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CHANGE MANAGEMENT

Change management is a structured approach to the change in individuals,

teams, organizations and societies that enables the transition from a current

state to a desired future state.

THEORIES OF CHANGE:

The evolution of the change management field stems from psychology,

business and engineering. Hence, some models are derived from an organization

development perspective whereas others are based on the individual behavioral

model. For this reason, this section is divided into two sub-categories: IndividualChange Management and Organizational Change Management.

DYNAMIC CONSERVATISM:

This model by Donald Schon explores the inherent nature of organizations to

be conservative and protect them from constant change. Schon recognizes the

increasing need, due to the increasing pace of change for this process to become

far more flexible. This process being one of 'learning'. Very early on Schon

recognized the need for what is now termed the 'learning organization'. These

ideas are further expanded on within his frame work of 'reflection-in-action', the

mapping of a process by which this constant change could be coped with.

INDIVIDUAL CHANGE MANAGEMENT:

An early model of change developed by Kurt Lewin described change as a

three-stage process.

The first stage he called "unfreezing". It involved overcoming inertia and

dismantling the existing "mindset". Defense mechanisms have to be bypassed.

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In the second stage the change occurs. This is typically a period ofconfusion

and transition. We are aware that the old ways are being challenged but we do

not have a clear picture to replace them with yet.

The third and final stage he called "refreezing". The new mindset is

crystallizing and one's comfort level is returning to previous levels. Rosch (2002)

argues that this often quoted three-stage version of Lewins approach is an

oversimplification and that his theory was actually more complex and owed more

to physics than behavioural science. Later theorists have however remained

resolute in their interpretation of the force field model.

This three-stage approach to change is also adapted by Hughes (1991) who

makes reference to: "exit" (departing from an existing state), "transit" (crossing

unknown territory), and entry" (attaining a new equilibrium).

Tannenbaum & Hanna (1985) suggest a change process where movement is

from "homeostasis and holding on", through "dying and letting go" to "rebirth and

moving on". Although elaborating the process to five stages, Judson (1991) still

proposes a linear, staged model of implementing a change:

(a) Analyzing and planning the change;

(b) Communicating the change;

(c) Gaining acceptance of new behaviors;

(d) Changing from the status quo to a desired state, and

(e) Consolidating and institutionalizing the new state.

The ADKARmodel for individual change management was developed by

Prosci with input from more than 1000 organizations from 59 countries. This

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model describes five required building blocks for change to be realized

successfully on an individual level. The building blocks of the ADKAR Model

include:

1. Awareness of why the change is needed

2. Desire to support and participate in the change

3. Knowledge of how to change

4. Ability to implement new skills and behaviors

5. Reinforcement to sustain the change

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ORGANIZATION CHANGE MANAGEMENT

Organizational change management includes processes and tools for

managing the people side of the change at an organizational level. These tools

include a structured approach that can be used to effectively transition groups or

organizations through change. When combined with an understanding of

individual change management, these tools provide a framework for managing the

people side of change. People who are confronted by change will experience a

form of culture-shock as established patterns of corporate life are altered, or

viewed by people as being threatened. Employees will typically experience a form

of "grief" or loss.

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THE ROLE OF MANAGEMENT:

Management's responsibility (and that of administration in case of political

changes) is to detect trends in the macro environment as well as in the

microenvironment so as to be able to identify changes and initiate programs. It is

also important to estimate what impact a change will likely have on employee

behaviors patterns, work processes, technological requirements, and motivation.

Management must assess what employee reactions will be and craft a change

program that will provide support as workers go through the process of accepting

change. The program must then be implemented, disseminated throughout the

organization, monitored for effectiveness, and adjusted where necessary.

Organizations exist within a dynamic environment that is subject to change

due to the impact of various change "triggers", such as evolving technologies. To

continue to operate effectively within this environmental turbulence, organizations

must be able to change themselves in response to internally and externally initiated

change. However, change will also impact upon the individuals within the

organization.

Effective change management requires an understanding of the possible

effects of change upon people, and how to manage potential sources of resistance

to that change. Change can be said to occur where there is an imbalance between

the current state and the environment.

The change management process in systems engineering is the process of

requesting, determining attainability, planning, implementing and evaluation of

changes to a system. It has two main goals: supporting the processing of changes

and enabling traceability of changes, which should be possible through proper

execution of the process.

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INTRODUCTION OF CHANGE MANAGEMENT

There is considerable overlap and confusion between change management,

change control and configuration management. The definition below does not yet

integrate these. Change management is an important process, because it can

deliver vast benefits (by improving the system and thereby satisfying customer

needs), but also enormous problems (by ruining the system and/or mixing up the

change administration). Furthermore, at least for the Information Technology

domain, more funds and work are put into system maintenance (which involves

change management) than to the initial creation of a system. In the same way

Hinley describes two of Lehmans laws of software evolution: the law of

continuing change (i.e. systems that are used must change or automatically

become less useful) and the law of increasing complexity (i.e. through changes the

structure of a system becomes ever more complex and more resources are needed

to simplify it).

