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Critical Thinking Assignment
Module 03: Analyzing the Need for Change in an Organization
This week focuses on frameworks associated with change management, including the use of various
models that a manager may utilize to ensure the change process is more efficient and effective.
Depending on the situation and level in the organization, more than one model is frequently used to
ensure that the breadth and depth of change are addressed. Regardless of which model is utilized,
many factors associated with change remain challenging. Two universally challenging components are
the emotional effect and the impact of change. We will explore both factors in this module.
Question Requirements:
What to Change?
The Nadler and Tushman’s Congruence Model helps in the analysis of what is going on in an
organization and what components of an organization need to be changed.
1. Consider an organization that you are familiar with in the Kingdom and using the Nadler and
Tushman’s Congruence Model determine “what to change”.
1. Follow the “Transformation Process” in the Chapter 3 of the textbook (Figure 3.1 Nadler
and Tushman’s Organizational Congruence Model) and include the work to be done, the
formal structures, systems and process, the informal organization, and the people.
2. What did the Nadler and Tushman Congruence Model analysis miss that would be important
to your organization? Specifically identify why these missed points are important to the
organization discussed.
3. Having analyzed the organization from the Congruence Model perspective now consider one
of the other models in Chapter 3. Apply this model to the organization, share your results and
specifically identify what additional information was learned from the application of this change
process that was not learned from the Congruence Model.
Directions:
• Write an essay that includes an introduction paragraph, the essay’s body, and a
conclusion paragraph to address the assignment’s guide questions. Do not address the
questions using a question-and-answer format.
Your well-written paper should meet the following requirements:
• Be 5 pages in length, which does not include the title and reference pages, which are never
a part of the content minimum requirements.
• Use Saudi Electronic University academic writing standards and APA style guidelines.
• Support your submission with course material concepts, principles, and theories from the
textbook and at least two current, scholarly, peer-reviewed journal articles. Current articles
are those published in the last five years.
•
Ensure zero plagiarism. (very, very important)
In advance of submission, review the grading rubric to see how you will be graded for this
assignment.
Learning Outcomes
1. Appraise the complexities and interrelated nature of organizational components and their
effect on change.
2. Evaluate frameworks that can be utilized to determine what organizational changes are
needed.
3. Examine the process of organizational change.
Readings
Required:
• Chapter 3 in Organizational Change: An Action-Oriented Toolkit
• MASCU, S. (2021). Factors That Trigger Changes in Modern Organizations. Review of
International Comparative Management / Revista de Management Comparat
International, 22(5), 729–737.
Recommended:
• Module 3 PowerPoint Presentation
Chapter 3: What to Change in an
Organization: Frameworks
Chapter Overview
• Change leaders must understand both the HOW and the
WHAT of change. The focus here is on WHAT needs to
change
• Open systems organizational frameworks are valuable
assessment tools of what needs to change. Nadler and
Tushman’s Congruence Model is explored in detail
• The non-linear and interactive nature of organizations is
explored to make sense of their complexity
• Quinn’s competing values model is used to create a
bridge between individual and organizational levels of
analysis
• Organizational change over time is discussed
Deszca, Ingols & Cawsey, Organizational Change: An Action-Oriented Toolkit, 4th ed.. © 2020 SAGE Pub.
2
The Change Path Model
•
Awakening
Chapter 4
Use Diagnostic
Frameworks in
Ch.3 to better
understand:
• How to Change &
• What to Change
Mobilization
Chapters 5 through 8
Acceleration
Chapter 9
Institutionalization
Chapter 10
Deszca, Ingols & Cawsey, Organizational Change: An Action-Oriented Toolkit, 4th ed.. © 2020 SAGE Pub.
3
Open Systems Perspective
• Organizations exchange information, material
& energy with their environment. They are not
isolated
• A system is the product of its interrelated and
interdependent parts
• It represents a complex web of
interrelationships, not a chain of linear
cause–effect relationships
Deszca, Ingols & Cawsey, Organizational Change: An Action-Oriented Toolkit, 4th ed.. © 2020 SAGE Pub.
4
Dynamic Complexity because
Systems are:
•Constantly changing
•Self-organizing
•Tightly coupled
•Adaptive
•Governed by feedback
•Characterized by trade-offs
•Nonlinear
•Counterintuitive
•History-dependent
•Policy resistant
Deszca, Ingols & Cawsey, Organizational Change: An Action-Oriented Toolkit, 4th ed.. © 2020 SAGE Pub.
5
Open Systems Perspective (cont.)
• A system seeks equilibrium and one at
equilibrium will only change if energy is applied
• Individuals within a system may have views of the
system’s function and purpose that differ greatly from
those of others
• Things that occur within and/or to open systems
should not be viewed in isolation. See them as
interconnected, interdependent components of a
complex system
Deszca, Ingols & Cawsey, Organizational Change: An Action-Oriented Toolkit, 4th ed.. © 2020 SAGE Pub.
6
Nadler & Tushman’s
Organizational Congruence Model
Transformation Process
Output
Input
Informal
Organization
Environment
(PESTEL)
Strategy
Resources
History /
Culture
Work
Formal
Organization
People
Deszca, Ingols & Cawsey, Organizational Change: An Action-Oriented Toolkit, 4th ed.. © 2020 SAGE Pub.
Systems
Unit
Individual
7
Nadler & Tushman’s
Organizational Congruence Model
Environmental
Transformation Process
Pressures for
Change
Output
Informal
Organization
Input
Systems
Environment
(PESTEL)
Strategy
Work
Formal
Organization
Unit
Resources
History /
Culture
People
Deszca, Ingols & Cawsey, Organizational Change: An Action-Oriented Toolkit, 4th ed.. © 2020 SAGE Pub.
Individual
8
Analyzing Organizations Using Nadler and
Tushman’s Model
1.Use the congruence model to describe your organization or an
organization you are familiar with. Categorize the key components
(environment, strategy, tasks, etc.). What outputs are desired? Are
they achieved?
2. Is the strategy in line with organization’s environmental inputs? Are
the transformation processes aligned well with the strategy? How do
they interact to produce the outputs?
3.When you evaluate your organization’s outputs, are there things
your organization should address?
4. Are there aspects of how your organization works that you have
difficulty understanding? If so, what resources could you access to
help with this analysis?
Deszca, Ingols & Cawsey, Organizational Change: An Action-Oriented Toolkit, 4th ed.. © 2020 SAGE Pub.
9
Linear Event View of the World
Goal
Gap /
Problem
Decision /
Action
Results
Situation
Deszca, Ingols & Cawsey, Organizational Change: An Action-Oriented Toolkit, 4th ed.. © 2020 SAGE Pub.
10
Issues & Problems with the Linear View
• Time delays and lag effects related to variables
and outcomes you are trying to manage (e.g.,
inventory stocks and flows, customer satisfaction
and purchase decisions)
• Complexity makes cause–effect relationships
difficult to predict and track
• Attribution Errors and False Learning often result
from the above
Deszca, Ingols & Cawsey, Organizational Change: An Action-Oriented Toolkit, 4th ed.. © 2020 SAGE Pub.
11
A Feedback Model
Decisions
Decisions
Environment
Deszca, Ingols & Cawsey, Organizational Change: An Action-Oriented Toolkit, 4th ed.. © 2020 SAGE Pub.
12
But Feedback Models are Messier
Decisions
Goals
Environment
Side Effects
Goals of Others
Action of Others
Deszca, Ingols & Cawsey, Organizational Change: An Action-Oriented Toolkit, 4th ed.. © 2020 SAGE Pub.
13
Quinn’s Competing Values Framework
Flexibility
Internally
Focused
Externally
Focused
Control
Deszca, Ingols & Cawsey, Organizational Change: An Action-Oriented Toolkit, 4th ed.. © 2020 SAGE Pub.
14
Quinn’s Competing Values Framework (cont.)
Flexibility
Human
Resources
View
Open
Systems
View
Internally
Focused
Externally
Focused
Internal
Processes
View
Rational
Economic
View
Control
Deszca, Ingols & Cawsey, Organizational Change: An Action-Oriented Toolkit, 4th ed.. © 2020 SAGE Pub.
15
Quinn’s Competing Values Framework (cont.)
Flexibility
Human Resources View
• How to work with individuals and
groups
• Teamwork and HR dept.
• Mentor and group facilitator roles
Open Systems View
• How to use power and manage
change
• The challenge of change
• Innovator and broker roles
Internally
Focused
Externally
Focused
Internal Processes View
• How to understand & control
the work unit
• Consolation and continuity
• Internal monitor and
coordinator
roles
Rational Economic View
• How to stimulate individual and
collective achievement
• Maximization of output
• Producer and director roles
Control
Deszca, Ingols & Cawsey, Organizational Change: An Action-Oriented Toolkit, 4th ed.. © 2020 SAGE Pub.
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Greiner’s Five Phases of Organizational Growth
Size of
organization
PHASE 1
PHASE 2
PHASE 3
PHASE 4
PHASE 5
5: Crisis of ?
LARGE
Evolution stages
Revolution stages
4: Crisis of
RED TAPE
5: Growth through
COLLABORATION
3: Crisis of
CONTROL
2: Crisis of
AUTONOMY
4: Growth through
COORDINATION
3: Growth through
DELEGATION
1: Crisis of
LEADERSHIP
2: Growth through
DIRECTION
SMALL
1: Growth through
CREATIVITY
YOUNG
Age of Organization
Deszca, Ingols & Cawsey, Organizational Change: An Action-Oriented Toolkit, 4th ed.. © 2020 SAGE Pub.
MATURE
17
Stacy’s Complexity Theory and
Organizational Change
• Organizations are webs of nonlinear feedback
loops that are connected with individuals and
organizations through similar webs
• These feedback systems operate in stable and
unstable states of equilibrium, even to the point
at which chaos ensues
• Organizations are inherently paradoxes, pulled by
forces of stability and instability
Deszca, Ingols & Cawsey, Organizational Change: An Action-Oriented Toolkit, 4th ed.. © 2020 SAGE Pub.
