compact, managers should ensure that their behaviors align with the corporate strategy. Strebel (1996) strongly believes that an organization will not accomplish its goals if leaders do not address each dimension (p. 92).

Kurt Lewin’s 3 phase model of change theory in an organization was a pioneering theory. Lewin explained the theory in three phases. The first being unfreezing; this consists of making sure employees are involved in the planning of the changes first by discussion, then analysis, and then more discussion. The second phase is called change where the new standards are implemented and the employees change their behavior. Finally, the third phase is refreezing where the employees have incorporated the new behavior into the existing behavior by all members. There is also Kotter’s 8 step process which is a more modern management process to address change in an organization.

The concept of resisting a change also relates to the article of “What Makes a Leader?”. Written by Daniel Goleman (1998b), the article elaborated on the topic of emotional intelligence, which involves the power of five skills (self-awareness, self-regulation, motivation, empathy, and social skill) at maximizing not only the individual’s performance but their followers’ performances as well (Goleman, 1998b, p. 1). Managers who possess strength in emotional intelligence can help their teams to succeed through collaboration, understand underlying motivation, and increase potential through feedback. Of course, all the listed reasonings in the article for resistance are important to consider such as personal compacts–“reciprocal obligations and mutual commitments” (p. 87) that include formal dimensions (job duties, responsibilities, compensation and benefits agreements), psychological dimensions that works through feelings such as dependence and trust between the employee and the manager, and social dimension–perceptions turned into beliefs about how the company works, such as perceptions about how promotions and raises are doled out (Strebel, 1996, p. 87). Thus, a high degree of emotional intelligence along with exceptional leadership is required in order to overcome resistance by employees.

Conclusion
Organizational change can be difficult to initiate and it is even harder to have a successful change. Getting employees on board with change can be tough because the willingness to participate is often split; this is because of the different seniority levels amongst employees. Employees with a higher status within an organization view change as an opportunity versus lower status employees viewing change as an intrusion and a disruption. This gap must be closed in order to successfully implement change. In order to do this, personal compacts must be looked at. Personal compacts are mutual agreements and obligations between the employees and the organization. The three personal compacts are formal, psychological, and social. Both the psychological and social dimensions are often overlooked by managers and they don’t understand the underlying importance of those dimensions as how it ties to employee commitment.

There are three phases to revising personal compacts. Jan Timmer of Philips Electronics had to go through all the three phases in order to accomplish personal compact revision and to implement change successfully. Revising and realigning personal compacts allows employees to commit to the new goals of the company, ensuring managers and employees are both committed to the vision for corporate change. When it comes to change, management usually fails to understand the perspective of other employees. Managers must view change differently in order to understand the effects these changes will have on their employees and how they may react. Bridging the gap between upper management and lower-level employees through the revision of personal compacts is key to ensuring that the implemented change is effective and successful.

References
Goleman, D. (1998b). What makes a leader. Harvard Business Review. Retrieved from

https://hbr.org/2004/01/what-makes-a-leader.

Heathfield, S. (2019). Change management lessons about employee involvement. The Balance

Careers. Retrieved from https://www.thebalancecareers.com/change-management-lessons-about-employee-involvement-1917806

Mintzberg, H. (2006). How productivity killed American enterprise. Retrieved from

https://mintzberg.org/sites/default/files/article/download/productivity2008.pdf

Rick, T. (2014). Successful change management involves the employees. Meliorate. Retrieved

from https://www.torbenrick.eu/blog/change-management/successful-change-management-involve-the-people/

Roe, D. (2019). Why human behaviour is key to successful change management. CMSWire.

Retrieved from https://www.cmswire.com/digital-workplace/why-human-behavior-is-key-to-successful-change-management/

Strebel, P. (1996). Why do employees resist change? Harvard Business Review. Retrieved from

https://moodle.nait.ca/pluginfile.php/9391772/mod_resource/content/1/Why%2Bdo%2B

Employees%2BResist%2BChange.pdf

Appendix A: Discussion Template
Reading: Why Do Employees Resist Change?

Assigned Question(s):

1. Elaborate on the statement "Although each company's particular circumstances account for some of the problems, the widespread difficulties have at least one common root: Managers and employees view change differently. Both groups know that vision and leadership drive successful change, but far too few leaders recognize the ways in which individuals commit to change to bring it about." (page 1)

2. What must an organization realize and what does it require to make changes effective?

First Reading:

Who: Paul Strebel, a professor and director of Change Program at the International Institute for Management Development (IMD)

Issue(s) or Premise

What: Change is viewed differently by managers and employees. Understanding and altering personal compacts is key to implementing change successfully; personal compacts have three major dimensions.

Why: Revising compacts is important for organizations undergoing change. Managers need to understand the importance of compacts to successfully implement change for the company.

