Change Management


Definition change management

Change management is the identification, formulation, acceptance, decision making and implementation of changes to one or more aspects of the organisation as necessary for the effectiveness, efficiency, continuity, growth, development and/or the interest of the organisation. The goal of change management is to adapt the organisation in such a way and timely (to changing circumstances, new possibilities, new insights, threats, turbulence, etc.) that the interests involved with the organisation will be guaranteed.

Change management differs considerably from regular operational management and is a separate problem and competence area, in particular in dealing with resistance. After all, change management involves decisions and the implementation of these decisions that affect the interests of individuals, work routines, habits, values. In general, those involved can use their position, knowledge and their operational work to prevent, delay or weaken those decisions, thereby reducing the effectiveness of the intended decision making in such a way that the interests of the company are at stake.

Involved experts/staff departments and their role in change processes

Image: frequently involved experts (professional disciplines) and staff departments with specific roles in change processes

Change management is far-reaching, and although it is fully the responsibility of line management, they will have to rely on expertise from, if sufficiently present, internal staff departments or external consultants in change planning and implementation. Below is a concise overview of the required expertise and their role in change processes.
• strategy
- the detection of deviations in the assumptions of the policy that they are no longer valid, such as the economic, technological, market-technical, competitive hypotheses on which existing organisation and policies are based. Subsequently advising the management and drawing up a new business model and the associated governance operating model.
• new business development
- in consultation with strategy, identifying new opportunities that are not addressed in the existing structure and policies, then develop these new possibilities in plans and acquire the necessary resources and thus implement or supervise the startups' activities.
• finance & control
- has the task of (re)-designing (adjust/renew) control model associated with the new business model/ design, as part of the governance model and its further detailing in the accounting and control processes, including the redesign of the management information system.
• tax affairs
- in the case of organisational changes in multinational organisations, there may be consequences for the applicable method of tax compensation as a result of proposed new structures. This may result in the legal organisation having to be designed differently as the operational organisation. Furthermore, in the case of transfer prices between units located in different tax regimes, the proposed transfer pricing system will have to be tested on tax aspects and, if necessary, adjusted for taxation.
• legal affairs
- for example, adjustments and terminate of employment contracts or changes of local regulations or changes to the assets, company structure etc., legal will have to advise in the legal consequences, the options and the further elaboration of this.
• mergers & acquisitions
- when an organisational change also involves a restructuring or an acquisition, these experts are needed and will have to advise the disinvestment and acquisition of business activities and prepare these activities from their M&A expertise.
• management development
- they will concentrate on personnel guidance on the development, the recruitment, selection and training of the management and its managers as required by the new organisation according to competences and style of management.
• personnel & organisation
- the extensive task of taking care of transfers, resignation of redundant staff, describing, valuing and scaling new positions, adjusting employment contracts, supporting and advising line managers in both personnel restructuring and the selection of (new) employees and the process of change at decentral level, guiding / supporting employees with emotional problems arising from the change process, etc.

3 levels of change

When changing, three levels can be distinguished. The nature is essential because it directly determines the change approach and the complexity and, in connection with this, the risk factor.

* Change level 1 - Adjusting the existing
The current situation is well known, the problems are being recognised, and the solutions are clear. It is a change from a known situation to a new desired situation. It is also clear what needs to do to realise the improvement. The strategy, structure and culture remain the same. Likewise, the customers, products and markets remain stable. It is about serving current customers better and cheaper with existing products. Again the starting point and the goal are crystal clear. The approach to such change benefits from a planned and project-based approach. Basically, changes are only made to technical systems and work routines. This is changes by organisational improvement; improving the organisation is limited to more effective and more efficient execution of tasks within the established structure of the internal organisation.

* Change level 2 - Renew the existing
Change is focusing on the renewal of the existing. The current situation is more or less familiar, but the new situation is not yet entirely clear. In particular, the transition from the current situation to the new situation is crucial. The renewal of the existing will involves a change in strategy, structure, culture and technology as well as the working methods and behaviour of people in the organisation. The change has a strong cohesion. Examples are not only the redesign of business processes but also the merger or collaboration between companies, the introduction of a new product or services, etc. These change processes benefit from a phased and well-considered approach with input from all parties involved. This is an organisational change which can be characterised by a change in the task structure and the associated allocation of resources, delegated decision-making powers and accountability in the internal organisation. This is a typical transition or turnaround management.

