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What is organizational change and how is it best managed?

Last updated

19 September 2023

Author

Dovetail Editorial Team

Reviewed by

Shawnna Johnson

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All companies, regardless of industry or lifespan, will go through organizational change. Most of the time, this is planned change in response to an internal or external event.

Regardless of the source of the change, how well the company comes out on the other side depends on effective management and a proper plan during the transition process.

In this article, we'll discuss how change impacts a business and how managers can navigate the process.

What is organizational change?

The dynamic nature of today’s world of business requires companies to be agile and responsive; able to quickly adapt to changing conditions. Organizational change refers to any process companies undergo as they make these transitions.

The transitions can come from shifts in management structure, adoption of new technologies, or virtually anything else. Organizational change is a broad term, but the same principles usually apply, no matter the source of a company’s significant changes to operations.

Sometimes, these changes are necessary because of external pressure. For example, the huge shift to a work-from-home culture was driven almost entirely by pandemic lockdowns. At other times, the drivers are internal, for example, a company looking to change things to better facilitate its growth or refocus its core efforts.

Whatever the reason for organizational change, management must understand how to navigate it and be prepared.

The importance of organizational change management

Organizational change management (OCM) is the structured approach a company takes when transitioning from its current state to a desired future state. It impacts every level of the business – individuals, teams, and the organization itself.

In today's fast-paced world and rapidly evolving technological landscape, change happens more frequently than ever.

Effectively managing change is important for several reasons:

  • Minimizing resistance: Addressing concerns and involving employees can reduce resistance and keep morale high.

  • Ensuring a smooth transition: Detailed planning and clear communication minimize unforeseen disruptions to the transition process.

  • Maintaining productivity: Allocating the proper resources helps to keep productivity high throughout the change process.

  • Aligning goals and strategies: Ensuring the change aligns with the company's goals will result in a more effective result.

  • Promoting communications: Open channels of communication allow for feedback, questions, and clarity, keeping the goals of all stakeholders aligned.

  • Measuring progress and success: Regular evaluations ensure the change is on track and allow for adjustments as needed.

Without a clear change management strategy, businesses might not achieve the full benefit that they envisioned from the proposed changes. In extreme cases, they may suffer financial losses, damaged reputations, and a slip in market position.

Like everything else in business, it always helps to plan in as much detail as possible.

Causes of organizational change

As we've already discussed, organizational change covers many reasons a company might want to shift focus. Let's take a closer look at some of the more common ones.

  • Technological advancements: As technology advances ever more rapidly, upgrading existing equipment or workflows is a common reason for change.

  • Market dynamics: Sometimes a market shift dictates change. Maybe a new product opportunity arises, or an old product becomes less desirable. New competitors can also require adaptations.

  • Organizational growth: As a company grows, its structure may need to change to allow for the creation of new departments, teams, and roles to manage additional functions or regions. At the same time, internal processes may need to shift as the workload increases or becomes spread across different teams.

  • Globalization: As companies grow, they also may expand into new markets. These markets may have cultural or regulatory differences that require a shift in thinking.

  • Regulatory and legal changes: Even in an existing market, changes to regulations can require alterations to how a company operates.

  • Mergers and acquisitions: When companies merge or are acquired, significant changes in structure, culture, and strategy almost always occur.

  • Crisis situations: We discussed earlier how the pandemic forced organizational change on many businesses. Other unexpected events can have a similar effect such as supply-chain issues, weather-related impacts, deaths of key stakeholders, and more.

  • Economic factors: Economic downturns or booms can lead to organizational change, such as downsizing or expansion.

  • Innovation: The development of new products, services, or processes can lead to change.

  • Feedback and evaluation: Most successful companies conduct regular examinations of how efficient their business operations are. These can reveal opportunities for improvement through organizational change.

Types of organizational change

Just as there are many reasons for organizational change, there are many forms it can take. These changes aren't mutually exclusive; sometimes a company may experience more than one at a time.

Strategic change

Strategic change is a fundamental shift in a company’s direction, purpose, or mission. Companies often reevaluate their position in the marketplace and decide changes are in order. These changes may be a new business model, redefined target audiences, or a pivot to new products or services.

A company’s goal through a strategic change is to remain relevant and competitive through conditions that might have a negative impact if the change wasn’t occurring.

People-centric change

This type of change covers anything that relates to the human aspects of a business. It could mean shifts in personnel, leadership shakeups, or an attempt to alter the company culture.

The purpose of this type of change is to ensure employees are aligned with the evolving objectives of the company. Initiatives such as training programs, team-building exercises, and leadership development programs are often a part of people-centric changes.

Structural change

This type of change occurs when a business needs to modify its organizational framework. It could involve department mergers or the creation of new departments, downsizing or expansion of staff, changes to management hierarchy, or any other structural change.

These changes often come when a business realizes its operational efficiency can be improved by making such changes. The goal is typically to improve workflows and productivity.

