Strategic change is often a huge step for companies, requiring a lot of dedication and appropriate management. Change can often come with various types of resistance from employees. So, how can companies overcome this resistance? Through change management.
Change Management Theory
Strategic change can be defined as "changes in the content of a firm's strategy as defined by its scope, resource deployments, competitive advantages, and synergy" (Hofer & Schendel, 1978).
In other words, strategic change can often lead to changes in the vision of the company to become more competitive or profitable. It is not guaranteed that strategic change will always be successful. Companies have to create and implement a specific plan correctly. It is the managers' role to convey this change to employees and the organisation in general.
Change Management in Organisations
Two different types of change can take place within the organisation.
Change can either be incremental, taking place in small steps over a long period of time.
Coca-Cola releasing new flavours like cherry or vanilla.
Or disruptive (step-change), which is a more large-scale type of change that occurs rapidly, often throughout an entire industry.
Smartphones replace digital cameras.
Key drivers of change
There are a couple of reasons as to why a business would consider a strategic change.
External influences
Some examples of external factors that could influence change are:
The competitive environment: the competitive environment of a business is likely to experience various changes (Porter's Five Forces).
A competitor can easily gain increased market share due to a technological innovation that makes their production process more efficient or a competitor that can sell products for lower prices.
When rivalry between competitors is intense, a company may have to consider a strategic change to keep up with competitors. In these cases, it is possible that a quick and dramatic response is necessary (disruptive change) otherwise the firm will lose its competitive edge.
First mover advantage: rather than reacting to its environment, a firm might consider being the first mover when it comes to new technology or innovation. First mover advantage comes from a business that is first (or one of the few first) organizations that address the new wants and needs of consumers - before most competitors follow. This usually requires radical changes and for the business to be very open in embracing new technology.
New regulations and legislation: could also lead a business to consider strategic change, as it could put pressure on certain functional aspects of the business.
If new environmental regulations on emissions come into effect, the business might change its strategic direction to becoming a more environmentally conscious firm (reducing emissions and using sustainable energy).
Internal Influences
Some examples of internal factors that might influence the need for change are:
Issues with profitability: it could be that the business is not making enough money or even incurring losses. This would be a substantial reason why strategic change is necessary.
Weaknesses of the business: the need for change can come from a weakness the business has identified in a SWOT analysis. For example, inefficiencies like high waiting times during the production process, manufacturing costs or employee turnover.
Lack of internal innovation: Lack of innovation can be a reason why a business would consider change, as this can impact the competitiveness of the business.
Change Management Models and Process
Companies need to have an appropriate management tactic for embracing strategic change.
Managing Change and Organisational Culture
Organisational culture plays a huge role in strategic change. For strategic change to be effective, the change has to be integrated into the internal culture of the organization appropriately. Established firms can often have difficulty rethinking organizational culture, as shared organizational values and habits have been around for a long time - change will not happen overnight. This is why managers' leadership style is important to lead change. Managers need to understand that education, training and open communication are essential for leading effective change.
Effective management is also important as change can often come with an attitude of resistance. Resistance to change can show its forms through different ways, such as missing meetings and failing to deliver on commitments. Some of the reasons why employees could resist change include:
Fear of the unknown/change: the business has to be very transparent about the process of change. The more employees know about the change, the less likely they will feel fearful or neglected.
Misunderstanding: this can come from communication problems or mistrust due to the lack of two-way communication.
Organizational politics: some people may resist change to 'prove' that the organization has made a bad decision in their eyes, meanwhile others may resist change if they fear they will lose power within the organization.
Self-interest: when employees fear that change might lead them to lose their jobs.
For a business to manage change effectively, certain organizational structures that allow for a dynamic environment have to be in place.
The characteristics of a flexible organization include:
A flexible workforce: flexible work contracts make it easier for the organization to increase and decrease capacity quickly.
Information management systems in place: to increase the speed at which information and knowledge are shared within the organization. This can improve internal communication and customer service.
Flexible work options: like offering employees the option to work from home and working flexible hours. This can remove the time spent travelling to work and improve employees' work-life balance.
Cost savings: having a flexible workforce can decrease labour costs and so can remote working options.
Lewin's Force Field Analysis
Kurt Lewin proposed a model, the Force Field Analysis, which provides an overview of the different factors and issues that influence change within an organization.
Lewin argued that there are forces that drive change and forces that hinder change and in order to create effective change within the organization, there have to be more driving forces than restraining forces. If the number of forces is the same, meaning they are in equilibrium, no change will be made, which is why an organization has to disturb the equilibrium to bring about change.
Figure 1 (See below) provides an example of the application of the force field analysis for a company that wants to upgrade its factory with new equipment.
Here, we can see that there are ten total driving forces (forces for a change) and eleven total restraining forces (forces against change). The strength of each force is measured on a scale from 1-4 (see the top of the diagram). To create effective change, however, the organization needs an increased number of driving forces.
Figure 1. Lewin's Force Field Analysis Example, StudySmarter
Kotter and Schlesinger's Overcoming Resistance to Change Model
Kotter and Schlesinger (1979) developed a model for overcoming resistance to change.² The model includes six methods for managing resistance:
Education can be used when employees lack information or have wrong information about the changing process and its implications. Management should communicate the changes effectively to overcome this issue.
Participation includes involving resistors in the change design and implementation process. In this case, people will have a sense of ownership and commitment to making the change happen.
Facilitation can be used when people are resistant to change because they feel like they will not be able to make sufficient adjustments. To overcome resistance, management could provide training and emotional support.
Negotiation includes offering incentives for people to make the change. Negotiation could include a compromise leading to a slightly different type of change than originally intended.
Manipulation is when people are offered rewards if they agree to change.
Coercion is usually used when other methods are not viable. Coercion can include threatening employees with either job loss, transfer or promotion opportunities. This method is usually used when it is important to make the change quickly.
Change Management - key takeaways
Change management is the process of making sure that the business responds correctly to changes in its internal and external environment.
Strategic change can be defined as "changes in the content of a firm's strategy as defined by its scope, resource deployments, competitive advantages, and synergy" (Hofer & Schendel, 1978).
It is not guaranteed that strategic change will always be successful. Companies have to create and implement a specific plan correctly.
Change can either be incremental (small, gradual change) or disruptive (completely reinventing an industry).
Organizational culture plays a huge role in strategic change. For strategic change to be effective, the change has to be integrated into the internal culture of the organization appropriately.
A flexible organization is one that can respond quickly to changes in the external environment.
Kotter and Schlesinger (1979) developed a model for overcoming resistance to change. The six methods proposed include education, participation, facilitation, negotiation, manipulation and coercion.
The Force Field Analysis provides an overview of the different factors and issues that influence change within an organization.
¹M.A. Naghibi & H. Baban, Strategic change management: The challenges faced by organizations. In international conference on economics and finance research, 2011.
²J.P. Kotter & LA Schlesinger, Choosing Strategies for Change, 1979.
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