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  1. 10.1 The Nature of Change in Organizations

    Among supertrends shaping the future of business: (1) The marketplace is becoming more segmented and moving toward more niche products. (2) There are more competitors offering targeted products, requiring faster speed-to-market. (3) Some traditional companies may not survive radically innovative change. (4) China, India, and other offshore suppliers are changing the way we work. (5) Knowledge, not information, is becoming the new competitive advantage.

    Two types of change are reactive and proactive. Reactive change is making changes in response to problems or opportunities as they arise. Proactive change involves making carefully thought-out changes in anticipation of possible or expected problems or opportunities.

    Forces for change may consist of forces outside the organization or inside it. (1) External forces consist of four types: demographic characteristics, market changes, technological advancements, and social and political pressures. (2) Internal forces may be of two types: employee problems and managers’ behavior.

    Four areas in which change is most apt to be needed are people, technology, structure, and strategy. (1) People changes may require changes in perceptions, attitudes, performance, or skills. (2) Technology is any machine or process that enables an organization to gain a competitive advantage in changing materials used to produce a finished product. (3) Changing structure may happen when one organization acquires another. (4) Changing strategy may occur because of changes in the marketplace.

  2. 10.2 Organization Development: What It Is, What It Can Do

    Organization development (OD) is a set of techniques for implementing planned change to make people and organizations more effective. Often OD is put into practice by a change agent, a consultant with a background in behavioral sciences who can be a catalyst in helping organizations deal with old problems in new ways. OD can be used to manage conflict, revitalize organizations, and adapt to mergers.

    The OD process follows a three-step process: (1) Diagnosis attempts to ascertain the problem. (2) Intervention is the attempt to correct the diagnosed problems. (3) Evaluation attempts to find out how well the intervention worked.

    Four factors that make OD work successfully are (1) multiple interventions are used; (2) top managers give the OD program their support; (3) goals are geared to both short- and long-term results; and (4) OD is affected by culture.

  3. 10.3 Promoting Innovation within the Organization

    Innovations may be a product innovation or a process innovation. A product innovation is a change in the appearance or performance of a product or service or the creation of a new one. A process innovation is a change in the way a product or service is conceived, manufactured, or disseminated. Innovations may also be an incremental innovation or a radical innovation. An incremental innovation is the creation of a product, service, or technology that modifies an existing one. A radical innovation is the creation of a product, service, or technology that replaces an existing one.

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    Four characteristics of innovation are that (1) it is an uncertain business; (2) people closest to the innovation know the most about it, at least initially; (3) it may be controversial; and (4) it can be complex because it may cross organizational boundaries.

    Innovation doesn't happen as a matter of course. Three ways to make it happen are to provide the right organizational culture, so that it is viewed as a benefit rather than as a boondoggle; to provide the resources; and to provide the rewards, so that experimentation is reinforced in ways that matter. Three steps for fostering innovation are as follows. (1) Recognize problems and opportunities and devise solutions. (2) Gain allies by communicating your vision. (3) Overcome employee resistance and empower and reward them to achieve progress.

  4. 10.4 The Threat of Change: Managing Employee Fear & Resistance

    The degree to which employees feel threatened by change depends on whether the change is adaptive, innovative, or radically innovative. Adaptive change, the least threatening, is reintroduction of a familiar practice. Innovative change is the introduction of a practice that is new to the organization. Radically innovative change, the most threatening, involves introducing a practice that is new to the industry.

    Ten reasons employees resist change are as follows: (1) individuals’ predisposition toward change; (2) surprise and fear of the unknown; (3) climate of mistrust; (4) fear of failure; (5) loss of status or job security; (6) peer pressure; (7) disruption of cultural traditions or group relationships; (8) personality conflicts; (9) lack of tact or poor timing; and (10) nonreinforcing reward systems.

