ORGANIZATIONAL

RENEWAL
The Challenges of Change

7/23/2016

In partial fulfillment of the requirements of MBA 203 Organization Development In USLS –

Bacolod Graduate School

Submitted By:

Rejoice Fernandez Sola Guanzon

Glendy-Rose Nawanao Obahib

Submitted To:

Engr. Gerald Louis Poblador

“ Excellent firms don’t believe in excellence – only in constant improvement and
constant changes. “ – Tom Peters

I. KEY CONCEPTS

Corporate Entropy Vs. Corporate Renewal

Organizations exist in a changing environment, thus change is the only factor that
remains constant over time. Management must do more than just react to both internal
and external changes; they must be able to anticipate the changing patterns of people,
market, products, and technology in order to survive in the corporate world.

But change isn’t easy at all. Because organizations are made up of systems, it must
attempt to adapt itself to the forces that are outside or within its immediate influence
in order to be more effective. Some organizations resist change, and one of the major
reasons is stability.When an organization starts to feel that they have been more
successful in the past operation that they see no need for change or when the people
starts to become so used and comfortable of the organization’s culture that they see no
more room for improvement, the organization will then likely to suffer corporate
entropy. In order to prevent it from happening, organizations must undergo corporate
renewal, an adaptive orientation and management style that is geared to its
environment. Management should see that corporate renewal are:
1. Informed Opportunism: Information and flexibility are important in setting the
organization’s directions, and not in creating the organization’s detailed strategy.
2. Direction and Empowerment: Subordinates are empowered by treating them as a
source of inputs.
3. Friendly Facts: Facts and information are essential to remove random opinions
that can lead to incorrect decision-making.

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 4. A Different Mirror: The ability to anticipate crisis is not only based in one
perspective, but is based from different sources.
5. Teamwork and Trust: Corporate renewal is considered as a collaborative effort
among the systems of the organization.
6. Stability in Motion: Organizations undergo constant change against a base of
underlying stability.
7. Attitudes and Attention: Actions and Words must coincide with one another.
8. Causes and Commitment: Organization runs on turning grand causes into small
actions for everyone to contribute which will result to commitment.

Simplified Model of Adaptive Orientation in Organization

Hyperturbulent Renewing Reactive Management

Transformational (Reacting to stimuli after
(Introducing change to deal conditions in the
w/ future conditions before environment have changed)
they occur)
Environmental
Stability
Satisficing Management Sluggish-Thermostat
(Change is accomplished Management
good enough to keep but (Resist change until cost
behind the state of the art) trade-offs favor it)
Stable
High Adaptive Low
Orientation

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1. Sluggish – Thermostat Management ( Stable Environment, Low Adaptation): An
adaptive orientation of an organization that resist change until cost trade-offs
favor it and has a management style that is based on low risk with formalized
procedures, have more managerial levels, and high degree of structure and
control.
2. Satisficing Management (Stable Environment, High Adaptation): An adaptive
orientation of an organization in which change is accomplished at a rate that is
“good enough” to keep up with the industry but is behind the state of the art. Its
management style emphasizes in a more centralize decision-making.
3. Reactive Management (Hyperturbulent Environment, Low Adaptation): An
adaptive orientation of an organization in which change is implied to happen only
when serious problems emerge and corrective measures are done drastically.
4. Renewing / Transformational Management (Hyperturbulent Environment, High
Adaptation): An adaptive orientation of an organization in which change is
introduced to deal with future conditions before these conditions occur. A kind of
adaptation that constantly fights corporate entropy and continually seeks
organizational renewal and improvement.

Models of Organizational Change: Systems Theory and Sociotechnical Systems

To explain how change occurs, many scholars and practitioners have developed
models and approaches. Some are based on empirical research while others are based
on the experiences and witnessing the implementation of change in the organization.

1. Systems Theory or The Systems Approach:

This theory can be traced back to Ludwig von Bertlanffy, an Australian biologist,
who wrote about the systematic interconnections of the natural world. According
to him, the general systems theory is about understanding the characteristics of
the natural systems and the laws that defined the interconnections.

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In 1996, Katz and Khan were the first to adapt Ludwig’s theory in an
organizational approach. They said that organizations consist of patterned
activities of a number of individuals, and opened systems (a system which is
interconnected to its environment) displayed common characteristics such as
inputs, transformation processes, output, feedback, homeostasis / equilibrium, and
others.

Resource Transformation Outputs

Inputs Process

Information Organization Products

Equipment Human Goods
Facilities Resources Services
Materials Workplace
Money Actions
People Physical
Technology Resources

Consumer
Feedback

For example: Consider manufacturing a cola / soft drink.

