WHY ORGANIZATIONS CHANGE

CHAPTER NO 3

ENVIRONMENTAL PRESSURES FOR CHANGE

Environmental pressures are one focus for explaining change.

This occurs as a result of reduced demand for products and sales, decrease
in market share and bad investment decisions.

There are six types of environmental pressures for change that organization
faces:
Pressures to carry out fashionable management changes.
Pressures that are forced on the organizations from outside agencies.
Broad changes in geopolitical relationships necessitating changes in
organizational operations.
Pressures associated with declining markets.
Hypercompetitive business pressures.
Pressures to maintain corporate reputation and credibility with
stakeholders.

1.
2.
3.
4.
5.
6.

1. FASHION PRESSURES:
This occurs when organizations imitate the structures and practices of
other organizations in their field or industry, usually ones that they
consider as legitimate or successful.
Organizations forcefully trying to keep up with trends from other
organizations and industry practices.
Organizational change can occur in response to the latest management fad
or fashion: in order to be seen as professional, modern or progressive
managers may change their organizations in line with the latest innovation
and management practices.
For example: In 2001 Boeing Co. initiated a series of changes under the
direction of its CEO, Philip M. Condit. These changes were said to imitate
those made by Jack Welch at GE, a company that is well recognized as
having made a number of successful transformational changes over the
past two decades.
These mimetic changes included like setting up corporate learning and
training unit, changing the culture, restructuring the business, freedom,
setting high performance standards and access to corporate funding.

Some Fads may assist organizations, others do not deliver their promise of
better organizational performance, still others may have devastating effects
on large numbers of organizations and their employees.
2. MANDATED PRESSURES:
Organizations having to deal with news laws and practices being put in
place by external forces.
This change is forced onto an organization through formally mandated
requirements, where organizations are forced to take on activities similar to
those of other organizations because of outside demand placed on them to
do so.
These mandated pressures may either be formal or informal:
Formal Coercive Pressures: include government mandates such as new
laws and policies.
Organizations are forced to change to meet new legal and other legislative
requirements such as pollution requirements, tax laws etc. Subsidiary
organizations may be forced to adopt accounting standards, performance
criteria.
Informal Coercive Pressures: include commitment to a certain types of
organizational changes such as empowerment.

3. GEOPOLITICAL PRESSURES:
This is in the form of immediate crisis or longer terms geographic
realignments.
4. MARKET DECLINE PRESSURES:
Declining markets for products and services places organizations under
pressure to remain relevant.
When current markets begin to decline there is a pressure to find newer, more
viable markets.
For example Steve jobs returning to Apple and Verizon communications
choosing to focus on wireless.
5. HYPER-COMPETITION PRESSSURES:
Organizations are forced to deliver goods and services more quickly, more
customized and more flexibly.
For example Dell VS Gateway and Dell VS HP and Lenovo.
You tube disrupting television and My Space may next disrupt music.
6. REPUTATION AND CREDIBILITY PRESSURES:
Reputational pressures can come very suddenly.
For example Mattel toy manufacturer recall and Walt Disney company.
Change is associated with maintaining proper corporate governance
mechanisms to ensure a positive corporate reputation.

Corporate reputation is defined as a collective representation of a firms

past actions and results that describes the firms ability to deliver valued
outcomes to multiple stakeholders.
Corporate reputation is an important corporate asset being positively
correlated with organizational performance.

Why Organizations May Not Change in the Face of External

Environmental Pressures

All organizations are not the same and not all managers respond to external
pressures for change.
Some resist them, some are slow to respond and some may not recognize
them as a real threat as other managers do.
So why external pressures do not always lead directly to organizational
change, there are four debates about this issue:

1.

Organizational Learning perspective Vs Threat Rigidity perspective.

2.

Environment as Objective Entity Vs Environment as Cognitive Construction

3.

The balance between Forces of Change Vs Forces of stability

4.

Bridging (Adapting) Vs Buffering (Shielding) strategies.

1.

Organizational learning Vs Threat Rigidity perspective:

Organizational learning theorists argue that environmental pressures such
as market decline will lead to innovative organizational adaptation and
change, as managers learn from the problems and try to close the gap
between performance and aspirations.
Threat rigidity theorists argue that such pressures will inhibit innovative
change as managers cognitive and decision making process becomes
restricted when confronted with threatening problems.
Discontinuous Change: an organization faces discontinuous change, where
it faces new, fundamentally different trends in its operating environment.
An example of this is the emergence of digital media as a trend impacting
upon newspaper print media operations.
It is argued that change result from performance gaps that can be threat
based such as decline in profit or opportunity based such as raised
aspiration levels for growth.
Threat based responses may elicit a commitment to change but invoke rigid
behavioral responses and opportunity based responses may elicit new,
flexible ways of moving forward but lack a high level of commitment
because a residual fit between current capabilities and operating
environment.

