Managers affect society through their decisions about how to use resources.
Change management is the systematic approach and application of knowledge, tools and resources to deal with change. It involves defining and adopting corporate strategies, structures, procedures and technologies to handle changes in external conditions and the business environment. Effective change management goes beyond project management and technical tasks undertaken to enact organizational changes and involves leading the "people side" of major change within an organization. The primary goal of change management is to successfully implement new processes, products and business strategies while minimizing negative outcomes.
This article discusses the management of large organizational changes that may have far-reaching impacts on the organization and its workforce, including the following topics:
This article also highlights some of the special issues and challenges in implementing certain types of major organizational change, including mergers and acquisitions, downsizing, bankruptcy, business closure, outsourcing, and changes within the HR function.
To keep pace in a constantly evolving business world, organizations often need to implement enterprisewide changes affecting their processes, products and people. Change is a fact of life in businesses today. It can be difficult, and people often resist it. But to develop an agile workplace culture, organizations should follow a systematic approach to managing major change. Organizational development experts have established approaches for successfully navigating through change. See How to Manage Change.
Organizational leaders must identify and respond quickly to market changes and unexpected challenges, but most are not in a position to create an agile culture. Yet agile leadership—from CEOs down to line-level managers—separates high-performing from lower-performing organizations. Companies that consistently outperform competitors in profitability, market share, revenue growth and customer satisfaction reported much greater agility than lower performers.
The rate of major organizational change has accelerated dramatically in this decade. Global research and advisory company Gartner reports that the average organization has undergone five enterprise changes in the past three years and 73% of organizations expect more change initiatives in the next few years.1
As change initiatives have become more frequent and widespread, the importance of managing individuals through change has gained credence. Major changes can affect organizations across all levels. Many corporate leaders have concluded that failing to manage employees through change can be costly: Employees who are dissatisfied with or upset by change are generally less productive.
An employer that is serious about change management should develop a communication plan, a road map for change sponsors, integrated training programs and a plan for dealing with resistance.
HR should be involved in major organizational changes from the beginning and can assist by influencing the following:
The Roles of Management and HR
Business managers who want to undertake major transformation to stay competitive must work with HR staff to gain employee acceptance and support.
Having the right leadership and buy-in from the executive team is critical to unifying the organization behind a common strategic direction.
Another key is making sure all managers are equipped to coach their direct reports toward commitment. One-on-one conversations help individual team members analyze how the change will affect them, determine their level of commitment and choose how they will act. Questions managers should address with employees include:
Unfortunately, many managers are not adept at change management. The lack of change management skills among managers can make change initiatives difficult to achieve. A Towers Watson Change and Communication ROI Survey found that 87 percent of employers train managers on effective change management; however, only one-quarter of those employers found the training to be effective.2 To increase managers' skills, HR should provide training that is tailored to the specific change initiative and the competencies necessary to lead successful change.
HR can play a dual role in change management by initiating and leading the change and by serving as a facilitator for changes that other leaders and departments initiated.
The HR department performs a variety of functions associated with the communication, implementation and tracking of major changes. Most commonly, HR professionals assist employees by serving as a point of contact for questions and concerns and by explaining any impact on staffing. In addition, HR often coordinates meetings and communications about the change and related initiatives. Other common HR roles and responsibilities include:
HR can also play a strategic role in change management by calculating the post-implementation return on investment by identifying key performance indicators (KPIs) to be measured and by tracking and communicating these results.
By championing change, HR can help the organization increase buy-in, comfort and support for change across departments, thereby increasing the success of change initiatives.
Steps in the Change Management Process
Organizations should systematically prepare for and implement major organizational change. John Kotter, a Harvard Business School professor, developed a well-known and widely adopted approach for managing organizational change. This approach, updated in Kotter's book Accelerate, involves the following eight stages:3
1. "Create a sense of urgency." Successful transformation efforts usually begin when leaders examine the market for changes that may lead to new competitive realities for the organization. These changes can stem from demographic shifts, social trends, new technology, market or competitor changes, or new government regulations. The leaders should explain that a potential crisis or major opportunity is imminent, and they should encourage frank discussion throughout the organization. Creating a sense of urgency that the status quo is no longer acceptable is essential to gain the workforce's energetic cooperation.