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Stacy’s Complexity Theory and Organizational
Change (cont.)
• If organizations give into forces of stability, they
become ossified and change impaired
• If organizations succumb to forces of instability,
they will disintegrate
• Success is when organizations exist between
frozen stability and chaos
Deszca, Ingols & Cawsey, Organizational Change: An Action-Oriented Toolkit, 4th ed.. © 2020 SAGE Pub.
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Stacy’s Complexity Theory and Organizational
Change (cont.)
• Short-term dynamics (or noise) are characterized by irregular cycles
and discontinuous trends, but long-term trends are identifiable
• A successful organization faces an unknowable specific future
because things can and do happen
• Agents can’t control the long-term future—they can only act in
relation to the short term
• Long-term development is a spontaneous, self-organizing process
that may give rise to new strategic directions
• It is through this process that managers create and come to know the
environments and long-term futures of their organizations
Deszca, Ingols & Cawsey, Organizational Change: An Action-Oriented Toolkit, 4th ed.. © 2020 SAGE Pub.
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Summary
• When assessing organizations, think of them as open systems—
webs of interconnected and interdependent relationships that interact
with the environment
• Change often originates in the external environment.
• Change upsets the internal equilibrium in an organization and
thus may be resisted.
• Both evolutionary and revolutionary change is needed for
organizational growth
• We need to understand the WHY and WHAT of change.
• Models in this chapter have focused on the WHAT of change
• Change is not clean and linear—it is messy
Deszca, Ingols & Cawsey, Organizational Change: An Action-Oriented Toolkit, 4th ed.. © 2020 SAGE Pub.
21
1
Organizational Change
Fourth Edition
2
This book is dedicated to Tupper Cawsey,
our dear and wonderful friend, colleague, and
extraordinary educator.
He passed away, but his positive impact continues to
reverberate in those he touched.
Thank you, Tupper.
Gene and Cynthia
3
4
Organizational Change
An Action-Oriented Toolkit
Fourth Edition
Gene Deszca
Wilfrid Laurier University
Cynthia Ingols
Simmons University
Tupper F. Cawsey
Wilfrid Laurier University
Los Angeles
London
New Delhi
Singapore
Washington DC
5
Melbourne
6
FOR INFORMATION:
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Copyright © 2020 by SAGE Publications, Inc.
All rights reserved. Except as permitted by U.S. copyright law, no
part of this work may be reproduced or distributed in any form or
by any means, or stored in a database or retrieval system, without
permission in writing from the publisher.
7
All third party trademarks referenced or depicted herein are
included solely for the purpose of illustration and are the property
of their respective owners. Reference to these trademarks in no
way indicates any relationship with, or endorsement by, the
trademark owner.
Printed in the United States of America
Library of Congress Cataloging-in-Publication Data
Names: Deszca, Gene, author. | Ingols, Cynthia, author. | Cawsey, T. F., author/
Title: Organizational change : an action-oriented toolkit / Gene Deszca, Wilfrid
Laurier University, Canada, Cynthia Ingols – Simmons College, USA, Tupper F.
Cawsey – Wilfrid Laurier University, Canada.
Other titles: Organisational change
Description: Fourth Edition. | Thousand Oaks : SAGE Publications, [2019] |
Revised edition of Organizational change, [2016] | Includes bibliographical
references and index.
Identifiers: LCCN 2019013498 | ISBN 9781544351407 (paperback)
Subjects: LCSH: Organizational change.
Classification: LCC HD58.8 .C39 2019 | DDC 658.4/06—dc23
LC record available at
Acquisitions Editor: Maggie Stanley
Editorial Assistant: Janeane Calderon
Production Editor: Gagan Mahindra
Copy Editor: Lynne Curry
Typesetter: C&M Digitals (P) Ltd.
Proofreader: Rae-Ann Goodwin
Indexer: Mary Mortensen
Cover Designer: Candice Harman
Marketing Manager: Sarah Panella
8
9
Brief Contents
1. Preface
2. Acknowledgments
3. Chapter 1 • Changing Organizations in Our Complex World
4. Chapter 2 • How to Lead Organizational Change:
Frameworks
5. Chapter 3 • What to Change in an Organization: Frameworks
6. Chapter 4 • Building and Energizing the Need for Change
7. Chapter 5 • Navigating Change through Formal Structures
and Systems
8. Chapter 6 • Navigating Organizational Politics and Culture
9. Chapter 7 • Managing Recipients of Change and Influencing
Internal Stakeholders
10. Chapter 8 • Becoming a Master Change Agent
11. Chapter 9 • Action Planning and Implementation
12. Chapter 10 • Get and Use Data Throughout the Change
Process
13. Chapter 11 • The Future of Organizations and the Future of
Change
14. Notes
15. Index
16. About the Authors
10
11
Detailed Contents
Preface
Acknowledgments
Chapter 1 • Changing Organizations in Our Complex World
Defining Organizational Change
The Orientation of This Book
Environmental Forces Driving Change Today
The Implications of Worldwide Trends for Change
Management
Four Types of Organizational Change
Planned Changes Don’t Always Produce the
Intended Results
Organizational Change Roles
Change Initiators
Change Implementers
Change Facilitators
Common Challenges for Managerial Roles
Change Recipients
The Requirements for Becoming a Successful Change
Leader
Summary
Key Terms
End-of-Chapter Exercises
Chapter 2 • How to Lead Organizational Change:
Frameworks
Differentiating How to Change from What to Change
The Processes of Organizational Change
(1) Stage Theory of Change: Lewin
Unfreeze
Change
Refreeze: or more appropriately Re-gell
(2) Stage Model of Organizational Change: Kotter
Kotter’s Eight-Stage Process
(3) Giving Voice to Values: Gentile
GVV and Organizational Change
(4) Emotional Transitions Through Change: Duck
Duck’s Five-Stage Change Curve
(5) Managing the Change Process: Beckhard and Harris
12
(6) The Change Path Model: Deszca and Ingols
Application of the Change Path Model
Awakening: Why Change?
Mobilization: Activating the Gap Analysis
Acceleration: Getting from Here to There
Institutionalization: Using Data to Help Make the
Change Stick
Summary
Key Terms
End-of-Chapter Exercises
➡ Case Study: “Not an Option to Even Consider:”
Contending With the Pressures to Compromise by
Heather Bodman and Cynthia Ingols
Chapter 3 • What to Change in an Organization: Frameworks
Open Systems Approach to Organizational Analysis
(1) Nadler and Tushman’s Congruence Model
History and Environment
Strategy
The Transformation Process
Work
The Formal Organization
The Informal Organization
People
Outputs
An Example Using Nadler and Tushman’s
Congruence Model
Evaluating Nadler and Tushman’s Congruence
Model
(2) Sterman’s Systems Dynamics Model
(3) Quinn’s Competing Values Model
(4) Greiner’s Model of Organizational Growth
(5) Stacey’s Complexity Theory
Summary
Key Terms
End-of-Chapter Exercises
➡ Case Study: Sarah’s Snacks by Paul Myers
Chapter 4 • Building and Energizing the Need for Change
Understanding the Need for Change
Seek Out and Make Sense of External Data
13
Seek Out and Make Sense of the Perspectives of
Stakeholders
Seek Out and Make Sense of Internal Data
Seek Out and Assess Your Personal Concerns and
Perspectives
Assessing the Readiness for Change
Heightening Awareness of the Need for Change
Factors That Block People from Recognizing the
Need for Change
Developing a Powerful Vision for Change
The Difference Between an Organizational Vision and a
Change Vision
Examples of Visions for Change
IBM—Diversity 3.0
Tata’s Nano: From Vision to Failed Project
Change Vision for the “Survive to 5” Program
Change Vision for “Reading Rainbow”
Change Vision for a Large South African Winemaker
Change Vision for the Procurement System in a
Midsize Manufacturing Firm
Summary
Key Terms
A Checklist for Change: Creating the Readiness for
Change
End-of-Chapter Exercises
➡ Case Study: Leading Change: The Pharmacy
Team by Jess Coppla
Chapter 5 • Navigating Change through Formal Structures
and Systems
Making Sense of Formal Structures and Systems
Impact of Uncertainty and Complexity on Formal
Structures and Systems
Formal Structures and Systems From an Information
Perspective
Aligning Systems and Structures With the
Environment
Structural Changes to Handle Increased Uncertainty
Making Formal Structural Choices
Using Structures and Systems to Influence the Approval
and Implementation of Change
14
Using Formal Structures and Systems to Advance
Change
Using Systems and Structures to Obtain Formal
Approval of a Change Project
Using Systems to Enhance the Prospects for
Approval
Ways to Approach the Approval Process
Aligning Strategically, Starting Small, and “Morphing”
Tactics
The Interaction of Structures and Systems with Change
During Implementation
Using Structures and Systems to Facilitate the
Acceptance of Change
Summary
Key Terms
Checklist: Change Initiative Approval
End-of-Chapter Exercises
➡ Case Study: Beck Consulting Corporation by
Cynthia Ingols and Lisa Brem
Chapter 6 • Navigating Organizational Politics and Culture
Power Dynamics in Organizations
Individual Power
Departmental Power
Organizational Culture and Change
How to Analyze a Culture
Tips for Change Agents to Assess a Culture
Tools to Assess the Need for Change
Identifying the Organizational Dynamics at Play
Summary
Key Terms
Checklist: Stakeholder Analysis
End-of-Chapter Exercises
➡ Case Study: Patrick’s Problem by Stacy BlakeBeard
Chapter 7 • Managing Recipients of Change and Influencing
Internal Stakeholders
Stakeholders Respond Variably to Change Initiatives
Not Everyone Sees Change as Negative
Responding to Various Feelings in Stakeholders
15
Positive Feelings in Stakeholders: Channeling Their
Energy
Ambivalent Feelings in Stakeholders: They Can Be
Useful
Negative Reactions to Change by Stakeholders:
These Too Can Be Useful
Make the Change of the Psychological Contract Explicit
and Transparent
Predictable Stages in the Reaction to Change
Stakeholders’ Personalities Influence Their
Reactions to Change
Prior Experience Impacts a Person’s and
Organization’s Perspective on Change
Coworkers Influence Stakeholders’ Views
Feelings About Change Leaders Make a Difference
Integrity is One Antidote to Skepticism and Cynicism
Avoiding Coercion but Pushing Hard: The Sweet Spot?
