Change in organisations

According to Turner and Müller (2003, 3), traditional organisations adopt projects as a vehicle for change. They create a temporary organisation to deliver a coherent set of change objectives, because projects are better suited for managing change than functional organisation. Companies all over the world struggle with big re-engineering and organisational restructuring efforts: they restructure their management, rationalise and down-size, introduce changes in their systems and try to apply flexible work practices, and make attempts to implement total quality management. The list is never-ending. It is believed that the entire future of these organisations depends on the success of the change projects.

Change means that the new state of things is different from the old state (Lanning 2001, 9). The organisational development theory views the management of change as management of people, motivating them and solving conflicts between them (McCalman & Paton 1992, 93 - 113).

According to Turner (1999, 53), the change introduced by a project will be of two types:

Technical change, i.e. change of technology or the physical environment of the organisation. This may be a result of engineering work or IT work.

Cultural change, i.e. change in the culture of the organisation itself. This may involve changes in the people of the organisation, management processes and systems or the structure of the organisation itself.

Some projects result in a purely technical change, others in a purely cultural change. However, the vast majority result in a mixture. Turner (1999, 53 - 54) gives the term PSO-projects (people, systems and organisation) to them (Figure 3.3).

Purely technical projects Purely cultural projects

Quantitative objectives Construct a bridge

Build a ship Build a road

Qualitative objectives Organisational development

Management development Introduce redundancy

PSO-projects Mixed objectives Move to a new factory Introduce new technology Implement a computer system

Create a corporate budget Devise the long-range plan

Figure 3.3 The spectrum of PSO-projects (Turner 1999, 54)

Salminen and Lanning (1999, 50) provide a similar classification for change. The change in organisations has largely been viewed from two different angles, namely changing the organisation and the human behaviour, and changing the operations and the mechanisms of the technical system. In the beginning of the century, most of the research concentrated on organisations as purely technical systems, leading to simplistic and mechanistic assumptions about change. As the shortcomings of the mechanistic approach started to become obvious, an opposite school started to conquer the field of organisational research. It was recognised that organisations are collections of people, and changing how the organisations work is thus fundamentally about changing how the people work. All changes in organisations require changes in the way people work (Salminen & Lanning 1999, 50 - 51).

Salminen (2000, 11) defines organisational change as changes in the organisational structures, roles, values, culture, and other clearly people related issues.

Operational change is changes in operational procedures and processes, such as the manufacturing process, logistics, and customer service process. Organisational and operational change projects require a combination of knowledge and skills rooted in project management and change management.

Kenny (2003, 47) stresses that projects are about implementing strategy. Within an organisation, the implementation of a new strategy can involve a very complex change process, and the change in an organisation produces uncertainty. The more radical a strategy is, the more uncertainty is associated with it. Also Englund and Graham (1999, 52) emphasise the importance of linking the projects to the strategy. Growth in the organisations typically results from successful projects that generate new products, services or procedures. The managers are increasingly concerned about getting better results from their projects. Shenhar et al. (2001, 699) continue that defining and assessing the project success is a strategic management concept, which should help to align the project efforts with the short- and long-term goals of the organisation. de Wit and Meyer (1999, 140 - 146) have identified two types of strategic change – evolutionary and revolutionary. The proponents of the revolutionary or radical change point to the inherent inertia in the organisations and propose that a rapidly executed radical change is needed to overcome this inertia and achieve the desired strategic outcomes.

Although every business's change initiative is unique, Beer and Nohria (2000, 134) have recognised that there are two archetypes or theories of change. Theory E is a change based on the economic value. It is the hard approach to change. The shareholder value is the only legitimate measure of corporate success. Theory O is a change based on the organisational capability. This is the soft approach, whose goal is to develop a culture and a human capability through an individual and organisational learning-process of changing, obtaining feedback, reflecting and making further changes. Few companies subscribe to just one theory, but a mix of both. The obvious way to combine is to sequence them. Then it will be better to start by Theory E. According to the writers, it is highly unlikely that Theory E would successfully follow Theory O, because the sense of betrayal that it would involve.

(Beer & Nohria 2000, 134 - 138).

The need for change may originate from several different sources, both from inside and outside the organisation (Boddy & Buchanan 1992, 16 – 17; McCalman & Paton 1992, 6 - 7). The external forces include e.g. regulators, competitors, customers and technology, whereas the internal pressure may come from obsolete services and products, new market opportunities, new strategic directions, and increasingly diverse workforce. Organisations change primarily because of an external pressure rather than an internal desire to change (Goodstein & Burke 1997, 5). Also Scherr (1989, 407 - 408) and Miles, Coleman Jr. and Creed (1995, 142 - 143) address that

organisational change is triggered with the perception or experience of either environmental threat, loss or opportunity. A change is needed, when the current performance and the way of the operation of the business is no longer on a par with the requirements from inside the company or with the environment and the competitive situation (Lanning 2001, 9).

Beer et al. (1990, 161 – 164) have defined six steps to effective change in organisations:

Mobile commitment to change through joint diagnosis of business problems Developing a shared vision of how to organise and manage for

competitiveness

Fostering consensus for the new vision, competence to enact it, and cohesion to move it along

Spreading revitalisation to all departments without pushing it from the top Institutionalising revitalisation through formal policies, systems, and structures

Monitoring and adjusting strategies in response to problems in the revitalisation process

Kotter (1995, 61) introduces similar research results to produce change. For transforming the organisation, it is necessary to establish a sense of urgency and to form a powerful guiding coalition. In order to clarify the direction in which the organisation needs to move, it is important to create a vision and to communicate it. Empowering the others to act on the vision and creating short-term wins establish a transformation and increase the confidence on it. A real transformation takes time. Declaring the victory too soon is a risk. It is necessary to consolidate the improvements and finally institutionalise the new approaches.