Where does organizational change come from?
Organizations find change in one of two areas: ideas and needs. Ideas grow out of employees who are familiar with business processes usually because they understand how or what the company does on a daily basis. These employees can see how changes can impact the organization and make things better. Needs typically stem from managers who recognize a gap between how the company is operating and where it should be operating.
But those are internal sources.
Organizations exist within an environment and are rarely closed systems, so needs and ideas can spring from several different sources. Consultants, conferences, literature, suppliers, and professional associations are great sources for discovering new ideas that can lead to organizational change. On the other hand, customers, competitors, government regulations, technology, and changes in the labor force communicate needs which can be the impetus for change.
It is important for managers to create an organizational culture that is open to ideas and needs. Cultures that do not promote and seek new opportunities for innovation will quickly find their organizations on the decline and heading for financial ruin.
Competitive advantage is created from: (a) technology; (b) products and services; (c) strategy and structure; (d) culture.
Most managers tend to think of organizational change affecting the first three, but the fourth one, culture, is often the most important. The reason for this is an organization is nothing without its people. People are what the culture is all about. Organizations with strong cultures see happier and more productive employees. The people are more committed to the organization and believe in its mission. These people are members of the local community and will carry the company’s banner wherever they go—provided the organizational culture is something they are connected to.
To promote innovation, organizations must be organic and flexible. They must expect failure and applaud those employees who try and fail. Organic companies have decentralized command and control structures; they allow employees at all levels of the firm make decisions and be creative.
What about companies who must maintain a mechanistic approach? These types of companies are mechanistic because of a need to control the quality, and perhaps safety, of their products. Managers need to establish an organizational culture that allows some teams or departments to be organic while maintaining the mechanistic structure of production lines. Teams involved in research and development (R&D) should be organic but work closely with production lines to understand business processes. However, managers should be warned not to allow R&D teams to become too embroiled in production otherwise R&D teams will turn into production support and fail to deliver innovation.
There is a difference between innovation creation and innovation utilization. It is one thing to dream up new innovations, but it is often much more difficult to implement innovation into existing business processes. I’ll explore this in another post.
References
Daft, R. L. (2012). Organization theory and design (11th ed.). Mason, OH: South-Western, Cengage Learning.