CHAPTER 3

Change Realities and Dynamics

Sibbet and Wendling (2018) describe change as a “river.” Rivers are never the same from one season to the next and often differ a lot from one another. Holes, swirls, big rocks appear and disappear depending on how the water is running. This is a good metaphor for the fluid environment that leaders must navigate to champion and lead change. Part of navigating a river or the chaotic environment (the “speed of now”) leaders are experiencing requires a willingness to enter into the unknown. For leaders, entering into the territory of the unknown is essential for change to occur. There are some drivers of change that frame this journey into the unknown.

There are also many myths and anecdotes about change that weave through various change narratives. Brower (2020) offers some of these myths and a bit of “change reality:”

What Are the Drivers of Change?

As the world continues to diversify into a multitude of industries and a global economy that seems to shift with a high degree of regularity, understanding change and its results requires us to begin at grouping what influences change in the first place. How did Zoom pivot amid the pandemic? Why is it that Amazon’s delivery chain was minimally affected during the same time? While both these examples are from two different industries, the ability to pivot from environmental pressures—successfully—tends to have some commonality. Palmer, Dunford, and Akin (2009) identified a set of environmental pressures for change as well as organizational pressures. While it is not easy to apply these factors to an absolute degree, they provide a predictable framework to help us understand the basis of change in organizations and companies at regional, national, and global levels.

The environmental pressures they identified include:

These constitute pressures and realities that are largely external to a company but affect both the function and output of an organization at large. For example, the United States quite regularly experiences significant geopolitical pressures as it relates to oil security both domestically and abroad (Krane and Medlock 2018, 562), requiring it to change its approach to importing, exporting, and releasing strategic reserves of oil. General Motors, in response to changing trends in oil and electric vehicles, has declared a doubling down on electric vehicle development, in no small part influenced by competitors’ behaviors (LaReau 2021). By that same token, political forces are pushing the U.S. administration to consider significant regulatory changes to gas-powered vehicle sales (Shepardson 2021), which has most companies already preparing for a pivot. And as is the standard in the 21st century amid the almost ubiquitous use of social media as a means for consumers to voice their preferences, customers are voicing their desire for change among the U.S.-based auto companies to take future-proof methods to environmental sustainability (Fortuna 2021). All of this only just within the context of the automotive industry, showing that change can be as much a multiplier effect as it can be a chain effect.

Looking internally organizational pressures include:

Leana and Barry (2000) summed up the forces of change as adaptability, cost containment, impatient capital markets, control, and competitive advantage. These pressures and forces of change have become starkly evident during the 2020 global pandemic. Economic growth slowed, companies were forced to integrate both vertically and horizontally for survival much less profit (Nixon 2020), and identity of companies and leadership alike have both flourished and succumbed to the forces of a 24-hour, 360-degree news cycle (Mahoney 2021).

Heerwagen, Kelly, and Kampschroer (2006) note the structure, content, and processes of work have changed. Work is now more cognitively complex. Work is team-based and collaborative. Work is also highly dependent on technology, is time pressured, and becoming more and more mobile. In 2020, we learned that much more can be done for business remotely than ever imagined before, while simultaneously, many businesses—particularly those in the service industry—have shuttered their doors because of a structural inability to change overall (Guzman, Prema, Sood, and Wilkes 2020). Another major change in the way we do business came in the form of an increased need for transparency, internal communication, and how critical both are to the survivability of an organization amid so many change factors (Li, Sun, Tao, and Lee 2021). In fact, these two factors have come together during the pandemic—getting clarity on how mobile or centralized a workforce can be and hearing it clearly and transparently from leadership. Leaders hedging their decisions on the mobile versus centrally located debate are under constant scrutiny by the larger workforce, not only internally but also on external technology platforms that allow different organizational workforces to “compare notes” on work conditions. The days of management allowing for time to pass as the antidote to a confrontation with the workforce are quickly becoming extinct. Transparency is now currency and workforces are demanding that specific payment.

As a result, organizations today are more agile and lean than in the past, more tuned to dynamic competitive requirements and strategy, and continually reorganizing to maintain or gain a competitive advantage. The two key environmental drivers are:

Team B (2015) captured the drivers of change and some of the associated skills needed in this graphic:

What Does Change Really Look Like? What Really Changes?

