What Drives Organizational Change

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What Drives Organizational Change?
Gregory Fenwick
MGT380
July 25, 2011
Garren Hamby

What Drives Organizational Change?
Organizations change for many different reasons and situations. Some organizations need change to better themselves, others need change organizational change just to survive and stay in business. Some organizations need to change because of growth, and some change because of downsizing. This paper will look at many different reasons for change and how that change is brought about, including if the change is good or bad for an organization. In business management is faced with competitive environments that sometimes dictate change to keep up with or to surpass competition. The organizations that are able to make effective organizational changes are the ones that survive and prosper while the organizations that do not make the changes necessary to compete often are put out of business by the organizations that can. Even if an organization is able to change their organization, 84% of those organizations will not be successful after the change. This staggering fact raises questions of why management would participate in a major organizational change with such a high failure rate. One idea based upon the economic perspective of organizational change is based upon the “Management as Control” assumption. This assumption is that “In competitive economies, firm survival depends on satisfying shareholders. Failure to do this will lead them to either move their capital to other companies or to use their influence to replace senior management with those better aligned with their interests. Therefore, managers conduct change in order to produce better organizational performance in the form of better quarterly results with correspondingly better company share prices.” (Managing Organizational Change, Palmer, Dunford, Akin; 2009) Another perspective which is aligned with change management images is the “Management as Shaping” assumption, which is part of the organizational learning perspective. This perspective assumes that “Organizations and human systems of all sorts are complex and evolving and therefore cannot be reduced to a single, linear objective of maximizing shareholder value.” (Managing Organizational Change, Palmer, Dunford, Akin; 2009) This perspective is based upon the theory that the objectives of this type of change are based upon the need to increase an organization’s adaptive capacity. This includes how an organization might achieve shareholder value. The knowledge needed for achieving these goals is likely to change over time, so it is imperative to build the capacity to both respond to, and shape external changes. This is another reason why management conducts change. One focus for creating change is Environmental Pressure. Environmental Pressure occurs when an organization’s resources decrease because of a reduced demand for products and sales decrease in market share. This includes bad investment decisions. In extreme cases organizational change because of Environmental Pressure is designed to turn around negative cash flow to avoid bankruptcy or “Organizational Death”. Environmental Pressures include Fashion Pressures or mimetic isomorphism which is when a company imitates another company because of the successful changes that they have made. An example is Boeing Co. imitating General Electric. Mandated Pressure is another environmental pressure that causes organizational change because of a lawsuit or settlement that mandates organizational change. An example of Mandated Pressure is ChevronTexaco after settling a racial discrimination lawsuit changing its organizational structure to include establishment of an external diversity task force charged with monitoring the company’s practices and ensuring fair treatment for minority staff. Sometimes change is forced upon an organization through formally mandated requirements or coercive isomorphism, where organizations are forced to take...
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