Dr. Maximilian Groh
Dr. Maximilian Groh    Love e-commmerce & brand management, meaningful relationships, and getting things done. Fascinated by people, work, leadership, and strategy.

Primary Approaches to Change Management in Company Business

Primary Approaches to Change Management in Company Business

This article is a part of "Change management" series

Changes in strategy, business processes, structure and culture, can be made progressively, in small steps, or radically, in great leaps. The agility of implementation and degree of novelty of organizational changes are the main differences between these two approaches. Organizational development and reengineering of business processes are on the opposite ends, with compromise alternatives of development in between.

Reengineering of Company Business

Reengineering is a fundamental rethinking and radical redesign of an enterprise and its most essential processes. All these results in dramatic improvement (by an order of magnitude) of the most critical quantified indicators of costs, quality, the performance of service and time frames. According to this concept, it is a case of in-depth restructuring of an enterprise involving the entire value chain. The process of satisfaction of customer needs shall also be subject to radical restructuring.

Orientation towards the business process and customers is the main prerequisite for achieving the objectives of reengineering as well as creative use of the state-of-the-art information technology at the workplaces of qualified employees. New solutions shall be intentionally implemented by undemocratic means. Management shall be concentrated in the hands of a tiny number of persons who are vested with all the required legitimate power so that to implement the intended changes vigorously and in a short period. The satisfaction of needs of internal and external customers is at the heart of any restructuring of business processes. What shall be designated as the core processes depend on the strategy of the enterprise? The main focus shall be placed only on some of them (for example, development of new products, integration of logistics, etc.).

Supporting processes shall be optimized not in isolation but only with due account for the needs of the core processes. A new approach is required to the issue of the so-called points of overlapping interests. Special attention is paid to information technology. The objective of the implementation of information technology is to process information about customers and business processes to the full extent. However, this means entirely new fields of application rather than just the automation of processes. Owing to the objective-oriented use of data banks, expert systems and telecommunication networks, one can significantly extend the areas of responsibility of employees.

The enhanced data bank will not give the desired results if the expertise of employees is not changed, which means not only organizational parameters (duties and powers) but also purely qualification settings (capabilities, abilities and skills). Cooperation of personnel (for example, in workgroups) shall be radically improved. When required, an employee shall have a means of communication with any colleague. Other changes are also necessary with respect to human resource management. Thus, a compensation plan (remuneration) is especially important. Incentive system should be oriented, first of all, towards actual capabilities of employees rather than towards their previous merits and achievements. Small companies are oriented towards reengineering to a lesser extent as compared to industrial enterprises since headcount of the former is small and such companies have no complicated system, of business processes which can be subjected to radical restructuring.

Changes within the Scope of Organizational Development

Organizational development shall be understood to mean the concept of planning, launching and implementation of the processes of changing social systems with involvement of a wide range of participants. Organizational development is defined and a long-term, thorough and comprehensive process of changing and development of an organization and people working in it. The process is based on the training of all the employees by way of direct interaction and transfer of the field experience. The purpose of changes is to improve both the performance of an organization and the quality of work. Members of the organization shall implement changes. Internal and external consultants (the so-called change agents) can serve as auxiliary labour but not as the critical implementators of changes. Excessive hierarchical levels shall be eliminated, and relations of powers shall come down to partnership with the focus on mutual confidence.

A comprehensive concept of organizational development includes both structure-related and personnel-related aspects. An attempt is made within the scope of the structure-related approach to create favourable frame conditions for the achievement of the objectives of organizational development by means of changes in organizational regulations (for example, organizational plans, descriptions of certain role-based functions). The personnel-related approach implies taking of measures aimed at improving the skills of employees (development of personnel) and encouraging to accepting and implementing changes. The setting of objectives of the organizational development (economic and social performance) shall rely on a combination of these two approaches.

Organizational development is implemented in stages. At first, the unfreezing of the social system shall take place. Viewpoints, values and behaviour patterns of members of the system are challenged, and expertise of their acceptability for the achievement of the system objectives (efficiency, innovation activity and humanization of labour) is carried out. The movement towards changes begins at the second stage. New behaviour patterns and organizational regulations are tested and solidified in the course of personnel training. Change processes require a logical end as they are known to be endless. That is why stabilizing, and consolidation of the new authorized behaviour patterns and organizational rules are necessary. It takes place at the stage of the so-called refreezing of the process of changes.