2. "Build a guiding coalition." Once employees feel a sense of urgency, leaders should establish a group with enough power to lead the change. Members need substantial authority based on position, expertise, credibility and leadership, as well as effective management skills and proven leadership abilities. This coalition must learn to work together based on trust and set a common goal. Many guiding coalitions build trust through offsite meetings, joint activities and conversation.
3. "Form a strategic vision and initiatives." The guiding coalition should craft a clear vision for the future, motivate people to take appropriate actions and coordinate their actions. An effective vision is imaginable, desirable, feasible, focused, flexible and communicable, according to Kotter. Creating an effective vision takes time and can be a challenging process, but the end product provides a clear direction for the future.
4. "Enlist a volunteer army." Once the guiding coalition has developed the vision, its members should provide extensive communications about how the change will improve the business and how those improvements will benefit employees. Key elements in effective communications include simplicity, use of examples, multiple forums, repetition, explanation of apparent inconsistencies and two-way communication. The group should model the behavior expected of employees.
5. "Enable action by removing barriers." To empower workers to support change and act on the vision, change leaders should identify and remove obstacles. Four categories of important obstacles are:
6. "Generate short-term wins." Successful and enduring change takes time, which can be discouraging to employees at all levels of the organization. To maintain urgency, leaders should create conditions that support early successes and visible improvements. The key is to actively search for opportunities to score early achievements and to recognize and reward those who made these accomplishments possible. Good short-term wins have unambiguous results, are visible to many people and are clearly related to the change effort.
7. "Sustain acceleration." Until major changes are embedded in an organization's culture (which could take up to a decade), they remain vulnerable to resistance and regression. It is important to use the early successes as a foundation for larger challenges and to revise all systems, structures and policies that do not fit the change vision. HR can consolidate gains by hiring, promoting and developing employees who can implement the transformation vision. Additionally, the change process can be reinvigorated with new project themes and change agents.
8. "Institute change." The final stage in Kotter's model for successful change is linking the changes to two key components of corporate culture—norms of group behavior and shared values.
Another model for organizational change includes a four-phase change management process:
A large global retailer uses this model to increase the speed and impact of change initiatives while reducing the downturn of performance, thereby achieving desired outcomes quicker.
Overcoming Common Obstacles Encountered in Implementing Change
Organizations can have a clear vision for changes and a technically and structurally sound foundation for making changes, but the initiatives can still flounder due to obstacles that arise. Employee resistance and communication breakdown are common obstacles faced during major organizational change. See How to Avoid Common Mistakes in Change Management.
Successful change starts with individuals, and failure often occurs because of human nature and reluctance to change. Employees may also lack the specific behavioral traits needed to adapt easily to changing circumstances, which could decrease employee engagement and effectiveness and put organizational productivity at risk. How organizations treat workers during a change initiative determines how successful the change—and the organization—will be.
There are six states of change readiness: indifference, rejection, doubt, neutrality, experimentation and commitment. Organizations about to embark on a transformation should evaluate workforce readiness with assessment instruments and leader self-evaluations to identify the areas in which the most work is needed.
Leaders should have a solid strategy for dealing with change resistance. Some actions to build employee change readiness include:
Sometimes decisions about major organizational changes are made at the top management level and then trickle down to employees. As a result, why and how the company is changing may be unclear. According to a Robert Half Management Resources survey, poor communication commonly hinders organizational change-management efforts, with 65 percent of managers surveyed indicating that clear and frequent communication is the most important aspect when leading through change.
To avoid this problem, HR should be involved in change planning early to help motivate employees to participate. Effective communication promotes awareness and understanding of why the changes are necessary. Employers should communicate change-related information to employees in multiple forms (e.g., e-mails, meetings, training sessions and press releases) and from multiple sources (e.g., executive management, HR and other departments). See Why United Airlines' Lottery-Based Bonus Idea Fell Flat.
