The process by which a company adapts to its environment is called Organizational change
Think about it: your company wouldn’t survive for very long if it didn’t make changes to keep itself afloat.
It’s important that you understand the various terms and processes associated with organizational change in order to ensure success when you implement one.
These are the major types of organizational changes:
Innovation is the use of new techniques, processes and information to solve an organizational problem.
Innovation is what gives a company its competitive advantage. The change in equipment, staff and company culture that results from innovation is sometimes called a “management revolution.”
Routine replacement of parts or routine increases in sales are not innovations but innovations are changes that are intended to make money by solving some problem.
P&G’s Tide laundry detergent was the first major innovation in laundry detergent. P&g marketed the detergent through mass media advertising, a revolutionary marketing strategy at the time.
2. Organizational change
Organizational change occurs when the organization’s structure, policies and procedures no longer meet the current requirements of the market.
The purpose of organizational change is to keep the organization competitive.
Major changes that occur as a result of organizational change are:
· Addition or substitution of new products, services or processes, often to improve performance. Major examples include introduction of new products such as Tide; introduction of major structural changes such as leveraged buyouts; and introducing new policies, such as outsourcing computer operations. ·
Changing ownership by selling all shares or by selling a portion to outsiders. ·
Changing the firm’s direction by establishing a new corporate culture, changes to management or changes in the policies at the company’s board of directors.
Adaptation occurs when the structure of an organization fails to change quickly enough to keep up with changing market conditions.
For example, ordinary companies may be able to adjust their products and services by making small changes or one-time adjustments for particular markets or for a certain period of time.
But when there are fundamental changes such as adding new products, changing production methods, transforming into a new type of organization or selling all shares, it is necessary for them to adapt completely by restructuring their organization.
When a company begins to have problems, if it makes small adjustments or changes on its own, it is said that it is undergoing organizational change.
However, if the company’s performance continues to deteriorate and its market share shrinks, and if these changes are not dealt with adequately, the firm may have to undergo fundamental organizational change.
If this happens, the organization will be forced to evolve into a new type of organization or gradually disintegrate because of failure to respond effectively.
As a result of this change or decay (evolution), competent employees will leave, competitors will take over their market share and bankruptcy becomes unavoidable.
When the market conditions suddenly change and the company experiences a sharp drop in sales for a certain period of time, it is said to be undergoing organizational change.
This change occurs when there is a conflict between the company’s objectives and its customers’ needs – this kind of conflict leads to a need for drastic changes that can be described as catastrophe.
Companies undergoing catastrophic change lack decision-making capability and will be unable to hire new employees or make major changes that could ease their problems.
They are often forced to go out of business because they cannot survive any longer.
When a company enters a new market with a new product or service, it is undergoing organizational change.
In such situations, the climate of the market is so different from that of its home market that it needs to make drastic changes in an organization in order to adapt.
The change process they undergo is called transition.
To put it differently, when the firm enters or expands into foreign territory and there are no established rules in that country, employees have to undergo organizational change as an adjustment process.
When a company changes its structure, the way it operates and its management style, the company is undergoing a significant change process.
This kind of change is often called transformation because major changes are needed to allow employees to operate smoothly and support each other.
In fact, major changes need to be made in work processes, work techniques and management systems as part of the organizational culture change process for a company to undergo thorough transformation.
8. Adaptation stage
The last stage before organizations go out of business is called the adaptation stage. It is characterized by a low level of activity.
The company is unable to make any major changes and is trying to maintain its existing framework.
This stage leads to the final stage of organizational deterioration, which is total disintegration. The company might be able to make a few adjustments but will not be able to solve its problems.