- Resource inputs would include, water, sugar, food coloring, a plastic material
for plastic bottle and etc.
- Transformation processes would include, the creation of a plastic bottle from a
plastic material, mixing of ingredients, filling, and packaging.
- The output would be a cola in a plastic bottle ready to drink with its
distinguish characteristic.
- The feedback would be inventory numbers, sales rates, and sales revenue.
The feedback processes are usually an information creation in order to
maintain the organization’s equilibrium in order for it to adapt to its
environment changes appropriately.

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 It is important for an organization to maintain its equilibrium because it will lead
to a corporate “negative entropy” where an organization needs to cope with its
expensed energy without any incoming energy to assist its survival. Fro example,
if the colas are not being sold because of low demand, high competition, and other
factors, these colas will be stuck in the storage room and will increase the
organization’s inventory, also it will decrease the company’s production which
will slowly kill the organization if without intervention.

2. Socio-technical Systems or Organizations as Socially Constructed:

This idea can be traced back to Berger and Luckmann’s seminal work “The social
construction of Reality” on 1967. It does not consider the organization to be
living things with concrete social environment, a formal structure, recognized
goals and variety of needs. However, it looks at the organization as a concept
developed out of actions and languages. The underlying reason, according to
them, is that the more the organization is personify, the more important ideas are
obscured because organizations are not people. In this approach, the organization
is viewed as an open system interacting with its environment and consisting of
five primary reasons.

1. The Structural System: include formal designs, policies, procedures, and so

on. It also includes division of work and patterns of authority.
2. The Technical Subsystem: includes primary functions, activities, and
operations, which cover techniques and equipment to produce the output.
3. The Phycosocial Subsystem: includes network of social relationships and
behavioral patterns of members.
4. The Goals and Values Subsystem: includes basic mission and vision of the
organization.
5. The Managerial Subsystem: it spans the organization’s directing, organizing,
an coordinating of all activities towards the fulfillment of mission.

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 For example: Consider the sales revenue report of selling colas.
The revenue figures in the loss or profit statement alone would tell an
organization to produce more colas. The numbers or figures would basically mean
nothing at all on their own. Instead, in order for them to be useful for the
organization, it must have a meaning through interpretation that maybe based on
past experiences of the organization, agreement, or even just a gut-feel.

The Contingency Approach

This approach simply recognizes that in dealing organization’s problems, there is

no best way of managing in all situations. It suggests that managers in different
divisions or departmental units face circumstances and situations that differs from
one another on a number of dimensions. Thus, the effectiveness, consulting styles,
intervention techniques, and strategies in dealing change will vary according to
the circumstances of the organization.

Approaches to Managing Change: Organization Transformation and

Orgnizationan Development

1. Organization Transformation: refers to actions in changing the organization’s

form, shape, appearance, or changing energy from one form or another. This
transformation focuses on unplanned, second-order nature changes from within
the system in response to crises and life cycle considerations. The changes in
organization transformation are introduced in an immediate time-frame.
2. Organization Development: refers to planned, first-order nature changes that are
introduced by consultants in an organization-wide and from top to bottom level. It
is an attempt to change the organization’s ability to survive by changing its
problem-solving and renewal processes, and by using behavioral science
knowledge, as per to Richard Beckhard. The organization development not only

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 focuses on an individual level, but it also considers the group or the organizational
behavior as a whole. OD considers four things:
1. Individual Effectiveness: This considers that in achieving organizational goals
and objectives, and improving the organizational effectiveness, it is not
enough to only create a culture that attains such but also to create a culture
that satisfies every organizational member’s needs.
2. Team Effectiveness: This considers the importance of involvement of all
members of the organization in moving towards its goals. Therefore, an
organization must desire improve not only the task activities, but also the team
processes.
3. Process Observation: This considers the need for the change leader to actively
participate and the same time be aware of group processes termed as
“participant- observer” in observing and examining group and members’
behaviors.
4. Organization Effectiveness: This simply considers that an OD consultant or a
change leader see to it that planned change program/s are geared towards
dealing with correctly identified problems to improve organization’s
effectiveness by structural, technical, or managerial subsystems.

II. RELATED CONCEPTS

Models of Organizational Change: Systems Theory and Sociotechnical Systems

Systems Theory:

1. Lewin’s Three-Phase Model of Change and Force Field Analysis

- Authored by Kurt Lewin in 1951. He stated that change occurs in three
processes, (1) unfreezing, (2) moving, and (3) refreezing. According to him,
organization needs to be unfreeze from its current or existing processes to

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 change. Then, the organization will undergo the moving stage, which is the
transformational or the implementation of the planned change/s. Once the
organization has changed, it needs to unfreeze the newly adopted practices.
He pointed out that change will only occur when the forces promoting change
is greater than the forces of maintaining the status quo.

For example:
Change can only happen when customer demand (a force promoting change)
is greater than insufficient resources (a force resisting change).