As recently as the first decade of the 21st century, an estimated 46 percent of organizations were undergoing three or more complex change programs at one time (Bareil, Savoie, and Meuier 2007), indicating a need for leaders to accept change as normality (Senior and Swailes 2009), as well as understanding the nature of change. Consider a multitude of organizations and companies just in the last two years, inclusive of the pandemic. Companies, both large and small, have shuttered while other companies such as Home Depot have flourished. While the predictability of what would be successful and fail during this time can be up for debate, the unifying reality across all organizational outcomes has been the continuous change experienced and the resilience to stay relevant has contributed to survivability.

Adapted from Institute for the Future, Future Work Skills 2020, 2011

Organizational change, or change at its most baseline, has a fleeting definition overall. Hammer and Champy (2009) define this type of change as “the fundamental rethinking and radical redesign of business processes to achieve dramatic improvements in critical, contemporary measures of performance such as cost, quality, service, and speed.”

Palmer, Duncan, and Akin (2009) posit the main types of changes tend to be driven by three common organizational or structural changes that include downsizing or rightsizing, technology or systems changes, and realignments (mergers, acquisitions, or divestitures). A fourth could be added with leadership changes (CEO). In a survey in 2006, it was found that 43 percent of companies reported at least two of these types of changes in the prior 12 months (Dool 2006). On the other hand, Aims, Slack, and Hinnings (2004) maintain the literature sees incremental or evolutionary change being interspersed with revolutionary change. Palmer, Duncan, and Akin (2009) further argue that organizations generally face what they labeled as “first order” (incremental change) or “second order” (discontinuous change) (p. 86).

First-order changes can be either anticipatory or reactive. They are generally small-scale changes and often a result of individual initiatives or from the development of local practices or routines. These are often changes as a result of tuning, improving, enhancing, or developing. They are adjustments that are intended to support organizational continuity and order. The year 2020 laid bare the outcomes of such changes, as evidenced by Amazon’s ability to increase its marketplace and delivery streams in a seamless and responsive manner to the pandemic economy while other competitors such as Target, Best Buy, J.C. Penny, and J.Crew have filed for bankruptcy (Markowitz 2021). Amazon’s behavior during this time can characterized as anticipatory; in seeing the change in the marketplace from the pandemic, Amazon adjusted all parts of its service delivery and warehouse processing to adjust for current and ongoing demand changes. Big box companies such Target and the others previously mentioned who were already under competitive pressure from Amazon, can be seen as having taken a reactive position to the pandemic. As with many businesses globally, these companies to a “wait and see” approach to the pandemic shutdown, perhaps hoping that it would be short-lived. While no one was able to completely predict the extent of the pandemic and its effect on business, Amazon’s anticipatory behavior caused them to take immediate action to immediate market changes.

Second-order change is transformational or radical. These types of changes alter the organization and include discontinuous practices such as delayering, outsourcing, disaggregation, down scoping, and changes in internal boundaries (Palmer, Duncan, and Akin 2009). For the most transformational and all-encompassing example of second-order change in this day is the shift of organizations to remote working and the current consideration of continuing that arrangement after the pandemic with a view toward making workplaces more responsive to workers’ needs (Thompson 2020). Early in the pandemic, there was significant resistance to a fully mobile workforce, in some cases because of assumptions made by some companies of their inability to conduct business in a remote work environment.

Palmer, Duncan, and Akin (2009) go on to note these second-order changes can be characterized as “tectonic” change (large enough to overcome inertia), “punctuated equilibrium” (short bursts of fundamental change), and “robust transformation” (enactment of new capabilities). Further, researchers posit rapid and fast paced change creates a momentum needed to overcome the inertia that build within organizations over time (Aims, Slack, and Hinings 2004). Quattrone and Hopper (2001) argue that change is better defined as drift.

Armenakis and Bedeian (1999) identify three areas as common to all efforts to changing an organization; content, context, and process. Content refers to the specifics of the change. Is it an incremental change, made over time or is it a dramatic change that fundamentally changes the organization’s way of operating? Context refers largely to preexisting forces in the organization’s operating environment. Process issues are those involving all aspects of communicating the change. Readiness for change can be defined as the extent that the organization is prepared, both psychologically and behaviorally, to implement change (Weiner, Amick, and Lee 2008).

