Organizational change is necessary to address changes in both an organization’s internal and external environments. Changes in the external environment include new technologies, demand for new and different goods and services and changes in the structure of the industry in which the firm competes. External changes also include changes in the way we view an organization’s responsibilities to its stakeholders, which affect standards and regulation as well as consumer power in influencing business decisions. At the same time, changes in attitudes toward an organization may also reflect changing demographics or attitudes in the workforce that put internal pressure on the firm to change or address structural lag. Organizational change also comes as a result of changes in resources or a firm’s economies of scale.
Change in an organizational context can be one of three types. Developmental or incremental change involves improving simple processes or ways of doing things, and is a frequent and ongoing process within organizations. Transitional change is more complicated than developmental change, and involves identifying an opportunity and moving the firm from its current state to a new, known state to harness the opportunity, such as automating a process or introducing a new product line. Transformational change is often enterprise-wide and may involve fundamental changes to the organization's values as well as processes.
While we find that successful change management is defined in a number of ways in current research, a literature review suggests that managing change successfully involves three main steps, as first identified by social psychologist Kurt Lewin (often seen as Unfreeze, Move, Freeze):
- A beginning phase in which pressures to change or new opportunities are assessed, the required change is defined along with new goals and measures of success, and the organization’s vision and strategy are redefined to align with the requirements of the change.
- A middle phase in which the actual change takes place: this may involve developing an implementation plan, communicating the need for the plan and the necessity of the change, changing the organization’s structure and the roles of employees, dealing with resistance to change, providing training and redesigning performance measurement and reward systems.
- The ending phase, where the manager is concerned about sustaining the change.
Business managers are the number one change agents in a firm, and successful change management is critical for overcoming challenges and harnessing new opportunities. Change involves risk, and managing change can either make-it or break-it for an organization. Similarly, managers must be acutely aware of the difficulties of overcoming resistance to change, using a variety of managerial tools and skills to move the organization in a direction forward. Change management fundamental to the study of business management.