Any organization, regardless of its form of ownership and industry affiliation, is forced to constantly respond to external and internal “challenges” or threats. Why? Yes, because modern organizations operate in a complex, dynamic environment, often with a high level of uncertainty. What is the reason for this? On the one hand, there is the constant improvement of technologies based on the creation of new materials (as a result of the discoveries of new laws of physics, chemistry, and other fundamental research) and other things, a constant change in the operating environment (and not always for the better), i.e. macro- and microeconomic factors, ranging from the phenomena of globalization, continuing with global financial crises and ending with increased competition in a specific market segment; on the other hand, needs change, and the qualifications of employees, and the structure of the organization do not always have time to adapt to them. And the most important problem area is that the organization does not have time or is not able to adapt to different types of “challenges” and loses to competitors in the speed of changes introduced, and therefore in the fight for the consumer.
Accordingly, the organization needs changes in order not to “get lost” in the “sea” of business, to quickly and effectively respond to changes in the external environment through continuous change/improvement of internal technological management processes and management structure. It is the ability of an organization to timely make changes associated with a constantly changing operating environment or, more importantly, the ability to change the operating environment itself “to suit itself” is the most important characteristic of a modern organization, which ensures the organization’s competitiveness and its ability to survive in the medium and long term. It is not for nothing that one of the 8 fundamental principles of the quality management system of any organization, in accordance with the standards of the ISO 9000 series, is the principle of “Continuous improvement”.
Here's a current example: the other day a huge scandal broke out with one of the flagships of the German and global auto industry, the Volkswagen concern. Instead of actually responding to the requirements of national standards (in particular in the USA) for environmental protection in the framework of reducing emissions of harmful substances into the atmosphere, the concern is actually accused of deliberately falsifying data (for seven years) on the indicators of harmful emissions into the atmosphere. Now, in order to somehow save its reputation, the company can recall about 11 million software testing machines worldwide and pay a fine of 18 billion dollars (in the USA only), and also be brought to criminal charges. What prevented the employees and management of the concern from rebuilding/changing internal technological processes? At least the costs would be an order of magnitude less than the possible losses!
Well, now let’s answer the question “What is this?”
Currently, many articles and manuals have been written on how to manage change in an organization. In a general sense: organizational change management is managing the transition of an organization, as a system, from one stable state to another. Organizational change can be defined as the process of mastering and implementing a new idea, type of behavior, or as any modification of some element of the organization's management system. This may concern both core and supporting business processes, business management and/or development processes. Examples of changes include: changing product production technology, improving technology for providing services to customers, creating a new product, restructuring the organizational and functional structure of the organization to accommodate technology changes, improving corporate culture, etc.
All changes in an organization can be reduced to two types, in accordance with the previously mentioned “challenges”: operational changes associated with improving production and/or management processes, and strategic changes aimed at radically updating the organization, reorienting its mission, goals and objectives .
In practice, there are planned and spontaneous changes. Natural changes are reactive changes to the adverse effects of random factors. Such changes are not systemic, they are carried out, as a rule, locally and, accordingly, do not change related processes, and, therefore, ultimately lead to disastrous consequences and additional losses (like a microbe that first appears in one place, and then gradually infects the entire environment).
Planned changes are the organization’s proactive response to a problem, i.e. thoughtful, balanced steps for improvement, in other words, it is a system of actions, for the implementation of which it is necessary to conduct the necessary research, identify and localize the problem, identify opportunities and threats, and understand the strengths and weaknesses of the organization. The purpose of the functioning of such a system is to prepare the organization for possible or expected changes in the impact of the operating environment, to mobilize resources, to prepare proactive measures and minimizing actions.
Now it remains to answer the question “How?”.
On the one hand, any organizational system must be clearly manageable within the organization; on the other hand, like any system, it can “get tired,” i.e. another responsibility, among many others, assigned to managers at various levels. As an example, let’s take the “Qualification reference book for positions of managers, specialists and other employees” (approved by Resolution of the Ministry of Labor of the Russian Federation of August 21, 1998 N 37, with amendments and additions), on the basis of which job descriptions, in particular for managers, are usually developed at enterprises. Now, if we take the qualification characteristics for any manager, then almost all job responsibilities state that the manager must increase the productivity of subordinate workers, constantly improve production and economic activities, apply and implement modern technologies and methods of labor and management, etc. What in practice? But in practice - turnover! And these requirements/responsibilities, as a rule, are not implemented. “So what to do,” you ask? And it’s very simple - to initiate and encourage initiative “from below”! Remember the system of rational proposals, forgotten by many. Create conditions for the development of initiative from below, i.e. organize the mobilization of internal resources at your enterprise - the development of the intellectual potential of your own employees. After all, they are the ones who are faced with the daily “routine”, they are the ones who solve current problems at the operational level, they see and often know how to solve emerging problems, but remain silent - after all, they are not paid for the initiative, and are often punished by being assigned additional non-core tasks. and unpaid duties.
And there is a solution: the introduction of the “Change Management” process into the organization’s management system allows you to effectively, with minimal costs and very substantively initiate, evaluate, plan and implement changes in the organization. Let's consider the procedure for employees to initiate, prioritize, make decisions and implement changes, as well as the system of motivating employees and the difficulties that an organization may encounter when introducing the change management process into its production and economic activities.
Change Management Process Diagram
But let's start with concepts. So, a change is an intention to make adjustments to local regulatory documentation, including strategy, standards, regulations, job and role instructions, managerial, technological, etc., the organization’s infrastructure, including business processes, aimed at improving the production and economic activities of the entire organization or its individual elements.
The classic diagram of the change management process is presented in Fig. 1:
The key stages of the change management process are:
- Initiating change.
- Change analysis.
- Making a decision to implement a change.
- Planning the implementation of changes according to timing and resources.
- Coordination and monitoring of change implementation
- Monitoring the results of implementing the change.
A change request can come from two main initiation sources:
- Optimization commands (what is an optimization command can be found here: http://openadvisors.ru/2_11_podgotovka.htm)
- Any proactive employee of the company.
A change request goes through the following main stages (outlined):
Each of the stages indicated in the diagram is interesting in itself and deserves close attention, but I would like to especially highlight two of them:
- Directly initiating a change (precedes the preparation of a change request);
- Priority management.
Initiating change
First, let's look at the key characteristics of a change request, which include:
- Purpose of change.
- Justification for the change.
- Contents of the change.
- The effect (input-output ratio) of introducing a change.
- Timing for implementation of the change.
- Costs of implementing the change.
Let's take a quick look: what is a “Change Request” and where does it even come from? I propose to consider the initiation of changes coming from any employee (since initiation from the Optimization Team is a separate but standardized scheme). The answer to the question “what is this?” lies in the key characteristics of the change request. When introducing this process into the enterprise management system, the change request is drawn up in the form of a standardized document with fields corresponding to the key characteristics of the request, and, if necessary, with additional fields. Much more interesting is the answer to the question “Where does it come from?”
I’ll tell you the example of implementing a change management process in a large network service company. Any operator of the company could become the initiator of changes (after appropriate online training), the main thing is that this employee should be proactive (caring) and motivated to improve. It is clear that staff motivation is one of the key incentives for implementing the change management process, and in this case, the emphasis must be placed on the efficiency of the personnel management service, which must select and justify to management such a scale of success for enterprise employees that will allow material and intangible incentives to ensure initiative from below.
So, in his workplace, as a rule, any employee faces one or another set of problems every day and observes the company’s existing losses. It is clear that it is necessary to initiate performance improvement in cases where an employee sees constantly recurring problems (systemic), and not one-time ones (which may be random). Accordingly, any normal, sensible person, seeing constantly recurring problems, can certainly offer a way out of the current situation. If improvement measures are not obvious for various reasons (the potential initiator lacks information on the topic, or lack of knowledge), then the initiator can turn to other, more trained employees for help and then it will be a subject of collective creativity, the main thing is that “Request for change" was completely filled in all required fields (at least according to formal criteria).
What is this for? The fact is that at the initial stage there can potentially be a lot of initiatives from below (just a “wave”), if the motivational scheme is sufficiently attractive, and the task of the created system at the initial stage, among other things, is to cut off unprepared changes without calculating the expected effects so as not to waste the energy of the employees involved in the process on analyzing unprepared documents. In addition, the second (informal) task at the initial stage is to encourage company employees to improve their professional level in order to prepare informed, economically justified decisions, which ultimately indirectly (through improving the quality of personnel) leads to an increase in the company's capitalization.
Priority management
Regarding priority management: after the change management manager determines the type of change request according to a certain algorithm: urgent, standard or unique, the priority of the change is assigned (for which a priority scale is developed during the implementation of the system). The priority determines the order in which a change request is implemented. However, the priority of different types of changes may change over time (increase or decrease). Priority changes can occur either automatically or by decision of the Process Owner or Change Management Committee.
Why do you need to change the priority (we’ll talk about lowering or raising the priority a little lower)? A change in priority is necessary so that the change corresponds to the current situation in the external and internal environment of the company.
At the same time, the revision (migration) of the priority of a change towards its increase can be carried out automatically, or as needed, and a decrease in priority is most often carried out when higher priority tasks appear or the change loses relevance, accordingly, this is a good mechanism for reducing the company’s losses in terms of reducing resource intensity of changes.
As a result, the essence of priority migration is, in simple words, the ability to implement the proposed change sooner or later (except in cases where the change loses its relevance).