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The field of manufacturing is nowadays also confronted with many changes due

to increasing and worldwide competition, technological advances and demanding

customers. Therefore, (efficient and effective) change management is also of great

importance in this area.

It is not unthinkable that the above statements are true for other domains aswell, because usually, systems tend to change and evolve as they are used. Below,

a generic change management process and its deliverables are discussed, followedby some examples of instances of this process.

In the process below, it is arguable that the change committee should be

responsible not only for accept/reject decisions, but also prioritization, which

influences how change requests are batched for processing.

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THE PROCESS

For the description of the change management process, the meta-modeling

technique is used. Figure 1 depicts the process-data diagram, which is explained in

this section.

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ACTIVITIES:

There are six main activities, which jointly form the change management

process. They are: Identify potential change, Analyze change request, Evaluate

change, Plan change, Implement change and Review and close change.

These activities are executed by four different roles, which are discussed in

Table 1. The activities (or their sub-activities, if applicable) themselves are

described in Table 2.

Table 1: Role descriptions for the change management process

Role Description

Customer

The customer is the role that requests a change due to problems

encountered or new functionality requirements; this can be a person

or an organizational entity and can be in- or external to the company

that is asked to implement the change.

Project

manager

The project manager is the owner of the project that the CHANGEREQUEST concerns. In some cases there is a distinct change

manager, who in that case takes on this role.

Change

committee

The change committee decides whether a CHANGE REQUEST will

be implemented or not. Sometimes this task is performed by the

project manager as well.

Change

builder

The change builder is the person who plans and implements the

change; it could be argued that the planning component is (partially)

taken on by the project manager.

Activity Sub-activity Description

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Identify

potential

change

Require new

functionality

A customer desires new functionality and

formulates a REQUIREMENT.

Encounter

problem

A customer encounters a problem (e.g. a bug ) in

the system and this leads to a PROBLEMREPORT.

Request changeA customer proposes a change through creation of a

CHANGE REQUEST.

Analyze

change

request

Determine

technical

feasibility

The project manager determines the technicalfeasibility of the proposed CHANGE REQUEST,

leading to a CHANGE TECHNICAL

FEASIBILITY.

Determine costs

and benefits

The project manager determines the costs and

benefits of the proposed CHANGE REQUEST,

resulting in CHANGE COSTS AND BENEFITS.

Evaluate

change

Based on the CHANGE REQUEST, its CHANGE

TECHNICAL FEASIBILITY and CHANGECOSTS AND BENEFITS, the change committee

makes the go/no-go decision.

Plan changeAnalyze change

impact

The extent of the change (i.e. what other items the

change effects) is determined in a CHANGE

IMPACT ANALYSIS. It could be argued that this

activity leads to another go/no-go decision, or that

it even forms a part of the Analyze change requestactivity.

Create planning A CHANGE PLANNING is created for the

implementation of the change. Some process

descriptions illustrate that is also possible to save

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changes and process them later in a batch. This

activity could be viewed as a good point to do this.

Implement

changeExecute change

The change is programmed; this activity has astrong relationship with Propagate change, because

sometimes the change has to be adapted to otherparts of the system (or even other systems) as well.

Propagate

change

The changes resulting from Execute change have to

be propagated to other system parts that are

influenced by it. Because this and the above sub-

activity are highly dependent on each other, they

have been modeled as concurrent activities.

Test change

The change builder tests whether what he has built

actually works and satisfies the CHANGE

REQUEST.

Update

documentation

The DOCUMENTATION is updated to reflect the

applied changes.

Release changeA new SYSTEM RELEASE, which reflects theapplied change, is made public.

Review and

close

change

Verify change

The implementation of the change in the new

SYSTEM RELEASE is verified for the last time,

now by the project manager. Maybe this has to

happen before the release, but due to conflicting

literature sources and diagram complexity

considerations it was chosen to model it this wayand include this issue.

Close changeThis change cycle is completed, i.e. the CHANGE

LOG ENTRY is wrapped up.

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Examples:

A good example of the change management process in action can be found in

software development. Often users report bugs or desire new functionality from

their software programs, which leads to a change request. The product software

company then looks into the technical and economical feasibility of implementing

this change and consequently it decides whether the change will actually be

realized. If that indeed is the case, the change has to be planned, for example

through the usage offunction points.

The actual execution of the change leads to the creation and/or alteration of

softwarecode and when this change is propagated it probably causes other codefragments to change as well. After the initial test results seem satisfactory, the

documentation can be brought up to date and be released, together with the

software. Finally, the project manager verifies the change and closes this entry in

the change log.

CHANGE MANAGEMENT IN INDUSTRIAL PLANTS:

Since complex processes can be very sensitive to even small changes, proper

management of change to industrial facilities and processes is recognized as

critical to safety. In the US, OSHA has regulations that govern how changes are to

be made and documented.

The main requirement is that a thorough review of a proposed change be

performed by a multi-disciplinary team to ensure that as many possible viewpoints

are used as possible to minimize the chances of missing a hazard. In this context,change management is known as Management of Change, or MOC. It is just one

of many components of Process Safety Management.

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EFFECTIVE MANAGEMENT OF CHANGE

Organizational and personal change management, process, plans, change

management and business development tips:

Here are some rules for effective management of change. Managing

organizational change will be more successful if you apply these simple principles.