Technological change

Companies are continuously seeking to stay at the cutting edge of technology in their industry. Technological change happens when old systems need to be updated. It can be changes in local software, more advanced machinery, or a transition to cloud-based solutions.

In addition to the changes in technology, this type of organizational change often requires training staff in the new technology.

Unplanned change

This type of change is the result of some unforeseen circumstances that the company must adapt to quickly. We've seen the example of the pandemic lockdowns, but events such as market disruptions, regulatory shifts, and economic issues can all prompt similar needs for organizational change.

The negative impact of this type of change can be mitigated with improved risk assessment and contingency plans.

Incremental change

Although technically just a form that any of the previously mentioned types of change can take, incremental change is worth mentioning as a separate item. Changes don't always have to happen immediately. Sometimes, a business bakes an end goal into a lengthier timeframe, preferring to make incremental steps rather than one giant leap.

When rapid change isn't necessary, incremental change can allow management time to refine each step and adapt future ones before moving on.

Preparing for organizational change

Whenever (and whatever!) organizational changes are needed, take the time to make a plan to ensure a smooth transition. This starts by assessing your current state and defining a clear vision for the end state.

At this point, engage key stakeholders with open communication channels. This allows everyone to provide insights about how the change may affect them, so you can develop strategies to mitigate negative impacts.

With the plan in place, begin the process of allocating resources and preparing training, if applicable. Now is also a good time to find staff members in all areas of the organization who can serve as change champions and help guide and influence their peers.

Before you begin making the changes, implement feedback mechanisms so concerns can be expressed and resolved early. A pilot program before the full-scale rollout may also prove helpful.

How management impacts organizational change

As company leaders, managers play a pivotal role in organizational change. Their influence determines the direction, pace, and success of any change initiative. Management is responsible for setting the vision and objectives for change and providing a clear roadmap.

How well management conveys the reasons for the change and its benefits determines how much resistance there will be to the change from employees. The leaders’ commitment and involvement set the tone for the staff's enthusiasm for the project.

The various roles of leaders

At various points in the change process, leadership will wear many hats. In dealing with superiors, subordinates, and peers, there are a lot of relationships to be managed during an often stressful change process.

Communicator

Managers are the company’s voice for the people who work for them. They are responsible for relaying information about the change to all relevant members of staff.

They'll need to make sure everyone understands the reasons for the change, its benefits, and the details of its implementation. This will reduce the uncertainty and misconceptions, helping to reduce resistance to the change and ensure a smoother process.

Liaison

Managers aren't only dealing with the people who work for them. They're also dealing with their peers: managers from other departments. They facilitate the flow of information between departments and aim for all departments to be on the same page regarding the changes. 

Managers may also be the liaison between customers and vendors, helping identify the change and making clients aware of how the change might impact deliveries, product quality, and pricing.

Advocate

Management always needs to advocate and support the change. As the tone setters for the rest of the company, their attitudes will play a key role in getting everyone on board.

For those employees who are resistant to the change, management can help them understand why it's necessary and/or beneficial.

Resistance manager

Sometimes, advocacy alone isn't enough to temper resistance to organizational change. For those times, leadership needs to go a step further. By listening to employee concerns and offering solutions, management can turn hesitant employees into advocates. 

Everyone assuming this role must be well-versed in the changes so they can properly address issues and clear up any misunderstandings.

Coach

Some changes are harder than others. In challenging cases, employees will need help adapting. A manager's role here is to provide staff with the resources and training needed to get up to speed with the new way of doing things.

Encouragement and constructive feedback are also vital elements of effectively coaching staff through a major change.

Strategies to drive successful organizational change

We've seen the importance of having a plan before you embark on any major organizational change. Now, let's take a look at some of the elements that need to go into that plan:

  • Establish a clear vision and goals: Without a clear vision of its destination, no business can get there. Keeping the goals of the business aligned with the goals of stakeholders requires everyone to know where they stand and where they want to be. Measures and milestones should be outlined so the company knows when the changes have occurred and how they’re being implemented.

  • Prioritize steps: Operational change consists of many steps, not all of which can be completed at once. Prioritizing the steps that will have the largest impact on the company and which ones depend on others will help guide the process.

  • Secure buy-in from your entire organization: Even under the best circumstances, change can be hard. It's even harder when everyone isn't on board. All stakeholders should have a say early on about how the change will look, and the benefits of the final plan should be explained to everyone. Establish a plan to deal with organizational resistance.

  • Build a change implementation plan: Draw up a detailed roadmap that outlines every step of the transition, including required resources and the people and roles to be involved.

  • Focus on training and support: As things start changing, staff need to adapt to the new way of doing things. Provide comprehensive training whenever necessary and put into place support for employees who need extra help.

  • Ensuring employees have the resources they need: The implementation plan should account for any resources required to implement the change. Once the process has begun, management needs to follow up with staff to ensure everyone has what they need.

In summary

Change management is hard, but preparation is key to a successful transition. A change management plan acts as a roadmap, guiding organizations toward successful implementation while maintaining employee morale, productivity, and organizational stability.

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