    Kurt Lewin's change model has three stages—unfreezing, changing, and refreezing—to explain how to initiate, manage, and stabilize planned change. (1) In the unfreezing stage, managers try to instill in employees the motivation to change. One technique used is benchmarking, a process by which a company compares its performance with that of high-performing organizations. (2) In the changing stage, employees need to be given the tools for change, such as new information. (3) In the refreezing stage, employees need to be helped to integrate the changed attitudes and behavior into their normal behavior.

    In a model corresponding with Lewin's, John Kotter's suggests an organization needs to follow eight steps to avoid the eight common errors senior management usually commits. The first four represent unfreezing: establish a sense of urgency, create the guiding coalition, develop a vision and strategy, and communicate the change vision. The next three steps represent the changing stage: empower broad-based action, generate short-term wins, and consolidate gains and produce more change. The last step, corresponding to refreezing, is to anchor new approaches in the organization's culture.

Management in Action
Companies Try to Change Employees’ Behavior Toward Using Car Pooling, Mass Transit, Shuttles, & Buses

For years, in-house transportation gurus at companies across the country have been obsessing about how to cajole employees out of their cars. They've handed out mass-transit passes, ordered fleets of luxury coaches, reserved premium parking spots for van pools, and filled locker rooms with toiletries and towels for those who bike to work. They've educated workers about the evils of not only the SUV but the SOV (single-occupancy vehicle). And they've appealed to the corporate drudge's quest for happiness, brandishing research showing that those who travel to work alone in cars are the most miserable commuters of all.

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Nothing, however, has done as much for their cause as today's record prices for petrol. Employees who once sneered at the “bus people” or “bike freaks” are clamoring to sign up for all manner of company-subsidized transportation programs. “Every time gas prices rise, I get more and more employees who are taking our car pools or van pools or shuttle buses,” says Schering-Plough's transportation chief Sheila Gist. This new golden age has Gist in overdrive, scheduling new routes for what has become Schering's own in-house transit system. In the past year alone, Gist says, ridership is up by as much as 40%. Companies are big on breaking the car addiction because doing so raises productivity, amps morale, and delivers much lusted-after green cred.

The surge in oil prices has accelerated the trend. So have new corporate tax deductions for employer-subsidized transportation. Consider what's happening at insurer Safeco. When the company moved to Seattle last year, it installed commuting concierges to help employees figure out how best to use the company's vouchers for mass transit, shuttles, car pools, and ferries. Free rentals from Zipcar await those who need to run errands during the day. Safeco also encourages its staff to skip the commute altogether by offering free phone and broadband service for their home offices, as well as a furniture stipend with which to decorate. Today [in 2008], 90% of employees are out of their cars, up from 50% in 2006. The company is aiming for zero-car status. Says Safeco transportation analyst Brady Clark: “We're still working on that 10%.”

Some companies can't meet the demand fast enough. After Microsoft rolled out a new shuttle-bus service last fall, employees immediately howled for more routes. The plush, Wi-Fi-equipped coaches have become so wildly popular—strategy chief Craig Mundie is a big fan—that when word leaked recently that Microsoft was adding to the service, a group of Microserfs hacked into the reservation system and filled up the new routes before they were even announced. Employee Bryan Keller used to commute alone in his 20-mpg Honda Pilot. “I've regained two hours of my day,” he says. Using Microsoft's online “carbon calculator,” Keller estimates he's saved $150 on gas and dropped 1,000 pounds of CO2 from his carbon footprint since he began using the service in October [2007].

For Discussion
  1. Which of the forces for change are causing organizations such as Safeco and Microsoft to try and change employees’ views about driving to work? Explain.

  2. Thinking more broadly, will the price of gasoline create incremental or radical innovation for organizations? What type of industries will be most affected?

  3. How did Safeco and Microsoft try to reduce employees’ resistance to their work travel programs? Describe.

  4. To what extent would Safeco and Microsoft's travel programs increase productivity? Explain.

Source: From Michelle Conlin, “Suddenly, It's Cool to Take the Bus,” BusinessWeek, May 5, 2008, p. 24. Reprinted with permission.
How Adaptable Are You?
  1. To assess your adaptability.