Regarding the efforts made to decide on the implementation of the change and the immediate implementation process. Of course, these are inseparable important parts of the entire process, but they are quite identical to similar processes in the daily implementation of production and economic activities: i.e. the decision-making process can be successfully implemented with a prepared and comprehensively considered proposal for improvement, and the implementation process is a fairly common and, as a rule, well-established project activity in many companies.
In light of the above, it seems appropriate to make the following recommendations for change management:
- The most important driving force for change is the interest and understanding of the organization’s management of the need to implement a change management system as such. In this regard, it is necessary to enlist the support of top management, incl. regarding the mobilization of the company's internal resources.
- When senior management has realized and accepted the importance of change, it is necessary to create conditions for initiative “from below” - this is especially true in an economic period when external sources of development have certain limitations.
- Launching the process itself is a very expensive stage (although the cost of creation is relatively low), so it is recommended to provide a separate budget for resources for it. It should be sufficient for progress even at the first stage, when tangible effects from the implementation of changes have not yet been obtained, and therefore the staff does everything “by touch”, without sufficient feedback.
- Please note that in any case, you will have resistance from some employees to innovations. This may be due to the influence of a specific corporate culture, and the natural, human qualities of individual people. Those. employees who themselves cannot and do not want to take initiative can “put a spoke in the wheels” of those who are more proactive and caring. In this regard, you need to take care, on the one hand, to change your corporate culture to suit new goals and objectives, and on the other, to carry out individual explanatory work with employees. Some of them may have to part ways with your organization as a result—and that's okay.
- Be aware of the risk of lack of competence of the participants in the process. Those. they may want changes, but they will be able to carry them out. In this case, their training and development of skills related to the changes will help.
The most important thing is to make a clear decision for yourself: how do you want your company to develop? And do you want it to develop at all? But keep in mind that countries and companies that are advanced in this matter (for example, Toyota) have long ago decided everything for themselves and are developing successfully!
Norbert Tom Director of the Institute of Organization and Personnel, University of Bern (Switzerland)
From the archives of the journal "Problems of Theory and Practice of Management"
Today it is obvious that in order to survive in the market and remain competitive, enterprises must make changes to their business activities from time to time. Moreover, the need for change has begun to arise so frequently that its impact on the life cycle of an enterprise is no longer considered an exceptional phenomenon. In practice and scientific research, more and more attention is paid to the analysis of methods and organizational capabilities of change management (“change management”).
The concept of change management covers all planned, organized and controlled changes in the areas of strategy, production processes, structure and culture of any socio-economic system, including private and public enterprises. "Change Management" deals with specific issues of enterprise management, including organizational, personnel, communication and information aspects.
Prerequisites for change
The fundamentally important question is: how can an enterprise withstand changes in the external environment (which occur frequently, but irregularly and practically unpredictable), and also, through preliminary measures or responses, maintain its viability and achieve its goals. The enterprise must constantly monitor the main components of the surrounding system and draw conclusions regarding its needs for change. Typically, these components include economic(for example, market globalization or regional differentiation), technological(rapid spread of new technologies), political and legal(changes in legislation), socio-cultural(demographic shifts, changes in value systems) and physical-ecological(climatic conditions, load on the ecosystem).
An enterprise facing the need for change is greatly influenced by production And personnel options. The first category includes strategic economic areas, organization and progress of the production process, corporate culture, technology used, and property relations. Among the personnel parameters, the most important ones are the psychological ability to perceive changes by members of the organization, personal ambitions, opportunities for professional development, and readiness for cooperation.
As a rule, crisis situations are the impetus for change. From an economic point of view, crises should be distinguished by the areas in which they pose a threat to the achievement of company goals. So, liquidity crisis means a real loss of solvency. Therefore, urgent measures are necessary, otherwise the enterprise will be forced to leave the market (for example, as a result of its sale at auction or other liquidation procedures).
Success crisis characterized by a clear negative deviation of the actual state from the planned one (for example, in terms of sales, cash receipts, profit, profitability, costs, etc.). The reasons for such a crisis may be errors in market research, production, capital investments, and personnel policies.
Less noticeable and less immediate is strategic crisis. Although the position of the company at the moment (situation of success) may seem quite satisfactory, its onset must be diagnosed if disruptions occur in the development of the enterprise, the potential for success decreases, and protective capabilities in competition weaken. The emerging gap between probable and desired results can only be closed by changing the previous orientation or adopting a new one (for example, entering new markets, product or technological innovations). As a rule, such changes are designed to last for many years.
Two extreme approaches to change management
Changes in strategy, operations, structure and culture can be made gradually, in small steps, or radically, in large leaps. In this regard, they respectively speak of evolutionary And revolutionary models of change. In the spirit of such an “extreme” classification, it is advisable to present the concepts of changes in sociotechnical systems.
Revolutionary changes within the framework of "business reengineering"
In 1993, American management specialists M. Hammer and J. Champi formulated the basic concept of business reengineering. In their opinion, economic reengineering is a fundamental rethinking and radical redesign of an enterprise and its most important processes. The result is a dramatic (by an order of magnitude) improvement in the most important quantifiable indicators of costs, quality, service and deadlines. According to this concept, we should be talking about a deep reorganization of the enterprise along the entire value chain. The process of meeting customer needs is also subject to radical reorganization.
An important prerequisite for achieving such ambitious goals is a focus on the production process and the customer, as well as the creative use of the latest information technology in the workplace by competent employees. New decisions must be deliberately implemented in a non-democratic way. Leadership is concentrated in the hands of a few individuals who are endowed with all the necessary legitimate power to carry out the intended changes energetically and in a short period of time.
Satisfying internal and external customers is at the center of any business process overhaul. The enterprise strategy determines what should be adopted as key processes. But the focus should be on only a few of them (for example, new product development, logistics integration, etc.).
Auxiliary processes should not be optimized on their own, but solely taking into account the needs of key processes. It is also necessary to take a new approach to the problem of so-called points of intersection of interests.
Particular attention is paid information technology. The purpose of its implementation is to completely process information about customers and production. We are talking about completely new areas of application, and not just process automation. Thanks to the targeted use of data banks, expert systems, and telecommunication networks, it is possible to significantly expand the scope of employee tasks.
A more advanced information base will not bring the desired result unless the competence of personnel is changed, taking into account not only organizational (responsibilities, powers), but also purely qualification (opportunities, abilities, skills) parameters. The authors of the concept of economic reengineering in this regard talk about “authorized” employees who should become “process professionals.”
Staff collaboration must be fundamentally improved (eg in work groups). If necessary, the employee must have a means of communication with any colleague. Other changes are also needed in the field of personnel management. Thus, the new compensation base (wages) is especially important. The incentive system should be focused primarily on the actual abilities of employees, and not on their previous merits.
Evolutionary changes within organizational development
Organizational development refers to the concept of planning, initiating and implementing processes of change in social systems with the involvement of a wide range of participants. Proponents of the evolutionary concept proceed from the fact that, first of all, the views, values and behavior patterns of members of a sociotechnical system must change, and then the system itself (“organization” in the institutional sense).
Organizational development is defined as the long-term, thorough, comprehensive process of change and development of an organization and the people working in it. The process is based on training of all employees through direct interaction and transfer of practical experience. The purpose of the changes is to simultaneously increase the organization's productivity and the quality of work.
This definition already outlines the main normative provisions of organizational development. Change must be driven by the members of the organization. Internal and external consultants (called change agents) can act as a supporting force, but not as the main agents of change. This is expressed in the postulate of “self-reliance” (without dependence on experts), as well as “people affected by change become participants in it.” In this way, organizational development can contribute to the democratization of work. Unnecessary hierarchical levels should be eliminated, and power relations should be reduced to the level of partnership with an emphasis on mutual trust.
The expanded concept of organizational development includes both structural and personnel aspects. Within structural approach An attempt is made through changes in organizational regulation (for example, organizational plans, descriptions of individual role functions) to create favorable framework conditions for achieving organizational development goals. Personnel approach is to carry out activities to improve the qualifications of employees (personnel development) and stimulate their readiness to accept and implement changes. Undoubtedly, the goal setting of organizational development (economic and social efficiency) should be based on a combination of both approaches.
Organizational development is carried out in several stages. First, the social system “unfreezes” occurs. The views, values and behavior patterns of system members are questioned and their suitability for achieving system goals (productivity, innovative activity, humanization of work) is examined. At the second stage, the movement towards change begins. New models of behavior and organizational regulation are tested and reinforced during staff training.
Comparison of the main methods of change management
|
Origin of the method |
Engineering Sciences, Management Consulting Practice |
Social psychology, sociology consulting practice |
|
main idea |
Radical rethinking and redesign of enterprises or production and economic processes |
Long-term, comprehensive change and development of the organization and its members |
|
Criterion |
Economic reengineering |
Organizational development |
|
The principled position of managers |
Keeping organization members in place Involvement of employees affected by change |
|
|
Attitude towards staff |
Granting additional permissions |
Relying on employees who are capable of learning and ready to take responsibility |
|
Nature of changes |
Profound and all-encompassing change |
Long process of training and development |
|
Project implementation timeframe |
Several years with a focus on rapid, quantifiable success |
For a long time with patience and openness in mind |
|
Change object |
Enterprise as a whole or key processes |
The enterprise as a whole or parts thereof |
|
Significant and sustainable increase in profitability (economic efficiency) |
Increasing profitability (economic efficiency), humanization of labor (social efficiency) |
|
|
Type of crisis |
Liquidity crisis |
Success crisis |
|
Change strategy |
Top-down strategy |
Top-down strategy |
|
Methodological aspects |
Reorganization of key processes in accordance with the adopted market strategy |
Structural and personnel approach (new forms of organizational structures, changing attitudes and behavior patterns of employees, qualifying activities for individuals and groups) |
|
Key Roles |
Leader ("powerful patron") |
“Agents of change” (composed of specialists and the “owner of the process” in the role of consultant) |
|
Strengths |
Possibility of radical updating |
Social acceptability due to the natural course of change |
|
Weak sides |
Instability in the phase of change |
Insufficient reaction speed |
Change processes require a logical conclusion, since it is known that they can last indefinitely. Therefore, stabilization and consolidation of new, officially legitimized models of behavior and organizational rules are necessary. This occurs at the stage of the so-called freezing of the change process.