Organizational development is typical of the majority of small companies since it enables them to achieve the objectives of changes with the least possible risks and expenses.  

Table 1. Comparative Analysis of Approaches to Change Management

Standard of Comparison Reengineering of Business Processes Organizational Development
Origin of Method Management consulting; engineering sciences Conventional management; social psychology
Conceptual Framework Attempt to analyze the company business from the standpoint of engineering sciences; building of optimal business process as the basis for decision making; process-oriented approach Management of company personnel; scientific and intuition-based opinion as the basis for decision making; preferred functional approach
Main Idea Radical rethinking and redesign of business processes and procedures in an organization Long-term and comprehensive changing and development of an organization owing to gaining of experience of making of the right decisions
Tasks of Management Unconventional view of an organization; building of a team of leading professionals; clear understanding of the optimal business process; persuasion of personnel in appropriateness of the new approach; control of actions leading the changes astray Strategic view of business, tasks, position and qualification of members of an organization; maintaining and development of potential of an organization; creation of self-developing basis in the team; involvement of employees affected by changes
Attitude to Personnel Granting of additional powers; building of professionals; firing of saboteurs and experts who fall outside of the new system Democratization of management; creation of stability and prospects for development; reliance on employees capable of learning and ready to assume responsibility
Depth of Changes Complete rethinking of business processes; discontinuity of process; changes in great leaps Time consuming process of training and development; continuity of process; changes in small steps
Timeline Project scheduled; results are apparent relatively soon after project completion For a long period of time with a view to strategic development
Object of Changes Enterprise as a whole or the core processes Enterprise as a whole owing to improvement of its elements
Objectives Significant and quick rise in profitability (economic effectiveness), liquidation of ballasts Gradual rise in profitability and humanization of labor (social performance)
Applicability Stagnation of an enterprise and low profitability; liquidity crisis, failure to succeed Not limited
Strategy of Changes Top-down strategy Top-down strategy; bottom-up strategy; bipolar strategy; multiple point strategy
Methodological Approaches Reengineering of processes in compliance with the marketing strategy; adoption of organizational structures and job duties; changing of value system of employees (orientation towards the process of value creation or towards customers); implementation of the state-of-the-art information technology; re-training of personnel Structure-based and personnel-based approach (new forms of organizational structures; change of viewpoints and behavior patterns of employees; advanced training of employees)
Key Roles Leader (with clout); process owner (as its manager); reengineering team; steering committee (consisting of the leader with clout and specialists); reengineering czar as specialist) Change agents (consisting of specialists and the process owner as consultant); customer system (area under restructuring); catalyst of changes
Strengths Applicability in  crisis situations; possibility of radical renovation; possibility of quick rise in profitability; conceptual consistency of measures; significant extension of expertise of specialists; implementation of the state-of-the-art information technologies; availability of techniques and procedures for business modeling Continuity of changes; relatively small cost of errors at small intervals of changes; consideration of development ability of members of the system; encouraging of self-management and self-organization; long-term perspective; lack (decrease) of resistance to changes; extensive use of expert opinions
Weaknesses Revolutionary approach; solely process orientation; large cost of error; instability in the phase of changes; limitations of time and actions in connection with the intention of quick improvement of results; exclusion of alternative strategies (only top-down); low social acceptability; high resistance of a part of management Insufficient response; overstated requirements to soft skills of participants of the process of organizational development; inadaptability in crisis situations; insufficient IT support

Several intermediate alternatives exist in between the extreme forms of changes, that is, business reengineering and organizational development. They can be different in the degree of involvement of members of an organization and freedom of action of the senior management with respect to the implementation of changes. Depending on this, the emphasis is laid on economic and/ or social performance. Type of crisis determines the urgency of changes and, thereby, the extent of their radicality. Successful use of one or another method depends heavily on the measures taken with respect to human resource management. Besides taking of measures aimed at retaining employees, differentiated concepts of staff reduction shall not be ignored. Managers of reengineering programs shall solve employment issues without inflicting of moral harm on the dismissed persons and doing their best to ensure the employment of such persons on the labour market.

The objective of change management is to achieve and fulfill the potential of personnel for improving of competitiveness of an enterprise rather than to downsize it.

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