Dr Georg Kraus
Dipl.-Wirtschaftsingenieur (equiv. to a Master’s degree in industrial engineering). Georg is a lecturer at the Clausthal University of Technology and possesses long-standing experience as a change management consultant. He supports companies in the execution of turnaround processes.
Christel Becker-Kolle
Dipl.-Psychologin (equiv. to a Master’s degree in psychology) and business economist with formal education in business philosophy and business culture management. In her work as a consultant and coach, Christel builds on the experience amassed during her time as human resources manager and manager of organizational and HR development departments in a variety of companies. She has advised these companies during both the set-up and dismantling phases.
Thomas Fischer
Dipl.-Psychologe (equiv. to a Master’s degree in psychology). Thomas began his professional career as a change management consultant at a business consulting firm. He then went on to gain several years of experience as a management trainer and coach at a large bank, where he led change projects and supported project managers and senior management in the implementation of change processes. He has worked as a freelance consultant since 1998, training senior management and project managers, as well as advising companies on change projects.
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© 2017 Georg Kraus
Satz und Umschlaggestaltung: Buch&media GmbH, München
Herstellung und Verlag: BoD – Books on Demand GmbH, Norderstedt
ISBN 978-3-7460-7122-0
Printed in Germany
This handbook, translated from the German, deals with change processes in companies and organizations. It provides information on the fundamental principles, background and methods and instruments of change management and is aimed at those responsible for change management within companies and organizations, as well as at external consultants, coaches and trainers.
The book combines the focal areas of organizational development and human resources within a single holistic approach to the planning and management of change processes, offering guidance on:
The authors draw on a corresponding spectrum of qualifications and experiences: Christel Becker-Kolle is a business economist and trained psychologist, Thomas Fischer is a trained psychologist and Dr. Georg Kraus is a trained industrial engineer. All three authors are active as consultants.
Change is part of life. Despite this fact, people strive for stability. The desire to have control, security and order often shape the way we think and act. It is difficult to determine the source of this need. Is it an early childhood longing for security? Is it because we constantly attempt to reduce the complexity of reality to a point where it makes sense? There are several models that attempt to explain why humans tend to hold on to the present state. Though the analysis of these basic patterns is an interesting and revealing study, this work will focus on the symptoms and behavior patterns rather than the psychological and evolutionary biological explanatory models of the human being. The following axioms are the basis of this study in change management.
Nothing is stationary, everything constantly changes
We change biologically every day as we grow older. Through age and information, our knowledge changes, as does our way of thinking. Organizations change, even unconsciously as employees change their base of knowledge through experience. Regardless of these daily shifts, many hold on to the status quo.
Change is not always easily recognized by the observer
There are changes that are not visible to the observer. The homo sapiens does not recognize the evolution of the homo sapiens. We can develop an evolutionary theory based on the past, but we cannot see that we are caught up in this biological process of change ourselves. This also applies to observations of natural phenomena such as mountains. Erosion is so minimal to the observer that he cannot see the change within his conception of time. Change managers like to bring up the “boiled frog” example. If you throw a frog into hot water it will jump right back out. If you put the frog in cold water, however, and slowly heat it up, it will not be aware of the gradual increase in temperature. More often than not, it will miss the point at which it could jump out of the pot. The water is then so warm that the frog’s extremities are numb and it can no longer jump, even though it wants to. This example symbolizes how dangerous it is to overlook change.
It is often difficult to recognize one’s own change
We are often not aware of our own change. Our surroundings then serve as a mirror for our change. People who have developed a good defense mechanism towards feedback and criticism are at risk of changing in a certain direction without noticing. This is often referred to as “step-by-step realization”. We don’t recognize our own change until an outside impulse, such as an event, feedback, or a crisis make us realize that
our self-image needs to be revised.