Within the framework of the concept of organizational development, it is important to establish at what point in the organizational hierarchy is the starting point for the process of change, which will subsequently become all-encompassing for the social system. The concept under consideration in this regard is very different from the concept of economic reengineering. If the latter is characterized by a “top-down” movement, then the concept of organizational development is much richer in options. It allows not only the reverse course of the process (“bottom up”), but also its initiation in the lower and upper parts of the hierarchy simultaneously (the so-called bipolar strategy).
The process of change can also begin in several hierarchical links, different special areas and at different hierarchical levels (the “many points” strategy) or like a wedge in the center of the hierarchical structure, gradually spreading to adjacent layers of the social system (the “wedge” strategy).
It should be noted that the method of organizational development (at least its most essential components) is widely used in the organizational practice of modern enterprises.
Comparison of approaches
Assessing the feasibility of using a particular method depends on many factors. The attitude of staff to change and understanding of power on the part of both management personnel and employees are of decisive importance. Situational readiness for change, in accordance with one of the extreme concepts, should be assessed depending on the type of crisis in which the social system finds itself.
In conditions of a liquidity crisis, organizational development cannot be considered as a serious alternative to economic reengineering, while the principles and techniques of the former provide sufficient opportunities to solve problems in a strategic crisis. It is especially important to make the right decision regarding the choice of approach in the event of a success crisis. In this case, first of all, the personnel factor, as well as economic parameters, should be taken into account.
In the table, the considered methods are compared according to a number of the most important criteria.
The fundamental idea of each change method determines the role functions of the participants in the process. Representative of the authorities ( in economic reengineering - a leader, in organizational development - a “catalyst of change”), due to its high position in the organizational hierarchy, legitimizes the process of change, provides the necessary resources, and removes systemic barriers. As part of business reengineering, senior management takes on the role of a powerful change agent. In organizational development, a "catalyst for change" can accelerate or slow down (which happens more often) the process of change.
Function those responsible for the execution of the process(in economic reengineering - the “master of the process”, in organizational development - the “change agent”) is to form a project team, prevent bureaucratic interference, and directly inspire and motivate the participants. They are also entrusted with the function of chief coordinators. They provide information about the progress of change.
Finally, the role specialists(respectively “reengineering chief” and “change agent” in combination with “client system”) is to provide the tools for change. This may include training in change techniques (process analysis, creative approach techniques, group exercises, etc.), as well as the application of specific knowledge to problem solutions. Within the framework of organizational development, specialized knowledge is not monopolized by the “change agent”; the forces of the “client system” are consciously involved in cooperation, i.e. employees of the area being rebuilt. All participants in the process must, of course, cooperate effectively and work in an atmosphere of freedom.
The idea of differentiated and integrated change management
The analysis shows that change management can be applied in a wide variety of situations and take on a variety of forms of implementation. An important area for further research is the connections that can arise between intra- and extra-company conditions, personnel parameters of the organization, different types of crises, and the main tools for change management. It is necessary, first of all, to clearly identify these connections, and then make empirically based assessments of the adequacy of the state of the enterprise and the tools for implementing change (see diagram).
Between the extreme forms of change - economic reengineering and organizational development - there are a number of intermediate options. They may differ in the degree of participation of members of the organization and the freedom of action of top management to implement changes. Depending on this, the emphasis is placed on economic and/or social efficiency. The type of crisis determines the urgency of change and thus the degree of radicality.
The successful application of a particular method significantly depends on activities in the field of personnel management. Along with measures to preserve employment, differentiated concepts of staff reduction cannot be ignored. Leaders of the change program must address employment problems without causing moral harm to those being laid off and seeking to ensure their use in the labor market. The goal of change management is not to reduce personnel, but to discover and realize its potential to increase the competitiveness of the enterprise.
A starting framework for differentiated and integrated change management
“Defend yesterday, i.e. traditional is much more risky than creating tomorrow.” Peter F. Drucker
In many sectors of the modern economy, business conditions change very quickly. Rapid scientific and technological progress leads to the emergence of new technologies, on the basis of which new types of products and services are developed. New markets are being formed around new technologies and products. The economy is growing, individual and social welfare is increasing, consumer needs and the structure of demand are changing. An increasing number of countries are joining the values of economic growth. The world economy, due to new technologies and unification of consumer demands, is gradually becoming global. In parallel, spontaneous processes occur within enterprises that erode structures and management systems, violate process standards, and reduce controllability.
Under pressure from external and internal circumstances, business enterprises are forced to change their own strategies, systems and management structures. Otherwise, their effectiveness in an increasingly competitive environment may quickly be called into question. Those who manage to get ahead of competitors and be the first to offer the market new, more effective management solutions, as a rule, receive additional competitive advantages.
For this reason, the topic of change management has become one of the most pressing. Numerous studies, books and articles are devoted to it. Change management is taught to students of higher educational institutions, course participants, training participants... It has become an integral part of modern management theory. It seems that everything is known about how to properly manage change. However, numerous companies still fail and are forced to exit the market or change hands.
From a change management perspective, any such failure indicates that the company's management failed to promptly and skillfully carry out the necessary changes in the management of its business. At the same time, other companies become prosperous not only due to the implementation of calculated innovations in advance, but also due to a combination of circumstances and decisions that refute generally accepted management and technical norms.
No less important is the fact that the heads of companies, both successful and unsuccessful, are rarely random people. As a rule, those who have proven themselves well before, have specialized education and experience of effective work in similar companies are invited to leadership positions. However, success in one company, as it turns out, does not guarantee the manager an equally successful continuation of his career in a new place. Moreover, a manager who previously effectively coped with his responsibilities may encounter insurmountable difficulties without changing jobs. Therefore, it is not entirely correct to completely link the successes and failures of management with the personal data of senior management.
If this is so, then it will be easier to understand where change begins and why it occurs if we try to move from such static categories of management theory as strategies, structures and management systems to dynamic behavioral categories.
Reasons for changes
Any, even the largest and most complex business consists of operations and processes performed by people. A person cannot work quickly, accurately and efficiently if, when performing any elementary task, he does not search for its optimal solution every time.
Each of us learns to drive a car for some time, during which we try and master different driving techniques. Gradually, the most convenient techniques are selected and skills are formed. Gradually a person develops his own driving style. At the same time, the driver sooner or later stops thinking about how exactly he performs this or that technique. Driving becomes something similar to breathing: it becomes a routine and does not require constant review and analysis of how to carry out specific operations. And then the driver can choose the route to get to work or on vacation, without thinking about how and when he will have to change gears or press the clutch.
The same is true in business practice. Effective strategies can only work when they are based on clearly defined routine processes and operations. In this case, performing basic actions does not require too much time and money, the necessary specialization and quality of the product appears, the interaction of workers and structural units is easily coordinated, and the behavior of the enterprise becomes predictable and manageable.
From time to time, the existing system of routine processes suddenly loses its effectiveness. This can happen both under the influence of external changes and due to the loss of some information and degradation of the routine processes themselves. And then, to maintain efficiency, it is necessary to make changes to the existing operating system of the enterprise.
Changes in routine processes arise under the influence of innovations, the source of which is the initiative of individual employees, services or management of the enterprise. Depending on the object being changed, innovations are usually divided into technical and administrative. Technical includes the creation of new or improvement of existing products or technology. Administrative – any change in the management system and organization of the enterprise. As a rule, innovations are aimed at increasing the efficiency of an enterprise - improving business operations, entering a new market, creating a new product; or solving political problems - strengthening the influence of specific officials, redistributing resources, etc.
Ultimately, the task of change management is to correctly assess the essence of the processes occurring in the external environment of the enterprise, to select and implement those innovations that will reduce the diversity of external and internal influences to a single line of behavior, to maintain or increase the efficiency of activities.
The process of change management begins with the recognition that there is a problem of loss of efficiency or the threat of this problem in the future. This is followed by setting the goals of the administrative project, which consists of designing a new strategy, systems and management structures that correspond to the changing operating conditions. After the new organizational project is ready, a program for its implementation is drawn up. And during the implementation process, the results achieved must be monitored.
Rice. 1. Strategic gaps as a basis for planning changes
Relationship between formal and informal elements of the management system, conscious and spontaneous changes
The term “change” itself suggests a dynamic process unfolding over time. As a rule, in life such processes manifest themselves in the form of specific events that are clearly recorded by consciousness. Therefore, it is most convenient to describe changes as a certain sequence of events related to each other.
