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In the previous tutorial we looked at someone designing what is essentially a new organization. But often, organizational design comprises shifts that occur within an organizational system as people enter or leave the organization, market conditions change, supply sources change, or adaptations are introduced in the processes for accomplishing work. Through managed change, leaders in an organization can intentionally shape how these shifts occur over time.
Most organizations begin as very small systems with loose structures. In a new venture, nearly every employee might contribute to many aspects of an organization’s work. As the business grows, the workload increases, and more workers are needed. Naturally, as the organization hires more and more people, employees begin to specialize. Over time, these areas of specialization mature through differentiation, the process of organizing employees into groups that focus on specific functions in the organization. Usually, differentiated tasks should be organized in a way that makes them complementary, where each employee contributes an essential activity that supports the work and outputs of others in the organization.
EXAMPLE
Recall that Jestina is helping the Quenchbliss beverage company expand their reach into Mexico. Suppose the soft drinks are extremely popular in Mexico, and as a result, the Mexico division has grown. As a result, they need more order fillers, packers, and delivery drivers. When this part of the organization was smaller, the warehouse manager probably helped the order filler when times were busy. But now that 10 additional people have been hired to fill that role, the warehouse manager needs to focus on other tasks, rather than jumping in and helping where needed. This is an example of differentiation. In smaller organizations, one can say that everyone might do a bit of everything. But as organizations grow, people tend to have more rigid roles to meet the specific needs of the organization.The patterns and structures that appear in an organization need to evolve over time as an organization grows or declines, through four predictable phases.
In the entrepreneurship phase, the organization is usually very small and agile, focusing on new products and markets. The founders typically focus on a variety of responsibilities, and they often share frequent and informal communication with all employees in the new company. Employees enjoy a very informal relationship, and the work assignments are very flexible. Usually, there is a loose, organic organizational structure in this phase.
The second phase, survival and early success, occurs as an organization begins to scale up and find continuing success. The organization develops more formal structures around more specialized job assignments. Incentives and work standards are adopted. The communication shifts to a more formal tone with the introduction of hierarchy with upper- and lower-level managers. It becomes impossible for every employee to have personal relationships with every other employee in the organization. At this stage, it becomes appropriate to introduce mechanistic structures that support the standardization and formalization required to create effective coordination across the organization.
In a third phase, sustained success or maturity, the organization expands, and the hierarchy deepens, now with multiple levels of employees. Lower-level managers are given greater responsibility, and managers for significant areas of responsibility may be identified. Top executives begin to rely almost exclusively on lower-level leaders to handle administrative issues so that they can focus on strategic decisions that affect the overall organization. At this stage, the mechanistic structures of the organization are strengthened, and functional structures may be introduced. Often, tension emerges over how to find balance in the structure. Most organizations at this stage of development need to have elements of a mechanistic bureaucracy while maintaining an environment that allows for the innovation and flexibility that is a feature of an organic structure.
A transition to the fourth phase, renewal or decline, occurs when an organization expands to the point that its operations are far-flung and need to operate somewhat autonomously. Functional structures become almost essential, and subunits may begin to operate as independent businesses. Often, the tensions in the company between mechanistic and organic inclinations may be out of balance. To address these issues, the organization has to be reorganized or restructured to achieve higher levels of coordination between and among different groups or subunits. Managers may need to address fundamental questions about the overall direction and administration of the organization.
To summarize, the key insight about the organizational life cycle is that the needs of an organization will evolve over time. Different structures are needed at different stages as an organization develops. The needs of employees will also change. An understanding of the organizational life cycle provides a framework for thinking about changes that may be needed over time.
| Entrepreneurship | Survival and Early Success | Sustained Success | Renewal or Decline | |
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| Organization |
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| Extent of Formal Systems | Minimal to Nonexistent | Minimal | Basic/Developing/Maturing | Extensive |
| Key Ideas |
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As you can see from the chart above, smaller organizations and entrepreneurial ones tend to need less hierarchy. But as they grow in the number of employees, the number of geographic locations, or the number of products or services offered, a more formalized structure is necessary to organize the work.
Our discussion about organizational structure to this point has focused on the forms that an organization might take and the options that are available to managers as they design structures for their organizations. However, organizations are constantly evolving. Because of this, it is important for structures to have the flexibility to change. Effective managers need to be aware of the various factors that drive the need for change and adapt the organization so that it is ideally situated to continue to accomplish organizational goals, which at times may mean changing the organizational structure. They need to know how to plan and implement change to achieve organizational success.
We will begin this tutorial by reviewing the types of changes that may occur in an organization. Then we will explore the organizational life cycle model, which explains how the structural needs of an organization evolve over time.
There are many different types of changes in organizations. The first is structural change. This has to do with the changes in the overall formal relationships within an organization. Examples of structural change include reorganizing departments or business units, adding employee positions, or revising job roles and assignments. These changes should be made to support broader objectives, such as to centralize or decentralize operations, empower employees, or find greater efficiencies.