Change brings uncertainty and is therefore often avoided
We prefer to live in a state of clarity. Rituals and traditions make us feel as though the world is controlled and manageable. This longing for perceived security can be observed in small settings (e. g. marriage) as well as in large settings (e. g. traditions and religions). The creation of illusions as a form of security is an important engine in human behavior.
Change often requires physical and psychological energy and is therefore often avoided
It is exhausting to deal with change. It is uncomfortable to observe, evaluate, and adjust to change in our surroundings and within ourselves. Therefore, if we can sidestep change, we often will.
With any change, there are winners and losers
Change usually leads to a shift in power, as social structures and hierarchies alter. Benefits that we have grown accustomed to are removed or given to others, responsibilities are adjusted, and social demands are questioned. Some individuals are affected, while others are involved. “Scrambled eggs with bacon” is a good analogy. When you make scrambled eggs with bacon, the chicken is involved and the pig is affected. Change is similar and resistance is therefore more or less intense. Those involved agree or observe, while those impacted fight openly or secretly against the change. Each person focuses on their own well-being and can individually reject and boycott necessary change if they believe they will emerge as losers. An example are dictators, who are not willing to support change in their country because of their own need for self-preservation.
Time strengthens structures (in thinking and in organizations)
The longer people have experienced and approved of certain structures, the more difficult it is to let them go. Because of this, older people tend to struggle with a change in their thinking more than others. Traditional organizational structures are often perceived as “given” and are, therefore, not questioned. The ability to mirror observations with our own encounters and to make judgements based on these experiences makes daily life easier, because we do not need to constantly question everything. But it also leads to an acceptance of familiar phenomena and a failure to question the status quo. This, in turn leads to a so-called “operational blindness”.
Most changes in the history of change processes were so-called “big bangs”. Big changes, apart from those caused by nature, such as volcano eruptions or periods of drought, were often attributed to a crisis. Generally, a situation was exhausted and stretched to the limit until people were ready to act. In some cases, the resistance to change was so strong, that entire societies perished rather than adjust to the new circumstances. While reacting to a crisis can be viewed as “dealing with change”, it is not considered a rational approach, as the focus becomes crisis management. A continuous process of change, during which people constantly confront and adjust, is much more desirable. This applies to leaders as well as followers.
The objective of this book is to explain why change management is the one of the most important leadership skills and to illustrate how leaders should approach change. The term “change management” has only become popular in the past few years and originates with the Anglo-Saxon language, as do many management vocabularies. The term “organizational change management” is also a common business term, but is aligned with the people side of change management. For the purpose of this book and in following the latest trend, we will use the term “change management” to describe professional management of change rather than tie it to a methodological concept. Change management should therefore be considered a metaconcept that summarizes individual enhancing or contradicting concepts. We will describe each facet of managing change in addition to describing entire concepts as an integrated approach to the subject.
Although change management has played a role for as long as mankind exists, we will focus on the modern definition within this book. Change management has its roots in the 1950s. Until the 1960s most organizations had a strong hierarchical structure. Employees were generally given clearly defined tasks. The organization was seen as absolute and the authority of superiors was generally accepted without question.
The generation of 68, those that protested the social constraints of the time, called for a stronger focus on employees. Activities around group dynamics, team training and team development began popping up in organizations. These employee-oriented approaches further evolved over time and were labelled “organizational development” in the 80s. Most of these organizational development approaches continued to focus heavily on influencing employee behavior and showed signs of evolving into the group dynamic approach. Until the mid-1990s, there was a clear distinction between structural and strategic changes in an organization and employee focused reform. Since the proponents of these approaches represent different practices, this is understandable. A more integrated view of “driving change” has emerged only in the past ten years.
The Springer Gabler business dictionary defines change management as the strategy of planned and systematic change, which happens when organizational structure, corporate culture, and individual behavior is influenced, with the greatest possible inclusion of all involved employees. The chosen holistic perspective takes into consideration the interaction between individuals, groups, organizations, technology, environment, time and communication patterns, value structures, power constellations, etc., which exist in the relevant organization.