Achieving personal change will be more successful too if you use the same

approach where relevant. Change management entails thoughtful planning and

sensitive implementation, and above all, consultation with, and involvement of,

the people affected by the changes. If you force change on people normally

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problems arise. Change must be realistic, achievable and measurable. These

aspects are especially relevant to managing personal change.

Before starting organizational change, ask yourself: What do we want to

achieve with this change, why, and how will we know that the change has been

achieved? Who is affected by this change, and how will they react to it? How

much of this change can we achieve ourselves, and what parts of the change do we

need help with? These aspects also relate strongly to the management of personal

as well as organizational change.

Instead, change needs to be understood and managed in a way that people can

cope effectively with it. Change can be unsettling, so the manager logically needs

to be a settling influence.

Check that people affected by the change agree with, or at least understand,

the need for change, and have a chance to decide how the change will be managed,

and to be involved in the planning and implementation of the change. Use face-to-

face communications to handle sensitive aspects of organizational change

management. Encourage your managers to communicate face-to-face with their

people too if they are helping you manage an organizational change. Email and

written notices are extremely weak at conveying and developing understanding.

If you think that you need to make a change quickly, probe the reasons - is the

urgency real? Will the effects of agreeing a more sensible time-frame really be

more disastrous than presiding over a disastrous change? Quick change prevents

proper consultation and involvement, which leads to difficulties that take time toresolve.

Involving and informing people also creates opportunities for others to

participate in planning and implementing the changes, which lightens your burden,

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spreads the organizational load, and creates a sense of ownership and familiarity

among the people affected.

Bad news needs even more careful management than routine change. Hiding

behind memos and middle managers will make matters worse. Consulting with

people, and helping them to understand does not weaken your position - it

strengthens it. Leaders who fail to consult and involve their people in managing

bad news are perceived as weak and lacking in integrity. Treat people with

humanity and respect and they will reciprocate.

RESPONSIBILITY FOR MANAGING CHANGE:

The employee does not have a responsibility to manage change - the

employee's responsibility is no other than to do their best, which is different for

every person and depends on a wide variety of factors (health, maturity, stability,

experience, personality, motivation, etc). Responsibility for managing change is

with management and executives of the organization - they must manage the

change in a way that employees can cope with it.

The manager has a responsibility to facilitate and enable change, and all that

is implied within that statement, especially to understand the situation from an

objective standpoint (to 'step back', and be non-judgmental), and then to help

people understand reasons, aims, and ways of responding positively according to

employees' own situations and capabilities. Increasingly the manager's role is to

interpret, communicate and enable - not to instruct and impose, which nobody

really responds to well.

Change must involve the people - change must not be imposed upon the

people

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Be wary of expressions like 'mindset change', and 'changing people's mindsets'

or 'changing attitudes', because this language often indicates a tendency towards

imposed or enforced change (theory x), and it implies strongly that the

organization believes that its people currently have the 'wrong' mindset, which isnever, ever, the case.

If people are not approaching their tasks or the organization effectively, then

the organization has the wrong mindset, not the people. Change such as new

structures, policies, targets, acquisitions, disposals, re-locations, etc., all create

new systems and environments, which need to be explained to people as early as

possible, so that people's involvement in validating and refining the changes

themselves can be obtained.

Whenever an organization imposes new things on people there will be

difficulties. Participation, involvement and open, early, full communication are the

important factors.

Workshops are very useful processes to develop collective understanding,

approaches, policies, methods, systems, ideas, etc. Staff surveys are a helpful way

to repair damage and mistrust among staff - provided you allow people to

complete them anonymously, and provided you publish and act on the findings.

Management training, empathy and facilitative capability are priority areas -

managers are crucial to the change process - they must enable and facilitate, not

merely convey and implement policy from above, which does not work.

You cannot impose change - people and teams need to be empowered to find

their own solutions and responses, with facilitation and support from

managers, and tolerance and compassion from the leaders and executives.

Management and leadership style and behavior is more important than clever

process and policy. Employees need to be able to trust the organization.

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The leader must agree and work with these ideas, or change is likely to be very

painful, and the best people will be lost in the process.

1. At all times involve and agree support from people within system (system =

environment, processes, culture, relationships, behaviors, etc., whether

personal or organizational).

2. Understand where you/the organization is at the moment.

3. Understand where you want to be, when, why, and what the measures will

be for having got there.

4. Plan development towards above No.3 in appropriate achievable

measurable stages.

5. Communicate, involve, enable and facilitate involvement from people, as

early and openly and as fully as is possible.

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SUCCESSFUL CHANGE

JOHN P KOTTERS EIGHT STEPS TO SUCCESSFUL CHANGE:

John Kotter's highly regarded books 'Leading Change' (1995) and the follow-

up 'The Heart of Change' (2002) describes a helpful model for understanding and

managing change. Each stage acknowledges a key principle identified by Kotter

relating to people's response and approach to change, in which people see, feel and

then change: Kotter's eight step change model can be summarized as:

1. Increase urgency - Inspire people to move, make objectives real and

relevant.2. Build the guiding team - Get the right people in place with the right

emotional commitment, and the right mix of skills and levels.