Another common type of change is technological change. Implementation of new technologies is often forced upon an organization as the environment shifts. For example, an industry upgrade in a commonly used software platform may require that employees learn new ways of working. Upgraded machinery or hardware may require employees to learn new procedures or restructure the way that they interact with one another. The advent of cloud computing, where multiple users can access and work on the same digital documents and other files at the same time, is one example of ways in which new forms of collaboration are becoming more available. Organizations that used to email documents to one another can now simply read and revise the latest version through a web browser, using a tool like Google Drive or Dropbox. Technological change often induces structural change because it requires different ways of connecting across an organizational system.
A third type of organizational change is culture change. Organizational culture refers to the common patterns of thinking and behaving within an organization. Culture is rooted in the underlying beliefs and assumptions that people hold of themselves and of the organization. These beliefs and assumptions create mindsets that shape the culture. Culture change is among the most difficult kinds of change to create within an organizational system. It often involves reshaping and reimagining the core identity of the organization. For example, as many organizations have moved to fully remote work with no actual office, the culture of organizations has shifted.
When considering how to assess the need for change in an organization, it can be helpful to think of three dimensions: the scope of change, the level of change, and the intentionality of change.
The first, the scope of change, refers to the degree to which the required change will disrupt current patterns and routines. Incremental change refers to small refinements in current organizational practices or routines that do not challenge but rather build on or improve existing aspects and practices within the organization. Common incremental change practices are LEAN and Six Sigma, which are used to find relatively small changes that can generate greater efficiencies in a process. Changes to human resource management processes to better support the organization would also be considered an incremental change. An organization can improve its product line efficiencies by identifying small discrepancies in process, then fixing them in a systematic way. Incremental change does not typically challenge people to be at the edge of their comfort zone.
In contrast, transformational change refers to significant shifts in an organizational system that may cause significant disruption to some underlying aspect of the organization, its processes, or structures—for example, the launch of an entirely new product line. Apple, for example, used to sell computers, but when they launched the iPhone and iPod, this transformational change was required. Transformational change can be invigorating for some employees, but also highly disruptive and stressful for others. Examples of transformational change include large systems changes and organizational restructuring. Culture change often requires transformational change to be successful.
Finally, a strategic change is a change, either incremental or transformational, that helps align an organization’s operations with its strategic mission and objectives. This kind of change is necessary for an organization to achieve the focus it needs to thrive internally and externally. For example, a strategic change might involve a car manufacturer adding an electric car to the mix because they see competitors are offering this type of model.
The level of change refers to the breadth of the systems that need to be changed within an organization. Individual-level change focuses on how to help employees to improve some active aspect of their performance or the knowledge they need to continue to contribute to the organization in an effective manner. Individual-level change programs include leadership development, training, and performance management. Group-level change centers on the relationships between people and usually focuses on helping people to work more effectively together. Team development, or team building, is one of the most common forms of a team change process. Organization-level change is a change that affects an entire organizational system or several of its units. Strategic planning and implementation are perhaps the most common type of organization-level change. Higher-level change programs usually require changes at lower levels; an organization-level change may require change at both team and individual levels as well.
Intentionality is the final dimension of change and refers to the degree to which the change is intentionally designed or purposefully implemented. Planned change is an intentional activity or set of intentional activities that are designed to create movement toward a specific goal or end. Planned change processes often involve large groups of people and step-by-step or phase-by-phase activities that unfold over a period of time. Usually, effective leaders identify clear objectives for the change, the specific activities that will achieve those objectives, and the indicators of success. For example, an organization may decide it would like to offer a new product line, and this product line is carefully researched, developed, produced, and marketed in a planned way with timelines.
In contrast, unplanned change is unintentional and is usually a result of external environment change. For example, an unplanned change might be the movement to virtual workplaces due to a pandemic or could occur due to new government regulation. The most successful organizations use tools to constantly monitor the external environment to predict and prepare for such unplanned changes. However, sometimes unplanned changes are unintended consequences of a planned change. For example, if a company decides to sell electric vehicles, but then realizes their dealerships do not have charging stations, they will need to change quickly to meet that need. This is because it is difficult for leaders to anticipate all the consequences of a planned change effort. Employees react in unpredictable ways, technologies don't work as expected, changes in the marketplace don't happen as expected, or other actors may react in unanticipated ways.
As we will discuss later, some change models are designed to take advantage of the potential for spontaneous organizing among employees. Unplanned change can be harnessed as a positive force when employees are invited to be proactive about working toward common organizational goals.
Source: THIS TUTORIAL HAS BEEN ADAPTED FROM OPENSTAX "ORGANIZATIONAL BEHAVIOR". ACCESS FOR FREE AT OPENSTAX.ORG/BOOKS/ORGANIZATIONAL-BEHAVIOR/PAGES/1-INTRODUCTION. LICENSE: CREATIVE COMMONS ATTRIBUTION 4.0 INTERNATIONAL.
