Table of Contents
Nowadays, any organization should change in order to survive. New inventions and technological advances profoundly modify standard ways of working. Organizations that spend most of their time and resources on maintaining stability are unlikely to thrive in today’s volatile environment. A successful organization should be dynamic as it can be compared to a living organism that is constantly moving in the direction of growth or decline. All organizations aim to develop, which means that their goal is to move in a positive direction, which is the direction of growth.
Most entrepreneurs want to expand the organization they founded. However, with constant improvements of the company, managers have to develop systems and procedures that could help them manage the growing organization and control it. On the other hand, there is a large number of small companies, whose founders are satisfied with their size and the ability to adapt to the external environment. Thus, it is necessary to try to understand what makes some companies grow and others inhibit the growth.
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Many organizations aim to be globally competitive. Therefore, they need substantial resources for the creation of large enterprises. Large companies are characterized by standardized and complex structure and a mechanistic way of managing. The complexity of the structure is one of the main reasons to employ workers of various specializations. Moreover, a large organization appearing one day may become a factor in stabilizing the labor market for many years. Thus, the aim of this paper is to analyze the principles of organizational changes which occur within an organization by using the work The Heart of Change by Kotter and Cohen (2002).
Managers who start to work for an organization know that they should expect roughly the same career, which made “people organization” of the 1950s – 1960s. They expect that the organization where they are employed can guarantee stability, promotion, and professional growth.
The main purpose of the book The Heart of Change lies in the authors’ aim to focus on the issue of transitions and changes. The authors believe that the so-called “simultaneous approach” cannot be used without involving the management team. It is extremely difficult to single-handedly have all knowledge of provisions and instruments. Besides, without the advisers’ help, any company cannot initiate the process of change (Kotter & Cohen, 2002).
The major themes the authors of the book reveal are as follows: the essence of changes and their role within an organization, the way of their implementation, and the results they are supposed to bring for an organization. Moreover, the authors provide numerous ways to overcome the staff’s resistance to changes. The book is divided into parts, which relate to a particular number of stages and phases that an organization should take in order to successfully implement the changes. The concepts the authors introduce are directly connected with both theory and practice of management and organizational changes.
According to Kotter and Cohen (2002), each phase begins with changes followed by sustained growth and stability. The main task for the organization’s management in each revolutionary stage is to search for new organizational methods that will form the basis of management in the next evolutionary period. The authors emphasize that each evolutionary period is characterized by its own revolution. Therefore, going to the next step can be a revolution that refers to a series of organizational changes (Kotter & Cohen, 2002).
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Kotter and Cohen claim that moving into a new stage of the lifecycle determines the new rules according to which an organization must implement and maintain the internal functioning connected with its environment (Kotter & Cohen, 2002). Each evolutionary period is characterized by the dominant management style, while each revolutionary period is characterized by the dominant management problem. By this, Kotter and Cohen (2002) mean that, the higher growth rate in the industry in which the company operates, the faster it moves from one stage to another. Each stage is also a result of the preceding and following reason. Addressing each stage becomes a source of problems for another one. The most important conclusion to each stage is that if the company tends to continue the growth, the further actions of its management should be defined in detail.
The simultaneous approach involves hiring consultants to support the process of change but not change management. However, it is impossible to put all the responsibility for the success on the changes of consultants. The authors mention that success will entirely depend on the energy and knowledge of managers (Kotter & Cohen, 2002). Consultants are needed only in the early stages of the change process to examine specific areas of management and support management team decisions. An essential part of the consultants’ work is to teach managers how to work as a team. Finally, change is a difficult process, which can be rather dramatic at any level.
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The simultaneous approach to the changes, as the authors mention, eliminates many unpleasant moments by creating a strong corporate culture focused on the interests of employees (Kotter & Cohen, 2002). It has long been proven that changing only “hard” elements of the organization, such as strategy, structure, and systems, without changing the “soft,” such as culture, values, and philosophy is a road to nowhere. It is necessary to create and develop emotional commitment to new strategies and structures or “hard” elements simply will not work.
To describe organizational transformation systems, Kotter and Cohen (2002) drew analogy between the organization and the human body. The premise underlying business transformation, according to the authors, is that the complexity of modern organizations is challenging its mechanistic description that the corporation is like a living organism and is a biological corporation.
The essence of change management is the continuous adaptation of the company to environmental conditions. Change management is a complex process, which requires high competence of the company’s management, creation of an effective system to monitor the external environment of the enterprise, and intelligent application of analytical tools in the study of economic trends. Therefore, the control system change should be built on the basis of science-based concepts including the purpose, principles, mechanism, and management of results.
