Strategic Organizational Change

and Transformation

Erica Mitchell Colorado Technical University

ODC874-1403C-02 Leading and Managing Large Scale Transformation

Dr. Kenneth Long September 15, 2014

LEARNING OBJECTIVES • Identify and define organization transformation in

relation to change process. • Understand basic strategy-culture matrix and other

approaches to changing culture to fit the strategy. • Recognize importance of corporate culture and its

relation to strategy.

THE TRANSFORMATION OF FAMILY DOLLAR STORE

• Family Dollar Store is a number-one neighborhood dollar discount retail chain in the U.S.

• It had unstructured and entrepreneurial culture • Competitor Dollar General Store began taking market share • Consultant Erica Mitchell was brought in to transform the

dysfunctional organizational culture of Family Dollar Store

THE TRANSFORMATION OF FAMILY DOLLAR STORE (cont.) • Lack of support for changes from lower levels • Changes resulted in unintended consequences • Mitchell brought in new top management team • Innovation and sense of ownership declined • HR manager said it was revolution, not evolution

STRATEGY AND TRANSFORMATION Success can work against a company when it looses touch with customers. Radical changes may be the only choice for an organization in desperate need of change. Strategic change is about successfully allocating resources to strategic initiatives.

STRATEGY AND TRANSFORMATION “Strategic planning is the process by which members of an organization envision its future and develop the necessary procedures and operations to achieve that future” (Pfeiffer, Goodstein, & Nolan, 1986; Rothwell, 1989).

TRANSFORMATION STRATEGY Strategy is the direction and scope of an organisation over the long term which achieves advantage for the organisation through its configuration of resources within a changing environment to meet the needs of markets and to fulfil stakeholder expectations (Johnson & Scholes 1993) .

• Refers to drastic changes in how organization functions and relates to its environment.

• Strategies represent more gradual approaches to strategic change.

• Approaches are drastic and abrupt change. • May or may not be developmental. • Uses directive, not participative, approaches to change.

ORGANIZATIONAL TRANSFORMATION

ORGANIZATIONAL TRANSFORMATION

ORGANIZATIONAL TRANSFORMATION (cont.)

• Usually top-down, top-management driven. • Requires shared vision, willingness to clean house,

restructure, tackle many problems. • Tends to be shaped by use of power rather than

collaborative approaches. • Due to immediate threat, this may be the only way for

organization to survive.

CHARACTERISTICS OF TRANSFORMATIONAL CHANGE • Triggered by Environmental and Internal Disruptions • Systemic and Revolutionary Change • New Organizing Paradigm • Driven by Senior Executives and Line Management • Continuous Learning and Change

LARGE-SCALE CHANGE STRATEGIES

Large-scale change approaches are:

• Incremental - long-term planned change • Transformative - immediate, drastic change

LARGE-SCALE CHANGE MODEL

Model based on 3 key dimensions:

1. Time frame of change—short or long. 2. Level of support of organizational culture. 3. Degree of discontinuity with environment.

FOUR CHANGE STRATEGIES 1. Participative evolution - incremental; anticipates

change; support of culture through collaborative means.

2. Charismatic transformation - radical change in short time with support of culture.

3. Forced evolution - incremental adjustments over longer period without support of culture.

4. Dictatorial transformation - used in times of crisis; major restructuring running counter to internal culture.

CORPORATE CULTURE Culture is an observable, powerful force in any organization. Made up of its members’ shared values, beliefs, symbols, and behaviors, culture guides individual decisions and actions at the unconscious level. CEO and managers’ actions, not words, produce culture. Organization’s major strength when consistent with strategies. As a result, it can have a potent effect on a company’s well being and success.

CORE CHARACTERISTICS OF CULTURE • Individual autonomy. • Sensitivity to customers and employees’ needs. • Support and assistance provided by managers. • Interest in having employees initiate new ideas. • Openness of communication channels. • Risk-seeking encouraged.

STRATEGY-CULTURE FIT Strategy:

• Course of action used to achieve objectives. • Relates resources of organization to opportunities in

environment. • Environmental structure provides the ‘place’ where

organizational action occurs (Whittington, 1988).

Culture:

• Set of values for setting priorities. • Critical factor in implementation of strategy.

SHARING THE VISION Management theorists feel vision is the essence of leadership.