2. The Nadler – Tushman Congruence Model

- Authored by Nadler and Tushman in 1983. This idea puts a greater emphasis
on the transformation processes. It views the organization as a system with
components that interact with one another. It uses the traditional model of
inputs, processes, output and feedback, but with expansions. In inputs, aside
from the resources, they added history, environment and organizational
strategy to affect the transformation process. Strategy is now included the
transformation process together with the traditional elements of tasks,
individuals, and organizational arrangements. The output is now defined not
only as a tangible product, but also the intangible ones such as performance,

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 outputs, stress and job satisfaction. This idea stated the organization
effectiveness can only be achieved when there is a fit of areas relating to each
other.

For example:
If an organization demands to produce an output that requires a specific
knowledge, it must consider that its input such as a member skills and
knowledge satisfies its requirement. Otherwise, it will have a low fit, thus
hindering the organization to become more effective.

3. The Burke-Litwin Model of Organizational Performance and Change

- Authored by Burke and Litwin in 1992. Their model was developed as a
causal model. According to them, their model attempts to integrate notions of
both transformational and transactional change. In their model, they stated that
external environment, mission and strategy, leadership, and culture, are
factors of transformational change and have the greatest influence on the
organization’s performance. Others such as structure and management

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 practices are factors of transactional change which must be considered as
major factors of interest.

4. Weisbord’s Six Box Model

- Authored by Weisbord in 1976 and was first elaborated as an article only. The
model illustrated the elements of the system that are not in coordination of
other systems in the organization. According to him, the organization has six
problem areas, (1) Purposes, (2) Structure, (3) Rewards, (4) Helpful
Mechanisms, (5) Relationships, and (6) Leadership. He added that in these six
problem areas, each on of them have formal (official), and informal (how
things work in practice) components which must be aligned so that the
organization can avoid spending energy in maintaining both or may or may
not be functioning as needed.

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Sociotechnical Systems:

1. Weick and Quinn, 1999

- Stated that the sociotechnical systems approach is interested in what change
means to people or the members of the organization recognizing that the
meaning will adapt in various points in time. It approaches to change as a
continuous change rather than an episodic change. This idea was also
supported by Ford in 1999 where he defined as organizational change
occurrence as shifting conversations in which people exchanges or uses
languages to understand reality.

2. Barrett, Thomas & Hocevar, 1995.

- The implied that organizational change happens when one way of talking
replaces another of talking.

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 3. Kegan and Lahey, 2001.
- Both proposes seven new languages shifts to encourage change on their “How
the Way We Talk Can Change The Way We Work,” (1) From the language to
complain to the language of commitment, (2) Fron the language to blame to
the language of personal responsibility, (3) From the language of ‘new year’s
resolutions’ to the language of competing commitments, (4) From the
language of prizes and praising to the language of ongoing reward, (5) From
the language of assumptions that hold us to the language of assumptions that
we hold, (6) From the language of rules and policies to the language of public
agreement, and (7) From the language of constructive criticism to the
language of deconstructive criticism.

Theories of Planned Change or Organizational Development

1. Action Research Model

- Focuses on planned change as a cyclical process in which the a research will
subsequently provide information to further steps or actions that an
organization must undertake. It aimed to develop more knowledge that can be
applied to other areas or settings.

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 2. The Positive Model
- Focuses on what the organization is doing right rather than organiztion’s
problems. It states that by doing so, it helps the members understand their
organization which will create positive results. This model has five phases, (1)
initiate inquiry, (2) inquire into best practices, (3) discover the themes, (4)
envision a preferred culture, and (5) design and deliver ways to create the
future.

III. SUMMARY OF THE CHAPTER

Change is inevitable and it’s the only thing that remains constant, especially in the
corporate world. Given that an organization exists in an unchanging world, it must
have to develop itself by either transforming or developing itself in order to cope with
the internal and external forces that can affect its competitiveness, effectiveness and
even its survival in the industry. Therefore, it is beneficial for an organization to have
the ability to see possible crises before they can happen so that they can deal with it
with a competitive edge. In dealing with the crises there are several adaptive
orientation that an organization can imply, but one must see to it that it seeks a
renewing- transformation adaptability.

There are two general models of organizational change one is a model that sees the
organization as a set of an input, transformation processes, output, and feedback,
called the Systems Approaches. On the other hand, the Sociotechnical systems sees
the organization as communication patterns and considers change as a continuous
process rather than an episodic change.

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 Positive Areas of the Two General Models of Organization Change
1. Systems Theory 1. Helps to see role-based interactional
patterns rather than isolated actions of
single individuals.
2. Since the object of change is the system
rather than the person, understanding
the system will provide change leaders
appropriate place to begin the
intervetion.
3. Since changes have ripple effects from
one system to another, change leaders
can easily predict negative result and
deliberate changes.
2. Sociotechnical Systems 1. It offers a useful explanation of human
behavior.
2. It directs the change leader’s attention o
the cultural processes that result in
action/s.
3. Emphasizes member’s active role.
4. It sees the importance of
communication in creating change
5. It’s foundation is a change in meaning.
Sensemaking logics.