  2. To examine how being adaptable can help you cope with organizational change.


Ultimately all organizational change passes through an organization's people. People who adapt more easily are better suited to cope with organizational changes and so they clearly are important assets to any organization. The purpose of this exercise is to determine your adaptability.


Read the following statements. Using the scale provided, circle the number that indicates the extent to which you agree or disagree with each statement:

  • 1 = strongly disagree

  • 2 = disagree

  • 3 = neither agree nor disagree

  • 4 = agree

  • 5 = strongly agree

1. In emergency situations, I react with clear, focused thinking and maintain emotional control in order to step up to the necessary actions. 1 2 3 4 5
2. In stressful circumstances, I don't overreact to unexpected news. I keep calm, focused, and manage frustration well. 1 2 3 4 5
3. I solve problems creatively by turning them inside out and upside down looking for new approaches to solving them that others may have missed. 1 2 3 4 5
4. I easily change gears in response to uncertain or unexpected events, effectively adjusting my priorities, plans, goals, and actions. 1 2 3 4 5
5. I enjoy learning new ways to do my work and I do what is necessary to keep my knowledge and skills current. 1 2 3 4 5
6. I adjust easily to changes in my workplace by participating in assignments or training that prepares me for these changes. 1 2 3 4 5
7. I am flexible and open-minded with others. I listen and consider others' viewpoints, adjusting my own when necessary. 1 2 3 4 5
8. I am open to both negative and positive feedback. I work well in teams. 1 2 3 4 5
9. I take action to learn and understand the values of other groups, organizations, or cultures. I adjust my own behavior to show respect for different customs. 1 2 3 4 5
10. I adjust easily to differing environmental states such as extreme heat, humidity, cold, or dirtiness. 1 2 3 4 5
11. I frequently push myself to complete strenuous or demanding tasks. 1 2 3 4 5
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When you are done, add up your responses to get your total score to see how adaptable you are. Arbitrary norms for adaptability:

  • 11–24 = Low adaptability

  • 25–39 = Moderate adaptability

  • 40–55 = High adaptability

Questions for Discussion
  1. Were you surprised by your results? Why or why not?

  2. Look at the areas where your score was the lowest. What are some skills you can work on or gain to increase your adaptability? Describe and explain.

  3. What are some ways being adaptable can improve the way you handle change? Discuss.

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Ethical Dilemma
Should Drug Salespeople Be Allowed to Give Doctors Free Drug Samples & Gifts?

For years, they've been the standard freebies that drug companies have offered in an attempt to get doctors to prescribe their medications: expensive dinners, golf outings, trips to ski resorts, and drug samples….

This week, 11 current and former sales executives from TAP Pharmaceutical Products—a leading drug company—go on trial, accused of conspiring to pay kickbacks to doctors, hospitals, and other customers. The charges focus on efforts to get doctors to prescribe Lupron, the company's prostate cancer drug, as well as Prevacid, its heartburn drug….

Doctors approached by the 11 TAP employees were offered gifts including trips to swanky golf and ski resorts and “educational grants,” used to pay for cocktail parties, office Christmas parties and travel, according to prosecutors. Defense lawyers say the sales executives were simply doing their jobs. “As far as I can tell, this is the first time there has ever been a prosecution under the health care statute in which salespeople are being charged with a crime [for things] that they thought were completely within their job descriptions,” says Roal Martine, a Chicago attorney who represents Carey Smith, a former TAP executive.

Solving the Dilemma

What is your feeling about drug salespeople giving doctors free drug samples and trips and/or “educational grants” as a way to get doctors to prescribe their products?

  1. There is nothing wrong with this practice. Giving drug samples and gifts is simply another form of advertising.

  2. Although this practice amounts to bribery, the doctors should not take the gifts. But I think it is all right for doctors to take only free drug samples. Doctors who take trips and “educational grants” for cocktail parties should be punished.

  3. The salespeople and TAP should be punished. This practice drives up the costs of drugs, which ultimately are passed along to consumers.

  4. Because guidelines established by the American Medical Association are vague, the TAP employees should not be punished. We need clear guidelines that include real penalties for not following them.