Any events occurring in a company are the result of countless actions of its employees located at all levels of the structural hierarchy. Ultimately, it is their behavior and elementary actions that shape the behavior and strategy of the entire organization. It is generally accepted that in modern conditions strategy is a necessary tool for effective management. Naturally, the higher the level of an official in the management hierarchy, the greater his influence on the processes occurring in the company. It is top management that forms the strategy, systems and management structures. And then, based on management actions and documents, it regulates the work of all company employees.
In management, strategy is usually understood as a set of interrelated decisions and actions taken by a company to achieve its goals. Based on this definition, we can conclude that the bulk of the events that determine the company’s market behavior and the actions taken by its employees must be subject to the general idea of effective activity. Such subordination is achieved through the regulation of repetitive operations and processes with special documents: regulations on departments, job descriptions, process descriptions, technical requirements, etc. Problems, the solution of which, due to their non-standardity or other reasons, is not provided for by the documents, are solved with the help of separate orders of managers .
However, no job description, description of a business process or specific order can provide for the entire variety of situations that arise in the workplaces of employees at lower levels of the hierarchy. Moreover, a lot of events are constantly happening inside and outside the organization that disrupt the usual flow of work. And information transmitted through vertical and horizontal channels in the form of reports, orders or instructions is inevitably distorted. Therefore, it is impossible to achieve complete control over the events and processes occurring in the company. There is always some part in the behavior of personnel and, consequently, in the work of the company, regulated by informal norms of behavior.
Each employee who appears in the company, after becoming familiar with the formal requirements for his work, is forced to develop his own line of behavior and way of solving the tasks assigned to him. This search is based on consistent trial and error. A new person cannot know the informal traditions of the company and its corporate culture. In his actions, he is forced to proceed from his own ideas about the correct course of action. These ideas, in turn, are determined by the character and natural data of a person, upbringing, education, life and professional experience, and other numerous factors. Therefore, the employee’s choice of informal behavior is subjective and remains largely random for the company.
The basic standards of behavior that newly arriving employees must comply with are initially formed at the initial stage of the company’s work, when a group of people creating their new business first gathers, and in the process of work they begin to “get used to” each other. Everything else is a history of changes.
The degree of randomness of employee behavior is to some extent regulated in the process of selecting candidates for vacant positions. But there are no ideal employees who fit one hundred percent into the corporate culture. And even if one of the managers is lucky enough to find an almost ideal employee for his company, it is still impossible to fill all the jobs with such employees. It is equally important that each employee in the process of work proceeds not only from the interests of the company. At the same time, he strives to achieve his own goals. So, in the simplest version of such a divergence of goals, a purchasing department employee can take goods not from the supplier who offers the best conditions, but from the one who makes good kickbacks. This example is a variant of elementary selfish motivation, leading to a divergence between personal goals and the goals of the company, forming a very specific way of informal behavior. And in addition to purely mercantile ones, there are much more complex systems of private and group interests associated with the continuation of a personal career, distribution of power, etc. And this entire system of interests of an individual influences his behavior, which turns out to be more complex than the leader would like.
Based on his own ideas about work efficiency, corporate and personal goals, the employee tries one or successively goes through several methods for solving the problems facing him. As soon as the desired effect is achieved, the person begins to repeat the chosen behavior. Thus, some elementary process or action is fixed. If a person cannot find an effective way to solve the problems facing him for a long time, he leaves the company or is transferred to another job.
Since a person works in a team, all his actions must correspond to the way other employees act. The employee adapts to the team, and the team adapts to him. Thus, a collective or group way of action, a service value system and culture are formed.
From such individual and group value systems, corporate culture is formed: a set of formal and informal values and rules that characterize the correct course of action within the organization. The more detailed the documents regulating its work are written in an organization, and the higher the discipline, the more the corporate, group and individual culture and way of action correspond to the formalized documented requirements.
Recognizing the need and initiating change
Awareness of the problem of management inefficiency and the need for changes can occur on the basis of an advance analysis of the logic of processes occurring in the market and within the company. This option is most attractive because the enterprise can carry out in advance the entire range of required changes in the business organization. Then external changes turn from a threat to well-being into favorable opportunities for development. Change management becomes active. And the transformation program itself turns out to be associated with lower costs, while giving the greatest effect (Fig. 2).
Methods for identifying threats in this case are forecasting the development of the situation. As a rule, a revision of an enterprise's business practices requires fundamental external changes, under conditions of which the previous experience of successful management loses its relevance. Therefore, the most useful thing in predicting the development of a situation is an understanding of the logic of the ongoing processes and good intuition of managers. The use of statistical methods and quantitative information is also necessary, but they play rather a supporting role.
Rice. 2. Active change management process diagram
The surrounding reality provides a huge amount of information about events around the enterprise. Over time, this flow of information only intensifies. And the fundamental problem becomes identifying the general flow of precisely those signals that indicate impending changes. Excessively strict filtering of information is dangerous by increasing the likelihood of discarding something really important during the selection process. On the other hand, it is almost impossible to process the entire flow of information, and responding to too many signals leads to inefficient dispersal of resources. The ability to find the “sweet spot” and recognize truly important information is one of the core competencies required for effective change management.
An alternative option for identifying the problem of loss of efficiency and the need for change is to react “after the fact,” that is, as a result of a deterioration in the company’s performance. This deterioration means that external unfavorable factors have already begun to act or the degradation of existing routine processes has gone quite far.
Changes in the external conditions of economic activity are not the only possible cause of loss of efficiency. At the same time as external changes, internal changes always occur in the company. These are two parallel processes that, when combined, can take a company to the heights of success. But more often than not, if internal changes remain uncontrolled, the company sooner or later faces the threat of loss of efficiency.
Uncontrollable or, otherwise, spontaneous internal changes occur regardless of the will of the company’s management and are initially local, that is, they affect only individual processes. For example, the establishment of informal relationships between the site foreman and workers. The source of such changes are the actions of employees who, for various reasons, are not satisfied with the current order of things. The reasons for such activity can be very different. Someone wants to make a company or a specific business process more efficient, someone is driven forward by professional interest, someone wants to climb the career ladder and gain more power, someone wants to make their work easier without particularly caring about the quality of the product they produce. . The important thing is that in any team there are almost always people who are not completely satisfied with the existing way of doing things. And they are trying to change it. Not necessarily globally, but at least in your own narrow area.
The search for new solutions to various problems can occur in a company with varying intensity, but it never completely stops. Spontaneous changes never stop and occur continuously in the company. They can affect the company's performance both positively and negatively. Thus, in one company engaged in the installation of beer factories, workers had a tradition of drinking coffee for fifteen minutes at the beginning of the working day. The new site manager considered this wasteful and demanded that all coffee be drunk before 8-00, and work begin at exactly eight. The workers complied, but were offended. And they began to work much slower. The authority and determination of the foreman were not enough to force the workers to work all day with full effort. And after some time he was fired for deteriorating production performance. After his departure, the tradition of drinking coffee was restored. But from the whole story, the workers realized that now they can “not get hurt” at work. Their productivity remained at a reduced level.
In the course of their activities, company employees regularly look for ways to more easily perform their regular duties. And, in the absence of proper management control, simplifying the process often leads to a loss in the quality of the work performed. Degradation of business processes and skills, loss of critically necessary knowledge and competencies is a natural evolutionary process for any organization. It is directed in the direction opposite to the process of organizing management on the part of management and is part of spontaneous changes within the organization. It is because of its inevitability in practical management that the rule was derived according to which no organization can maintain a constant level of efficiency. Either its management improves and the organization develops, or degradation occurs and efficiency decreases. One of the reasons for degradation is the loss of staff motivation for development.
In addition to spontaneous internal changes, the reason for the loss of management efficiency can be a conscious change in the company itself, requiring an adequate transformation of its management system. The reason for the emergence of such a situation may well be the desire for business growth and technology development, an example of which was described above. In this case, it is not only formal policies and structures that must be changed. In a renewed company, old routine processes and behavioral patterns are likely to hinder the implementation of the new strategy and will be ineffective.
A classic version of this situation is the qualitative growth of a company, in which a business moves from the small to the medium category. When the number of employees reaches 50-60 people, it becomes necessary to introduce elements of regular management. Something similar happens when a company enters the category of large business, when it becomes a joint stock company, and when it enters the stock exchange.
Rice. 3. Reactive Change Management Process Flowchart
In this case, the main limitation for the change program becomes the period of time during which the business can maintain financial stability. In other words, the costs of implementing the change program in combination with losses from operational activities should not lead to a critical decrease in the value of assets, after which the independent operation of the enterprise becomes impossible. Such change management is usually called reactive (Fig. 3).
With reactive change management, understanding the logic of what is happening is just as necessary as with proactive change management. But, as a rule, it does not come immediately. At first, the recorded deterioration in performance results is attributed to temporary objective difficulties and does not cause much concern. When concerns do arise and become serious enough, a period of using standard solutions begins that does not go beyond the boundaries of established processes and management systems. The most traditional of these decisions is the principle: “Turnover has fallen, you are incurring losses - cut costs,” or: “Inventory turnover has fallen - reduce prices, increase advertising.”
And only after the entire arsenal of previously used successful solutions has been tried, but did not give the expected result, does the understanding of the need to change the management system and business processes begin. But the loss of time is quite significant.
And the more time has been lost previously, the more difficult it is to plan and implement the developed strategies, processes, systems and structures. All design and implementation activities must be coordinated in time with each other and with changes in the external environment of the enterprise. To do this, a plan for transition to the target state, laid down at the stage of organizational design, is developed.
