The nature and dynamics of organisational change

The nature and dynamics of organisational change has been studied extensively within management literature. It is arguably vital to understand this it is an essential element of examining organisations and understanding the forces of organisational change as they wrestle with managing innovation and change in new environments and contexts for doing business. According to Huczynski and Buchanan (2001) an organisation is a social arrangement for achieving controlled performance in the pursuit of collective goals. This definition emphasises the fact that people in the organisation interact in order to achieve some objectives and in terms of business those certain purposes always appear to be related to organisational growth. To a large extent it can be said that growth is related to the dynamics of change and innovation which are in turn fuelled by environmental forces. For example a series of inventions and innovations which reduced the number of people needed to work and the concomitant introduction of mass production systems resulted in the Industrial Revolution and related new styles and applications of industrial organisations. For these organisations the standard structure was to place these mechanistic lines under a system of rigid control, (Senior, 2002).

For many years change was considered more as an evolutionary process than a revolutionary process. The evolutionary assumption reflects the view that change is a product of adjustment. As Greiner (2000) points out each growth phase begins with a period of evolution. In other words change is incremental when the components of change phenomenon which are defined as a system, process or product undergo minor changes but the structure of the organisation remains unchanged, (Sircar, Nerur & Mahaoatra, 2001). However while evolutionary changes are essential for short term success it can not sustain an organisations long term survival in the face of pressure. As such then while evolutionary change is easier to accommodate revolutionary change causes stress because the implicit architectural basis for organisational knowledge such as the organisational culture is embedded in various processes which undergo fundamental and dramatic alterations. Yet revolutionary change it can be contended is essential in all organisations’ growth and a significant element in pushing them into the next phase of their growth cycle. Tushman & O’Reilly III (1996) point out that almost all successful organisations evolve through relatively long periods of evolutionary change combined with bursts of revolutionary change.

In Schein’s (1988) view organisations have to achieve both external adaptation and internal integration, thus attention is also drawn to the idea that some changes emerge unseen while others can be planned in order to achieve organisational growth. It thus is useful to have a look at the nature of organisational change and understand the conceptual barriers that it presents. One starting point for considering the nature of organisational change is Henderson’s (1996) framework in which change is described in terms of its components and architecture. Depending on the extent to which it affects organisations an innovation can result in an evolutionary (or incremental) change or a revolutionary (or radical) change. In Henderson’s model the subject of change can be clarified in terms of its components and architecture.

From this perspective evolutionary change occurs when the components undergo minor change while the architecture remains unchanged. Revolutionary change in contrast is characterised by dramatic change in the components as well as in the structure of the entire organisation. However a recent survey of Information System managers revealed that 39 percent of organisation have adopted an Object-Oriented (OO) technology to some extent nevertheless OO methodologies are used in only 5 percent in IS objects (Glass, 1999). In addition researchers believe that the OO approach is only an evolutionary adjustment from the structured systems, (Meli, 1994; Parodi, 1995; Booch, 1996). Sircar, Nerur and Mahapatra (2001) argue that while the knowledge of the information system does not change the relationship among these components enables the transition from a structured approach to an OO approach. This change can be defined therefore as neither an evolutionary change nor a revolutionary change because the organisational structure remains unchanged. As such architectural innovations which fall in between these two changes appear to be a factor in analyzing organisational change also. As a result the process of managing change is not positioned as a structure placed on the top level of management but as an ongoing experience and knowledge process related to both components and structure within an organisation.

Taking Motorola as an example over decades its steady evolution in the face of altered technological and business environments has allowed it to maintain its competitive advantage in the world market. Paul Galvin the founder of Motorola believed that in order to survive the company had to renew itself continually and that senior managers needed to engage with change actively rather than passively, (Miraglia, 2002). In order to move its managers’ point of view from a national to a global perspective Motorola shifted its point of reference from a primarily technical focus to a competitive business orientation and brought incentive systems in line with the achievement of strategic goals. Miraglia (2002) describes these innovations as an evolutionary approach to revolutionary change. Incremental changes enabled Motorola to reinforce their competitiveness however due to the size and age of the organisation it also suffered revolutionary change during the course of its expansion process. As a result Motorola operates successfully as a highly decentralized company in which each business unit develops and pursues its own strategies under the broad guidelines of headquarters. This short example is only an illustration of the pattern that organisations evolve to which is namely periods of evolutionary change punctuated by revolutionary changes. This follows Greiner’s (1998) theory about evolutionary and revolutionary changes from the perspective of organisational growth.