Further, Greenwood, and Hinings (1996) propose scope and pace as dimensions of change. Plowman, Baker, Beck, Kulkarni, Solvansky, and Travis (2007) contend the types of change vary along the following dimensions:

Because of the complexity of change, leading organizational program can be risky (Newman 2000) but can lead to organizational survival in changing environments (Wischnevksy 2004).

Why Do Most Change Initiatives Fail?

Research indicates that change initiatives fail at a high rate (70 percent) (Gill and Whittle 1992; Higgs and Rowland 2000; Miller 2002). The Gartner Group (as cited in Miller 2002) has reported that 28 percent of all major corporate systems investments are abandoned before completion, 46 percent are behind schedule or over budget, and 80 percent are not used as intended or at all within six months of completion. Change initiative failures occur for various reasons including poor strategy decisions, inappropriate choices, poor monitoring and control, lack of resources, leadership impatience, lack of a unifying framework for action, a shift in conditions, the lack of holistic integration, poor execution or poor design, and communications (Garvin 1993). Some change initiatives are launched without any formal structure whatsoever. Failed change initiatives may contribute to employee stress by undermining the employee’s capacity to absorb and respond to more change (Sikora, Beaty, and Forward 2004). A classic example of failed change initiatives is the Kodak company. For decades, the industry leader for all things cameras and film, the company displayed a classic example of not recognizing a shift in conditions and making poor strategic decisions. In the face of rising digital adoption of photography, Kodak predetermined that the digital revolution was not going to affect their core business. As a result, Kodak began to see a quick loss of market share followed by a collapse of their market leader position. Despite being a multibillion-dollar company at its height, Kodak filed for bankruptcy in 2012, joining a growing list of companies seeing their downfall due to an inability, or perhaps in unwillingness, to change.

A popular metric is the often-stated 70 percent failure rate for organizational change efforts (Hughes 2011; Senge, Kleiner, Roberts, Ross, Roth, and Smith 1999). This value was mainly established by two Harvard Business Review articles: one by Beer, Eisenstat, and Spector (1990), “Why Change Programs Don’t Produce Change,” and the other by Kotter (1996), “Leading Change: Why Transformation Efforts Fail.” Kotter (1996) applies it again in A Sense of Urgency, as do Hammer and Champy (2009) in Reengineering the Corporation: Manifesto for Business Revolution.

McKinsey (2015) published the results of a survey showing that 40 percent of executives reported their transformation efforts as completely or mostly successful. Many companies claim to be transforming, but when they looked for evidence, successful change efforts seemed to be rare. In their study of S&P 500 and Global 500 firms, they identified only 10 companies that seemed to meet the inclusion criteria for success: new growth, the ability for core repositioning (agility), and financial performance. The companies that stood out as transformational were Amazon, Netflix, Priceline, Apple, Aetna, Adobe, DaVita, Microsoft, Danone, and ThyssenKrupp. Short of conditions of catastrophic failure or tremendous opportunity, organizations are increasingly challenged to make these radical transformational changes. However, identifying and supporting change agents that might take on such tasks is difficult.

There have been many studies that have analyzed the success and failure of various change management programs in various industries and organizations. The problem with these studies is that they have been inconsistent with what constitutes failure and what criteria is employed in the analysis (Hutzschenreuter and Kliendienst 2006).

There are no known measures that can predict the successful implementation of organizational change and it is further complicated when we recognize that change in organizations occurs over time (Carr and Hancock 2006). Implementation can also occur differently in each unit of an organization.

According to Hoag, Ritschard, and Cooper (2002), obstacles to change included poor leadership (such as no vision, a lack of a change policy, a “victim mindset,” or saying “this did not succeed before,” promoting the status quo, and so forth), internal systems that prevented success, poor communication, a culture that promoted confusion, and the rumor mill (pp. 10–11). An ongoing and current example of such obstacles to change can be found in the United States Postal Service (USPS). A behemoth organization with a confused culture and limited communication on goals and objects, USPS has continued to struggle to stay relevant in the face of electronic communication, market competitors such as UPS and Fedex, and a failure to think beyond a victim mindset. Beyond just its struggles of being a public organization operated with a private mindset, the limited change policies of an organization reliant on “doing things how they have been always done” has resulted in creating a hobbled organization supported by the U.S. government and home to an antiquated work environment.