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One of the approaches the authors explore in their book is revolutionary change, which is believed to be fast, efficient, and well-targeted. Typically, these changes are applied when the current management methods cannot cope with environmental threats. The types of revolutionary changes are re-engineering, restructuring, and innovation. Re-engineering involves fundamental rethinking and radical changes in the business process in order to achieve dramatic improvements in critical current performance efficiency, such as cost, quality, service, and speed. When an organization is experiencing rapid deterioration in its performance, the manager can try to change the situation by restructuring. Innovation is the successful use of skills and resources to create new technologies or products and services. As a result, the organization can change and improve responses to customers’ requests and needs. Thus, the most revolutionary changes are suitable for survival in a crisis, and organizations should not forget about such methods of solving problems. The introduction of organizational changes during the period of a crisis helps not only to survive in times of difficult economic conditions and to consolidate position of enterprises in the market but also to improve their competitive advantage and even go to the next level of activities.
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The model was developed to explain the decision-making scheme for organizations whose activity is highly uncertain. Michael Cohen, James March, and John Olsen, who stood at the origins of this model, called the conditions of extreme uncertainty of organized anarchy, which is a democratic organization. Organized anarchy does not rely on normal vertical hierarchy of authority and bureaucratic decision-making rules but is characterized by three features:
- Problematic preferences. Goals, objectives, alternatives, and solutions are poorly defined. Uncertainty is characteristic for each step of the decision-making process.
- The fuzzy, poorly understood technology. Cause-and-effect relationships within the organization are difficult to detect. Comprehensive information necessary to reach a solution is not available.
- Turnover of staff in the organization. In addition, employees are overloaded and too limited in time in order to focus on a single problem and its solution. Participation in any decision is unstable and limited (Kotter & Cohen, 2002).
Decisions in the model are the result of independent streams of events occurring within the organization. There are four types of relevance to decision-making in the organization of the event flow:
- Problems. They highlight the current dissatisfaction with the activities and work performance. Besides, they represent the gap between the desirable nature of the job and the current activity. Problems are separated from the solutions and alternatives. The problem may or may not lead to a decision. Conversely, the decision can be made, but the problem will remain unsolved.
- Potential solutions. Solution is mainly represented by someone’s idea proposed for adoption. Such ideas comprise the flow of alternative solutions in the organization. Ideas can be brought into the organization as newly emerged workers as well as old employees. Participants may simply be overwhelmed by certain ideas and propose them as logical solutions in any situations regardless of the existing problems. Such attachment to the idea may be the reason why employees begin to search for the problem that can be applied to this idea. The main point that should be taken into account is that solutions exist independently of problems. The decision is officials who come to the organization and pass through it. People are hired to work, change their positions, and be dismissed. Participants greatly differ in their ideas, perception problems, experiences, assessments, and education.
- Opportunities for selection appear when the organization decides so. For example, they may appear when the contracts are signed or when people are made redundant, or, on the contrary, given approval for new products. Furthermore, they appear when there is a “right set” of participants, solutions, and problems (Kotter & Cohen, 2002).
Any management process includes the subject (control system) and the object (controlled system) control. On the one hand, this view seems quite logical, because that is what leaders have to exercise management influence including in the change management process. However, on the other hand, recognition of the other members of the management process, particularly workers, who are objects, is not entirely correct.
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Regarding the state of organizational changes and the book by Kotter and Cohen (2002), it is possible to come up with the two theories which help understand and contrast the authors’ opinions with the general vision of changes. Thus, the first theory is a so-called stakeholder theory, which is closely intertwined with the theory of communication (communication perspective). Their essence is to ensure that there are participants with certain expectations and demands with respect to the activities of the organization. For example, employees expect from wage growth distributors payments for products delivered in the stipulated contract period and from consumers ‑ high-quality service, the tax inspectorate as well as providing timely reporting and remittance of tax payments, etc. These participants enter into communication process with each other, which involves analyzing whether the union members will support or deny changes. Thus, it is advisable to allocate two categories of change management entities: subjects of the first order – the company’s executives and its units engaged in general management changes, and subjects of the second order ‑ including employees and external parties that influence the process of implementing changes.
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Companies operate in the conditions of constant changes in various areas. In particular, they are greatly influenced by the changes in the tastes and preferences of consumers, supply volume of competing products and services, the number of customs barriers, the reduction or increase in the accessibility of the domestic market for foreign suppliers, the national currency exchange rate against the US dollar / euro and the other foreign currencies, and the legislative regulation of production and trade of certain goods in the country.
Taking into account the concept of the four streams, the general decision tree in the organization becomes random. The organization undergoes problems as well as solutions proposed and selected by participants. In a sense, the organization includes the mixture of all the streams. Thus, as Kotter and Cohen (2002) claim, observing the organization as a whole and considering it to an extreme degree of uncertainty, it is evident that there are problems that are not solved and solutions that do not work. Solutions defy ordering and do not result from incremental logical sequence. The situation can be so complicated that the decision, the problem, and the results are completely independent from each other. When they collide, some problems can be solved, but mostly they remain unresolved.