* Change level 3 - Transformation
This is about the search for new possibilities in an uncertain situation, where in fact everything is subject to change. The identity of the organisation is under pressure, and there is uncertainty about the right to exist. The current situation is unclear, and the future is uncertain too. The changes are very drastic and affect everyone involved. Transformative changes require courageous and transformational leadership. Depending on the urgency, this can also be classed as a turnaround or crisis/recovery management.

Types of organisational change

Image: 16 types of organisational change

It is elementary to distinguish between the many change interventions that all fall under the heading organisational change. On the one hand, there is a frequent confusion of tongues, but also since most change processes have multiple goals, methods and desired outcomes. With this, we also recognise that there is a difference to be made, but in practice, there is often a change combination. Here our list of types of organisational changes;
• fundamental
- a large-scale fundamental transition, basic and of great significance, leading to a totally different way of functioning that affects the entire organisation. The starting point remains the keeping of the aspects that are essential for the organisation, regardless of the structure. Using such a change is the most radical and requires great involvement and acceptance of staff. Extensive communication is therefore of great importance in a change where everything and the coherence between strategy, structure, culture, people, resources and results will differ completely from the original situation. This, while in a normal transformation change, elements are still retained.
• agile (incremental)
- continuous, and progressive, small successive phases, an on-going method of ever small changes that lead to improvements to an organisation. This method is increasingly being used for certain continuous improvement programs such as reaching a specific level of quality.
• scale up
- raise capacity, increasing the output volume of the organisation without significant changes or shifts in structures and processes (no re-engineering). Volume growth can also cause emotions and to maximise the involvement, the stabilising nature of the improvements is emphasised.
• corrective (unplanned)
- correcting the unexpected, in response to deviations, unwanted outcomes, threats or suddenly arising problems which give an acute challenge for an organisation. The effectiveness of the change efforts can be assessed relatively whether the problem is solved and how it has been eliminated.
• organisational change
- a change in the task structure and the associated allocation of resources, delegated decision-making powers and accountability in the internal organisation of a company, institution or concern.
• organisational improvement
- improving the organisation is limited to carrying out tasks more effectively and efficiently within the established structure of the internal organisation.
• transformation
- a strategic reorientation of an organisation, an organisational change based on completely or partially changed policy; mission, identity and ambition level. Such a strategic change involves new strategic choices that a company makes, f.e. developing new products, new services, conquering new markets. Requires a significant commitment and flexibility from all levels of staff and is usually managed in a top-down manner. In order to maximise involvement, one needs to communicate coherently and consistently about the transformation.
• processes and systems
- changes of workflows, information transfer and communication lines, available resources allocation and production processes redesign and/or optimise these to increase effectiveness and efficiency and thus the strength. Changes in known processes and systems may require significant behavioural changes in affected individuals.
• legal structure
- changes in the hierarchy of powers of an organization and legal structure such as ownership (shares and share ratio), control (f.e. administrative organization including voting rights, decision-making procedures between or within the institutions of the organisation; the general meeting of shareholders, the supervisory board and the board of directors, etc.) and the legal organization (f.e. legal conversion, legal merger, legal demerger, transfer of a (part of the) capital or company, shares merger, contractual merger, etc.) of an organization and its business units. Furthermore, all kinds of other legal developments and procedures that can have consequences for an organisation and directly lead to change management processes. These could include government-imposed regulations, contracts, lost or won legal cases, etc.
• people & culture
- cultural change is about the difficult to grasp the change in organisational culture. This can be about a large, all-encompassing cultural shift such as a controlling organisation that wants to become a learning organisation. But it can also be about a partial aspect of the organisational culture, such as changing the communication culture. Culture change is usually the change management activities that are designed to influence the (core) values, principles, roles and leadership style.
• restructuring
- a restructuring of an organization is a very dramatic change, often caused by a not timely intervention and therefore it is mainly aimed to survive (recovery), and as a result it will regularly be a combination of delete one or more business activities, sell (disinvestments), a significantly reduce in business volume (activities, employees, costs) and/or debts (financial restructuring). Actually a combination of different change intentions as mentioned here.
• merger and acquisition
- this is the integration of two (or more) organisations, with different cultures, systems, values and working methods. A new organisation with a certain hierarchy of competencies will also have to be designed and implemented. In our opinion, this reorganisation is often underestimated. The upstream (rational matters) are well organized, but the emotional undercurrent in the organisation is in full swing and often in turmoil. The change management efforts, therefore, focus on maintaining stability and morale in order to minimise unrest and employee turnover.
• de-merger (independent new branch/company)
- also, the divestment (and transferring) or privatisation of a part of the organisation, a department or business unit (often as a result of a strategic re-evaluation), is a form of reorganisation. In the case of an independent company, the change management activities will include the disengagement, transfer and the development of new leadership capabilities, processes and competencies. All of this for the independence of a business entity that has never acted as one entity before.
• downsizing
- reducing the activities in an organisation to eliminate overcapacity and/or reduce costs, which is often accompanied by the dismissal of employees. A simple management separation in responsibilities is essential and easy to apply; for outgoing staff and change management initiatives for repositioned and staying staff. The change management is mainly aimed at minimising negative effects and promoting morale, trust and productivity, the re-filling and/or restructuring of work processes and the support of remaining staff through training and coaching efforts.
• relocation
- change management initiatives are to ensure uninterrupted service to internal and external customers with a focus on clarifying the reasons for the relocation, the expectations and the communication about, support and adjustments to the specific behaviour of individuals and groups.
• strong growth
- even with the growth of the organisation, it must be adjusted and therefore always reorganised. The needs of the organisation are constantly changing at a rapid pace. This has an impact on the functions and in particular on the knowledge, skills and attitude of employees. (‘scale up’ has only volume growth, but little or no adjustment to processes and working methods as opposed to ‘strong growth’ that has a more thorough change in intervention)