Creating Consistent Signals from Systems and
Processes
Steps to Minimize the Negative Effects of Change
Engagement
Timeliness
Two-Way Communication
Make Continuous Improvement the Norm
Encourage People to Be Change Agents and Avoid the
Recipient Trap
Summary
Key Terms
Checklist: How to Manage and Minimize Cynicism About
Change
End-of-Chapter Exercises
➡ Case Study: Travelink Solutions by Noah Deszca
and Gene Deszca
Chapter 8 • Becoming a Master Change Agent
Factors That Influence Change Agent Success
The Interplay of Personal Attributes, Situation,
and Vision
Change Leaders and Their Essential
Characteristics
Developing into a Change Leader
16
Intention, Education, Self-Discipline, and
Experience
What Does Reflection Mean?
Developmental Stages of Change Leaders
Four Types of Change Leaders
Internal Consultants: Specialists in Change
External Consultants: Specialized, Paid Change
Agents
Provide Subject-Matter Expertise
Bring Fresh Perspectives from Ideas That Have
Worked Elsewhere
Provide Independent, Trustworthy Support
Limitations of External Consultants
Change Teams
Change from the Middle: Everyone Needs to Be a
Change Agent
Rules of Thumb for Change Agents
Summary
Key Terms
Checklist: Structuring Work in a Change Team
End-of-Chapter Exercises
➡ Case Study: Master Change Agent:
Katherine Gottlieb, Southcentral Foundation by
Erin E. Sullivan
Chapter 9 • Action Planning and Implementation
Without a “Do It” Orientation, Things Won’t Happen
Prelude to Action: Selecting the Correct Path
Plan the Work
Engage Others in Action Planning
Ensure Alignment in Your Action Planning
Action Planning Tools
1. To-Do Lists
2. Responsibility Charting
3. Contingency Planning
4. Flow Charting
5. Design Thinking
6. Surveys and Survey Feedback
7. Project Planning and Critical Path Methods
8. Tools to Assess Forces That Affect Outcomes
and Stakeholders
17
9. Leverage Analysis
10. Employee Training and Development
11. Diverse Change Approaches
Working the Plan Ethically and Adaptively
Developing a Communication Plan
Timing and Focus of Communications
Key Principles in Communicating for Change
Influence Strategies
Transition Management
Summary
Key Terms
End-of-Chapter Exercises
➡ Case Study: Turning Around Cote
Construction Company by Cynthia Ingols, Gene
Deszca, and Tupper F. Cawsey
Chapter 10 • Get and Use Data Throughout the Change
Process
Selecting and Deploying Measures
1. Focus on Key Factors
2. Use Measures That Lead to Challenging but
Achievable Goals
3. Use Measures and Controls That Are
Perceived as Fair and Appropriate
4. Avoid Sending Mixed Signals
5. Ensure Accurate Data
6. Match the Precision of the Measure With the
Ability to Measure
Measurement Systems and Change Management
Data Used as Guides During Design and Early
Stages of the Change Project
Data Used as Guides in the Middle of the
Change Project
Data Used as Guides Toward the End of the
Change Project
Other Measurement Tools
Strategy Maps
The Balanced Scorecard
Risk Exposure Calculator
The DICE Model
Summary
18
Key Terms
Checklist: Creating a Balanced Scorecard
End-of-Chapter Exercises
➡ Case Study: Omada Health: Making the
Case for Digital Health by Erin E. Sullivan and
Jessica L. Alpert
Chapter 11 • The Future of Organizations and the Future
of Change
Putting the Change Path Model into Practice
Future Organizations and Their Impact
Becoming an Organizational Change Agent:
Specialists and Generalists
Paradoxes in Organizational Change
Orienting Yourself to Organizational Change
Summary
End-of-Chapter Exercises
Notes
Index
About the Authors
19
20
Preface to the Fourth Edition
Difficult to see. Always in motion
is the future.1
1 Spoken by Yoda in the movie The Empire Strikes Back
The world has continued to churn in very challenging ways since
the publishing of the third edition of this text. Uneven and shifting
global patterns of growth, stubbornly high unemployment levels in
many parts of the world, increasing income inequality, and serious
trade disputes that threaten to transform trade patterns are
severely stressing our highly interconnected global economy. The
massive credit crisis of a decade ago was followed by
unprecedented worldwide government stimulus spending and low
interest rates to promote growth, which, in turn, have resulted in
escalating public debt, exacerbated in some nations through tax
cuts. These combine to threaten the capacity of national
governments to respond to future economic difficulties.
In addition, wars, insurrections and civil insurrections in parts of
Africa, the Ukraine, the Middle East, and Asia have sent masses
of people searching for safety in new places. Simultaneously,
deteriorating international relationships involving major powers,
fears of global pandemics (Ebola and MERS), and the staying
power of radical Islamist groups such as al-Qaeda and ISIS
affiliates, Boko Haram and Jemaah Islamiyah have shaken all
organizations in affected regions—big or small, public or private.
Escalating concerns related to global warming, species
extinctions, and rising sea levels are stressing those who
recognize the problems in governments and organizations of all
shapes and sizes, as they attempt to figure out how to
constructively address these emerging realities. Add to these
elements the accelerating pace of technological change and it’s
easy to see why we, at times, feel overwhelmed by the
turbulence, uncertainty, and negative prognosis that seem to
define the present.
21
But, all is not doom and gloom. Progress on human rights and
gender equity, reductions in extreme poverty and hunger,
declining rates of murder and violent crime, improving rates of
literacy and life expectancy, and increasing access to information
and knowledge through affordable digital resources provide
evidence that progress is being made on some fronts. The
growing public willingness to tackle very difficult environmental
and social issues now, not later, are combining with innovative
technologies, creative for-profit and not-for-profit organizations,
and forward-thinking politicians and leaders from all walks of life.
Supportive public policies are combining with public and private
initiatives to demonstrate that we can make serious progress on
these issues, if we collectively choose to act in constructive and
thoughtful manners locally, regionally, and globally. These factors
have also made us, your authors, much more aware of the
extreme influence of the external environment on the internal
workings of all organizations.
As we point out in our book, the smallest of firms needs to adapt
when new competitive realities and opportunities surface. Even
the largest and most successful of firms have to learn how to
adapt when disruptive technologies or rapid social, economic,
political and environmental changes alter their realities. If they fail
to do so, they will falter and potentially fail.
Our models have always included and often started with events
external to organizations. We have always argued that change
leaders need to scan their environments and be aware of trends
and crises in those environments. The events of the past two
years have reinforced even more our sense of this. Managers
must be sensitive to what happens around them, know how to
make sense of this, and then have the skills and abilities that will
allow them to both react effectively to the internal and external
challenges and remain constant in their visions and dreams of
how to make their organizations and the world a better place to
live.
A corollary of this is that organizations need a response capability
that is unprecedented because we’re playing on a global stage of
increasing complexity and uncertainty. If you are a bank, you need
22
a capital ratio that would have been unprecedented a few years
ago, and you need to be working hard to understand the potential
implications of blockchain technologies, regulatory changes, and
changing consumer preferences on the future of banking. If you
are a major organization, you need to design flexibility and
adaptability into your structures, policies, and plans. If you are a
public-sector organization, you need to be sensitive to how
capricious granting agencies or funders will be when revenues dry
up. In today’s world, organizational resilience, adaptability, and
agility gain new prominence.
Further, we are challenged with a continuing reality that change is
endemic. All managers need to be change managers. All good
managers are change leaders. The management job involves
creating, anticipating, encouraging, engaging others, and
responding positively to change. This has been a theme of this
book that continues. Change management is for everyone.
Change management emerges from the bottom and middle of the
organization as much as from the top. It will be those key leaders
who are embedded in the organization who will enable the needed
adaptation of the organization to its environment. Managers of all
stripes need to be key change leaders.
In addition to the above, we have used feedback on the third
edition to strengthen the pragmatic orientation that we had
developed. The major themes of action orientation, analysis tied
with doing, the management of a nonlinear world, and the bridging
of the “knowing–doing” gap continue to be central themes. At the
same time, we have tried to shift to a more user friendly, action
perspective. To make the material more accessible to a diversity
of readers, some theoretical material has been altered, some of
our models have been clarified and simplified, and some of our
language and formatting has been modified.
As we stated in the preface to the first edition, our motivation for
this book was to fill a gap we saw in the marketplace. Our
challenge was to develop a book that not only gave prescriptive
advice, “how-to-do-it lists,” but one that also provided up-to-date
theory without getting sidetracked by academic theoretical
complexities. We hope that we have captured the management
23
experience with change so that our manuscript assists all those
who must deal with change, not just senior executives or
organization development specialists. Although there is much in
this book for the senior executive and organizational development
specialist, our intent was to create a book that would be valuable
to a broad cross section of the workforce.
Our personal beliefs form the basis for the book. Even as
academics, we have a bias for action. We believe that “doing is
healthy.” Taking action creates influence and demands responses
from others. While we believe in the need for excellent analysis,
we know that action itself provides opportunities for feedback and
learning that can improve the action. Finally, we have a strong
belief in the worth of people. In particular, we believe that one of
the greatest sources of improvement is the untapped potential to
be found in the people of all organizations.
We recognize that this book is not an easy read. It is not meant to
be. It is meant as a serious text for those involved in change—that
is, all managers! We hope you find it a book that you will want to
keep and pull from your shelf in the years ahead, when you need
to lead change and you want help thinking it through.
