Organizational change is a gradual modification of an organization from the existing state to the intended state. The change may be in different elements of the organization like technology, culture, strategy, etc.
What is Organizational change?
The change is always carried out in an organization, whether it is intended or not. There can be both types of changes in an organization, which is planned change and unplanned change. When it comes to a planned change, the organization may have been preparing for it for many years. On the other hand, the unplanned change may not be anticipated by the organization.
However, it is crucial to understand the necessity of implementing change in the organization. What could be the reason to change the existing state of affairs to a new one?
The significant needs which drive change are primarily the need for growth in the market. With the current competition, an organization has to keep up, sustain, and gain a competitive edge in the market.
Other reasons for change may include expansion of the organization, merger, and acquisition, implementing new organizational culture, following a new marketing strategy, updating the vision and mission of the organization which necessitates a change in all existing levels, and all other reasons depending on the organization, type of industry and specific requirements.
The right plan can be implemented only after detailed planning by the organization.
Types of Organizational change
There are different types of changes that an organization implements. The following are a few of the common types of changes in the organization; however, there are other types of changes that companies implement from time to time.
1. Strategic Transformational Change
As the name suggests, strategic transformational change involves significant alterations in the organization’s existing state of affairs. Strategic change is the type that affects the entire organization, unlike other changes.
For example, if an organization changes the way it transacts with customers, it will majorly affect the sales and finance departments. On the other hand, operations, HR, and other departments will remain relatively unaffected by this change. But if an organization implements a strategic change, the entire organization can be expected to transform.
One of the common examples of this type of change is changing the organization’s mission and vision. Usually, a serious desire to attain a goal is what motivates an organization to implement strategic change.
The goals to be achieved are identified, and preparations are made accordingly right from grassroots to the executive level. This is done because this change will transform and affect all the employees in the organization.
Another example of strategic change is the implementation of automation. Contemporary organizations have most of the processes in standard form. When an organization decides to automate the processes of production and manufacturing and administrative functions, it can affect the entire organization. The existing functioning of all the employees is subject to change because of this strategic change.
Another example of strategic change is when an organization decides to change its marketing strategy. An organization that is used to target a price-conscious market, if now suddenly chooses to target a niche market, this change will affect the entire organization.
2. Reactive Change
As the name suggests, reactive changes are the ones that happen as a reaction to specific events. This event impacts the entire organization, which necessitates it to implement the change.
For example, the recent outbreak of Coronavirus has mandated many organizations to wear masks and apply hand sanitizers in everyday use in the offices. This is the best example of reactive change. The organization has reacted to the external threat and made necessary changes to adapt accordingly.
When an organization is undergoing a financial crisis, then cost-cutting is a common reaction which the organization adopts as a part of the reactive change. Reactive change is not an anticipated event, and therefore usually, the organization is not prepared for it in advance. Thus the organization has to learn as it goes ahead by implementing the change.
There is generally very little time for reactive change as compared to the planned change. Other examples of a positive reactive change are implementing new technology, adapting to the new taxation according to the government laws, implementing government regulations and mandatory changes, etc. reactive changes may or may not affect the entire organization. It depends on the nature of reactive change.
3. People-centric organizational change
This type of organizational change will affect employees differently. It is recommended to use a gradual and slow approach to incorporate this change because emotional outbursts from the existing employees are common.
One of the best examples of this change is hiring new members. Whenever an organization requires new employees, they have to undergo the onboarding and training process. This is done to get the new and old employees in sync and on the same level. You have to explain to the existing employees the reason for hiring new people. This is because it can create panic in the existing employees.
The newer employee has to change his job profile; he will have to be assigned new job duties and responsibilities. This usually happens when an organization is being restructured. Existing employees and their existing job roles are transformed to incorporate the change.
Typically, such a change is done in the organization as a whole, and the nature of duties and responsibilities of almost all the employees are transformed.
Another typical example of people-centric organizational change is that changes in the existing for the size of the organization. Simple policies such as employee leaves, maternity leaves, etc. need to be modified often.
Recently, New Zealand has incorporated a four day work week, which has drastically changed many aspects of the organization. Such changes should be communicated to the employees even though they are for the benefit of employees.
If employees are not notified, then expect an emotional outbreak from them.
4. Incremental change
As the name suggests, incremental changes are made slowly and gradually to incorporate large changes over time. These changes are usually initiated at the unit level and are slowly adapted to the entire organization.
The primary objective behind these smaller changes is to incorporate significant changes in the organization or modify existing factors to create healthy and better facilities.
The company can learn from its own experiences and develop necessary changes to meet the vision and mission. More often than not, these changes are challenging to implement overnight, which is why a gradual method is approached — for example, incorporation of new software for tallying finances. The software is gradually rolled out, first to the few users.
The feedback from them is noted from initial users, and then the organization can implement it on an entire company-wide basis implementing the modifications.
5. Structural change
As the name suggests, these changes are performed on the team hierarchy. For example, the existing designations of Finance manager, Finance auditor, Financial accountant, Accounts payable accountant, etc. are sometimes changed to Accounts manager, Accounts auditor, Accounts specialist, Collection Specialist, etc.
Although all of them perform similar functions, the change in designations could be for many reasons. It could be done to implement a homogenous change throughout the organization.
It could be part of restructuring the company or making the designations all through the organizations at a normal level. Such a structural change often clashes with people-centric changes.
Another reason for implementing structural change is mergers and acquisitions. Whenever a new company acquires or merges with another company, there are two scenarios in this case.
Either the culture of both companies combine, and a mixed culture is born, or the culture of only one company survives, and the culture of the other company is slowly erased by combining structural change with incremental change.
Also, when the company is in expansion mode or contraction, significant departmental changes occur in the existing hierarchy. For example, in the expansion phase, the company increases the staff and specializes in the current department personnel’s functions.
On the other hand, when the company is in contraction mode, the company reduces the staff and generalizes the tasks of employees. Such changes are made on a structural level and affect the working of the organization; hence it is classified under structural change.
6. Total Change
As the name suggests, total change involves change on a large scale. When an organization changes its vision and tries to balance vision and other strategies, employees’ morale and, most importantly, business, that is when total change occurs.
Usually, it happens when the realities of business do not match the expectations of the organization, or the senior management is unable to satisfy the employee’s expectations.
In such cases, the ultimate result is on the business, and soon the numbers start slipping off, and the market share is lost to the competition. The organization forms a new vision that is in sync with the existing requirements of the company.
Change in organizations are of many types, and it is entirely dependent on the organization as to which change to implement. The adoption of a change strategy is triggered by the needs of the organization or external requirements.
However, the type of change selected should be applied carefully, and a reaction from employees is expected in any circumstances.
Therefore organizations should be prepared to deal with occasional employee outbursts or adverse reactions, and it should deal with such reactions before they are aggravated.