Other terms that have a direct relationship with change management or (possibly) initiate a change process

Image: some activities initiating and related to change management processes (a few examples)

• re-engineering
- can be distinguished in process re-engineering (process change) and business re-engineering.
--- process re-engineering is the optimisation of operational and/or administrative processes (adjusting the existing: eliminating superfluous, shortening of waiting/lead times, etc.)
--- business re-engineering involves fundamentally different organisation of the production chain and is often accompanied by other restructuring measures, including outsourcing. (renew the existing)
• debt restructuring
- debt restructuring can basically have two causes. The first is to try to change the corporate loan (financing); the outstanding debt obligations are used to change the terms of the debt agreements to obtain any benefit. The second cause is more dramatic; the reorganisation of the outstanding obligations of an ailing company near insolvency. In order to restore liquidity and keep it in operation, they can only achieve this through negotiations to reduce outstanding debts, extend payment terms and/or obtain additional financing.
• cutting costs
- additional to not making unnecessary expenses that do not contribute, but mainly through other ways of working, can be a lot of money saved. Not only the role of better and cheaper purchasing but redesigning (engineering) and re-specifying products, making fixed costs variable, flexible/temporary personnel, etc. In this way, outsourcing and supply chain management also could offer savings opportunities. Note; sometimes it is smarter to raise the price slightly than to cut costs! But then the customer has to pay for that slightly higher price! Marketers must, therefore, find out what the customer wants to spend (maximally), and not let financial calculators determine the sales price on the basis of the cost price.
• chain collaboration,
- a form of optimising the collaboration between parties that work together in succession on one product or process. In the first instance, these parties need not have a direct business arrangement with each other but are indirectly jointly responsible for the realisation of a project, product or service.
• customer-oriented operations
- change effects can be quite significant at; the customer is priority 1 (instead of the organisation's own needs), listening to the wishes and needs of the customers and attuning the organisation to this and matching it to market needs.
• efficiency development
- the setup and application of quality models (f.e. ISO 9001, Kaizen, Six Sigma, Lean Manufacturing, Operational Excellence) can ensure that the work is carried out correctly and first time right.
Through insight, one can then subsequently improve the effectiveness and efficiency and make specific changes.

Change management and transformational leadership

Change management starts with transformational leadership, that is leadership that observes, interprets and acts from a deep responsibility for the continuity and development of an organisation. Traditional or transactional leadership (subjective principles and values; a cooperation in exchange for a reward or to avoid punishment) is reinforced by transformational leadership with universal principles. Principles transcend self-interest and group interests, they focus on the optimal solution for all parties involved, i.e. for shareholders and managers as well as for trade unions, employees, customers and suppliers. Principal thinking is based on respect, solidarity, equality, patience and synergy. The 'and-and' thinking that stands against polarising 'or-or' thinking. It is driven by the larger whole, not the smaller part. This type of thinking is the only way to synergy and develop maximum strength in an organisation, starting from
• open systems: striving for connectedness, collective dynamics and insights, promoting mutual influence (processes, systems, resources etc.) instead of control.
• tolerance for chaos: with chaos we do not mean disorder but free, unstructured energy - full of possibilities and the feeling for self-organizing processes, less straightforward thinking, understanding that something seemingly small can lead to major changes
• willingness to try things: mutual trust, letting go, delegating, wisely 'wasting' through testing, flexibility in staffing, an organization that evolves.
• the existing order is challenged: being open to opportunities and possibilities, out of the box thinking, tolerance for deviant ideas.
• and a coaching aimed at personal development (starting with the leader)

What makes someone a transformational leader?