To avoid communication breakdowns, change leaders and HR professionals should be aware of five change communication methodologies—from those that provide the greatest amount of information to those that provide the least:
Experts estimate that effective communication strategies can double employees' acceptance of change. However, often companies focus solely on tactics such as channels, messages and timing while failing to do a contextual analysis and consider the audience. Some of the specific communication pitfalls and possible remedies for them are the following:
Executive leaders and HR professionals must be great communicators during change. They should roll out a clear, universal, consistent message to everyone in the organization at the same time, even across multiple sites and locations. Managers should then meet both with their teams and one on one with each team member.
Leaders should explain the change and why it is needed, be truthful about its benefits and challenges, listen and respond to employees' reactions and implications, and then ask for and work to achieve individuals' commitment. See Keep it Clear: Three Ways to Help Communicate Change in Your Organization and Managing Organizational Communication.
Employee resistance and communication breakdowns are not the only barriers that stand in the way of successful change efforts. Other common obstacles include:
Change management experts have suggested that unsuccessful change initiatives are often characterized by the following:
Successful change management must be well-planned, well-timed and well-integrated. Other critical success factors include a structured, proactive approach that encompasses communication, a road map for the sponsors of the change, training programs that go along with the overall project and a plan for dealing with resistance. Change leaders need to be active and visible in sponsoring the change, not only at the beginning but also throughout the process. Turning their attention to something else can send employees the wrong message—that leaders are no longer interested.
Managing Varied Types of Major Organizational Change
Organizational change comes in many forms. It may focus on creating new systems and procedures; introducing new technologies; or adding, eliminating or rebranding products and services. Other transformations stem from the appointment of a new leader or major staffing changes. Still other changes, such as downsizing or layoffs, bankruptcy, mergers and acquisitions, or closing a business operation, affect business units or the entire organization. Some changes are internal to the HR function.
In addition to the general framework for managing change, change leaders and HR professionals should also be aware of considerations relating to the particular type of change being made. The subsections below highlight some of the special issues and HR challenges.
Mergers and acquisitions
A merger is generally defined as the joining of two or more organizations under one common ownership and management structure. An acquisition is the process of one corporate entity acquiring control of another by purchase, stock swap or some other method. Nearly two-thirds of all mergers and acquisitions (M&As) fail to achieve their anticipated strategic and financial objectives. This rate of failure is often attributed to HR-related factors, such as incompatible cultures, management styles, poor motivation, loss of key talent, lack of communication, diminished trust and uncertainty of long-term goals.
HR professionals face several challenges during M&As, including the following:
Successfully implementing a layoff or reduction in force (RIF) is one of the more difficult change initiatives an HR professional may face. Tasks HR professionals will need to undertake include:
See Managing Downsizing by Means of Layoffs and Drive Team Performance Using Organizational Transformation.
Filing for a business bankruptcy and successfully emerging from the process is generally a complex and difficult time for all parties. HR may have to cut staff, reduce benefits, change work rules or employ a combination of such actions. A major strategic concern during a Chapter 11 bankruptcy is retaining key personnel.
Compassion, frequent communication and expeditious decision-making will help reduce the stress an organization's employees are likely to experience during this difficult organizational change. Showing genuine respect for people and treating them with honesty, dignity and fairness—even as difficult decisions are being made about pay, benefits and job reductions—will drive the success or failure of an organization post-bankruptcy. See Managing Human Resources for a Company in Bankruptcy.
Closing a business operation
Businesses make the difficult decision to close all or part of their operations for many reasons, including economic recession, market decline, bankruptcy, sale, a realignment of operations, downsizing, reorganization, outsourcing or loss of contracts.