There are multiple reasons for change. The following list gives examples of possible causes of change processes:
There are generally three ways in which change can occur:
A crisis constitutes a change due to external factors and requires quick action and deep cuts. The organization must adapt in order to survive. Renewal or planned change is a planned strategic restructuring of an organization. Management recognizes it and reinvents the organization. Adaptation is an evolutionary approach, where those involved continuously work on their personal development.
Although most change processes and methods are distinctive, we were able to identify certain common characteristics on a higher level. The following three categories should always be considered when approaching change.
Strategy-Structure-Culture Triangle
Change therefore requires direction (strategy), clarification of processes and organization (structure), and involvement of people (culture). No matter how complex the change process, these three levels will help you ask the questions necessary to achieve a successful transformation.
Apart from strategy, structure, and culture we have observed an emphasis on the architecture of change. One of the change manager’s main tasks is therefore to design and support the process in a concise and professional manner.
Factual level
(information, organizational structures and staff planning)
Change management is often related to changes in the organization. People will be required to work together in a different way. A critical function of change management is to professionally analyze, plan, and implement these shifts.
Process level
(with a focus on direction, steps and efforts)
The importance of the process level has been underestimated in the past. Change cannot happen with the click of a button. Sometimes it can take years to implement. The successful design and support of the change process within an organization is one of the most important tasks in change management.
Historical level
(history and corporate culture)
It is important to understand and integrate the history of an organization. Change managers can only design the right change processes if they understand where people come from and what traditions and rituals shape the organization.
Personal or psychological Level
(behavior, attitudes, fear, motivation and resistance)
Recognizing the resistance to change, identifying winners and losers, relieving fears and reaching people on a personal level are all important features of successful change. This is often underestimated, as many managers approach change mechanically and fail to involve the people that will be affected.
Change management is often seen as a “project”. The need for change is recognized, management agrees that it is the right time for change, goals are formulated, and the project is realized. The following illustrates the “standard sequence” of change.
Standard procedure of a change process (as a project)
Analyze
Formulate objectives
Generate commitment
Design the intervention
Project management
Determine next steps
This project approach is commonly viewed as the most effective method for implementing change. Within the past twenty years, a strong demand for “continuous change” has emerged, however, this cannot be accomplished through a single project plan. Concepts like kaizen (continuous improvement) and “learning organizations” emerged. This type of change management is subtler and not tied directly to one single need for change. Rather, it is important to keep an organization “fit” and flexible, so that it can recognize and react to change in its environment.
Dealing with change in a systematic way will be increasingly important in the future. But we must also recognize undesirable developments. Some organizations seem to believe that change is simply a trend. Contemporary managers put the subject of change on their agenda, but intend to conduct methodical change, which results in employees being confronted with new concepts on a semi-annual basis. We believe this to be a misinterpretation of the term change management, especially because it ignores certain levels (i. e. personal level, historical level).
Most change managers are faced with the challenge of change needing to occur alongside regular business operations. The organization cannot be shut down while implementing change. Instead, change must happen during regular business hours. Organizational change is like an airplane that needs to be completely remodeled in flight without compromising the security of the passengers. This scenario places a great deal of pressure on employees, as well as the entire organization. Successful change management, therefore, involves balancing daily operations and with the change process.
Over the course of the 20th century, several concepts in the practice of “dealing with change in organizations” have been established. The effectiveness of the relevant concepts depends on the specific situation in the organization. Organizations that are in crisis, for example, and need to completely re-invent themselves, require a different approach than organizations that are well-positioned, but seeking improvements. Leadership should, therefore, assess the organization and determine to what degree change is needed and gage employees’ willingness to change. The greater the need for change in an organization, the more aggressive and sturdier the concepts for implementation must be. The higher the willingness to change, the more involved and employee-focused the process will be.
The following diagram introduces the most well-known concepts used in organizational change within the past fifty years.