Differences of the Two General Models of Organization Change

Systems Theory Sociotechnical Systems
The view of organization Views organizations as set of Views organizations with
inputs, transformational concepts and categories as
processes, outputs, and created, developed and infused

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 feedbacks with predefined with meaning by members.
singular meanings.
How members decide to take The organization must act to Considers the process of
action achieve the equilibrium making and creating meaning,
and developing and sharing
interpretations in deciding the
actions.

According to Bergquist, 1993, many believe that the sociotechnical systems

approach is captures new reality effectively for it fills in the missing elements of
the systems approach.

According to Kotter 1996, there are eight steps that change leaders should follow
instituting major change in the organization, (1) Establishing a sense of urgency,
(2) Creating the guiding coalition, (3) Developing a vision and strategy, (4)
Communicating the change vision, (5) Empowering broad-based actions, (6)
Generating short-term wins, (7) Consolidating gains and producing more change,
(8) Anchoring new approaches in the culture.This set of steps were also agreed by
many scholars and practitioners aside from the existing Action Rearch Model and
Positive Model.

IV. PAIR’S VIEWPOINT

Several models and approaches have been developed to explain how change occurs,
and every one of them has both benefits and drawbacks. We were provided with two
conflicting school of thought, one is based on a system theory that looks an
organization as a set of basic components of input, process, output, and feedback; and
the other looks an organization in a social construction perspective as it unfolds in
and by communication process

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 Buying both ideas would be incongruous, and choosing which one is the most
appropriate to use is hard to determine considering the contingency approach that
there’s no best way in dealing crises in all situations. Therefore, as pair, our
viewpoint is it doesn’t matter which, among the models is right, but how much the
model can help facilitate the need of an organization. If an organization is too
hierarchal, then it may be good if it adopts the systems theory, and use the social
construction perspective during social meetings and interactions to better understand
team conflict and motivation.

Also, we think that using multiple models cannot harm an organization instead it can
help to make some elements of the organization visible, which have been obscure if
only one model have been used.

V. APPLICATION OF THE CONCEPT

Local Setting:
With the newly introduced AFTA or the Asian Free-Trade Agreement in the
Philippines wherein producers are on the verge of high competition against the
international markets, organizations in Negros (especially in Sugar Industry) must
fight complacency in order to avoid corporate entropy and death. The existence of
competitors with more advanced technologies must be put into considerations in
making changes in the organizations. Otherwise, the international organizations will
be the only ones who will profit the demand of products. This is essential for the
Negros’ sugar organizations since ¾ of sugar production comes from them. If these
external forces cannot be dealt with properly, it is not only the sugar farmers and
organizations that will suffer, but also the country at large.

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National Setting:
It has been a common knowledge that in government offices you can’t easily get an
employment once you don’t know anyone from the government offices with higher
positions. Considering the system theory approach, more often the required skills and
knowledge to produce an output is not properly meet by the input since the
employment is based on a “popularity,” or “who knows who” kind of system. With
the new administration headed by President Duterte, this kind of system must be
change, as he often say it, “It must be stop!” Government offices should start hiring
people based on merit and its capability to handle tasks and promote effectiveness in
the organization. This way “low fit” will be avoided and organizational effectiveness
will be achieved.

International Setting:
With emerging labor markets in the world, organizations must keep in mind that new
approaches to change must be anchored in the organization’s culture; ensure that the
new employees and leaders represent the desired culture.

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APPENDIX A

This report recognizes the following ideas from:

1. Lewin’s Three-Phase Model of Change and Force Field Analysis

Organizational Development: The Process of Leading Organization Change by Donal
Anderson, pp. 66-67.

2. The Nadler – Tushman Congruence Model

Organizational Development :The Process of Leading Organization Change by Donal
Anderson, pp. 67-69.

3. The Burke-Litwin Model of Organizational Performance and Change

Organizational Development : The Process of Leading Organization Change by Donal
Anderson, pp. 69-72.

4. Weisbord’s Six Box Model

Organizational Development : The Process of Leading Organization Change by Donal
Anderson, pp. 72-74.

5. Weick and Quinn, 1999 / Barrett, Thomas & Hocevar, 1995 / Kegan and Lahey, 2001
Organizational Development : The Process of Leading Organization Change by Donal
Anderson, pp. 78-80.

6. The Positive Model and Action Research Model

Organizational Development and Change by Thomas G. Cummings, and Christoher G.
Worley, pp.23-27.

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