Business routines as an object of change management
This task is difficult, first of all, because new strategies, processes, systems and structures cannot arise from scratch and must inevitably be obtained by changing existing ones.
The set of stereotypes of the existing way of conducting business operations is stable. Otherwise, these stereotypes would not allow us to maintain processes and work effectively earlier. A stable way of conducting operations cannot be changed at once and causes resistance to change, called organizational resistance. This resistance is distributed at three levels: individual, group and systemic.
Moreover, the concept of stereotypes and routines fully applies to the behavior of company management. The only peculiarity of the activities of top management is that it experiments not with private processes, but with various options for corporate strategies, structures and management systems, goal setting, planning methods, methods of motivation and control, methods of managing functional resources and organizing business processes. Tried options for management decisions are developed by managers on the basis of knowledge acquired in the process of training and accumulation of professional experience, as well as under the influence of characteristic personality traits. It is no coincidence that among many management specialists there is an opinion that each company is a reflection of the character of its leader. Moreover, the higher the professionalism of the manager, the less trial and error he will need to find one of the possible effective solutions.
Thus, corporate strategy and processes carried out at any level of the management hierarchy are based on norms and stereotypes of behavior, only partially regulated by formal documents. A significant part of them is fixed at the subconscious level of employees.
These behavioral stereotypes, selected largely by chance and having undergone a kind of “natural selection,” represent a unique combination. Thanks to this, each company has behavioral characteristics and strategies that are unique to it. Consequently, the reasons that lead each organization to success, or, conversely, to inefficiency and failure, are purely individual. In particular, it is from these behavioral characteristics that competitive advantages arise that distinguish market leaders from less successful competitors.
The other side of the coin is that changing a company's strategy requires changing a significant part of established corporate, group and individual behavior patterns and updating the accumulated knowledge base. Processes and repetitive operations become accustomed to each other. Changing one of them becomes impossible without adequately changing the others. Thus, behavioral stereotypes that allow routine operations to be performed regularly give the entire system resistance to external influences. Management stereotypes in the same way shape the pattern of management decisions made. The set of behavioral stereotypes and the established procedure for performing routine operations increasingly influence management decision-making. On the one hand, this allows you not to spend too much time looking for the right solutions in typical situations for the company. But, on the other hand, such stereotypes interfere with making adequate decisions when the situation changes. And, starting from a certain point, management becomes hostage to those stereotypes and processes that it itself has formed. A situation arises, figuratively described by the Americans as “the tail wagging the dog.” From this moment on, the system acquires stability of behavior, which is maintained even despite a possible decrease in the efficiency of activity.
The presence of stable behavioral stereotypes and routines creates resistance to consciously implemented changes at the individual and group levels. Individual resistance is caused, first of all, by the psychological unpreparedness of the employee to realize the objectivity of external changes and accept the proposed organizational innovations that require a revision of previous experience in developing successful management decisions. Another, but more rational basis for resistance is the psychology of many people’s perception of innovation as a threat to their current position. This happens, first of all, due to a lack of competence to work in a new capacity.
Employees with similar views on the problems of the enterprise are usually united in groups that are internally homogeneous in organizational cultural orientations. Such groups defend collective value systems and more actively try to influence the strategy of the enterprise. Conservative groups are sources of group resistance.
Systemic resistance to innovation arises due to the lack of capacity at enterprises to analyze external changes and develop an adequate response. Thus, if the solution of strategic problems as an additional burden is entrusted to the units responsible for operational activities, current problems push into the background the work on introducing organizational and technical innovations. A similar situation occurs when managers specially appointed for this work turn out to be insufficiently competent.
To overcome organizational resistance, a change in the value system of employees and the organizational structure of the enterprise as a whole is required. At the individual level, solving the problem is facilitated by training and retraining of employees. To gain support for innovation, it is necessary to convince employees that working in a new capacity opens up new prospects for career and professional growth.
This result can be achieved by starting the transformation from the so-called “launching pad”. That is, from those groups of employees who clearly support the proposed changes. If innovations are successfully launched, their active participants should be publicly rewarded, both financially and morally. Thus, management must motivate staff to follow new values and operating principles. Then gradually involving the remaining part of the staff in the transformation process turns out to be much easier. In any case, those employees who do not show loyalty to innovations are at a much greater risk of losing their previously achieved position.
Moreover, if the first new initiatives fail, employees who take responsibility and risk for introducing innovations should not be subject to persecution or punishment. It is impossible to do without trial and error when introducing innovations. And punishments can quickly discourage anyone from participating in further experiments.
But in any case, a necessary condition for successfully overcoming organizational resistance is support from top management, consistency and rigidity in their use of power.
The reasons for individual and group resistance are largely related to the psychological characteristics of a person’s perception of innovation and are not always of a rational nature. Therefore, activities aimed at overcoming previous behavioral stereotypes, the team’s awareness of the need for change and their active support should affect not only the rational, but also the emotional sphere of consciousness. For emotional impact, vivid and symbolic actions are needed that clearly demonstrate the inevitability of change.
In this regard, a very indicative case occurred at one trading company. This company, due to external circumstances, was forced to change product suppliers and introduce new brands to the market. It is impossible to solve this problem without the active participation of sales managers. However, the entire sales staff of the company over many years of work was completely committed to the previous brand.
No meetings and gatherings at which the reasons for the situation that arose, new tasks and criteria for the effectiveness of sales and promotion were discussed as openly and in detail as possible could achieve a radical change in the minds of managers. Somewhere in the depths of their souls, people retained hope for a return to the previous normal state of affairs. Instead of offering customers a new range of products under a new brand, managers continued to explain that the company did not yet have the previous range.
Everything changed the moment a worker appeared on the company’s sales floor and began scrubbing the old branding from the stands. His responsibilities included preparing the hall for the presentation of a new range under new trademarks. But by his actions this man accomplished something much greater. All managers stopped what they were doing and began to silently observe the leisurely actions of the worker. Everyone already knew that something like this was going to happen any day now. But only when people themselves witnessed this process did they experience a deep emotional shock and fully feel the irreversibility of the changes taking place.
Planning and implementing changes
The “launching pad” method can only provide gradual overcoming of organizational resistance and is effective in situations where the enterprise has the necessary time to use it. As already mentioned, the maximum period for an enterprise’s reaction to external strategic changes is objectively limited by the time during which the changed conditions of economic activity do not have time to bring irreparable losses to the enterprise. The implementation of the change program must be fully within this deadline. But, on the other hand, increasing the time frame for introducing innovations reduces resistance to change and the costs of overcoming it.
Therefore, the fundamental problem is to minimize the total losses from the influence of external changes and overcome organizational resistance by choosing the optimal reorganization option. These options differ in the sequence of closing strategic gaps and in the ways of overcoming organizational resistance.
Overcoming individual and group resistance is associated with updating the informal element of management potential - organizational culture. Overcoming systemic resistance requires changing the formal organizational structure and management decision-making system. Therefore, in an administrative project, formal reorganization and adjustment of organizational culture often act as separate sets of work.
The classic version of organizational adaptation, described by A. Chandler, assumes the following sequence of organizational changes: strategy ® formal systems and structures ® organizational culture and personnel behavior. This process involves a gradual awareness of the depth of emerging problems and the search for solutions through trial and error. It is possible only with slow external changes that the enterprise manages to record and respond to them “after the fact” (Trk) (Fig. 4). The change in the system of goals in this case occurs through the natural replacement of less effective owners in the process of trading shares and shares in the capital of enterprises.
Reorganization is carried out much faster if the new strategy is based on a previously prepared basis. The sequence of changes in this case takes on the following form: culture and system of goals ® formal systems and structures ® strategy. In this case, organizational resistance to the implementation of a new strategy turns out to be noticeably less. But in this case, a new strategy, management system structure, and business processes should be formed not spontaneously by trial and error, but consciously and purposefully.
Rice. 4. Schedule for developing the enterprise’s management response to changing the strategy and management structure:
a) with slow external changes,
b) with rapid and continuous external changes
The third transformation option involves a parallel change in all the main elements of the organization. It is the most complex, although the first positive results can appear quickly. Organizational resistance in this case is maximum, which is why this option is most often resorted to under pressure from circumstances in crisis situations.
To overcome resistance in this case, a group of like-minded people is formed in the top management, which decisively violates the existing formal systems and structures, preventing opponents of change from making decisions. And for a short time, until the new organization is established or the most acute period of the crisis has passed, the management of the enterprise is carried out with the help of direct orders from senior management, communicated right down to employees at the lower level of the management hierarchy.
An additional danger in this case comes from the phenomenon of so-called reverse loyalty. The fact is that individual and group resistance of personnel in a crisis in the face of a clearly perceived threat can sharply decrease. But already at the first signs of the danger’s retreat, resistance is reborn with renewed vigor, destroying the newly created system and management structure. Therefore, even with obvious successes in organizational changes in a crisis situation, the activity of measures to prevent and weaken resistance cannot be weakened.
In addition, in conditions of high variability of the external environment, the use of active change management becomes an important condition for successful adaptation. An early reaction becomes a necessity when the time required to develop and implement the entire set of innovations turns out to be longer than the period of time during which changes in the external environment develop (Trr).
An enterprise can carry out a full range of internal changes before external processes cause financial losses (Trf). Ideally, a properly planned strategy in this case will allow you to achieve competitive advantages and generate additional profits.