Hammer and Champy initiated Business Process Reengineering (BPR) trend in 1993 with their book “Reengineering the Corporation”. The objective of this practice is to attain increased customer satisfaction and organizational performance of revolutionary magnitude – “we are talking quantum leaps”. The business model needs to be fundamentally redesigned in order to prepare the organization for new market demands. To lower costs and increase service quality, a radical redesign and reorganization of an enterprise is necessary. The concept is fundamentally top-down oriented and is especially successful when a high pressure situation, or crisis, dictates perception.
The principles are:
Reengineering concepts are rather mechanical in their approach, while people play a minor role. Focus is on a strategic remodeling and restructuring of the organization. The change manager follows these four steps: positioning, process description, process design and controlling.
Positioning is the base for a successful initiation and fulfillment of the BPR process. The change manager must:
The change manager can use the following Business Reengineering tools:
Process analysis and description are very important in this concept and are conducted using the following steps:
Tool | Technique |
Process modeling | Illustration of business processes in an organization Illustration of process related functions (tasks, responsibilities) within the content and time related dependencies with the use of link operators (and, or, exclusively) due to high complexity performed with computer support |
Process simulation | Time simulation (for separate tasks) Simulation of probability distributions Horizontal positioning of vertical operational practices in relation to operational processes |
In process redesign, operational practices are aligned with strategic challenges pursuing the following targets:
Applied measures and reorganizations need to be monitored. If necessary, processes will be continuously improved.
Hammer and Champy themselves admitted that reorganizations fail approximately nine times out of ten. The presumption is that revolutionizing organizations is not a model for success from a mechanical point of view. It is difficult to illustrate the complexity of reality in a purely mechanical way. Excluding employees in the process generates a resistance that works against an otherwise reasonable concept.
Reengineering concepts are the basis for an approach that is similar in thought, but focuses more on maintaining resources and self-organization. Like reengineering, the goal is to adapt the organization to the needs of the environment and is a top-down process. The considerable difference lies in the involvement of employees and middle management in the thought process and implementation. In addition to the methods for “operational optimization”, methods for employee involvement are introduced, allowing employees to identify with the change process. An intervention design is created to identify when and to what extent employees are being engaged in the process and what “interventions” are being employed.
When designing interventions, it is important to realize that they can happen on different levels (Willke, 1995):
Within the framework of intervention design these three types of interventions should be considered:
In a role intervention, those involved in a change process are assigned a role. Roles tend to broaden, especially during phases of change, which often leads to uncertainty about the division of responsibilities, resulting in frustration. The main goal of role interventions is to provide involved and concerned parties clarity about, or to redefine, their roles.
Management Workshops for those involved in the change process can be helpful in answering the following questions:
Competencies and responsibilities
Mental models
Common goals
Know-how
Social relationships are shaped by personal, social, factual, and emotional factors and can be observed in verbal and non-verbal communication. Relationship interventions target patterns of social relationships. Communication is the basis of social activities, but each communication has a relationship aspects. These relationship aspects are often apparent when observing the differences between verbal and non-verbal communication, as well as between formal and informal relationships. Workshops can help in determining the following:
The pre-requisites for successful communication are 1) relevant information, 2) penetrating connection (docking), and 3) willingness to communicate. Communication interventions target patterns of communication that allow and support the acceptance and transparency of communication. To achieve successful communication, three steps are crucial:
Parting with the telephone model (problem of information)
Communication is not simply the transfer of complete information parts from the sender to the receiver. One of the biggest factors in unsuccessful communication is the belief that the quality of communication depends solely on the accuracy of given information. It is important that information also makes sense and is relevant to the receiver. In the telephone model of communication, ambiguity and misinterpretation represent the biggest obstacles to successful communication. When these hurdles can be eliminated, communication should be successful.