PARADOX: It is not that one set of capabilities suddenly becomes obsolete,

to be replaced with another.
The paradox suggests that companies in this situation need to be able to have
frames co existing within it that focus on both opportunities and threats, one
protecting the current business and the other helping to transition the company
into new arenas.
Trapped by success: is another reason why organizations may fail to respond
to pressures for change.
Companies that have a winning business formula may become trapped by this
when condition change.
Companies may become arrogant and assume that their market dominance
will continue unchallenged into the future.
Such forces lead organization and their managers becoming learning
disabled so that they do not respond to pressures for change.

2. Environment as Objective Entity Vs Environment as Cognitive Construction:

The environment as an objective entity per se that pressures organization to
change has been brought into question.
View the environment as an objective entity, however misperceptions may occur.
Such as type 1 error and type 2 error.
The third view of environment is the constructivist view that the outside world
is brought into existence through individuals perception of it.
Managers in different organizations see what is going on outside the
organizations in very different ways and with different interpretations about
change actions that are needed.
Hypercompetitive environments and organizational changes associated with
them are perpetuated by the cognitive interpretation of managers.
Managers are trapped by their cognitive sense making frames.
3. Forces for Change Vs Forces of Stability:
The environmental pressure will lead to innovative change will be affected by
three factors:
The extent to which organization mission is institutionalized in stakeholders and
the external environment: the less institutionalized it is, the more flexibility

 The organization will have to respond to innovative change.

The extent of diffusion of power and resources throughout the organization: the
more concentrated the power in the organization, the greater the ability to make
decisions and allocate resources to achieve change.
The controllable or stable the causes of decline are, the more likely managers
are to introduce innovative changes.
These arguments alert us to the need to consider both forces for stability and
forces for change as both are necessary part of the organizations effective
functioning in the long term.
4. Bridging (Adapting) versus Buffering (Shielding) Strategies:
Responding to pressures for change resulting from uncertainty in the
environment is a classic issue within organization theory.
The management of environmental uncertainty divided into two broad
strategies: bridging and buffering.
Bridging strategies: are designed to keep the organization effective by adapting
parts of it to changes happening in the outside environment.
Buffering strategies: are designed to keep the organization efficient by avoiding
change through shielding parts of it from the effects of the environment.

Bridging: in the context of school environment, bridging strategies may be

used to lift student performance in high poverty schools. The way the
school is organized may be adapted in response to external pressures to lift
student educational performance in lower socioeconomic setting.
Bridging occurs as firms seek to adapt organizational activities so that they
conform with external expectations.
In bridging firms promote internal adaptation to changing external
circumstances.
Buffering: involves trying to keep the environment from interfering with
internal operations and trying to influence the external environment or to
protect an organization from external environment.
In continuation with the example of school, through the use of formal rules
and regulations, the principal of the school may shield his or her teachers
by insisting that external groups may make an initial contact through the
principal rather than directly to a teacher.

ORGANIZATIONAL PRESSURES FOR CHANGE

Five potential forces for change that are internal to

organizations.
1. Pressures related to organizational growth.
2. Pressures related to need for integration and collaboration
3. Pressures around establishing organizational identities in new
eras
4. New broom pressures associated with the appointment of new
CEO
5. Power and political pressures.

1. Growth Pressures
As companies age, Change in the form
of growth is brought about.
Need for rules, policies, and procedures
once an organization reaches a certain
size
Some managers resist the growth of
their organization beyond where they
lose personal control of the day-to-day
operations beyond this point they lost
job satisfaction

2. Integration and
Collaboration Pressures
Some changes are made in order to
better integrate the organization or
create economies of scale across
different business units
Goal is to have better coordination
and collaboration across multiple
business units of the company in
order to produce a customer-oriented
culture

3. Identity Pressures
Employees might lack cultural identity
with the organization and its name brand
Goal is to enhance the identity and
commitment of staff to the organizations
brand as well as to achieve service
excellence
Eg. the U.S. Mint seen as a slow,
inefficient organization became more
modern, customer-focused

4. New Broom Pressures

When a new CEO arrives it can act as
a signal that the old ways are about
to change
Not all new broom changes are
necessarily the right changes

Advantages New CEOs Have

1. Likely to be able to create energy for change
2. Unhampered by adherence to past
organizational practices (will not appear
inconsistent if they change things)
3. Can focus on problems that may have been
known but not able to be named in the past
as they were organizational sacred cows
that could not be brought into question
4. Likely to be able to tackle customer
problems with credibility since they are not
associated with previous problems

5. Power and Political

Pressures

Competition between CEOs when companies merge

(internal political pressures associated with changes at
CEOs level)
Some changes are made to alter the traditional internal
power relationships in order to speed up decision making
and to allow access to others engaging in it.
Ousting of CEOs by powerful investors
Sam Palmisano abolishing the IBM Executive Management
Team when he took over as CEO
Internal conflicts within organizations