Some examples of practical change management
A clear example of effective active change management is the work of the Boeing Corporation, which managed not only not to lose, but also to improve its competitive position as a result of geopolitical changes and the globalization of the aerospace industry markets. In the nineties, Boeing actively filled existing gaps in key technologies and entered new market segments, allowing it to successfully develop in the context of the commercialization of the industry and the growth of the new economy. The management structure (Fig. 5) allowed the corporation to incorporate new companies in the form of separate modules that were responsible for their market segment.
Rice. 5. Schematic diagram of the management structure of the Boeing Corporation (circa 2000)
This is exactly what happened, for example, during the 1996 takeover of Rockwell Dynamics, which produced military and space equipment as part of the Rockwell International corporation. The reason for the sale of the department was Rockwell's desire to get rid of assets that had lost their effectiveness after the reduction in government purchases of military equipment. Within Boeing, the new department was supposed to expand the range of components produced and enhance the positive economies of scale in the field of space systems propulsion. Therefore, under the rights of the Rocketdyne company, it became part of the information, space and defense systems group in the space transport systems division.
Thus, Boeing carried out changes in management strategy in parallel with changes in the structure, which ensured external efficiency of operations. After this, starting in 2000, the corporation began to integrate its divisions, ensuring internal efficiency. As part of the final stage of restructuring, Boeing plans to get rid of excess capacity resulting from the acquisition of companies with similar products and technologies (for example, McDonnell Douglas), increase production and transfer part of production operations to external suppliers.
Change has long been a traditional management practice at Boeing. In the thirties, it was this company that created the legendary B-17 bomber, which brought it worldwide fame during World War II. In the fifties, the corporation created the world's first jet-powered passenger aircraft, the Boeing 707. In the late sixties, the corporation built the first wide-body passenger aircraft, the Boeing 747. In the nineties, Boeing pioneered the industry's comprehensive computer-aided design system and made the strategic changes described above.
This rich history of embracing change has allowed the company to create informal values and traditions, formal processes, systems and management structures that are highly responsive to change. Therefore, the main difficulties in implementing changes are related to the functional integration and integration of the organizational cultures of the acquired companies with the processes and organizational culture of Boeing itself.
Control during changes
However, no matter how well the practice of change management is developed at the enterprise, the future state of the new economy and the conditions of economic activity are characterized by a high degree of uncertainty. Therefore, when developing, selecting and implementing innovations, it is impossible to do without trial and error. This feature of the change management process places special demands on the implementation of the control function, which should be based not on minimizing deviations, but on the formation of positive feedback that enhances favorable internal changes.
The emergence of innovation ideas within an enterprise is a statistically random process. Enterprise management can only create favorable conditions for their generation, selection and implementation. The tool for solving this problem is a system of managerial values and motivation that encourages the search for new solutions and directs employees to take reasonable risks. Any innovation is a deviation from existing practice. Therefore, control by deviations in change management is contraindicated. Each deviation from the planned parameters must be analyzed and considered as a possible source of favorable changes.
The differences between variance control and change management control are shown in Figure 1. 6. For example, when implementing a project at the stage of development and implementation of changes, before the start of using new processes in the regular management mode, overspending on R&D is recorded. If it was caused by additional research that gives the product or processes additional consumer properties, then further investment can ultimately significantly increase the income from the project. Under change management, such work should be given the green light and R&D spending increased. If control is carried out on the basis of minimizing deviations, current investments should be reduced as much as possible to get closer to the planned parameters. In this case, the product or processes being developed may not acquire the necessary qualities and not provide the expected income.
Rice. 6. Scheme for implementing control in change management
In the English company Marconi, working in the field of information systems and modern high technologies, it was the uncertainty of external strategic changes that required a move from conservative selection of projects and financing of work in new areas of activity, based on minimizing risk and clear cost planning, to the formation of a portfolio of risky projects . The company's management formulated this principle as follows: “If you make a decision with 60 percent or more of the information you need, you are probably already too late.” The less information a company has about new technologies and possible future markets for new products, the greater the opportunities that open up for the company. Of course, subject to sufficiently high qualifications of technical specialists and managers.
Change management and efficiency
It is generally accepted that the risk of failure with any major changes in the business practices of enterprises due to the uncertainty of the future and the difficult predictability of results is much higher than when maintaining an established traditional way of doing things. And that supporters of changes are people prone to increased risk, who are attracted, first of all, by the high level of profitability provided in case of success. In this view, change management becomes akin to a lottery.
However, in the dynamically developing sectors of the new economy, only those who strive to keep up with the demands of the time, clearly define the strategy and implement active changes can count on efficiency. Moreover, the innovative solutions of change leaders in many ways themselves begin to shape the conditions of competition and thereby create additional advantages. The more significant the leader's innovations are ahead of changes in the business of competitors, the better they take into account market development trends, the more supporters they receive among consumers and the more difficult it is for followers to change market preferences in their favor. Even if the solutions of followers turn out to be more advanced from a technical point of view.
This is exactly what happened with the advent of the traditional keyboard of typewriters and computers, in the top row of which there is a sequence of QWERTY keys. This solution took over the market and became the accepted standard, even though it was followed by more user-friendly keyboard shortcut options. Something similar happened with IBM computers when it was the first to offer its technology to the mass corporate consumer to automate and increase the productivity of routine operations. Similarly, the Windows operating system has established itself in the software market, despite the fact that many experts mercilessly criticized it for being excessively cumbersome and poor performance. This list can be continued for a very long time.
Thus, the most exciting thing for the initiators and participants of changes is not the desire to break the bank under a successful combination of circumstances, but the feeling of real involvement in shaping the future of not only their company, but also their industry and the entire economy.
In order to minimize risk and make change management as effective as possible and not like a lottery, you should adhere to several rules.
Firstly, ideas and projects must be based on a detailed analysis of changes in the market and fit into a clearly developed enterprise development strategy.
Secondly, there should be enough ideas and projects for changes to reflect the entire range of possible problems of the enterprise. When implementing them, you often have to go through successive trials and errors in order to find a truly effective solution. Most of them can be rejected at various stages of development and implementation.
Thirdly, to ensure the effectiveness of such selection in management, it is necessary to provide a reliable control system that will allow one to compare the achieved results of the project with the expected ones and reveal previously unplanned market opportunities or obstacles to the implementation of changes. In case of failures, you must remain consistent and decisive in implementing your plans.
Fourthly, it is necessary to organizationally separate change projects from operational activities to ensure the current profitability of the business.
Fifthly, it is necessary to work out in detail a plan for overcoming organizational resistance. Otherwise, even the most successful ideas can be ruined at the implementation stage.
The listed rules are simple and clear, but they can be difficult to follow. But for those who make changes an integral part of their business practices and achieve compliance with these rules, the risk of losing their business is much less than for those who avoid changes. It was this fact that made Peter F. Drucker, the recognized founder and classic of management theory, write the following: “Undoubtedly, innovation cannot be done without risk. But isn't it risky to drive a car every day? Essentially, all economic activity is associated with high risk, and protecting yesterday, that is, the traditional, is much more risky than creating tomorrow.”
The significance of changes in management for the evolution of macroeconomics
External reasons why existing routine processes and behavior patterns suddenly become ineffective arise due to the natural development of the macroeconomy and markets in which the company operates. These could be general institutional changes similar to economic reforms in our country. But such large-scale changes are quite rare. Much more often, business conditions change as a result of market evolution, consolidation and consolidation of capital, increased efficiency of competitors, development and emergence of new technologies.
If competitors' management does not deteriorate, but improves, then they gradually find solutions that increase the efficiency of their work. Including in changing market conditions. Maintaining the same level of competitiveness requires that routine processes and behavioral patterns within the company itself be improved to the same extent as those of competitors. Otherwise, the company may turn out to be ineffective, even if its internal processes do not degrade, but do not develop quickly enough.
For this reason, it is customary to choose the efficiency of similar processes in other companies as a criterion for internal process efficiency. In particular, this evaluation principle was widely used at the Xerox company in the 80s. Here's how the CEO of the corporation at the time, David D. Kerne, put it: “First of all, we were going to break production into stages, find benchmarks for them in other companies and try to exceed them. We defined this approach as “continuous costing of products, services and operation, aimed at winning victories over our fiercest competitors and recognized leaders in the copying industry. Our goal is excellence in all areas: quality, reliability and cost." For example, if a company is superior to others in transportation and operation, then matching it in this area becomes our main goal. The same applies to industrial production, marketing, etc. At first we developed this methodology only for the production department, but, starting in 1979, we gradually extended it to other departments" (Kearns D., Nedler D. Prophets in the Dark, or the Story of How "Xerox" rose from the ashes and gave battle to the Japanese - St. Petersburg: Azbuka, 1996.). “It is important to note that we were interested in the organization of labor not only in competing firms, but also in enterprises operating in other industries” (2 See: ibid.). And in a special address to Xerox employees it was said: “Each of us must understand that, when faced with another problem, Xerox cannot always know its best solution” (3 See: ibid.).
When private improvements in competitors' businesses gain critical mass, a more global trend in the development of the entire market as a whole is formed. In particular, the creation of new technologies makes it possible to increase operational efficiency when business enlarges. Positive economies of scale lead to increased business through mergers and acquisitions between companies. Within companies, this threatens the loss of effectiveness of the previous management system, processes and behavioral stereotypes. In the market as a whole, due to this effect, a so-called “evolutionary loop” effect may arise.