Another potential cause of change failures is the variable of resistance. In addition, Rosenberg and Mosca (2011) note that individual or personal factors for resisting change came in two dimensions: active and passive.

Resistance to change is often cited by leaders as the reason for change failures Leaders believe workers resist change and as a result do all sorts of things to counter that resistance. But instead of breaking through resistance, leaders may create it. People resist being controlled. And so 70 percent of all corporate change efforts “fail,” as noted earlier.

To be clear, people do not resist change, they resist being changed. Resistance to change is hard to assess, measure, and monitor. Rigid change leadership and management initiatives, with chain-of-command type governance, are often undermined by key stakeholders who resist planned change with skilled use of power, influence, and resources. Management across all levels, not just at leadership, are both key drivers and challengers to change initiatives. Management sometimes is unable to discern the difference between process changes and changes that aim to change people themselves. The former, articulated well, will have a greater chance of success versus the latter which is more likely to fail. For example, most companies during the pandemic changed work processes and conditions to adapt to working from home, provided workers with the resources needed to move with this change, and revising policy to support this rapid and unexpected conversion of classic practices. Companies that kept the focus on changing the method of work tended to see more success during this transition. On the other hand, companies that then followed up such a change with expecting workers at home to be tied to their desks, check in several times a day to prove that they were “at work,” and not distracted by personal obligations faced greater resistance from employees than they expected. The difference in these two examples is that the former sought to change work processes versus the latter sought to change employees themselves.

Skilled change management practitioners are able to understand and diagnose resistance in organizational culture, and work within constraints. The more skilled the change agent, the better the chances for success. Change initiatives fail also because the reasons for change have not been made strongly enough and communicated effectively across the organization. Often, it’s only the senior leaders who understand the reasons for the changes. Blanchard (n.d.) noted that many change efforts start with all the managers getting together behind closed doors and deciding what should be done. They never think of telling their people what is going to happen and why, let alone canvassing their opinions, ideas, or suggestions because they are the people closest to the front line and who just might be able to see what ultimate impact the change could have on the customer.

In summary, leaders must understand their impact on change success.

Leadership mistakes or impatience often leads to change failure. In their rush to change their organizations, leaders end up immersing themselves in an alphabet soup of initiatives (Beer and Nohria 2000). Serial changes due to leadership impatience undermine the ability of the organization to sustain change. Rosenberg and Mosca (2011) conclude that leaders can address the barriers to change by: (1) rooting the concept of change into the organizational culture; (2) hiring workers who accept working in a dynamic environment; and (3) adopting strategies directed to overcome barriers (p. 144).

The Speed of Change

A final aspect of change is the speed at which it is undertaken and attempted. In today’s context, it would seem almost unthinkable to effect change in an incremental speed, taking an iterative purposeful approach rather than reacting to the previously mentioned environmental factors that force us to pivot immediately. As observed by Uotila (2017), “in stable and simple environments, incremental changes found to be sufficient to keep pace with the task environment.” These kinds of changes are seen most often, somewhat counterintuitively, in invention and innovation. Steam engines to the industrial revolution, jet planes to aviation, and e-commerce to the Internet, are all examples of incremental change in a stable environment where iterative steps were taken to achieve the conveniences and marketplaces we know them to be today (Kishore 2015). The same can be said of high-tech giants such as Amazon, Apple, and Microsoft. While each of these companies make giant leaps in their respective areas, stepping back, we see this change occurring over two to three decades.

This is not to say that transformational or radical change does not have its place. One famous example is that of Netflix, that pivoted rapidly in 2007 from being a DVD-based mail company to an online streaming platform. While the Netflix we know today has made incremental changes to its streaming offerings—original content, documentaries to mini-series, purchasing movies from production houses—its major pivot away from DVDs to online content was planned, executed, and rolled out over the course of just over a year (Venkatraman 2019). Both models of the speed of change have their place in organizational change, yet the outcomes and effects to both employees and consumers can be wide ranging and hard to predict.