Parting with the command-obedience model (problem of arrival of information)
In complex and professional relationships, the command-obedience model cannot be used to achieve a desired steering effect. There are too many opportunities to be evasive and to object. The sender is responsible for his message to be heard – and understood. Within the command-obedience model of communication, there are two sources for communication barriers: the extent of the sender’s authority and the receiver’s willingness to obey. If the manager or consultant has the required authority and if required motives to obey are present, communication should be successful.
Using the dialogue model
Communication is the processing of relevant differences. An effective model for social communication must be more complex. Communication is a process of transformation, which is dictated in large part by the operational terms of the communicating systems (i. e. people, groups, departments, organizations). The dialogue model of communication outlines the actual extent of barriers to communication that must be overcome in order to be able to communicate effectively and successfully. Communication is not just the sending of complete messages, but also, a system of understanding information, accepting information, and processing information. Communication will rarely be successful without translation. Since each system values only its own relevance, speaks its own language, and processes information according to its own preferences, translation is needed to achieve successful communication.
Within the framework of change processes, the change manager is responsible for creating a platform that accommodates the necessary translation. Groups can be assembled for this purpose, but the goal must be to involve all parties to ensure understanding of the goal and the process of change.
Strategic redesign is currently the most integrated approach. The combination of change on a structural level and involvement of employees yields the greatest chances for success. This approach is also fueled by the logic of “change over time”. The goal is to adjust an unsatisfying situation and to establish a new one. However, the model lacks the logic of permanent change.
Organizational development (OD) is a professional tool for the design of change processes that originated in a socio-psychological environment about sixty years ago. The concept of organizational development can be traced back to three sources: the “laboratory method” and the “survey-feedback” approaches developed by psychologist Kurt Lewin, a modern pioneer of organizational, social and applied psychology, as well as the social science work of the London Tavistock Institute of Human Relation.
OD methods and concepts are characterized by a process oriented evolutionary development approach. They are dedicated to the activation and expansion of the potential that exists within an organization and its members. The organization and its members are empowered to influence the requirements of internal and external environments. They are tasked with identifying relevant answers and implementing solutions in coaching and assessment sessions, workshops and seminars, team and department development meetings, group events and certifications. These are the basic intervention levels:
Based on a relevant analysis of the situation, measures will be developed to improve work success as well as work satisfaction.
While work satisfaction is viewed as a necessary condition for development and improvement in other concepts, it is the starting point and catalyst of change in organizational development.
Organizational development philosophy:
The goal of OD, above all, is to further the development of an organization at the cultural level. The following effects should be targeted, according to Cornelli (1995):
The success of organizational development is tied to certain conditions. The main requirement is that the organization is ready for the process, so that participatory organizational development methods are not overwhelming. In addition, there needs to be awareness that a problem exists. Organizational development as a participative method is relatively time consuming. Therefore, it is important that there is no time pressure. It is critical to conduct a problem analysis at the beginning of each organizational development process to ensure that measures are in place. To ensure that those involved can handle the process and can be successful, measures should be taken in small steps. The purpose and goals of change must be clearly defined to ensure and clarify everyone’s involvement. Full disclosure, trust, and transparency must be present throughout the process of organizational development, and progress and success should be noted accordingly. The involvement of an external consultant, who oversees the change process and conducts supervision sessions, can be beneficial for a successful organizational development.
This approach originates in the automobile industry. With the publication of The Machine that Changed the World in 1990 by Womack, Jones, and Ross, based on the Massachusetts Institute of Technology’s (MIT) study of the automobile industry, a new approach to organizational design was introduced. Never before had the differences in performance measures among large organizations in Japan, Europe, and the United States, resulting in the failure of the western automobile industry, been highlighted in such clarity (Haug, Martens & Pudeg, 1993). Only a change in manufacturing organization and corporate culture could avert a descent into insignificance. The MIT authors also presented possible solutions for the western industry: the prevalent and most successful management principle of that time was lean management, or lean production. The philosophy of these principles was described with terms such as kaizen or continuous improvement process (CIP). With the help of a lean production, the advantages of mass production (cheap and fast) were linked to the advantages of manual production (quality and flexibility). During the course of reorganizing, several similar management concepts surfaced in the 90s, all of which have their roots in lean management. These management approaches are especially effective in improving work organization and better utilizing employee skills.