At the initial stage of market development, when basic industry technologies do not yet allow the creation of large-scale businesses, companies seeking to consolidate and forming appropriate management systems and structures turn out to be ineffective. Their accumulated knowledge and experience, routine operations and behavioral patterns are lost as their owners leave the market. And when, after some time, institutional and technological changes in the market create the opportunity to effectively increase business, there are simply no companies left in the market that could take advantage of this opportunity. All surviving competitors are captive of previous management stereotypes and are unable to provide effective management after consolidation. And such a state of competitive dynamic equilibrium can persist for quite a long time until one of the market participants, through trial and error, finally finds a set of rules of behavior that are effective for managing a large business. An alternative to disrupting this balance is the entry into the market, together with foreign competitors, of effective technologies for managing large businesses from more developed foreign markets.
As mentioned above, the history of the formation of behavioral stereotypes and the reasons for the loss of efficiency in each company are purely individual. But when randomly selected consumers and companies interact in the market, when their individual behavioral stereotypes interact, a certain trend in the development of the entire market is formed. This trend follows the laws described by economic theory. And the “evolutionary loop” is one of the manifestations of such general economic patterns.
CHANGE MANAGEMENT AS AN OBJECT OF RESEARCH
An important feature of a modern competitive firm, enterprise, company is effective change management. In a dynamic market, organizations must have the ability to quickly adapt to changes in the external environment. An example is the situation that unfolded in our country in connection with the global crisis. Only those enterprises that can find a new consumer and even largely change the range of goods and services they produce will survive.
Change management is a complex multidimensional problem for any company; these are its properties and, in a certain sense, its key competence, the basis of its competitiveness. In practice, transformations in a company can be divided into planned and unplanned. The first are carried out within the framework of evolutionary development, the trends of which are well monitored. Based on this information, the most appropriate moment for transformation is outlined. Unplanned ones often have to be carried out spontaneously, in unexpected situations, so sometimes their process can become spontaneous and uncontrollable.
Let's consider the features of changes that are planned by the organization's management for a specific purpose. Planned organizational changes represent conscious actions of managers and employees to improve the performance of structural units or organizations as a whole in areas that are important to them. Such changes must be carried out continuously in order for the organization to effectively adapt to the external environment over which managers cannot influence. Requirements for change come both from within the company in the form of the needs and expectations of employees, and from outside, for example, in the form of increasing competition (with Russia's accession to the WTO) or changes in legislation. Some organizations make changes after they are pressured by these demands, while others seek to anticipate such pressures and make changes proactively.
All specific change goals can be divided into two broad categories: improving the organization's ability to adapt to the external environment and changing employee behavior.
To improve organizational adaptability, it is characteristic that organizations need effective technologies and work methods to adapt to changing market situations, labor surplus, legal requirements, etc. Typically, organizations create special units that develop and implement plans for the required changes. The practice of domestic companies has shown that departments traditionally involved in organizational changes (organizational departments, organization and management departments, administrative departments) are today unable to ensure organizational adaptability.
In the specialized literature, there is a consensus that in a modern flexible organization, not only all departments, but also all employees must be able to adapt to external changes. In this case, organizational culture plays an important role in a company's ability to adapt. For example, changes associated with shortening the life cycle of a product, which objectively leads to a reduction in the duration of the production cycle. For production sites, this problem is solved through the use of new modern design systems integrated with a complex of robotic equipment. Managers, in turn, can increase the adaptability of the organization through the use of temporary or flexible organizational management structures, temporary interdepartmental teams, and adequate motivation.
Adaptive, temporary structures enable an organization to quickly respond to new information, accelerate the transition to new operations, promote broad employee participation in decision making, and create the conditions for the emergence of future leaders. In other words, technological change always involves a change in the behavior of workers, attitudes towards work, and the search for new forms of work organization, i.e. new organizational management structures.
Special literature notes that the prosperity or aging of an organization always depends on the behavior of its employees. For example, a new organizational structure will not solve all problems if due attention is not paid to changing the roles of employees, their level of responsibility, attitude towards work, etc. Moreover, measures are needed to maintain the spirit of innovative entrepreneurship among workers. Thus, for organizational change, changes in individual behavior are mandatory.
Reasons for organizational changes. One of the main reasons for the need for such revolutionary changes in the management of an organization is the globalization of the economy.
The main form of the process of internationalization of production and division of labor across regions is the emergence of transnational corporations. These global organizations began to put pressure on national businesses, encouraging them to rebuild in an international manner. Global markets have emerged for many products, both B2C, so for B2B. To master them, companies are forced to change their strategy, structure, culture and production.
The next reason is the development of information technology, leading to the creation of computer and telecommunication networks and powerful remote systems, which allows many companies to become flexible enough to operate effectively in global markets. Information technologies have made possible high speed transmission, processing of information, monitoring of markets, transfer of financial resources around the world, and also ensured the processing of a significantly larger volume of information for decision-making.
The new management philosophy is another reason for the changes. Globalization and information technology have changed the nature of management. There has been a qualitative change in the roles and activities of managers in the organization, for example, a new style manager does not act strictly according to the command hierarchy, but works with those with whom the work needs to be done. Of course, there are not so many advanced managers in real practice, but life, nevertheless, will require restructuring from everyone.
The third main reason is the changing nature of the workforce. The labor market is experiencing numerous changes, such as an increase in the average age and skill level of the workforce, and an increase in the employment of women. The changes are noticeable in that many now work in more than one place, work only part-time or in virtual organizations, and also work from home. The share of workers engaged in hiring is constantly increasing compared to the number of people hired. Workers are becoming less and less influenced by trade unions. People's values, expectations and preferences are changing faster than before. Under these conditions, the processes of motivating and stimulating employees become more complicated.
Thus, all of these factors create a volatile and unpredictable environment, meaning that organizations are in a constant state of change. For a modern organization, a process of constant change, determined by the requirements of its development according to the laws of the organization’s life cycle, becomes mandatory. Experts are unanimous in their opinion that maintaining a leading position in its field and in its market requires the company to continue its renewal processes.
You and I understand that almost every successfully implemented project changes the face of our company. But to what extent does this happen? How dramatic and intense? Change management for a commercial organization is a project based on a field of scientific knowledge, methodologically deeply developed. In this article we will pay attention to managing not all types of changes occurring in companies, but only organizational changes. They are the ones that present the greatest difficulty in practical implementation and are close to the essence of the design paradigm.
Changes and their management
The fabric of today's events and images of the elements of the future system. They are connected by threads of transformation that are growing hyperbolically quickly in modern life. Sergei Kapitsa, a famous Soviet scientist and popularizer of science, in his latest article identified 1995 as the point of phase transition to the phenomena that we are now observing. From that moment on, everything around us began to transform before our eyes at an unprecedented pace. Business is an open system embedded in the general context of life processes that surround us. Therefore, the same dynamics are observed in it, which greatly complicates the conduct of affairs.
But what are the changes taking place in a business organization? How is change managed? In general terms, change is proposed to be understood as the process of transforming a system from one qualitative state to another. The features of this process are the instability of activity during the transition period, the irreversibility of the new state achieved and a clearly defined direction: positive or negative. Changes can be gradual (evolutionary) or radical (revolutionary). Step changes are the latter.
Diagram of revolutionary system changes
What causes the changes: internal contradictions in the system or external pressure? The question is quite difficult. If, on a general scale, we go down to the level of a commercial organization, then, in my opinion, the reasons always lie within the company. There is a “ripening” root problem in business, hidden behind a mass of symptoms, which at some point simply blocks the organization’s ability to cope with external challenges.
At some point, it becomes obvious to management that the development of the system has reached a certain point. And if the necessary changes are not made, the organization can slowly or quickly lose its position and end the cycle. The company, on the contrary, can be reborn like a “phoenix” if changes eliminate the existing contradictions. Scientific thought has long been interested in the question of the likelihood of change. This has become especially relevant in connection with orders from large businesses, based on the needs of general management. The model of D. Gleitcher is widely known, who, in collaboration with his colleagues, derived the formula for the need for transformation, presented below.
Model of the need for change by D. Gleitcher and R. Bechard
We understand change management in a commercial organization as a set of measures aimed at resolving the root problem of the business and bringing it to a qualitatively new level, consistent with the strategy. The functions of such management are monitoring, diagnosing and, in fact, solving the problem of change. Naturally, such a task is unique, limited in resources, and aimed at achieving specific goals. This means its project nature, the peculiarity of which is uncertainty in duration.
The essence of organizational change
In the observed practice, two forms of a company’s passage through its development cycle can be distinguished: natural and replication. In the first case, a business is created from a certain zero point by a group of founders and goes through all stages of natural development, including the phase of “family” culture and structure. At the same time, the company develops through a series of maturational crises and accompanying changes.
An alternative to the described option is the case when a business is created with the participation of established businessmen or companies representing them. Here, the infant, and in some cases, childhood stages, can be “skipped” due to a replica of the financial basis, partly the culture, the level of the organization from the donor, parent company. In any case, at some stage of their development, both types align and are subject to the same patterns, including in the field of change and their management. Let's assume that the business has successfully dealt with the first crises and has come to the point where, in all respects, it recognizes itself as an average company. What usually happens in this case?
- The word “strategy” appears in the management lexicon, and long-term goals begin to be developed. The strategy at the first stages allows you to significantly change performance indicators on the same basis.
- The strategy of adaptation to market conditions is replaced by an orientation toward shaping or changing the market. Precedents are emerging for the purchase of businesses, acquisitions and mergers.