Your authors,
Gene, Cynthia, and Tupper
Note on Instructor Teaching Site
A password-protected instructor’s manual is available at
study.sagepub.com/cawsey to help instructors plan and teach
their courses. These resources have been designed to help
instructors make the classes as practical and interesting as
possible for students.
PowerPoint Slides capture key concepts and terms for each
chapter for use in lectures and review.
A Test Bank includes multiple-choice, short-answer, and essay
exam questions for each chapter.
24
Video Resources for each chapter help launch class discussion.
Sample Syllabi, Assignments, and Chapter Exercises as optional
supplements to course curriculum.
Case Studies and teaching notes for each chapter facilitate
application of concepts in real world situations.
25
26
Acknowledgments
We would like to acknowledge the many people who have helped
to make this edition of the book possible. Our colleagues and
students and their reactions to the ideas and materials continue to
be a source of inspiration.
Cynthia would like to thank her colleagues at the School of
Business, Simmons University, Boston, Massachusetts. In
particular, she would like to thank Dr. Stacy Blake-Beard, Deloitte
Ellen Gabriel Chair of Women and Leadership, and Dr. Paul
Myers, senior lecturer, who each contributed a case to this fourth
edition of the book. In addition, Paul graciously read and gave
feedback on other cases and parts of the text, suggesting ways to
bring clarity to sometimes muddled meanings. Alissa Scheibert, a
Simmons library science student, conducted in-depth research for
a number of chapters. Dr. Erin Sullivan, research director, and
Jessica L. Alpert, researcher, Center for Primary Care, Harvard
Medical School, contributed two cases to this edition of the book
and I am very grateful for their contributions. Jess Coppla, a
former Healthcare MBA student leader and author of one of the
cases, will someday be CEO of a healthcare organization. . . . I’m
just waiting to see which one. Colleagues Gary Gaumer, Cathy
Robbins, Bob Coulum, Todd Hermann, Mindy Nitkin, and Mary
Shapiro were wonderful cheerleaders throughout the many hours
of my sitting, writing, and revising in my office: thank you all!
Managers, executives, and front-line employees that we have
known have provided insights, case examples, and applications
while keeping us focused on what is useful and relevant. Ellen
Zane, former CEO of Tufts Medical Center, Boston, is an inspiring
change leader; her turnaround story at the Tufts Medical Center
appeared in the second edition of this book and was published
again in the third edition; it continues to be on the Sage website
for use by faculty. Cynthia has also been fortunate to work with
and learn from Gretchen Fox, founder and former CEO, FOX
RPM: the story of how she changed her small firm appeared in the
second edition of the book and the case continues to be available
27
through Harvard Business Publishing ( Noah
Deszca, a high school teacher, was the prime author of the
Travelink Solutions case, an organization that underwent
significant changes while he was working there. Katharine
Bambrick, a former student of Gene’s and the CEO of the Ontario
Trillium Foundation and the former CEO of Food Banks Canada,
is another of the inspiring leaders who opened their organizations
to us and allowed us to learn from their experiences, and share it
with you. The Food Banks case appeared in the third edition of
this book and is one of the additional cases that are available on
this book’s website.
Special thanks to Paige Tobie for all her hard work on the
instructors’ resources. She is a gem to work with.
As with the previous editions, our partners Bertha Welzel and
Steve Spitz tolerated our moods, our myopia to other things that
needed doing, and the early mornings and late nights spent on the
manuscript. They helped us work our way through ideas and
sections that were problematic, and they kept us smiling and
grounded when frustration mounted.
Our editors at Sage have been excellent. They moved the project
along and made a difficult process fun (well, most of the time).
Thank you, Maggie Stanley, our acquisitions editor, for keeping us
on task and on time (or trying to keep us on time…). We
appreciate your style of gentle nudges. Thank you to Janeane
Calderon, our editorial assistant who was constantly on top of the
various parts of the book and helped us push through to the end.
Copyeditor Lynne Curry found stray commas and inconsistencies
throughout the book: thank you for fixing the problems. Gagan
Mahindra, Production Editor, kept us wonderfully focused on the
details of production: thank you!
Finally, we would like to recognize the reviewers who provided us
with valuable feedback on the third edition. Their constructive,
positive feedback and their excellent suggestions were valued.
We thought carefully about how to incorporate their suggestions
into this fourth edition of the book. Thank you Mulugeta Agonafer
28
of Springfield College, Brenda C. Barnes of Allen College, C.
Darren Brooks of Florida State University, Robert Dibie of Indiana
University Kokomo, Jonathan E. Downs of MidAmerica Nazarene
University, Alexander C. Heckman of Franklin University, Scott
Elmes McIntyre of University of Houston – Clear Lake, Frank
Novakowski of Davenport University, Pamela R. Van Dyke of
Southern Methodist University, Jack Wilson of the United States
Naval Academy, and Diana J. Wong-MingJi of Eastern Michigan
University.
In short, our thanks to all who made this book possible.
29
30
Chapter One Changing
Organizations in Our Complex
World
Chapter Overview
The chapter defines organizational change as “planned
alteration of organizational components to improve the
efficiency and effectiveness of organizations.”
The orientation of this book is to assist change leaders—and
potential change managers—in becoming effective in their
change activities.
The social, demographic, technological, political, and economic
forces pushing the need for change are outlined.
Four types of organizational change are discussed: tuning,
adapting, reorienting, and re-creating.
Four change roles found in organizations are described:
change initiators, change implementers, change facilitators, and
change recipients and stakeholders. The terms change leader
and change agent are used interchangeably and could mean
any of the four roles.
The difficulties in creating successful change are highlighted,
and then some of the characteristics of successful change
leaders are described.
Organizations fill our world. We place our children into day care,
seek out support services for our elderly, and consume
information and recreational services supplied by other
organizations. We work at for-profit or not-for-profit organizations.
We rely on organizations to deliver the services we need: food,
water, electricity, and sanitation and look to governmental
organizations for a variety of services that we hope will keep us
safe, secure, well governed, and successful. We depend on
health organizations when we are sick. We use religious
organizations to help our spiritual lives. We assume that most of
our children’s education will be delivered by formal educational
organizations. In other words, organizations are everywhere.
Organizations are how we get things done. This is not just a
31
human phenomenon as it extends to plants and animals: look at a
bee colony, a reef, a lion pride, or an elephant herd and you’ll see
organizations at work.
And these organizations are changing—some of them declining
and failing, while others successfully adapt or evolve, to meet the
shifting realities and demands of their environments. What exactly
is organizational change? What do we mean when we talk about
it?
32
Defining Organizational Change
When we think of organizational change, we think of major
changes: mergers, acquisitions, buyouts, downsizing,
restructuring, the launch of new products, and the outsourcing of
major organizational activities. We can also think of lesser
changes: departmental reorganizations, installations of new
technology and incentive systems, shutting particular
manufacturing lines, or opening new branches in other parts of the
country—fine-tuning changes to improve the efficiency and
effectiveness of our organizations.
In this book, when we talk about organizational change, we refer
to planned alterations of organizational components to improve
the effectiveness or efficiency of the organization. Organizational
components are the organizational mission, vision, values,
culture, strategy, goals, structure, processes or systems,
technology, and people in an organization. When organizations
enhance their effectiveness, they increase their ability to generate
value for those they serve.
The reasons for change are often ambiguous. Is the change
internally or externally driven? In July 2018, Tim Hortons (a
Canada-based coffee restaurant chain) announced that it was
aiming to open 1,500 new stores in China in the next decade.1
This is in addition to expansion efforts involving the United States,
the Philippines, Britain, Mexico, the Middle East, and Spain. Tim
Horton’s has a network of approximately 3,900 outlets in Canada
and another 900 elsewhere. It has also been busy revising its
menu to shore up flattening same-store sales, adding Wi-Fi
access, undertaking major store remodeling, and making changes
to its sustainability and corporate social responsibility initiatives.
What is driving these changes? The executives reported that they
were undertaking these actions in response to competitive
pressures, customer needs, market opportunities, and the desire
to align their efforts with their values. For Tim Hortons, the drivers
of change are coming from both the internal and external
environment. Dunkin’ Donuts, a much larger U.S.–based chain
with similarities to Tim Hortons’ business model and competitive
pressures, seems to have been pursuing similar adaptive
33
responses.2 It is essential for managers to be sensitive to what is
happening inside and outside the organization and adapt to those
changes in the environment.*
* Tim Hortons and Burger King announced their $12.5 billion
merger on August 26, 2014, forming the third largest quick-service
restaurant in the world. They have maintained these two distinct
brands post-merger, but have taken advantage of synergies by
leveraging their respective strengths and geographic reach.
Note that, by our definition and focus, organizational change is
intentional and planned. Someone in the organization has taken
an initiative to alter a significant organizational component. This
means a shift in something relatively permanent. Usually,
something formal or systemic has to be altered. For example, a
new customer relations system may be introduced that captures
customer satisfaction and reports it to managers; or a new division
is created and people are allocated to that division in response to
a new organizational vision.
Simply doing more of the same is not an organizational change.
For example, increasing existing sales efforts in response to a
competitor’s activities would not be classified as an organizational
change. However, the restructuring of a sales force into two
groups (key account managers and general account managers) or
the modification of service offerings would be, even though these
changes could well be in response to a competitor’s activities
rather than a more proactive initiative.
Some organizational components, such as structures and
systems, are concrete and thus easier to understand when
contemplating change. For example, assembly lines can be
reordered or have new technologies applied. The change is
definable and the end point clear when it is done. Similarly, the
alteration of a reward system or job design is concrete and can be
documented. The creation of new positions, subunits, or
departments is equally obvious. Such organizational changes are
tangible and thus may be easier to make happen, because they
are easier to understand.
34
When the change target is more deeply imbedded in the
organization and is intangible, the change challenge is magnified.