Research points in the direction of 5 key elements that make a leader a transformational leader. A transformational leader is a person;
• with a charismatic appearance,
• motivates people through inspiration instead of persuasiveness,
• challenges the employees intellectually,
• understands the collective forces in a team or organisation and at the same time,
• he/she also pays great attention to individual needs.

Transformational leaders can also be recognised by their actions;
• develop a fascinating vision for the future,
• use stories and symbols,
• create a strong sense of goals and mission,
• speak a language that confirms this,
• get confidence through what they do, how they act,
• do invest in the pride of the teams and individuals,
• are working from principles and coherent values,
• highlight decisions from an ethical point of view (and not only from an economic point of view),
• search for alternatives and other/alternative (added value) visions and methods,
• challenge people intellectually,
• pay great attention to individual needs and differences,
• act from compassion and patience.

8 steps process for leading change

Image: 8 steps process for leading change by John P. Kotter

I Research phase
1. Create a sense of urgency

Business changes start with a first most important step; the creation of awareness, necessity and urgency among employees gives the required base of support. Employees are often not aware of the necessity and urgency for implementing business changes. This first phase requires an open, honest and convincing dialogue with all involved to persuade them of the importance. For example, by discussing potential threats, possible solutions can be can be presented and evaluated. Why do we have to change? Which problems needed to be solved? Emotions are the driving force and do connect, and therefore, in the beginning, the emphasis must be on emotion ('see-feel-change') rather than just only on the ratio ('analysis-think-change').
* The task of the board
• exam opportunities and threats
• analyse the strengths and weaknesses
• identify and discuss problems, outcomes/scenarios of unchanged policy and (potential) solutions
• have a communication plan (honest and convincing dialogue) aimed at creating support

2. Create a guiding coalition
The next step is to set up a project group: first who, then what. A group of enthusiastic people from the full breadth of the organisation must be supported and appointed by the board; this will be the 'leading coalition' (project team). This coalition is preferably composed of employees from different positions with formal and informal influence and sufficient critical capacity so that all employees can join the group and identify with the team members. Due to the open character, the group also has a sounding board function, so that open communication remains possible.
It is advisable to include in the composition of this project team 1 or more external interim managers/consultants as this will increase the effectiveness of the team. Adding externals to the team will magnify their collective experience with change management processes and the objectivity in analysis, business planning and implementing.
In addition to active and involved leadership, the initiation of an activating and enthusiastic movement, the third aspect in this phase is the personnel policy. To get the right people in the right place, the organisation works with personal objectives, appropriate assessment and remuneration, and possibly attracts new employees. In this phase, the management must not forget to take measures to limit (possible) adverse effects on the operational organisation so that usual operational outcome is still guaranteed.
* The task of the board
• forming a competent, powerful and influential team to lead the change (possibly supplemented by external expertise)
• organise this guiding coalition to work as an effective team
• take measures to limit the adverse effects on the operational organisation

Research phase
Emotional expression
Shock and/or surprise
* Management intervention
Providing guidance
- to inform
- giving influence
- offer structure
- schedule time

II Preparation phase
3. Create a vision for change

Make the change vision concrete, realistic, understandable and appealing. Identify the essence: what change does it take, what has to be achieved and why this change is required? Identify the common values and underlying assumptions that form the basis for the desired approach with which the change and the desired results can be realised. By taking ideas and suggestions from employees and processing them, the new vision will be accepted more quickly, and in any case, the support will be increased.
* The task of the board
• indicating the preconditions regarding vision development
• making analyses to achieve explicit assumptions
• provide supervision and support to the team that has the role to develop and clarify the vision
• formally reinforce the vision as a direction for the change effort
• ordering the development of a first/basic change plan to realise the vision (the who, what, where, when, why and how)