3. Get the vision right - Get the team to establish a simple vision and strategy

focus on emotional and creative aspects necessary to drive service and

efficiency.

4. Communicate for buy-in -Involve as many people as possible,

communicate the essentials, simply, and to appeal and respond to people's

needs. De-clutter communications - make technology work for you rather

than against.

5. Empower actions - Remove obstacles, enable constructive feedback and

lots of support from leaders - reward and recognize progress and

achievements.

6. Create short-term wins - Set aims that are easy to achieve - in bite-size

chunks. Manageable numbers of initiatives. Finish current stages before

starting new ones.

7. Don't let up - Foster and encourage determination and persistence -

ongoing change - encourage ongoing progress reporting - highlight

achieved and future milestones.

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8. Make change stick - Reinforce the value of successful change via

recruitment, promotion, and new change leaders. Weave change into

culture.

IDEAS ON ILLUSTARTING CHANGE MANAGEMENT ISSUES:

When people are confronted with the need or opportunity to change,

especially when its 'enforced', as they see it, by the organization, they can become

emotional. So the managers who try to manage the change, Diffusing the

emotional feelings, taking a step back, encouraging objectivity, is important to

enabling sensible and constructive dialogue. To this end, managers and trainers

can find it helpful to use analogies to assist themselves and other staff to look at

change in a more detached way.

On this site there are several illustrations which can be used for this purpose,

depending on the type of change faced, and the aspect that is to be addressed. Here

are a few examples, useful for team meetings, presentations, one-to-one

counseling or self-reminder, particularly to help empathize with others facing

change:

Just as the state of 'unconscious incompetence', needs to be developed into

'conscious competence' to provide a basis for training, so a person's subjective

emotion needs to be developed into objectivity before beginning to help them

handle change. None of us is immune from subjectivity, ignorance or denial. The

lessons and reminders found in stories and analogies can help to show a new clear

perspective.

OTHER POINTS ABOUT PEOPLE AND CHANGE:

Strong resistance to change is often rooted in deeply conditioned or

historically reinforced feelings. Patience and tolerance is required to help people in

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these situations to see things differently. Bit by bit. There are examples of this sort

of gradual staged change everywhere in the living world.

Also, certain types of people - the reliable/dependable/steady/habitual/process-

oriented types - often find change very unsettling.

People who welcome change are not generally the best at being able to work

reliably, dependably and follow processes. The reliability/dependability

capabilities are directly opposite character traits to mobility/adaptability

capabilities.

Certain industries and disciplines have a high concentration of staff who needa strong reliability/dependability personality profile, for example, health services

and nursing, administration, public sector and government departments, utilities

and services; these sectors will tend to have many staff with character profiles who

find change difficult.

Be mindful of people's strengths and weaknesses. Not everyone welcomes

change. Take the time to understand the people you are dealing with, and how and

why they feel like they do, before you take action.

BUSINESS DEVELOPMENT DRIVEN CHANGE

Business development potentially includes everything involved with the

quality of the business or the organization. Business development planning

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first requires establishing the business development aims, and then

formulating a business development strategy, which would comprise some or

all of the following methods of development.

Sales development.

New product development.

New market development.

Business organization, shape, structure and processes development (e.g.,

outsourcing, e-business, etc).

Tools, equipment, plant, logistics and supply-chain development.

People, management and communications (capabilities and training)

development.

Strategic partnerships and distribution routes development.

International development.

Acquisitions and disposals.

Generally business development is partly scientific, and partly subjective,

based on the feelings and wishes of the business owners or CEO. There are so

many ways to develop a business which achieve growth and improvement, and

rarely is just one of these a single best solution. Business development is what

some people call a 'black art', i.e., difficult to analyze, and difficult to apply a

replicable process.

FAST CHANGING ENVIRONMENT:

Planning, implementing and managing change in a fast-changing environmentis increasingly the situation in which most organizations now work.

Dynamic environments such as these require dynamic processes, people,

systems and culture, especially for managing change successfully, notably

effectively optimizing organizational response to market opportunities and threats.

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Key elements for success:

Plan long-term broadly - a sound strategic vision, not a specific detailed

plan (the latter is impossible to predict reliably). Detailed five years plans

are out of date two weeks after they are written. Focus on detail for

establishing and measuring delivery of immediate actions, not medium-to-

long-term plans.

Establish forums and communicating methods to enable immediate review

and decision-making. Participation of interested people is essential. This

enables their input to be gained, their approval and commitment to be

secured, and automatically takes care of communicating the actions and

expectations.

Empower people to make decisions at a local operating level - delegate

responsibility and power as much as possible (or at least encourage people

to make recommendations which can be quickly approved).

Remove (as far as is possible) from strategic change and approval processes

and teams (or circumvent) any ultra-cautious, ultra-autocratic or

compulsively-interfering executives. Autocracy and interference are thebiggest obstacles to establishing a successful and sustainable dynamic

culture and capability.

Encourage, enable and develop capable people to be active in other areas of

the organization via 'virtual teams' and 'matrix management'.