For example, a shift in organizational culture is difficult to
engineer. A change leader can plan a change from an
authoritarian to a more participative culture, but the initiatives
required to bring about the change and the sequencing of those
initiatives are trickier to get a hold of than more concrete change
initiatives. Simply announcing a new strategy or vision does not
mean that anything significant will change since “you need to get
the vision off the walls and into the halls.”3 A more manageable
way to think of such a culture change is to identify concrete
changes that reinforce the desired culture. If management alters
reward systems, shifts decision making downward, and creates
participative management committees, then management
increases the likelihood that it will create cultural change over
time. Sustained behavioral change occurs when people in the
organization understand, accept, and act. Through their actions,
the new vision or strategy becomes real.4
The target of change needs to be considered carefully. Often,
managers choose concrete tangible changes because they are
easiest to plan for and can be seen. For example, it is relatively
easy to focus on pay and give monetary incentives in an attempt
to address employee morale. But the root cause of these issues
might be managerial styles or processes—much more difficult to
recognize and address. In addition, intervening through
compensation may have unanticipated consequences and
actually worsen the problem. An example of this can be found in
the story below.
Change at a Social Service Agency
In a mid-sized social service agency’s family services division,
turnover rates climbed to more than 20%, causing serious issues
with service delivery and quality of service. The manager of the
division argued that staff were leaving because of wages. According
to him, children’s aid societies’ wages were higher and staff left to
join those organizations. Upon investigation, senior management
learned of morale problems arising from the directive, non-inclusive
management style of the manager. Instead of altering pay rates,
which would have caused significant budgetary and equity problems
35
throughout the organization, senior management replaced the
manager and moved him to a project role. Within months, turnover
rates dropped to less than 10% and the manager decided to leave
the agency.5
In this example, if the original analysis had been accepted,
turnover rates might have declined since staff may have been
persuaded to stay for higher wages. But the agency would have
faced financial challenges due to higher labor costs as well as a
festering morale problem.
36
The Orientation of This Book
The focus, then, of this book is on organizational change as a
planned activity designed to improve the organization’s
effectiveness. Changes that are random (occur simply due to
chance) or unplanned are not the types of organizational change
that this book will explore, except, insofar, as they serve as the
stimulus for planned change initiatives. Similarly, changes that
may be planned but do not have a clear link to attempts to
improve organizational effectiveness are not considered. That is,
changes made solely for personal reasons—for personal gain, for
example—fall outside the intended focus of this book.
There is a story of two stonecutters. The first, when
asked what he was doing, responded, “I am shaping this
stone to fit in that wall.” The second, however, said, “I am
helping to build a cathedral.”
The jobs of the two stonecutters might be the same, but their
perspectives are dramatically different. The personal outcomes of
satisfaction and organizational commitment will likely be much
higher for the visionary stonecutter than for the “just doing my job”
stonecutter. Finally, the differences in satisfaction and commitment
may well lead to different organizational results. After all, if you are
building a cathedral, you might be more motivated to stay late, to
take extra care, to find ways to improve things, and to help others
when help is needed.
In other words, the organizational member who has a broader
perspective on the value of his or her contributions and on the
task at hand is likely to be a more committed and capable
contributor. As a result, we take a perspective that encourages
change leaders to take a holistic perspective on the change and to
be widely inclusive in letting employees know what changes are
needed and are happening.
37
If employees have no sense of the intended vision and see
themselves as “just doing a job,” it is likely that any organizational
change will be difficult to understand, be resisted, and cause
personal trauma. On the other hand, if employees “get” the vision
of the organization and understand the direction and perspective
of where the organization is going and why, they are more likely to
embrace their future role—even if that future means they leave
the organization.6
This book is aimed at those who want to be involved in change
and wish to take positive actions. We encourage readers to
escape from passive, negative change recipient positions and to
move to active and healthy roles—those of change initiators,
facilitators, and implementers. Readers may be in middle
manager roles or may be students hoping to enter managerial
roles. Or, they may be leaders of change within an organization or
a subunit. The book is also intended for the informal leaders in
organizations who are driving change, sometimes in spite of their
bosses. They might believe that their bosses “should” be driving
the change but don’t see it happening, and so they see it as up to
them to make change happen regardless of the action or inaction
of their managers.
This book has an action, “how to do it” emphasis. Nothing
happens unless we, the people, make it happen. As someone
once said, “The truth is—the cavalry isn’t coming!” There will be
no cavalry charging over the hill to save us. It is up to us to make
the changes needed. At the same time, this “how-to” orientation is
paired with a focus on developing a deep understanding of
organizations. Without such an understanding, what needs to be
changed, and what the critical success factors are, change efforts
will be much more difficult. This twin theme, of knowing both how
to do it and what to do, underpins the structure of this book and
our approach to change. To paraphrase Zig Ziglar, “It’s not what
happens to you that matters. It’s how you respond that makes a
difference.”7
Change capability is a core managerial competence. Without skills
in change management, individuals cannot operate effectively in
today’s fluctuating, shifting organizations.8 Senior management
38
may set the organizational direction, but, in this decentralized
organizational world, it is up to managers and employees to shift
the organization to accomplish the new goals and objectives. To
do this, change-management skills are paramount. In many
organizations, those managers are looked to for insights,
innovative ideas, and initiatives that will make a positive difference
in their firms. Investigate firms such as Google, Cisco, Marriott, St.
Jude Children’s Hospital, Deloitte, and others listed among the
100 best to work for here and offshore, and you will find many
examples of firms embracing these practices.9 They do so with a
realistic appreciation for the fact that change management is often
more difficult than we anticipate. We believe, as do Pfeffer and
Sutton, that there is a Knowing–Doing gap.10 Knowing the
concepts and understanding the theory behind organizational
change are not enough. This book is designed to provide
practicing and prospective managers with the tools they will need
to be effective change agents.
39
Environmental Forces Driving Change Today
Much change starts with shifts in an organization’s environment.
For example, government legislation dealing with employment law
pushes new equity concerns through hiring practices.
Globalization means that marketing, research and development,
production, and other parts of an organization (e.g., customer
service’s call centers) can be moved around the world and/or
outsourced. International alliances form and reform. These and
related factors mean an organization’s competition is often global
in nature, rather than local. New technologies allow purchasing to
link to production within an integrated supply chain, changing
forever supplier–customer relationships. Concerns over global
warming, sustainability, and environmental practices give rise to
new laws, standards, and shifts in consumer preferences for
products and firms that exhibit superior environmental
performance. A competitor succeeds in attracting an
organization’s largest customer and upsets management’s
assumptions about the marketplace. Each of these external
happenings will drive and push the need for change. These
factors are summed up in the acronym PESTEL. PESTEL factors
include political, economic, social, technological,
ecological/environmental, and legal factors that describe the
environment of an organization.
These are not simply private sector realities. Not-for-profits,
hospitals, schools, and governments all experience these
environmental challenges as the world shrinks and the seeming
pace of change accelerates and increases in complexity. Not-forprofits or NGOs (nongovernmental organizations) and various
governmental bodies respond to hunger in war-torn Somalia and
Syria; public universities and hospitals respond to for-profit
competitors. Governments around the world deal with issues
related to enhancing their economic competitiveness and
attracting employers, hopefully in sustainable and socially
responsible ways. No one is immune.
Sometimes organizations are caught by surprise by environmental
shifts, while other organizations have anticipated and planned for
40
new situations. For example, management may have systems to
track the perceived quality and value of its products versus its
competition’s. Benchmarking data might show that its quality is
beginning to lag behind that of a key competitor. These
environmental scanning and early warning systems allow for
action before customers are lost or provide paths to new
customers and/or new services. Toyota had such systems in
place, but management appears to have responded inadequately.
Did Toyota or GM Know About the Safety Defects?
41
Misreading the Environment and
Associated Risks
On April 5, 2010, the U.S. government’s transportation department
stated it would seek $16.4 million from Toyota for not notifying the
government about potential accelerator pedal problems. “In taking
the step, federal authorities are sending the strongest signal yet that
they believe the carmaker deliberately concealed safety information
from them.”11
Did Toyota know about these deficiencies and respond by denying
they existed and covering up? If so, this is an example of an
inappropriate organizational response to environmental stimuli.
The same question could be asked of General Motors concerning
ignition switch problems in the Cobalt and other brands. By GM’s
admission, they first became aware of this problem in 2001. It was
the subject of a technical service bulletin in 2005, but there was no
recall until 2014, in the aftermath of multiple deaths and injuries,
mounting public scrutiny, and lawsuits. The global recall totaled 2.6
million vehicles by May 2014: there have been humiliating U.S.
congressional hearings, CEO Mary Barra has publicly apologized,
and GM is sought immunity from the courts for lawsuits related to
periods before its 2009 bankruptcy. To say this had the potential to
undermine confidence in GM and its brand would be a gross
understatement and points to the danger of failing to act and
implement needed changes in a timely manner.12
It’s beyond the scope of this book to provide an in-depth treatment
of all of the various trends and alterations in the environment.
However, we will highlight below some of the important trends to
sensitize readers to their environments. As is always the case,
organizations find themselves influenced by fundamental forces:
changing social, cultural, and demographic patterns; spectacular
technological achievements that transform how we do business;
concerns about the physical environment and social responsibility
that are producing demands for changes in our products and
business practices; a global marketplace that sends us competing
worldwide and brings competition to our doorsteps; political and
legal forces that have the potential to transform the competitive
landscape; continued political uncertainty in many countries that
42
has the potential to introduce chaos into world markets; the
aftermath of the economic turmoil that rocked the world economy
in 2008; and trade wars in 2018 that promoted further uncertainty.