Greiner (1998) holds that organisations can be characterised by a five-phase growth process, which are creativity, direction, delegation, coordination and collaboration, and that each phase begins with a period of evolution which then ends with a revolutionary period of organisational change. In this process growth requires continuous improvement and evolutionary change so managers are able to incrementally alter strategies in response to external and internal forces. Thus in this model evolutionary change is comparatively small and controllable. The barriers created by organisational culture or people who are affected by this change are limited. As a result effective evolutionary change is crucial for short term success and provides the basis for revolutionary change that pushes organisations into the next growth phase. However this point is based on the assumption of a gradually changing environment and thus ignores a potential consideration that if rapid change is periodic discontinuity such as dramatic shifts in the availability of material may have unpredictable effects on an organisation. Therefore the industrial environment in which an organisation is competing such as the rate of industrial growth rate is a critical element in considering the stages of evolution and revolution which an organisation is to be placed in and passes through. Greiner (1998) points out organisations in a faster growth industry suffer shorter periods of evolutionary change and faster periods of revolutionary changes. Additionally technology cycles play a significant role in this process in which change in particular revolutionary change is not driven by particular technological fashions but reflects fundamental changes in the basis for technology.

Typical examples of these trends can be seen within the automobile industry such as for example the Japanese car maker Honda. Technological innovation is one of the most important driving forces leading Honda’s successful organisational change. Honda was cautious in its technological investments and sought to specialize in the production of reliable and efficient cars. Measures adopted such as the best use of a sub-contracting system had the effect of Honda developing more specific cars that were smaller and cheaper than their competitors yet which maintained reliability and quality levels. However the strong influence of its organisational culture presented and presents barriers to the enablement of revolutionary change within Honda. This can be seen in the informal norms, Japanese social networks, values and powerful organisational leadership that Honda has evolved in. It has been argued that the older the organisation becomes that the more predictable employees become and hence more resistant to both evolutionary and revolutionary change when it finally occurs in terms of their adaptation to it, (Greiner, 1998; Tushman & O’Reilly III, 1996). Therefore it is important to be aware of both the external industry environment in terms of political, economic, social, technological and legal elements (Pettinger, 2004) and the internal organisational environment in consideration of the role of evolutionary and revolutionary change in organisations.

Greiner’s (1998) model is mainly concerned with industrial and consumer goods companies and does not explicitly deal with either knowledge based organisations or service businesses. However there is a pattern in which success or failure often precedes and follows change within an organisation thus it is important to review the evolutionary and revolutionary trends which occur in these other types and forms of industries such as the accounting industry. Based on Greiner’s model which was first published in 1972 a mode for accounting firms’ growth phases was presented by Rea et al (1973). In their research revolutionary change occurred at the end of each phase and was then followed by a period of evolutionary change which managers needed to be aware of in order to affect a smooth growth pattern for those accounting firms. However in contrast to consumer goods companies the growth of an accounting company relys more on the superior service provided to clients and hence seeks to attract more customers based on this premise. Paying significant attention to the firm’s history in terms of revolutionary change reflects Greiner’s model which highlights a significant role for founding partners in the process of revolutionary change.