Scrutinize and optimize ICT (information and communications technology)

systems to enable effective information management and key activity team-

working.

Use workshops as a vehicle to review priorities, agree broad medium-to-

long-term vision and aims, and to agree short term action plans and

implementation method and accountabilities.

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Adjust recruitment, training and development to accelerate the development

of people who contribute positively to a culture of empowered dynamism.

TROUBLESHOOTING TIPS FOR INVESTIGATING APPARENT

POOR PERFORMANCE:

If you are ever give the job of 'troubleshooting' or investigating (apparent)

poor performance, perhaps in another location or business belonging to your own

organization, or perhaps as a consultancy project, here are some simple tips:

Actually 'troubleshooting' isn't a great word - it scares people. Use 'facilitator'

or 'helper' instead. It sets a more helpful and cooperative tone.

On which point, you could well find that the main issue will be people's

resistance and defensiveness to someone coming in to their organization do what

you are doing. When you overcome that challenge, then you can start comparing

what's happening with what the organization sets out to do (mission, values, goals,

priorities, targets, key performance indicators, processes, measures); how the

people feel about things (staff turnover, retention, morale, attitudes); and how

customers and suppliers feel about things too (actually go out and visit customers,

and ex-customers particularly).

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You must observe protocols very diligently - introduce yourself properly to

people and explain who you are and what you are doing. Don't assume that your

task gives you the right to be secretive, or to have access to anyone or anything

without permission. Ask for help. Ask for introductions. Ask for permission. Be

polite and courteous. Respect people more than you would do normally, because

they will be sensitive, understandably so.

And then be led by the people there as to what can be improved. You should

adopt the role of a researcher and enabler rather than a problem solver. Plan lots of

questions that will help people to tell you how they feel about things - customersand staff and suppliers - and what they think can be done to improve things.

Avoid asking 'why' unless they're really trusting you and working with you.

Used early, 'why' puts people on the defense and you'll not find out anything. Look

at the customer relationship materials as well - customers will tell you what's best

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to focus on, and will give you an early opportunity to facilitate some improvement

responses. Also look at the employee motivation survey material.

It's likely that you'll have to write a report and recommendations afterwards,

in which case try wherever possible to involve the people in what you say about

them. Let there be no surprises. Be constructive. Accentuate the positive. Be

straight and open with people.

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PRINCIPLES OF CHANGE MANAGEMENT

No single methodology fits every company, but there is a set of practices,

tools, and techniques that can be adapted to a variety of situations. What follows is

a Top 10 list of guiding principles for change management. Using these as a

systematic, comprehensive framework, executives can understand what to expect,

how to manage their own personal change, and how to engage the entire

organization in the process.

1. Address the human side systematically. Any significant transformation

creates people issues. New leaders will be asked to step up, jobs will be

changed, new skills and capabilities must be developed, and employees will be

uncertain and resistant. Dealing with these issues on a reactive, case-by-case basis

puts speed, morale, and results at risk.

A formal approach for managing change beginning with the leadership

team and then engaging key stakeholders and leaders should be developed

early, and adapted often as change moves through the organization. This demands

as much data collection and analysis, planning, and implementation discipline as

does a redesign of strategy, systems, or processes.

The change-management approach should be fully integrated into program

design and decision making, both informing and enabling strategic direction. It

should be based on a realistic assessment of the organizations history, readiness,

and capacity to change.

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2. Start at the top. Because change is inherently unsettling for people at all levels

of an organization, when it is on the horizon, all eyes will turn to the CEO and the

leadership team for strength, support, and direction.

The leaders themselves must embrace the new approaches first, both to

challenge and to motivate the rest of the institution. They must speak with one

voice and model the desired behaviors. The executive team also needs to

understand that, although its public face may be one of unity, it, too, is composed

of individuals who are going through stressful times and need to be supported.

Executive teams that work well together are best positioned for success. They

are aligned and committed to the direction of change, understand the culture and

behaviors the changes intend to introduce, and can model those changes

themselves. At one large transportation company, the senior team rolled out an

initiative to improve the efficiency and performance of its corporate and field staff

before addressing change issues at the officer level. The initiative realized initial

cost savings but stalled as employees began to question the leadership teams

vision and commitment. Only after the leadership team went through the process

of aligning and committing to the change initiative was the work force able to

deliver downstream results.

3. Involve every layer. As transformation programs progress from defining

strategy and setting targets to design and implementation, they affect different

levels of the organization. Change efforts must include plans for identifying

leaders throughout the company and pushing responsibility for design and

implementation down, so that change cascades through the organization.

At each layer of the organization, the leaders who are identified and trained

must be aligned to the companys vision, equipped to execute their specific

mission, and motivated to make change happen.

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A major multiline insurer with consistently flat earnings decided to change

performance and behavior in preparation for going public. The company followed

this cascading leadership methodology, training and supporting teams at each

stage. First, 10 officers set the strategy, vision, and targets. Next, more than 60senior executives and managers designed the core of the change initiative. Then

500 leaders from the field drove implementation.

The structure remained in place throughout the change program, which

doubled the companys earnings far ahead of schedule. This approach is also a

superb way for a company to identify its next generation of leadership.