Responses to the External Environment Can Escalate Risks
The financial crisis of 2008 occurred because banks failed to
comprehend the risks they took with asset-backed securities and
other derivatives. Incentive systems drove bankers to take on
excessive risks for excessive profits. They denied the evidence
presented to them, and when the bubble burst, the results were
catastrophic. For example, when warned by his chief risk officer, who
proposed shutting down the mortgage business in 2004, the head of
Lehman Brothers threatened to fire him! This rush for profits drove
many banks. Chuck Prince, the head of Citigroup at the time, just
before the credit markets seized up in August 2007, said, “As long as
the music is playing, you’ve got to get up and dance. We’re still
dancing.”13
Clearly bankers misread both the ethical and business implications of
what was going on inside their firms. Either there was collective
myopia at work with respect to mounting evidence of excessive risk
from very credible sources,14 or the rewards and short-term
performance pressures were such that they chose not to attend to
the warning clouds.
The Changing Demographic, Social, and
Cultural Environment
Age Matters.
The social, cultural, and economic environment will be
dramatically altered by demography. Demographic changes in the
Western world and parts of Asia mean that aging populations will
gray the face of Europe, Canada, China, and Japan.15 The
financial warning bells are already being sounded. Even before
the huge government deficits of 2009 and beyond that Western
nations have been digging themselves out from under, Standard &
Poor’s predicted that the average net government debt-to-GDP
ratio for industrialized nations will increase from 33% in 2005 to
43
180% by 2050, due to rising pension and health care costs,16 if
changes are not undertaken. In 2013 and 2016 they reported
modest progress had been made on this debt challenge, but the
problems and related societal challenges have certainly not gone
away.17
Although the United States will age less quickly, Europe and
Japan will face a dependency crisis of senior citizens requiring
medical care and pension support. By 2050, the median age in
the United States is projected to be 41 versus approximately 50 in
Europe. The United States will keep itself younger than Europe
through immigration and a birth rate that is close to replacement
level,18 though even here growth assumptions have come under
question as the rate of immigration has declined in the aftermath
of the economic slowdown and questions around emigration
policies remain highly politicized. Even with this influx, if nothing
changes, it is estimated the U.S. governmental debt-to-GDP ratio
will grow to 472% of GDP by 2050, due mainly to pension and
health care costs.19 Aging European countries will be around 300
–400% of GDP, despite older populations, due to more costefficient approaches in these areas. On the high side, Japan is
predicted to reach 729%. The European Union’s population is
projected to peak in 2025 at around 470 million and then begin to
decline, while the United States reaches 335 million in 2020 and
continues to grow thereafter to 398 million in 2050. The decline in
the European Union would occur much earlier if it were not for
immigration.
Throughout the world, fertility rates are falling and falling fast.20 In
1974, only 24 countries had fertility rates below replacement
levels. By 2009, more than 70 countries had rates below 2.1. In
some countries, the swings are dramatic. The fertility rate in Iran
dropped from 7 in 1984 to 1.9 in 2009, a huge shift.
44
Source: U.N. Population Division.
Some see a close tie between female education, fertility rates,
and economic growth. When economies are poor, the fertility rate
is high and there are many young dependents relying on working
adults and older siblings for sustenance. When fertility rates drop,
there is a bulge of people, meaning the ratio of working adults to
dependents increases, leading to an increase in per capita wealth.
Mexico and China are examples of this currently. When this bulge
ages, dependent, nonworking seniors become a larger
percentage of the population, so these advantages tend to
disappear over time, as incomes rise and fertility rates fall.21 As
discussed above, this has happened and is happening in Europe
and Japan. India, Africa, and Mexico are examples of areas with a
smaller proportion of dependents (the young and the old) relative
to their working populations, and this is something referred to as
an economic dividend. However, it is only a dividend if the
population has the skills and abilities needed, and there are
infrastructure and policies in place to support employment—
something many developing nations are finding very
challenging.22
45
These demographic shifts can take decades to work their way
through, and the economic implications for organizations are
significant. Imagine 400 to 500 million relatively wealthy
Americans and the impact that will have on global economic
power, assuming that pension and health care challenges are
effectively managed. Consumer spending in developing countries
is expected to grow to $44.8 trillion by 2030, eclipsing the $19.2
trillion in North America and Europe.23 Also imagine the impact of
a graying Europe and Japan’s declining workforce. Some
estimates put the fiscal problems in providing pensions and health
care for senior citizens at 250% of national income in Germany
and France.24
Pension costs can become a huge competitive disadvantage at
the company level too. At General Motors, there were 2.5 retirees
for every active worker in 2002. These so-called “legacy” costs
were $900 per vehicle at that time due to pension and health care
obligations. These costs rose to $1,800 by 200625 and retired
employee–related costs were one of the key reasons that GM
sought bankruptcy relief in 2009. Debt relief certainly alleviated
the immediate pressure, but as the number of retired to active GM
employees continues to grow, this challenge is not going away.26
Companies appear to be ill prepared to deal with this aging
population.27 Both private and public sector employers are waking
up to these pressures and attempting to bring about changes to
their pension programs that will be more sustainable, but the
journey will not be easy. Public pushback to reductions in pension
income and other entitlement programs has been strong, and
even relatively modest proposals for shifts to policies such as
increasing the age of retirement by a year or two have faced
widespread resistance. This is resistance that scares politicians
because these are also people who are most likely to vote and
who are also feeling vulnerable as they find their savings are
insufficient to sustain their lifestyle.28
An aging population also provides new market opportunities—
would you have predicted that the average age of a motorcycle
purchaser would be over 49? That’s Harley-Davidson’s
46
experience.29 With aging populations, organizations can expect
pressures to manage age prejudice more effectively. Subtle
discrimination based on age will not be accepted. Innovative
solutions will be welcomed by aging members of the workforce
and an increasing necessity for employers. See the story below.
Older Workers Can’t Be Ignored
“The day is coming when employers are going to embrace the value
of older workers. They don’t have a choice,” writes Kerry Hannon.
Demographic and fiscal realities are making the retention of older
members of the workforce escalate in importance and give rise to the
innovations in working relationships, from full time to flexible work
relationships and contract positions. Some employers are realizing
the benefits that these employees can bring with them and are
recognizing the importance of investing in them before their
knowledge walks out the door. Employers that fail to adjust their
approach to older employees could find themselves seriously at risk
as U.S. labor markets reflect the demographic realities.30
KPMG has publicly recognized the benefits, noting that “older
workers tend to be more dedicated to staying with the company, a
plus for clients who like to build a relationship with a consultant they
can count on to be around for years.”31
Diversity Matters
Other demographic issues will provide opportunities and
challenges. In the United States, Latinos will play a role in
transforming organizations. The numbers of Latinos jumped from
35.3 million during the 1990s, to 55.4 million or 17.4% of the
population in 2014 (up from 13% in 2000), making them the
largest ethnic/racial group in the United States. They are also
much younger (29 versus the national average age of 37.2), and
65.6% of its members have been born in the United States.
Significantly, the largest growth often is in “hyper-growth” Latino
destinations such as Nevada and Georgia,32 some of which have
seen an increase of more than 300% in Latino populations since
1980. The immigration component of this growth rate was
adversely affected by the U.S. economic downturn and
improvements in the Mexican economy, but it is predicted to
47
continue upward due to domestic population growth, difficult
conditions in other parts of Latin America, and the impact that a
return to economic health in the United States will have on
immigration.
One of the outcomes of hyper-growth in certain urban areas has
been an imbalance of Latino males and females. In the non-Latino
population, the ratio of males to females is 96:100. In the Latino
population, ratios as high as 118:100 are seen in the hyper-growth
destinations.33 While the specific implications for businesses are
unclear, the general need for response and change is not. Notions
of cultural norms (including those around English literacy and
dominant language used) and markets could be shattered by such
demographic shifts.
There have also been significant demographic shifts in Europe
and parts of Asia, as people move from disadvantaged areas
(economic, social, and political) in search of greater opportunities,
security, and social justice. These trends are likely to continue,
and as in the United States, they provide both challenges and
opportunities. For countries like France and Austria, they help to
moderate the effects of an aging population by providing new
entrants to the workforce and new customers for products and
services. However, they also represent integration challenges in
terms of needed services and there has been a backlash from
some groups, who see them as both an economic and social
threat. Resistance to immigration reform in the United States, the
tightening of emigration rules in Canada, the rise of antiimmigration political parties in Western Europe, and the January
2019 shut-down of the U.S. federal government over the disputed
wall on the U.S.-Mexico border are evidence of this.
Our assumptions about families and gender will continue to be
challenged in the workplace and marketplace of the future.
Diversity, inclusiveness, and equity issues will challenge
organizations with unpredictable results. The heated debates that
occurred in the United States in 2006 concerning legislation
related to illegal or undocumented immigrants, temporary workers,
and family unification continue to provoke passionate positions
and no resolution as of 2019. In Europe, debate around these
48
topics has given rise to some electoral success by what used to
be fringe parties in Sweden, France, and Italy (to name three),
and isolated examples of violence.34 Some nations have
implemented laws around certain religious practices (typically
associated with dress and visible symbols in schools and
workplaces) that are viewed by many as discriminatory.35 Matters
related to same-sex marriage, gender identity, and gender equity
continue to be challenging for many organizations, as laws and
behavioral norms related to what is acceptable slowly evolve. The
front-page coverage devoted to the drafting by the St. Louis Rams
of Michael Sam, the first openly gay professional football player,
testifies to the attention and emotions these matters can
generate.36 In too many parts of the world they represent life and
death issues.
The same is true for matters of gender violence, as seen in the
rise of the #MeToo movement in the United States and other parts
of the world. Bad behavior is being exposed, attitudes are
changing, and governments and organizations are beginning to
alter policies and procedures in meaningful ways. Reactions to the
reported behaviors of Harvey Weinstein (film producer), Roger
Ailes (Fox News chairman), and many others attest to this.
Christine Blasey Ford and Brett Kavanaugh’s 2018 Supreme
Court hearing concerning allegations of gender violence attracted
over 20 million viewers37 and the strength of subsequent
responses suggest public concerns and demands for action on
gender-related matters are increasing.
