What is Organizational Change? Exploring the Meaning and Types

Organizational change refers to the process of transforming an organization from its current state to a desired state, which can involve modifications in various aspects such as technology, culture, strategy, and more.

What is Organizational change?

Organizational change is inevitable, regardless of whether it is intentional or accidental. Planned and unplanned changes can occur within an organization, with planned changes often being the result of long-term preparation. Conversely, unplanned changes catch organizations off guard, as they are not anticipated.

Regardless of the type of change, it is essential to recognize the importance of implementing change within an organization. What is the rationale behind altering the current state of affairs and implementing a new one?

The primary driver for change within organizations is the need for growth in the market. In order to remain competitive, organizations must continually strive to sustain and improve their market position. There are also various other reasons for change, such as organizational expansion, mergers and acquisitions, implementing new cultural practices, adopting a new marketing strategy, and updating the organization's vision and mission. The specific reasons for change will vary depending on the industry and individual organizational needs.

The right plan can be implemented only after detailed planning by the organization.

Types of Organizational change

Organizations implement various types of changes, with some of the common ones including restructuring, process improvement, and mergers or acquisitions. However, companies may also implement other types of changes depending on their specific needs and goals.

1. Strategic Transformational Change

Strategic transformational change refers to the process of making substantial modifications to an organization's current state of affairs. Unlike other changes, strategic change impacts the entire organization and requires a comprehensive approach.

When an organization alters its customer interaction methods, it can significantly impact the sales and finance departments while leaving other departments like operations and HR relatively unchanged. However, if a strategic change is implemented, the entire organization can undergo a transformation. A classic example of such a change is the modification of an organization's mission and vision, which is usually driven by a strong aspiration to achieve a particular goal.

Preparations are made at all levels of the organization to identify the goals to be achieved in strategic change. For instance, implementing automation can have a significant impact on all employees in the organization. As most processes in contemporary organizations are standardized, automating production and administrative functions can lead to a complete overhaul of existing employee roles and responsibilities.

When an organization shifts its marketing strategy from targeting a price-conscious market to a niche market, it triggers a strategic change that impacts various aspects of the entire organization. This change not only involves changing the marketing strategy but also affects other functions like pricing, functioning, and targeting.

2. Reactive Change

Reactive changes are a response to a particular event that affects the entire organization, resulting in the need for change implementation. These changes are often sudden and require prompt action to address the issue at hand.

The Coronavirus outbreak serves as a prime instance of reactive change, as organizations have had to quickly implement measures such as mask-wearing and increased use of hand sanitizers to adapt to the external threat. Similarly, during financial crises, organizations often resort to cost-cutting as a reactive change. However, since reactive change is typically unexpected, organizations are often unprepared and must learn as they go when implementing such changes.

Implementing new technology, adapting to changes in government taxation and regulations, and making mandatory changes are all examples of positive reactive changes. While reactive changes may not always impact the entire organization, they can still be beneficial in improving processes and remaining compliant with external factors. However, it is important to note that reactive changes typically have a shorter time frame for implementation compared to planned changes.

3. People-centric organizational change

When implementing this type of organizational change, it's important to recognize that employees may respond differently. Gradual and slow incorporation is recommended as emotional reactions from existing employees are not uncommon.

A prime example of this type of change is the hiring of new team members. Onboarding and training processes are typically necessary to ensure both new and existing employees are aligned and working together effectively. It's essential to communicate the rationale behind new hires to the existing team, as this can alleviate concerns and prevent panic from setting in.

When an organization undergoes restructuring, it is common for new employees to be assigned different job duties and responsibilities. This often leads to a transformation of existing job roles for all employees throughout the organization.

Modifications to organizational policies, such as employee leave and maternity leave, are common examples of people-focused organizational change. However, these policies may require frequent adjustments as the organization grows and evolves. For instance, New Zealand's adoption of a four-day workweek has brought about significant changes to the workplace. While these changes are intended to benefit employees, it is crucial to communicate them effectively to ensure smooth implementation.

If employees are not notified, then expect an emotional outbreak from them.

4. Incremental change

Slow and gradual adjustments make up incremental changes, which are implemented at the unit level and gradually incorporated throughout the organization. The purpose of these smaller modifications is to introduce significant improvements or adjust existing factors to promote better and more efficient facilities.

The company can use its own experiences as a learning opportunity to make necessary changes in order to align with its vision and mission. However, implementing these changes can be challenging and therefore a gradual approach is often taken. One example of such an approach is gradually introducing new financial software to a select group of users and gathering feedback to make necessary adjustments before implementing it company-wide.

5. Structural change

Team hierarchy changes are implemented through alterations in designations. For instance, in place of Finance manager, Finance auditor, Financial accountant, Accounts payable accountant, etc., the titles could be changed to Accounts manager, Accounts auditor, Accounts specialist, Collection Specialist, etc.

The reasons for the change in designations among employees can vary, despite their similar functions. It may be a strategic move to ensure consistency throughout the organization, whether it is a result of restructuring or a desire to create a level playing field for all positions. However, such structural changes can sometimes conflict with employee-centric initiatives.

Incorporating structural changes can also be motivated by mergers and acquisitions. In such instances, there are two possible outcomes: a fusion of both companies' cultures to form a hybrid culture or the survival of one company's culture while the other's is gradually phased out through structural and incremental changes.

During periods of expansion or contraction, the company's hierarchy undergoes significant departmental changes. During expansion, staff is increased, and employees specialize in their current department's functions. Conversely, during contraction, staff is reduced, and employees' tasks are generalized. These structural changes have a significant impact on the organization's operations.

6. Total Change

Total change refers to the implementation of significant changes within an organization. This type of change occurs when an organization shifts its vision and strives to align it with other strategies, resulting in a positive impact on employee morale and, ultimately, the success of the business.

When business realities fail to align with organizational expectations or when senior management is unable to meet employee expectations, it can lead to negative consequences for the business. This can result in declining numbers and loss of market share to competitors. To address this, organizations may need to reassess their vision and ensure it aligns with current company needs.

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In conclusion, organizations must carefully consider the types of changes they wish to implement based on their unique needs and external demands. The decision to adopt a change strategy should be driven by a thorough analysis of these factors. By doing so, organizations can effectively navigate the challenges of change and achieve their desired outcomes.

It is important to exercise caution when implementing any type of change, as it is likely to elicit a response from employees. Organizations should anticipate and prepare for potential employee outbursts or negative reactions, proactively addressing any concerns before they escalate.