4. Make the formal case. Individuals are inherently rational and will question to

what extent change is needed, whether the company is headed in the right

direction, and whether they want to commit personally to making change happen.

They will look to the leadership for answers. The articulation of a formal case for

change and the creation of a written vision statement are invaluable opportunities

to create or compel leadership-team alignment.

Three steps should be followed in developing the case: First, confront reality

and articulate a convincing need for change. Second, demonstrate faith that the

company has a viable future and the leadership to get there . Finally, provide a

road map to guide behavior and decision making. Leaders must then customize

this message for various internal audiences, describing the pending change in

terms that matter to the individuals.

A consumer packaged-goods company experiencing years of steadilydeclining earnings determined that it needed to significantly restructure its

operations instituting, among other things, a 30 percent work force reduction

to remain competitive. In a series of offsite meetings, the executive team built a

brutally honest business case that downsizing was the only way to keep the

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7. Assess the cultural landscape. Successful change programs pick up speed and

intensity as they cascade down, making it critically important that leaders

understand and account for culture and behaviors at each level of the organization.

Companies often make the mistake of assessing culture either too late or not at all.Thorough cultural diagnostics can assess organizational readiness to change, bring

major problems to the surface, identify conflicts, and define factors that can

recognize and influence sources of leadership and resistance.

These diagnostics identify the core values, beliefs, behaviors, and perceptions

that must be taken into account for successful change to occur. They serve as the

common baseline for designing essential change elements, such as the new

corporate vision, and building the infrastructure and programs needed to drive

change.

8. Address culture explicitly. Once the culture is understood, it should be

addressed as thoroughly as any other area in a change program. Leaders should be

explicit about the culture and underlying behaviors that will best support the new

way of doing business, and find opportunities to model and reward those

behaviors. This requires developing a baseline, defining an explicit end-state or

desired culture, and devising detailed plans to make the transition.

Company culture is an amalgam of shared history, explicit values and beliefs,

and common attitudes and behaviors. Change programs can involve creating a

culture (in new companies or those built through multiple acquisitions), combining

cultures (in mergers or acquisitions of large companies), or reinforcing cultures

(in, say, long-established consumer goods or manufacturing companies).

Understanding that all companies have a cultural center the locus of thought,

activity, influence, or personal identification is often an effective way to jump-

start culture change.

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9. Prepare for the unexpected. No change program goes completely according to

plan. People react in unexpected ways; areas of anticipated resistance fall away;

and the external environment shifts. Effectively managing change requires

continual reassessment of its impact and the organizations willingness and abilityto adopt the next wave of transformation. Fed by real data from the field and

supported by information and solid decision-making processes, change leaders can

then make the adjustments necessary to maintain momentum and drive results.

A leading U.S. health-care company was facing competitive and financial

pressures from its inability to react to changes in the marketplace. A diagnosis

revealed shortcomings in its organizational structure and governance, and the

company decided to implement a new operating model. In the midst of detailed

design, a new CEO and leadership team took over. The new team was initially

skeptical, but was ultimately convinced that a solid case for change, grounded in

facts and supported by the organization at large, existed. Some adjustments were

made to the speed and sequence of implementation, but the fundamentals of the

new operating model remained unchanged.

10. Speak to the individual. Change is both an institutional journey and a very

personal one. People spend many hours each week at work; many think of their

colleagues as a second family. Individuals (or teams of individuals) need to know

how their work will change, what is expected of them during and after the change

program, how they will be measured, and what success or failure will mean for

them and those around them. Team leaders should be as honest and explicit as

possible.

People will react to what they see and hear around them, and need to be

involved in the change process. Highly visible rewards, such as promotion,

recognition, and bonuses, should be provided as dramatic reinforcement for

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embracing change. Sanction or removal of people standing in the way of change

will reinforce the institutions commitment.

Most leaders contemplating change know that people matter. It is all too

tempting, however, to dwell on the plans and processes, which dont talk back and

dont respond emotionally, rather than face up to the more difficult and more

critical human issues. But mastering the soft side of change management

neednt be a mystery.

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CASE STUDY

ICICI BANK

"What role is I supposed to play in this ever-changing entity? Has anyone worked

out the basis on which roles are being allocated today?"

- A middle level ICICI manager, in 1998.

"We do put people under stress by raising the bar constantly. That is the only wayto ensure that performers lead the change process."

- K. V. Kamath, MD & CEO, ICICI, in

1998.

THE CHANGE LEADER:

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In May 1996, K.V. Kamath replaced Narayan Vaghul, CEO of India's leading

financial services company Industrial Credit and Investment Corporation of India

(ICICI). Immediately after taking charge, Kamath introduced massive changes in

the organizational structure and the emphasis of the organization changed - from a

development bank mode to that of a market-driven financial conglomerate.

Kamath's moves were prompted by his decision to create new divisions to tap

new markets and to introduce flexibility in the organization to increase its ability

to respond to market changes. Necessitated because of the organization's new-

found aim of becoming a financial powerhouse, the large-scale changes caused

enormous tension within the organization. The systems within the company soon

were in a state of stress. Employees were finding the changes unacceptable as

learning new skills and adapting to the process orientation was proving difficult.