In some nations, employment- and human rights-related
legislation have gone a long way toward advancing the interests
and acceptance of diversity, by providing guidance, rules of
conduct, and sanctions for those who fail to comply. However,
issues related to gender, race, and diversity still need to be
attended to by organizations. Participation and career
advancement rates and salary level differences continue to attract
the attention of politicians, the public, and the courts. Further, they
constrain the development of talent in organizations and have
adverse consequences on multiple levels—from the ability to
attract and retain to performance and attitudinal outcomes that
can, in turn, influence the culture and work climate of the firm.38
49
What happens when this boils over? In 2014 the intense news
coverage and disciplining of Donald Sterling, the owner of the Los
Angeles Clippers NBA franchise, for racist comments made during
a private conversation, point to the extreme distress it caused
members of the team and the reputational and brand
consequences his behavior had on the franchise and the league
itself. Only the swift actions of NBA Commissioner Adam Silver
contained the damage, facilitated the sale of the franchise, and
clearly signaled what was expected of owners.39
Risks in this area are not just related to the actions of senior
management. Social media exposure extends the risks to all
levels of the firm, where postings from organizational members
can and do go viral with adverse consequences (more will be said
about this later). Employees in the United States have certain
protections when it comes to discussing working conditions with
others online. In the case of fast-food restaurants, this has
manifested itself into a very public national campaign to increase
the minimum wage from $7.50 to $15.00 per hour. This campaign
began on social media and is now giving rise to pay increases by
some firms and minimum wage increases at the state level.40
Firms are finding they must respond very carefully, in part
because of the public’s connection to a workforce where matters
of age, gender, race, ethnicity, and economic fairness are very
visible.41 When employee postings go over the line on matters of
race, gender, diversity, and equity, firms need to act and be seen
to be acting quickly and appropriately in order to control
damage.42
Being viewed as proactive and progressive in these areas can
create advantages for firms in terms of attraction, retention, and
the commitment levels of employees and customers. Firms such
as TD Bank communicate this commitment very publicly and have
been recognized as one of the best employers by Diversity Inc.,
Corporate Knights, and the Human Rights Campaign.43
Multinational corporations, such as IBM, view workforce diversity
management as a strategic tool for sustaining and growing the
enterprise.44 That doesn’t mean it is easy. Google has sought to
increase the diversity of its workforce for several years. In May
50
2014 it publicly recognized its current lack of diversity (30%
women, 2% black, and 3% Hispanic), and committed itself to
aggressively address this through significant external and internal
initiatives geared to attracting more individuals from these groups
to technical careers and Google.45 Smaller and medium-size firms
(particularly tech start-ups) are increasingly recognizing the
importance of this, as they attempt to scale their operations.
Race, gender, age, and diversity-related challenges multiply once
organizations extend their footprints internationally. Differing rules,
regulations, cultural norms, and values add to the change
leadership challenges that need to be managed, as people learn
to work with one another in efficient, effective, and socially
appropriate ways. Think of the workforce challenges that a North
American, Brazilian, or Indian firm needs to address when
establishing its presence in a different part of the world. How will
they deal with norms and values in these areas that run contrary
to their core values? This is not just an issue for larger
organizations. Increasingly, smaller firms find themselves facing
international challenges as they seek to grow. These come in
many forms—from managing virtual, globally dispersed teams and
supply chains, to dealing with the complexities of joint ventures.
While the challenges can seem daunting, an increasing number of
small and midsize companies are succeeding on the global stage.
A study of 75 such firms highlights the strategies and tactics that
have produced positive results. Change leadership skills in these
firms play a critical role in their survival and success.46
The Physical Environment and Social
Responsibility Matters
Concerns over global warming, the degradation of the
environment, sustainability, and social responsibility have
escalated societal pressure for change at the intergovernmental,
governmental, multinational and national corporate, and
community levels. Accountability for what is referred to as the
“triple bottom line” is leading firms to issue audited statements that
report on economic, social, and ecological performance with the
goal of sustainability in mind.47 The 2013 fire and building
51
collapse involving garment suppliers in Bangladesh (1,100
workers killed) and the 2014 spread of the Ebola virus in West
Africa intersected with questions about the role of multinational
corporations in the health and safety of people in developing
countries.
The 2010 pictures of BP’s oil well gushing millions of gallons into
the Gulf of Mexico combined with pictures of oil-coated pelicans,
drought, extreme heat, storm-related flooding, and disappearing
ice masses reinforce the message that action is urgently needed.
While the Paris Agreement on Climate Change was hailed as a
breakthrough, the United States decision to withdraw from it has
cast into doubt the future of coordinated global abatement efforts.
However, the increasing frequency of extreme weather events
(e.g., floods, storms, droughts, extreme heat events) and their
human impact will cause the pressure for action to intensify in the
years ahead. The question is more a matter of how quickly the
intensifying pressure for action will reach a tipping point and will
that tipping point come in time? The growing number of credible
reports expressing serious concerns over the future of seaside
metropolises such as Miami due to sea level rises, the increasing
frequency of storms, and imminent threats to its water supply will
hopefully hasten that tipping point and advance needed changes
before it is too late.48
There is also mounting evidence of the advantages that can
accrue to organizations that think about these issues proactively
and align their strategies and actions with their commitment to
sustainability and corporate social responsibility.49 Reported
benefits range from increased employee commitment to positive
customer reactions and improved financial performance. The
reputational damage firms incur when they are found to have
failed to behave responsibly can be severe (e.g., Volkswagen’s
falsification of diesel emissions tests).50
New Technologies
In addition to responding to environmental and demographic
changes in the workplace and marketplace, organizations and
their leaders must embrace the trite but true statements about the
52
impact of technological change. Underpinning technological
change is the sweeping impact that the digitization of information
is having. The quantity of data available to managers is mindboggling. It is estimated that digital data will grow from 400 billion
gigabytes of Web-enabled data in 2013 to 40 trillion gigabytes by
2020.51 The explosion in the amount of data available will be
aided by the impact of inexpensive nano-scale microelectronics
that will allow us to add sensors and collection capacity to just
about anything. The use of data mining methodologies and
artificial intelligence is becoming increasingly common in
organizations that seek to transform data into information.52 The
following list of technological innovations points to the breadth of
changes we can anticipate. This is not the stuff of science fiction.
In most of these areas, applications are already present and costs
are declining rapidly:
Software that writes its own code, reducing human error
Health care by cell phone, laptop, and app
Vertical farming to save space and increase yield53
The Internet of Things, cloud technology, and crowd sourcing
are providing access to massive data pools that can be
translated into useful information and action.
The automation of knowledge work
Advanced robotics, from industrial applications to surgery
Wearable computing, from basic data gathering to human
augmentation and computer–brain interfaces
Autonomous and near autonomous vehicles
Next-generation genomics, from agricultural applications to
substance production (e.g., fuel) and disease treatment
applications
Renewable energy and energy storage breakthroughs that
will change energy access and cost equations
3-D printing for applications as varied as the production of
auto parts and human body parts
Advanced materials (e.g., nano technology) for a host of
applications that will result in dramatic reductions in weight
and improvements in strength, flexibility, and connectivity
Advanced oil and gas exploration and recovery
technologies54
53
The use of blockchain technologies and cyber currencies is
likely to change the way we undertake and securely record
transactions on digital ledgers that can’t be tampered with.
These can be used to record and track the ownership those
assets over time, execute contracts, transfer ownership rights
and obligations, and make payments, to name a few of the
potential applications.
Technology has woven our world together. The number of
international air passengers rose from 75 million in 1970 to an
estimated 3.7 billion in 2016.55 The cost of a 3-minute phone call
from the United States to England dropped from more than $8 in
1976 to less than $0.06 in 2014 when VoIP (voice over Internet
protocol) is used for a call to a landline or cell phone. When both
the sender and receiver have the appropriate software (e.g.,
Skype, WhatsApp) then the cost goes to 0. The number of
transborder calls in the United States was 200 million in 1980.56
Estimates of the numbers today are in the tens of billions. VoIP
has disrupted traditional long-distance telephone markets
dramatically, and the proliferation of alternative communication
channels, including SMS texting, BBM (Blackberry Messenger),
Facebook, and their equivalents on other platforms have
transformed the communication landscape. The number of cell
phones in use totaled 6.8 billion in 2013, meaning one for almost
every person alive.57 In 2017, there were an estimated 2.32 billion
smartphone users, meaning access to digital information and
apps for everything from weather forecasts to online purchasing
and the transfer of funds. Even those without access to a bank or
smartphone can transfer cash safely and securely on a regular
cell phone in some developing parts of the world—Google “MPesa” for an example of this.58
Our embrace of digital technology and connectedness has
opened the world to us and made it incredibly accessible, but it
has come with costs. Security concerns related to viruses and
hacking have also escalated, and serious breaches are a common
occurrence. The Ponemon Institute estimates that in the United
States alone, 110 million adults had their personal information
exposed by hackers during a 12-month period in 2013. In
September 2018 Facebook reported that 50 million of its accounts
54
were directly affected by a hack.59 The cost to firms responding to
these threats and breaches are in the billions, and that doesn’t
include the damage done to customer trust and loyalty. Costs
related to online fraud and identity theft are in the billions (some
put the estimates in excess of $100 billion) and growing rapidly.
These issues will not go away any time soon.60 Issues related to
the loss of privacy, industrial espionage, and sabotage involving
both firms and government agencies have also become
common.61 On a business-to-business level, supply chains woven
together through software allows them to operate effectively and
efficiently, while at the same time opening them to risks.62
With the Internet, students around the globe can access the same
quality of information that the best researchers have if it is in the
public domain (which is increasingly the case) and if their
government hasn’t censored access to it. At the same time, the
technology that has made the world smaller has also produced a
technological divide between haves and have-nots that has the
potential to produce social and political instability. Aspects of the
gap are closing, as is seen in the growth of cell phones,
smartphones, and Internet access in the developing world.
Laptops and tablets are now available at well under $100, and the
cost in India has dropped to below $50.63 Lack of access to clean
water, sufficient food, and needed medication is less likely to be
tolerated in silence when media images tell people that others
have an abundance of such resources and lack the will to share.