4. Communicate the vision
Creating a basis of support within the organisation has to be achieved through frequent communication with the staff. Take the concerns, opinions, any fears and suspicions of the employees seriously. After all, employees are the pivot in the company. 'Feeling safe' is an essential condition for making behaviour negotiable and changeable. Management has a crucial role in this phase by being vulnerable, revealing and open. It is vital that managers are prepared to play a decisive role in the change process by addressing their own behaviour. This is where the dialogue with employees/stakeholders begins, and all involved are invited to personal engagement in the change process. In this phase, it is envisaged that the new vision is fully understood and accepted in the entire company.
* The task of the board
• use every possible way to communicate the new vision and change approach
• discuss the emotions and behaviour, show understanding
• the board and team must set a good example for the organisation

Preparation phase
* Emotional expression  
* Management intervention
- show interest
- listen
- bring the reality to their attention
- allow time
- conduct open conversations

III Implementation phase
5. Remove obstacles

For a complete acceptance of the business changes, at every level within the company, it is vital to reduce or even eliminate barriers that may undermine the new vision. By continuing to engage in dialogue with all employees, and by encouraging them to think 'out of the box' when looking for solutions, it becomes clear the attitude and emotions of the employees and those who oppose the change. To further encourage the vision among employees, it helps to implement their ideas and to get them connected and active into the changes. In short, there is and enlarge the base of support for the change. The most important precondition for this is the commitment (and presence) of the board: without unconditional and long-term support, every change is doomed to fail.
* The task of the board
• remove obstacles
• try to deduct the emotional blockages from the employees as much as possible
• change the structures and systems that prevent the change
• encourage risk-taking and generating unconventional ideas and activities
• be present and unambiguous and build on a base of support

6. Create short-term wins
Nothing motivates more than success, so generate short-term successes 'quick wins' and make these successes visible to everyone. By setting short-term goals within the change process, which are also feasible, it becomes clear to employees what happens. If targets are successfully completed, this encourages employees to continue building. There is more faith in the success of the new vision and strategy. By recognising and rewarding the employees who are close to the change process, it becomes clear at all levels that the company is heading in a different direction. Ignore those who are sceptical of the changes.
* The task of the board
• create plans for visible improvement in the performance
• get results, demand them and show them
• reward and esteem in a visible way the people who have made the short-term results possible

7. Consolidate improvements
Make use of the intermediate milestones to continue further change. Develop new milestones, reward success and continue to insist on the need for organisational changes.
After the first successes, it is crucial that the organisation does not become overconfident and gets the feeling that the change process is already complete. In this phase, the emphasis is on the continuation of changes, alignment and fine-tuning. A precondition for this is that the 'sense of urgency' remains high. Research what works, refine the approach and transfer these changes to other parts of the organisation. Many change processes fail because too soon after a small victory and some progress are assumed, the continuation of the change process will also be successful. But implementing business changes is a process for the longer term. Rapid victories are only the beginning of the long-term change.
* The task of the board
• build on credibility and slowly transform all policy plans, structures and systems that do not fit in with the vision
• use, promote and develop successful change agents
• strengthen the change process with new projects, themes, boosters and intermediate goals (milestones)    

Implementation phase
* Emotional expression
Doubt of self-esteem
Letting it go
Experiment Discover
* Management intervention
Give space
- awareness of emotions
- show interest
- relieving responsibilities
- give attention to the here and now
- honouring the old but also parting of the past
- talking about the future
- encouraging initiative
- offering influence
- organise a ritual
- educate
- learning from mistakes

?? V. Evaluation phase
8. Anchor the changes

Ensure that the new situation is safeguarded by embedding changes in the organisation. This mainly concerns the discipline and the perseverance to do things differently. Implement and anchor the results in the corporate culture, so that a return to the old system is avoided. When business changes become part of the core business, it can become part of the corporate culture. Unfortunately, this will not happen automatically. With a new vision and mission, the principles and values within the company must also be in line with this. Because employees must continue to support business changes, it is advisable to continue discussions and evaluations about the progress and the outcomes of the business changes. The anchoring is only complete if the development on change is periodically and systematically measured and evaluated. This is often omitted and is an important reason that changes often get bogged down. After all, what is not measured is not important enough.
* The task of the board
• improve performance through customer focus and productivity awareness, as well as through more effective leadership and management
• implement and anchor the results in the corporate culture, including with principles and values
• evaluate and measure change results, and these must meet targets (if not, the change process cannot be closed)
• monitor, block and prevent a possible and return to the old systems

Evaluation phase
* Emotional expression
* Management intervention
- talking about the new situation
- looking back to what happened
- develop vision
- attention to small improvements