The changes also brought in a lot of confusion among the employees, with media

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reports frequently carrying quotes from disgruntled ICICI employees. According

to analysts, a large section of employees began feeling alienated.

The discontentment among employees further increased, when Kamath

formed specialist groups within ICICI like the 'structured projects' and

'infrastructure' group.

Doubts were soon raised regarding whether Kamath had gone 'too fast too

soon,' and more importantly, whether he would be able to steer the employees and

the organization through the changes he had initiated.

BACKGROUND NOTE:

ICICI was established by the Government of India in 1955 as a public limited

company to promote industrial development in India. The major institutional

shareholders were the Unit Trust of India (UTI), the Life Insurance Corporation of

India (LIC) and the General Insurance Corporation of India (GIC) and its

subsidiaries. The equity of the corporation was supplemented by borrowings from

the Government of India, the World Bank, the Development Loan Fund (now

merged with the Agency for International Development), Kreditanstalt fur

Wiederaufba (an agency of the Government of Germany), the UK government and

the Industrial Development Bank of India (IDBI).

The basic objectives of the ICICI were to

Assist in creation, expansion and modernization of

enterprises.

Encourage and promote the participation of private capital,

both internal and external.

Take up the ownership of industrial investment.

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Expand the investment markets.

Since the mid 1980s, ICICI diversified rapidly into areas like merchant

banking and retailing. In 1987, ICICI co-promoted India's first credit rating

agency, Credit Rating and Information Services of India Limited (CRISIL), to rate

debt obligations of Indian companies. In 1988, ICICI promoted India's first

venture capital company - Technology Development and Information Company of

India Limited (TDICI) - to provide venture capital for indigenous technology-

oriented ventures.

In the 1990s, ICICI diversified into different forms of asset financing such as

leasing, asset credit and deferred credit, as well as financing for non-project

activities. In 1991, ICICI and the Unit Trust of India set up India's first screen-

based securities market, the over-the-counter Exchange of India (OCTEI). In 1992

ICICI tied up with J P Morgan of the US to form an investment banking company,

ICICI Securities Limited.

In line with its vision of becoming a universal bank, ICICI restructured its

business based on the recommendations of consultants McKinsey & Co in 1998.

In the late 1990s, ICICI concentrated on building up its retail business through

acquisitions and mergers. It took over ITC Classic, Anagram Finance and merged

the Shipping Credit Investment Corporation of India (SCICI) with itself. ICICI

also entered the insurance business with prudential plc of UK.

ICICI was reported to be one of the few Indian companies known for its quick

responsiveness to the changing circumstances. While its development bankcounterpart IDBI was reportedly not doing very well in late 2001, ICICI had major

plans of expanding on the anvil. This was expected to bring with it further

challenges as well as potential change management issues. However, the

organization did not seem to much perturb by this, considering that it had

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successfully managed to handle the employee unrest following Kamath's

appointment.

CHANGE CHALLENGES - PART I:

ICICI was a part of the club of developmental finance institutions (DFIs -

ICICI, IDBI and IFCI) who were the sole providers of long-term funds to the

Indian industry. If the requirement was large, all three pooled in the money.

However, the deregulation beginning in the early 1990s, allowed Indian corporate

to rise long-term funds abroad, putting an end to the DFI monopoly. The

government also stopped giving DFIs subsidized funds. Eventually in 1997, the

practice of consortium lending by DFIs was phased out.

It was amidst this new found independent status that Kamath, who had been

away from ICICI for eight years working abroad, returned to the helm. At this

point of time, ICICI had limited expertise, with its key activity being the

disbursement of eight-year loans to big clients like Reliance Industries and Telco

through its nine zonal offices.

In effect, the company had one basic product, and a customer orientation,

which was largely regional in nature. Kamath, having seen the changes occurring

in the financial sector abroad, wanted ICICI to become a one-stop shop for

financial services. He realized that in the deregulated environment ICICI was

neither a low-cost player nor was it a differentiator in terms of customer service.

The Indian commercial banks' cost of funds was much lower, and the foreign

banks were much savvier when it came to understanding customer needs and

developing solutions. Kamath identified the main problem as the company's

ignorance regarding the nuances of lending practices in newly opened sectors like

infrastructure.

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The change program was initiated within the organization, the first move

being the creation of the 'infrastructure group (IIG),' 'oil & gas group (O&G),'

'planning and treasury department (PTD)' and the 'structured products group

(SPG)', as the lending practices were quite different for all of these. Kamathpicked up people from various departments, who he was told were good, for these

groups.

The approach towards creating these new skill sets, however, led to one

unintended consequence. As these new groups took on the key tasks, a majority of

the work, along with a lot of good talent, shifted to the corporate center. While the

zonal offices continued to do the same work - disbursing loans to corporate in the

same region - their importance within the organization seemed to have diminished.

An ex-employee remarked, "The way to get noticed inside ICICI after 1996 has

been to attach you to people who were heading these (IIG, PTD, SPG, O&G)

departments. These groups were seen as the thrust areas and if you worked in the

zones it was difficult to be noticed.