HR professionals will play an integral role during such business closures, from developing the plan for the closure through the final stages of shutdown. Some of HR's major responsibilities during this type of organizational change are listed below:
For several reasons, including cost savings and freeing staff to focus on more strategic efforts, an organization may decide to outsource HR or other business functions. Outsourcing is a contractual agreement between an employer and a third-party provider whereby the employer transfers the management of and responsibility for certain organizational functions to the external provider. Many types of outsourcing options are available to employers, from outsourcing one aspect of a single function to outsourcing an entire functional department. This change can have a similar impact on employees as downsizing or closing a department.
When deciding whether to outsource, an organization should carefully consider questions about its needs in a particular functional area, current processes, business plan and outsourcing options, including:
During an HR outsourcing process, HR professionals may be asked to identify solutions to guide organizations through vendor selection and management of the outsourcing relationship. See Outsourcing the HR Function.
Changes within HR
HR professionals frequently help other parts of the organization respond to change, but what happens when the HR department becomes the epicenter of change? These kinds of transformations, such as moving to a shared services model, integrating with another HR function following a merger or delivering new services to new clients, can be more difficult for HR professionals to manage than other types of organizational changes.
During major changes within the HR function, HR should do the following:
In addition to managing the "people side" of organizational change initiatives, HR professionals should keep leadership informed of any applicable employment laws and the potential legal implications of various types of change. Typically, HR will be responsible, in consultation with legal counsel, for ensuring compliance with pertinent federal, state, local and international employment laws and regulations.
Legal compliance requirements may vary considerably based on the nature of the change initiative, the location(s) and size of the organization, whether the employer is unionized, and other factors. Federal laws that may apply to particular organizational change initiatives include:
See Federal Statutes, Regulations and Guidance.
HR professionals may also be responsible for negotiating contracts with unions, service providers or vendors. In such cases, they need to be familiar with key contract terms and issues and be able to represent the organization's interests effectively in contract negotiations and management.
Significant organizational changes can create ongoing conflict between two locations in the same country. But conflict is more likely to occur, and is harder to address, when differences in language, time zones, institutions and business practices exist. According to research conducted by the Economist Intelligence Unit, companies will continue to become larger and more global, handling operations in more countries than they do today.4
Culturally based assumptions about customer needs, infrastructure, competitive threats and other factors make it more difficult to find common ground during a cross-cultural change initiative. What differentiates an organization's products or services in one country may not be the same elsewhere, and the strengths that it has in its home market may not be easily replicated in other countries.
Common problems in cross-cultural change initiatives include:
Leaders of global change initiatives should consider these potential problems and plan to address them in advance. They will be far more likely to avoid change-related pitfalls; achieve their objectives; and build business partnerships characterized by mutual learning and superior business results.
Available in the SHRM Store: Agile Change Management: A Practical Framework for Successful Change.
1Gartner. (2018). Change Management. Retrieved from https://www.gartner.com/en/insights/change-management
2Willis Towers Watson. (2013, August 29). Only one-quarter of employers are sustaining gains from change management initiatives, Towers Watson survey finds. Retrieved from https://www.towerswatson.com/en/Press/2013/08/Only-One-Quarter-of-Employers-Are-Sustaining-Gains-From-Change-Management
3Kotter, John. (2014). Accelerate: Building strategic agility for a faster-moving world. Boston, MA: Harvard Business Review Press.
How management will affect the society life?
Management plays a vital role in modern society. It organizes the factories of production for social progress, greater productivity, increased jobs and income, better performance and for the fulfilment of society's needs. It promotes the development of society and welfare of the public.
What is the contribution of manager in the society?
preserving the ethical values of a society. to shareholders, providing fair returns on the capital invested by shareholders. products, solving customerâ€™s grievances by opening customer care centers.
How is a manager involved in the resources of an organization?
Managers coordinate an organization's resources of material resources, human resources, financial resources, and informational resources.
What are resources used by managers?
Resources are finances, staff, physical space, equipment, technology, and time. The goal of resource management is to use the best combination of resources to satisfy requirements while also realizing these same resources are likely in demand elsewhere in the business.