Events such as the Arab Spring, Occupy Wall Street, the 2014
election of Narendra Modi as India’s prime minister, and the 2017
Women’s March point to the power this technology has in
mobilizing public interest and action. Technology transforms
relationships. Facebook, LinkedIn, Twitter, and their equivalents
keep us connected, 19% of U.S. newlyweds in 2017 were
reported to have met online, and people have even been found
attempting to text in their sleep.64
The New Change Tool on the Block
Social media has fundamentally altered thinking about change
management. It has changed how information is framed, who frames
55
it, and how quickly it migrates from the few to the many. It can
stimulate interest, understanding, involvement, and commitment to
your initiative, and it can also be used to create anxiety and
confusion, and used to mobilize opposition and resistance. It can
create communities of shared interest, but it can also serve to isolate
communities when they choose to only search out information that
confirms their view of the situation. The one thing it can’t be is being
ignored!
Our purpose is not to catalogue all new and emerging
technologies. Rather, our intent is to signal to change leaders the
importance of paying attention to technological trends and the
impact they have on organizations, now and in the future. As a
result of these forces, product development and life cycles are
shortened, marketing channels are changing, and managers must
respond in a time-paced fashion. Competitors can leapfrog
organizations and drop once-market-leaders into obsolescence
through a technological breakthrough. The advantages of vertical
integration can vanish as technical insights in one segment of the
business drive down the costs, migrate the technology through
outsourcing to other segments, or otherwise alter the value chain
in ways that had not been anticipated.
Is this overstating the importance of paying attention to how
rapidly technological and social change can alter the competitive
landscape? BlackBerry went from creating and dominating the
smartphone business to less than 3% market share in five years.
Dramatic downsizing and reinvention became the order of the day
as the BlackBerry executives searched for new paths and
renewed market relevance; it took them years to regain their
competitive footing as a cybersecurity software and connected
cars firm.65 Now shift your thoughts to the automotive sector.
What will the emergence of self-driving electric vehicles mean for
manufacturers and their suppliers and distributors? What will they
mean for city planners, urban transit, and the taxi driver?
Prototypes are currently driving on the streets of Mountain View,
California, and elsewhere. Expectations are that these sorts of
vehicles will be for sale by 2020.66 The watchword for change
leaders is: be aware of technological trends and be proactive in
considering how to respond to organizationally relevant ones.
56
Political Changes
The external political landscape of an organization is a reality that
change leaders need to pay attention to and figure out how to
engage. Even the largest of multinationals has minimal impact on
shaping the worldwide geopolitical landscape and the focus of
governing bodies.67 However, if they are attentive and nimble,
their interests will be better served.
The collapse of the Soviet Empire gave rise to optimism in the
West that democracy and the market economy were the natural
order of things, the only viable option for modern society.68 With
the end of communism in Russia, there was the sense that there
was no serious competitor to free-market democracy and the
belief existed that the world would gradually move to competitive
capitalism with market discipline.
Of course, this optimism was not realized. Nationalistic border
quarrels (India–Pakistan, for example) continue. Some African
countries have become less committed to democracy (Zimbabwe
and Ethiopia). Nation-states have dissolved into microstates
(Yugoslavia and Sudan) or had portions annexed as in the case of
Crimea. While American power may still be dominant worldwide,
September 11, 2001 (9/11) demonstrated that even the dominant
power cannot guarantee safety. Non-nation-states and religious
groups have become actors on the global stage. The Middle East,
north and central parts of Africa, the Ukraine, Venezuela, and
Central Asia continue to be in turmoil, creating political and
economic uncertainty.
Changes in the economic performance of nations have also
altered the geo-political landscape. Growth in China and India,
though it has slowed, continues to advance much more than twice
the rate of the developed world.69 They led the world out of the
2007–2008 crash, and in some periods have been joined by other
African and Asian nations that are experiencing more rapid
economic growth than the developed world. However, progress in
the developing world has slowed in the face of global concerns
related to protectionism, trade wars, and constrained capital
57
flows70. Grinding poverty rates, though improving, are still the
reality for hundreds of millions of people who live in these areas.71
As organizations become global, they need to clarify their own
ethical standards. Not only will they need to understand the rules
and regulations of each country, they will also have to determine
what norms of conduct they will work to establish for their
organizational members, and what constitutes acceptable and
unacceptable behavior. Peter Eigen, chairman of Transparency
International, states, “Political elites and their cronies continue to
take kickbacks at every opportunity. Hand-in-glove with corrupt
business people, they are trapping whole nations in poverty and
hampering sustainable development. Corruption is perceived to
be dangerously high in poor parts of the world, but also in many
countries whose firms invest in developing nations.”72 Left
unaddressed, political corruption can become embedded in
organizations. Transparency International finds bribery most
common in public works and construction and arms and defense
corporations as compared with agriculture.73 The accounting and
governance scandals of 2001 to 2002 (Enron and WorldCom),
followed by an almost uninterrupted series of major ethical lapses
in global financial services/banking, pharmaceutical, and
government sectors (to name just three), have created public
demands for transparency, accountability, regulations with teeth,
and heightened expectations that firms should be expected to
behave in socially responsible manners. Some companies,
Hewlett-Packard, H&M, Tesco, Loblaw, and Apple, for example,
have responded by requiring that they and the participants in their
supply chain adhere to a set of specified ethical standards.
Further, they are committed to working with their suppliers to
ensure they reach these standards.74
The politics of globalization and the environment have created
opportunities and issues for organizations. The United States’
Obama administration was committed to the introduction of new
green energy initiatives, but the election of Donald Trump has
placed U.S. progress in this area in doubt.
The desire to reduce the world’s dependence on foreign oil and
coal has meant subsidy programs for new technologies and
58
opportunities for businesses in those fields. It has also led to an
explosion of energy recovery methods, such as fracking, which
bring with them their own ethical issues. Some organizations are
restructuring themselves to seize such opportunities. For
example, Siemens has reorganized itself into three sectors—
industry, energy, and health care—to focus on megatrends.75
Senge and his colleagues argued that the new environmentalism
would be driven by innovation and would result in radical new
technologies, products, processes, and business models.76 The
rapid rates of market penetration for such technologies and the
decline in their costs are evidence that Senge was right.
The politics of the world are not the everyday focus for all
managers, but change leaders need to understand their influence
on market development and attractiveness, competitiveness, and
the resulting pressures on boards and executives. Firms doing
business in jurisdictions such as Russia, China, and Argentina
know this all too well. Issues related to climate change, water and
food security, power, urbanization/smart cities, public transport,
immigration, health care, education, trade, employment, and our
overall health and safety will continue to influence political
discussion and decision making at all levels—from the local to the
international context. A sudden transformation of the political
landscape can trash the best-laid strategic plan. The growth of
populist and anti-global sentiments in Europe and the United
States has demonstrated how political surprises (e.g., the Brexit
vote in the UK and the election of Donald Trump) can quickly
disrupt existing relationships (e.g., alliances, markets, supply
chains) and create high levels of uncertainty as to what lies
ahead. It’s been argued that the rise of these movements is
attributable to the declining size of the middle class in many
countries, the massing of wealth by elites, and the declining sense
in parts of the population that a positive future is available, given
current conditions and trends.77
Successful change leaders will have a keen sense of the
opportunities and dangers involved in global, national, and local
political shifts. If they are behaving in a manner consistent with
corporate social responsibility, they will also have a keen sense of
the opportunities and dangers related to the issues themselves.
59
The Economy
In 2007, the world economy crashed into financial crisis and
appeared headed for a 1930s depression. Trillions of dollars of
asset-backed paper became valueless, seemingly overnight.
Investors and pension funds lost 20% of their value. Global stock
markets shrank by $30 trillion, or half their value.78 The American
housing market, which provided an illusory asset base, collapsed
and led to the credit crisis. Firms that were chastised for having
too much cash on hand and were seen as missing opportunities
suddenly became the survivors when credit vanished. At the
individual firm level, the economic crisis led to layoffs and
bankruptcies. Firms saw their order books shrink and business
disappear. Entire industries, such as the automotive industry, were
overwhelmed and certain large automotive manufacturers might
have vanished if not for government bailouts. An example of the
impact on one small firm is shown in the story below.
The Impact of the 2007–2009 Recession on a Small Business
Serge Gaudet operates a wholesale and retail drapery and window
blind business in the small Canadian town of Sturgeon Falls, Ontario.
The world economic crisis suddenly became real when banks would
no longer extend him credit. In his words, “I had signed orders,
contracts in hand, and my bank refused my line of credit so that I
could buy the inventory. How was I to finance this deal? I had the
contract and it was with a government hospital. Surely, this was
creditworthy? What else could I do?”
Mr. Gaudet managed through the crisis by negotiating newer,
tougher terms with his bank. But the lack of credit was not his only
problem. “Normally, I bid on requests for proposals and win a
reasonable percentage of them,” he reported. “Suddenly, there was
nothing to bid on. Nothing. Every institution that was going to buy
blinds was waiting—waiting for government aid that was very slow in
coming. It was touch-and-go whether I could last until new contracts
came in.”
Mr. Gaudet’s story is typical of the situation faced by many small
businesses as they struggled through the economic crisis of 2007–
2009. Many did not survive. Those that did were able to do so
60
because they had low overhead and debt.79 As of 2019, Mr Gaudet
continues to successfully operate his business.
Governments responded to the economic crisis with Keynesian
abandon. G20 countries ran huge deficits as governments tried to
stimulate their economies out of recession. America’s federal
deficit hit 83% of GDP in 2009, and the overall debt to GDP went
from 62% in 2007 to 99% in 2012.80 In December 2010,
economists were talking about a slow recovery in America and an
almost nonexistent one in Europe, and they were right.81
Economists also predicted that China would have an 8.6% GDP
growth and 11.1% investment growth, with significant growth also
predicted for India, the BRICS nations and other parts of the
developing world (in particular, Africa). While growth in these
economi…
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