Nevertheless recent financial scandals such as Enron and Worldcom have brought to the public’s attention the performance of board management and vitally the ways in which it had failed in relation to the performance of accounting firms. Research has revealed for example that these failures were largely related to the close relationship of boards with their outside auditors and a survey has found that 19.2% of respondents did not believe management had provided enough information in order that reporters could understand the significant and dominant accounting policies and judgments which were made in financial reporting, (Brancato & Plath, 2003). These disclosures related failures ultimately responsible for the financial scandals in turn set the seeds for revolutionary changes in the accounting industry. As a result there has arguably been a wave of revolutionary change in the accounting industry because of the increasing requirements of strict regulatory controls over the financial disclosure policies of firms. Evolutionary change it would then seem is not efficient enough in controlling and mediating against contemporary financial scandals leading to the revolution which has occurred in accounting regulations. As mentioned by Greiner (1998) public awareness can be one of the driving forces in managerial crisis and the resolution of each revolutionary period determines whether a company is able to move forward to the next growth stage followed by orderly change or collapse as a result of the pressures inherent within change.

The differences between evolutionary change and revolutionary change are obvious and significant. While evolutionary change is usually seen as a competitive capability enhancing tool revolutionary innovation in contrast are called competence destroying because it happens when established organisational architectures have difficulty in coping with retaining competitive advantages in light of systemic innovations, (Sircar, Nerur & Mahapatra, 2001). Thus understanding the nature of change is a crucial step in managing the changes associated with innovation. However it is easy to say this in the literature but very hard to presume universal patterns in the real business world hence appropriate strategies to be used in different evolutionary and revolutionary stages are essential in managing effectively organisational growth. The cost of incremental change is low in terms of money and risk taking consequently when the pressure to change is not urgent organisations’ should prefer and engage in evolutionary change. Revolution is risky yet is essential for the next stage of growth yet inefficient changes might cause organisational failure. Considering the influence of organisational culture and leadership style revolution should be initiated from the top management levels to each business unit. Drawing on Rene Thom’s theory four change strategies can be identified, these being incremental, precipitate, cooling out, and blocking, (Bigelow, 1980).

However those strategies are effective when change is planned or for example a certain consequence of the change is well known. Even though the cooling out strategies is described as being useful when the change is not forewarned this approach is to some extent passive rather than proactive. New trends in the business world force organisational changes to more rapid and urgent so new patterns of organisational change will require managers’ attention. Greiner (2000) argues that the development of computer technology requires a new management knowledge base and technique which shortens the life cycle of products as well as organisational structural life cycle. For example a new product of Motorola European Land Mobile Radio was developed in 18 moths instead of the normal 3 to 4 years and at substantially less cost a result associated with the development of new technology. Additionally these results were also due to the introduction of a new management structure where a focused project team is responsible for the development of new products instead of the normal functional matrixes. Miraglia (2002) believes that the process for managing this change requires largely information sharing systems in which all senior management would participate. Motorola operates successfully as a highly decentralized company and thus its corporate operation does not rely on fixed long range planning but depends instead on different strategies developed at business unit level according to their specific business needs in line with overall HQ set strategic goals. This phenomenon again demonstrates the reliability of Greiner’s (1998) model. Yet managers need to be aware of the risk that as top level management lose immediate and direct control over a highly diversified operation a company falls into a risk of crisis of control. Additionally the moving trend for organisations to be more object-orientated might accelerate the pace of evolutionary change towards a revolutionary change.

The new structural features and processes of world markets result in global economy which is a vital driving force for change whether evolutionary or revolutionary depending on the stage in which an organisation finds itself. Companies that seek an expansion into the global market need to equip themselves with new strategies, new products and new services. Furthermore increasing government demands and regulations might result in a revolution in the industry in which organisations operate. Thus while radical change researchers predict in order to accomplish a revolutionary change the use of revolutionary tactics is required Stoddard & Jarvenpaa (1995) propose that varied revolutionary strategies depend on the scope and depth of the change as well as the phase of the initiatives which the organisation needs concerns itself with. Thus revolutionary change decreases in amount and force in later phases and occurs largely during the early stage of organisational growth. Most change arguably should be regarded more as an evolutionary rather than a revolutionary process. However in the face of dynamic external forces it can be stated that revolutionary change may at times be the only means of organisational survival.

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