When: The article was published in the May to June 1996 issue of Harvard Business Review

Difficulty: Analysis: 4/5 Concepts: 4/5 Presentation: 4.5/5

Detailed Preparation:

Opening Paragraph

A. Premise [Broad and/or specific; Main point(s) of article]

1. Managers and employees commit to change differently. Change disrupts the relationship of commitments and obligations between organizations and employees. Personal compacts need to be revised accordingly in order to encourage employees to accept the change within the organization. There are three major dimensions of personal compacts:

i. Formal;

ii. Psychological; and

iii. Social

Body [Why and how the premise is supported]

B. Importance of premise, issue, perspective (potential impact)

1. Any organization needing to implement change has to understand that their efforts to change will fail if the leaders of the organization do not understand that most employees will not accept change unless each of the three dimensions of personal compacts is addressed and revised.

C. Assumptions (beliefs, presumptions)

1. The three dimensions of formal, psychological, and social are part of personal compacts in all organizations.

a. Formal dimension: basic duties required by the job agreements and descriptions.

b. Psychological dimension: implicit aspects of the relationship, such as reciprocal commitment that come from trust in the employment relationship.

c. Social dimension: employees’ perception of whether management’s behaviour aligns with the values of the company’s goals–this perception affects the employees’ loyalty and this dimension is undermined the most during change.

D. Analysis/ Evaluation of evidence [usefulness/ limitations; is it convincing]

1. Philips Electronics, a prestigious electronics corporation based in the Netherlands

a. In the 1980s, CEOs Wisse Dekkers and Cor van der Klugt both failed in their attempts to implement change within the company.

i. They tried to fix company problems such as slow product development, slow market time, and expensive manufacturing costs.

ii. By the end of Cor van der Klugt’s leadership, the company had the largest operating loss in the company’s history.

b. Company culture of lifelong employment–the tradition of job security for loyalty cemented responsibility limits.

i. Due to the culture of employees’ career and compensation being tied to seniority, employees did not feel motivation to work harder than expected or more than people in higher positions.

c. Jan Timmer had to lead the company out of the crisis going through the three phases of personal compact revision:

i. Leaders recognize the need to change and create compact revisions.

ii. Leaders create a process for employees to revise and accept new compact agreements.

iii. Lastly, new formal and informal terms are locked in.

d. Operation Centurion

i. Timmer initiated performance standards, binding contracts, and personal commitments as the new foundation for personal compacts in the company.

2. Eisai, a healthcare corporation in Japan

a. Culture of lifelong employment and seniority tied to authority and career growth.

i. Employees were loyal to managers and did not work towards individual recognition.

b. In 1988, CEO Haruo Naito understood the importance of personal compacts and led the employees through revising compact terms, which enabled a successful strategy change for the company.

E. Impact/ Implications [of the article, of the premise]

Leaders who want to initiate a strategic change in the company need to understand that employees have a different perspective on change and will resist changes unless personal compacts are revised. Despite different purposes and approaches, Jan Timmer of Philips Electronics and Haruo Naito of Eisai were successful in implementing change by understanding the importance of personal compact revision so that employees would accept the changes and commit to the new goals.

F. Conclusion(s) [take-away(s), usefulness for business practices]

In order to implement corporate change successfully, leaders must lead the process of revising the formal, psychological, and social dimensions of employees’ personal compacts. Revision of personal compacts allows employees to agree to commit to the changes and the company’s new goals.

Closing

G. Good / bad premise (Make a stand!) [are there alternative perspectives, methodologies, theories]

1. Strebel captures employer and employee personal compacts in a way that is simplistic and easy to understand. The idea of closing the gap between employers and employees with formal, psychological, and social dimensions describes successful alignment and enables focus on a company’s change management strategy. Stable fails to mention any self-serving bias or reward system. Managers and subordinates prioritize their own interests above any other including a company. Having a reward system encourages employee willingness to change personal compacts.

H. Further research suggested

1. The article “Change Management Lessons About Employee Involvement,” has a good view on employees having the power to initiate or be personally involved in the initiative to put forth a change management strategy and the increased cooperation.

2. The article “Successful Change Management Involves Employees,” encourages all levels of an organization to be involved in the implementation of a change management strategy, rather than management deciding and communicating it to subordinates.

I. Missing information

1. The lack of attention to human behaviour.

2. The role of change teams was not introduced. These can be stakeholders or front-line managers, but often informal respected leaders. They do not need to agree with the change. They can help to find out where resistance is coming from and why. They help to communicate with the resistors (Roe, (2019), para. 4-7).

3. Employee driven change was not present when it came to subordinates, only managers. Including this element into the paper, could have interested the reader to alternative routes to successful change management.