- A new level of agreements arises among business owners, new principles are established, including the procedure for owning a company. The purchase of businesses very often entails changes in the composition of the owners.
- Given the changed composition of tasks, there is a need to transform the organizational structure. For example, the functional structure is replaced by a divisional one.
- There is a need to create a management team. Key owners feel the need for hired top managers to also be able to develop strategy. This rarely happens, but even one team member can be a powerful generator of new ideas if he joins the strategic process.
Diagrams of company evolution options at critical stages of life cycle
Any enterprise evolves. If it moves according to the natural course of events, then at some stage (according to I. Adizes - with the beginning of maturity) a phase of extinction begins. The alternative is at such a moment to abandon old rules, methods, even technologies and areas of activity in favor of something else, unknown. It should be remembered that nothing passes without a trace, and changes at the first stage will cause a drop in results. But then a new, more intense upward dynamic arises if the change strategy is correct.
Change management logic
At the end of the previous section, an evolutionary approach to change management is presented. It is quite integral and quite natural. However, the history of the development of every successful company is, to one degree or another, a series of successful revolutions. If there are no revolutions, the enterprise will slowly but surely “die.” If the revolution is unsuccessful, then the enterprise “dies” even faster. This feature predetermines the essence of change management. Therefore, it is important to do the right things correctly, and to approach revolutions systematically, skillfully managing them using the entire available arsenal of means.
We have already said that change management is a set of measures for monitoring, coordinating, diagnosing, controlling and actually implementing changes in all management aspects. Among them, the key to the success of change is the issue of organization. Change management differs in the personal context and in relation to the organizational complex of the business structure. Changes in personal terms are managed in relation to personnel, as well as the volume and quality of their knowledge, skills and abilities. Organizational change management is built around:
- Business processes.
- Technological aspects of activity.
- Organizational system.
- Control systems.
Not every symptom of difficulty is a basis for introducing change. At the same time, there are significant moments, ignoring which, you can bring the situation to a state where changes will happen on their own, but in the worst of scenarios. Therefore, regardless of whether the company has reached an evolutionary “plateau” or not, there are certain prerequisites for changes, which are shown in a list in descending order of importance:
- changes in the market situation;
- transformation of owners' interests;
- purchase of an existing business;
- management problem in the form of accumulated contradictions;
- a company strategy that involves intensifying development.
The most undesirable reason is management problems. However, any of the above points can be perceived through the prism of a key management problem that is present and already ripe. Fortunately, today in practice there are good methodological developments for diagnosing root problems in business, based on the scientific approach of management research. Diagnostics in this regard is gaining importance and accounts for 10-12% of the total labor intensity of implementing changes. A logical approach to implementing change determines the following sequence of events and actions.
- The manager is ready to mobilize resources for changes, and the staff is ready to accept new ideas.
- Urgent problems are beginning to be resolved.
- Changes requested by staff are being introduced. Although they are usually of a secondary nature, they are perceived positively by the team.
- An unclaimed, often unpopular block of changes is being implemented.
- A strict control regime is introduced and observed.
Logical algorithm for implementing organizational changes
Personnel decides everything
The change management process is methodologically based on a body of knowledge concentrated at the intersection of management blocks: general management, personnel management, organization, etc. The approach we are considering in this section is designed to solve, first of all, the difficulties arising in connection with the opposition of key company personnel. Even at the first stage of preparation for implementation, people are preparing to correctly perceive the idea of the upcoming changes.
A special collective event – a meeting – is suitable for this. It provides people with all the necessary information about unclaimed transformations. At this moment, it is important to begin to diagnose the situation by the reaction of employees, initiating them to speak out and express their positions and ideas. Employee ideas are important in themselves, but something else is more important. You can hardly count on being heard until the people themselves are listened to and heard. This is time-consuming, but by concentrating on the problems of employees, it is possible to bring all ideas into one information field and work through them. This approach is more than justified.
Matrix for diagnosing communication objects when introducing changes
Change management uses different types of classifications of participants in implementation activities in project form. One of them is shown above. How to act if opponents (opponents), supporters, undecided and indifferent are identified? There is no universal formula; it all depends on the manager’s experience. Below is a table with the main types of tactics that can be used in interaction with staff to achieve the results the company needs.
Composition of tactics for reducing staff resistance to change
Co-optation, relatively speaking, is the creation of an “elected” body from a collective of employees loyal to management. Let me remind you that we are talking about unwanted changes. In a change implementation project, four tactics are typically effective.
- Compulsion.
- Persuasion based on logic and rational arguments.
- Working within one value system and trying to form new ones.
- Negotiation tactics based on compromises of the interests of the parties (“you give me, I give you”).
One of the ancient philosophers said that people are not afraid of change, they are afraid of being changed. As you and I understand, coercion works, but not always, especially at the level of middle management, where there are so-called internal leaders. Their slogan: “There is only my opinion and it is wrong!” Persuasion is also a very limited means. Values are a wonderful tool, but to form them anew requires significant time, which is not available, and to adapt requires talent, which is not easy to find. Negotiation tactics are the most effective, since at the moment of their completion the employee actually takes responsibility and certain and agreed upon obligations.
How to overcome resistance?
Implementing a project to introduce changes in a company is a risky undertaking. Change management models largely depend on the occurrence of employee resistance. There may be many reasons for some employees' resistance. Each requires an individual approach. It is difficult to successfully influence opponents of change, but it is possible using special techniques. Below is a model of the main personal barriers to accepting change and the corresponding methods of interaction.
Classification of personal reasons for resisting change
All the techniques presented in the diagram are attempts to persuade, to work within the same value system, and to reach a compromise. It is highly likely that there will come a time when there will be employees who are not affected by either conversations or compromise agreements. This is already a conflict. This difficulty can only be resolved by force. In this case, a typical action plan is as follows.
- On Friday at the end of the working day, gather a team in which there is a hotbed of opposition. Announce all negative changes (layoffs, reduction in status, salary level, etc.).
- Voice guarantees that there will be no more negative changes, only once.
- Declare a willingness to make individual decisions in dialogue with employees who have different ideas on specific situations.
Let's imagine an ideal situation. All agreements on changes have been reached, and tomorrow we will work in a new way. In 100% of cases, the new will not happen on its own. This happens for a number of reasons, the main one of which is a subjective reluctance to accept a personal program of change with general agreement. In this case, it is necessary to create a situation of systematic pressure on the team:
- in a group work format, prepare a schedule of all events;
- daily, without disruption, monitor the level of work completion according to schedule;
- allow only one global schedule adjustment.
But this does not guarantee that the point of no return has been passed. As a rule, sabotage occurs one by one or in several places at once with statements, for example, about the need to carefully prepare for changes, or that there is no time for a new job. Some employees go for direct confrontation: “we don’t need this,” “we’ve already been through all this,” etc. What to do? The hard pressure phase has already passed; diagnostic errors cannot be corrected.
The only working tool in this case is delegation of authority in the area of the employee’s usual and slightly unusual competencies. Oddly enough, in 90% of cases, when a manager asks a reluctant subordinate to take on a task with a slight expansion of his authority and recognition of the employee’s authority, delegation works. This is undoubtedly the art of management. It is important to find a balance between leadership pressure and delegation.
Model for balancing control pressure and delegation during change
Process reengineering as an example of change
Depending on the degree of radicality of the changes, the management of organizational changes can occur gradually or revolutionary. First of all, the organizational structure is subject to change if the structure of the organization at the enterprise is invariably functional. If a process approach arises or it has already been implemented earlier, then business processes are first optimized, and only after that the structure is adjusted to them.
The organizational structure includes a formal scheme for the distribution of authority and a significant part of the management system, including principles, mechanisms for decision-making, planning, control, motivation and flow of information. The organizational structure optimization project deserves special attention. We will only consider the basic principles of its construction.
- The principle of determining the main functions and organizing their execution.
- The principle of maximizing process simplification.
- The principle of involving key employees in development.
- The principle of relying on the personnel present at the enterprise.
One of the major changes is the radical restructuring of the company based on a form such as business process reengineering. Change management is carried out in a mandatory project form. This is an effective means of development, but in some circumstances and in the wrong hands it is quite dangerous and risky. Typically, such a project requires the mobilization of all organizational resources of the management system. The project involves the largest team I have ever observed. It usually includes the entire management team of the company.
The main differences between reengineering and incremental improvement
The object of optimization in the project is business processes (BP), and, first of all, the main ones. Reengineering is based on a fundamental rethinking and radical redesign of the power supply. At the same time, a significant effect is achieved in such KPIs as costs, efficiency and quality of service to the company’s external and internal consumers.
In a business process reengineering project, the following special principles are applied.
- Combining several works into one.
- Decision-making on current difficulties is made by the performers, and not by the owners of the business enterprise.
- Carrying out process steps in a convenient, natural order.
- Variability in the execution of work and its outputs.
- Choosing the most effective way to perform work.
- Reducing the number of quality control activities.
- Minimizing approvals.
- A combination of decentralization and centralization of work.
- Reducing the number of process inputs.
- Integration with suppliers.
Change management is discussed in this article from the perspective of significant changes in the company’s organizational system. Only experienced managers and PMs should undertake such project tasks. High status and broad powers allow them to successfully cope with all the difficulties associated with change. In my opinion, this material is also useful for novice project managers, since the principles of interaction with staff and working with counteraction to innovation are the same and have little correlation with the scale of the task.