Vision involves several stages: • Share the vision. • Empower the individual. • Acknowledge performance. • Reward performance.

STRONG VS. WEAK CULTURES Strong culture characterized by basic values intensely held and widely shared.

Weak culture may be seen in young company or one with high turnover.

Culture product of key components: structure, systems, people, and style.

STRATEGY-CULTURE MATRIX Four basic alternatives in determining strategy changes: 1. Manage change (manageable risk)

• Change important and compatible with culture. • Use cultural reinforcement as strategies.

2. Reinforce culture (negligible risk) • Forge vision that emphasizes shared values. • Reinforce existing culture.

STRATEGY-CULTURE MATRIX (cont.) 3. Manage around culture (manageable risk)

• Change important and incompatible with present culture.

• Reinforce value system, reshuffle power, use leverage in the organization.

4. Change strategy to fit culture (unacceptable risk) • Change important but incompatible with culture. • Changing culture is explosive, long-term process

that may be impossible. • Determine if strategic change is viable alternative

or if strategy should be modified to fit more closely with existing culture.

STRATEGIC CHANGE MANAGEMENT

• Seeks to align organization’s strategy, structure, and human resources to fit with environment.

• Organizations composed of 3 systems: 1. Technical 2. Political 3. Cultural

THREE STEPS TO STRATEGIC CHANGE

1. Develop image of desired organization. 2. Separate systems and intervene separately in each one. 3. Plan for reconnecting three systems.

REASONS FOR LARGE-SCALE CULTURAL CHANGES • Company has strong values that do not fit changing

environment. • Industry very competitive and changes quickly. • Company mediocre or worse. • Firm about to join ranks of larger firms. • Firm small but growing rapidly.

LARGE-SCALE CULTURAL CHANGE PRECAUTIONS

• Cultural change can be difficult and time consuming. • Culture change should be attempted only after less-

difficult solutions have been ruled out.

ORGANIZATIONAL DESIGN • Organizational design refers to the way managers

structure organizations to reach the organization’s goals • Structural elements include Allocation of duties, tasks, and responsibilities

between departments and individuals Reporting relationships Number of levels

ORGANIZATIONAL DESIGN (cont.) • Organizational charts show the formal design or structure. • Two basic goals of organizational design Get information to decision makers Coordinate the interdependent parts of an organization

SELF-CONTAINED ORGANIZATION

Chief FinancialOfficer

VP Research

Division ManagerAsia

VP HumanResources

VP Operations VP Sales andMarketing

Division ManagerNorth America

Division ManagerEurope

Chief ExecutiveOfficer

THE CONTINGENCY FACTORS OF ORGANIZATIONAL DESIGN

Overview

• External environment: Includes the organization’s competitors, customers, suppliers, and government

• Strategy: The plan for reaching the goals of the organization

• Open systems character of organizations tightly couples these two factors

• Technical process: The system an organization uses to produce its products or services

• Size: The number of organization members

The Contingency Factors of Organizational Design (cont.)

External environment Strategy

Major tools for implementation

Technical process

Forms of organizational design

Mission

Achieve organization

goals

Roles of organizational culture and size

Relationships Among the Contingency Factors

STRATEGY • An organization’s strategy describes long-term goals and

way of reaching the goals • Describes resource allocation • Plays a mediating role between the external environment

and the tools of organizational design • Strategy’s mediating role in organizational design

“Structure follows strategy” “Strategy follows structure” In both views, the design of the organization is a

major tool for carrying out the strategy

STRATEGY (cont.)

“Structure follows strategy”

Choice of an organizational form

Reach strategic goals

Strategy’s mediating role in organizational design

STRATEGY (cont.)

“Strategy follows structure”

Organizational design is an environment within which managers form strategy.

Develop effective strategy Prevents developing an effective strategy

Strategy’s mediating role in organizational design

REFERENCES Johnson, G. & Scholes, K. (1993) Exploring Corporate

Strategy, London, Prentice Hall, p. 10. Pfeiffer, J. W., Goodstein, L. D., & Nolan, T. M. (1986).

Applied strategic planning: A how to do it guide. San Diego: University Associates.

Rothwell, W. (1989). The strategic planning workshop. Amherst, MA: Human Resource Development Press.

Whittington, R. (1988). ‘Environmental structure and theories of strategic choice’. Journal of Management Studies, 25, 6, 521–36.