Lean management is implemented in the following steps:
The following parameters are important:
The emphasis of lean management is on optimizing manufacturing organization. Though advocates of the lean management approach insist that it can also be applied to administration, practice shows that manufacturing organizations introduce lean concepts regularly. The emphasis is on the introduction of “new forms of work organization”, which encompasses the following management principles: Group work and kaizen or continuous improvement process (CIP).
Group work as a central new form of work organization is a requirement and starting point for the development of competencies. The group is responsible for reaching a common goal. Since the group organizes itself, communication and cooperation are necessary and are the responsibility of the group members. The idea of group work is to bring employees together in teams to make them collectively accountable for a clearly defined task. This form of job enrichment leads to a higher level of identification with the job and therefore a higher level of engagement.
Kaizen is a Japanese form of employee-oriented management, which is generally defined as a philosophy of continuous change and the flexibility to react to change in the environment:
The Japan Juman Relations Organization (1994) calls for a long-term commitment when introducing and establishing kaizen. Kaizen means “change for better”, where “kai” means change and “zen” for the better (Imai, 1986). It is often referred to as continuous improvement process (CIP).
According to Kaizen philosophy: “Never let a day pass without having achieved organizational change.” It is important to note that not only refers to big and expensive investments, but to managing all the incidents in daily work routine. Kaizen deals with real tasks and real knowledge and develops leadership and organizational methods for an active, transparent, and value oriented self-management of organizations.
The kaizen movement started in the 1950s, when Taiichi Ohno was production manager for Toyota, which at the time following World War II was a tiny and hopelessly outdated car manufacturer. Ohno, observed the Ford plant in Detroit and determined that workers on the assembly line were not able to use their knowledge to the company’s advantage. Japanese managers struggled to keep up with the industrial advancements in the US, yet were critical of western manufacturing systems. Taylorism was flawed with waste in regard to work, material, and time. Ohno began to adapt the assembly line to Japanese standards in small steps. One of the first steps was to group workers in teams with a team leader instead of the more prevalent foreman. Teams were given a part of the assembly line with instruction to identify the best way of conducting the work. Through practice, this concept has developed over the years into an economic principle that is now referred to as lean management. There does not seem to be a theoretical basis, and development has still not concluded or been systematically explained – least of all by the Japanese.
When implementing kaizen, the networked consideration of tools and goals is of utmost importance. Customer service and employees are the focus of observation when implementing kaizen in an organization. Top management is charged with initiating and establishing the kaizen process. Employee oriented management systems are a prerequisite for the establishment of kaizen. Imai (1986) names mutual trust, the creation of team spirit, and an appreciation of improvement methods, especially during the early stages, as other important prerequisites.
Kaizen reflects Japanese values and the roots can be traced back to Buddhism and the mentality of Japanese society shaped by Confucianism. Since kaizen was also applied in American quality management, American concepts play a role as well. Kaizen philosophy describes life as constantly changing and therefore as a process of continuous change (Jung, 1993). In Japan, kaizen manifests itself in business as well as private life. The world, according to Buddhist beliefs, is continuous change. And within a changing world, humans change as well. The environment influences humans, as humans influence their environment. Whoever is not ready to continuously change themselves and their behaviors will hit a dead end. This is core concept of kaizen.
Essential kaizen criteria:
Kaizen continues to be the most integrated approach. It targets gradual and continuous improvements of organizational performance in all departments with involvement of all employees. Cost efficiencies, quality improvements and lead time reductions are the most important areas of success. By eliminating waste and synchronizing workflow, kaizen aims to optimize production.