Refuting this, Kamath remarked, "This may be said by people who did notmake it. And there will always be such people." Some of the people who did not

fit in this set-up were quick to leave the organization.

However, this was just the beginning of change-resistance at ICICI.

The basic objectives of the ICICI were to another change management problem

surfaced as a result of ICICI's decision to focus its operations much more sharply

around its customers. In the system prevailing, if a client had three different

requirements from ICICI, he had to approach the relevant departments separately.

The process was time consuming, and there was a danger that the client would

take a portion of that business elsewhere. To tackle this problem, ICICI set up

three new departments: major client group (MCG), growth client group (GCG)

and personal finance group. Now, the customer talked only to his representative in

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MCG or GCG. And these representatives in turn found out which ICICI

department could do the job.

CHANGE CHALLENGES - PART II

ICICI had to face change resistance once again in December 2000, when

ICICI Bank was merged with Bank of Madura (BoM). Though ICICI Bank was

nearly three times the size of BoM, its staff strength was only 1,400 as against

BoM's 2,500. Half of BoM's personnel were clerks and around 350 were

subordinate staff.

There were large differences in profiles, grades, designations and salaries ofpersonnel in the two entities. It was also reported that there was uneasiness among

the staff of BoM as they felt that ICICI would push up the productivity per

employee, to match the levels of ICICI. BoM employees feared that their positions

would come in for a closer scrutiny. They were not sure whether the rural

branches would continue or not as ICICI's business was largely urban-oriented.

The apprehensions of the BoM employees seemed to be justified as the

working culture at ICICI and BoM were quite different and the emphasis of the

respective management was also different. While BoM management concentrated

on the overall profitability of the Bank, ICICI management turned all its

departments into individual profit centers and bonus for employees was given on

the performance of individual profit center rather than profits of whole

organization.

ICICI not only put in place a host of measures to technologically upgrade the

BoM branches to ICICI's standards, but also paid special attention to facilitate a

smooth cultural integration. The company appointed consultants Hewitt

Associates to help in working out a uniform compensation and work culture and to

take care of any change management problems.

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ICICI conducted an employee behavioral pattern study to assess the various

fears and apprehensions that employees typically went through during a merger.

(Refer Table I).

TABLE I

'POST-MERGER' EMPLOYEE BEHAVIORAL PATTERN

PERIOD EMPLOYEE BEHAVIOR

Day 1Denial, fear, no improvement

After a month Sadness, slight improvement

After a YearAcceptance, significant improvement

After 2 YearsRelief, liking, enjoyment, business development activities

Based on the above findings, ICICI established systems to take care of the

employee resistance with action rather than words. The 'fear of the unknown' was

tackled with adept communication and the 'fear of inability to function' was

addressed by adequate training. The company also formulated a 'HR blue print' toensure smooth integration of the human resources. (Refer Table II).

TABLE II

MANAGING HR DURING THE ICICI-BoM MERGER

THE HR BLUEPRINTAREAS OF HR INTEGRATION

FOCUSSED ON A data base of the entire HR structure

Road map of career

Determining the blue print of HR

Employee communication

Cultural integration

Organization structuring

Recruitment, Compensation

Performance management

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moves

Communication of milestones

IT Integration - People Integration

- Business Integration.

Training

Employee relations

To ensure employee participation and to decrease the resistance to the change,

management established clear communication channels throughout to avoid any

kind of wrong messages being sent across. Training programmes were conducted

which emphasized on knowledge, skill, attitude and technology to upgrade skills

of the employees. Management also worked on contingency plans and initiated

direct dialogue with the employee unions of the BoM to maintain good employee

relations.

By June 2001, the process of integration between ICICI and BoM was started.ICICI transferred around 450 BoM employees to ICICI Bank, while 300 ICICI

employees were shifted to BoM branches. Promotion schemes for BoM employees

were initiated and around 800 BoM officers were found to be eligible for thepromotions. By the end of the year, ICICI seemed to have successfully handled the

HR aspects of the BoM merger. According to a news report, The win-win

situation created by.HR initiatives has resulted in high level of morale among

all sections of the employees from the erstwhile BoM."

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Even as the changes following the ICICI-BoM merger were stabilizing, ICICI

announced its merger with ICICI Bank in October 2001. The merger, to beeffective from March 2002, was expected to unleash yet another series of changes

at the organization. With Kamath still heading ICICI, analysts were hopeful that

the bank would come out successfully in the task of integrating the operations ofboth the entities this time as well.

SUMMARY

The goal of this document is to provide change management information that

can be beneficial both personally and professionally. Change refers to any

alteration that occurs in total work environment. Generally people are accustomed

to a well established way of life.

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Ashwathappa K., Organizational Behavior, published by Himalaya

Publication, Mumbai, India, 7th edition, 2007.

WEBLIOGRAPHY

http://www.wikipedia.org/wiki/Change_management

http://www.CartoonStock.com

http://www.etu.org.za/toolbox/docs/building/change

http://www.drbalternatives.com

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http://www.wikipedia.org/wiki/Change_managementhttp://www.wikipedia.org/wiki/Change_management

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