Organization Development Is A Process Of Planned Change

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Organizational Development

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Change Management

Why Do We Need Change and Change Management

Change projects are initiated when the company has reached a strategic turning point that requires organizational development and change. Examples for this are: innovation, introducing new technologies, having to cut costs, suddenly experiencing strong competition, or needing a cultural change.

In this article Digital Leadership will guide you through organizational development and change, and how this is planned and implemented within companies using relevant examples.

change management
Change management

Implementing new business strategies at strategic turning points

Management develops a fundamentally new strategy for the company. This planned change in organizational development is focused on the following three aspects:

(1) Meeting the demands of the market.

(2) Confronting the competition, and making the company successful in the long term. These are also referred to as “strategic turning points”. Examples of this include:

  • Entry into new markets, new sales regions or addressing completely new target groups
  • Acquisition of another company and integration of the product range and/ or several parts of the company
  • Sale of business units and new distribution of the remaining tasks
  • Realignment of the product portfolio with completely new service offerings or the elimination of several products
  • New business models due to technological progress or completely new competitors
  • Establishment of partnerships and networks

Strategic turning points usually occur when (1) competition changes significantly, (2) new rules apply in the markets (for example, as a result of market liberalization, new technologies, or new legislation) or (3) when a new phase in the life cycle of a company is reached (start-up, growth, consolidation, contraction).

Examples: E.ON and RWE

Climate change and the nuclear disaster in Fukushima have radically changed energy policy in Germany and many other countries. Renewable energies are progressing due to laws and government subsidization. For previously established large energy producers this results in having to shut down nuclear power plants and coal-fired power stations while facing strong competition from suppliers of green electricity. E.ON, RWE, Vattenfall, and EnBW are thus developing new strategies as a result.

Old business areas such as conventional power generation will likely be outsourced to independent companies. Some business units are being downsized or closed down, while investments are being made in others. Competitors are suddenly working together. Here’s what E.ON and RWE stated on their websites:

“E.ON and RWE have agreed to transfer RWE’s entire 76.8 percent stake in Innogy to E.ON in a far-reaching asset and business swap. … The new E.ON will be a leading company with a clear focus on smart power grids and customer solutions, ideally positioned as the leading company to innovate and drive the energy transition in Europe. RWE will become a broad-based power producer that ultimately combines its conventional business with a large portfolio of renewables and interconnects them via its existing trading platform. This positioning will enable RWE to generate sustainable profitable growth.”

Inventing new products and introducing innovations to the market

A company invents and develops new products or services, which it then wants to introduce to the market as an innovation and market them successfully. Managers and employees have to have excellent knowledge of the new products, understand them and communicate them to others. Innovation requires the acquisition of new or different competencies. This may include:

Example: Apple

The American computer maker was a pioneer in predicting and realizing changes that would happen to the music industry: Customers aren’t buying CDs anymore, but share music over the Internet or download songs to a wide variety of mobile music players. Apple focused on organizational development & change and invented iTunes.

A few years later, the iPhone revolutionized the use of the cell phone. The smartphone was invented. A whole new market for apps developed. Now the company is looking for more breakthrough innovations.

One could have been the iCar (Apple car). To do that, the company and its employees need to understand how cars are designed, built, and marketed. Apple has therefore approached experts from established car manufacturers to leverage their expertise. However, there is no release date for this yet.

Introducing new technologies within the company

Companies use new technologies, for example, information or production technologies, which must be learned and mastered by employees. This usually includes:

  • Setting up and defining interfaces
  • Changing processes and tasks for employees
  • Training employees to use and master the technologies correctly
  • Establishing independent departments for maintenance and support
  • Taking data protection and data security into account at all times
  • Communicating liability risks (product liability) for planned changes

Example: Allianz Online

The Allianz insurance group has recognized that many insurance customers use the Internet and smartphones as a purchasing & communication channel. Planned change in organizational development was needed. A new digital strategy was established shortly after and Apps were developed and websites established for this purpose. Processes were redesigned and, most importantly, those involved need to realign and reinvent their roles and responsibilities.

The Group commented on this in a March 2016 press release: “In order to offer the best products and services for customers, Allianz continues to drive digitalization and innovation. Most customers first obtain information on the Internet but then sign their insurance contracts predominantly in person. A key role is, therefore, to take into account the connection between the online and offline worlds.”

Realigning organization and processes

The organizational structure and process organization of a company changes. The tasks and responsibilities of managers and employees are redefined, and processes and procedures in the company are regulated differently. As a result, tasks, authorities and responsibilities of individual employees change. Reasons for this include:

  • New legal requirements
  • New management
  • Company growth or shrinkage
  • Selling or outsourcing parts of the company
  • Saving costs

Only if the company’s processes function smoothly can the company work, achieve goals and meet customer requirements. Due to reorganization projects, changing customer demands or legal requirements, existing processes have to be changed or adapted over and over again. The employees affected must adapt to this.

Example: Triumph International

The company manufactures and distributes bodywear and lingerie. In mid-2015, they announced in a press release: “Triumph International is optimizing its global supply chain. This is being done to challenge shrinking markets, rising production costs, and globally challenging economic conditions. … To achieve [the goals], the company will reduce cost-intensive capacities. Complex and strategically important as well as highly innovative products will continue to be manufactured in the company’s own factories. … Triumph [will] say goodbye to the company-owned Hungarian production site in Dunaújváros with 412 jobs and the Austrian sewing center in Oberwart with 210 jobs by the end of 2015. The Austrian network will focus on the Sloggi brand for more effective and efficient production. The Hungarian production site is to be sold.”

Changing the behaviour and attitudes of employees

Employee behavior and attitudes have a major impact on the performance of an organization and the working atmosphere. In addition, the image of the company is shaped by them. New colleagues, a change in values in society, and changing attitudes towards career and work are constantly placing new demands on employees and companies managers alike. Examples include:

  • Increasing demand for part-time work by employees
  • Increasing demand for work at home
  • Constant availability through emails, even in their free time
  • Changing the composition of the workforce; teams consist of people from different cultures and of different ages.

It is often in the interest of a company to change its own image. To do this, it needs a planned change and the development of organizational culture internally. This starts with the employees, who have to change their behavior; for example, they should act and communicate in a much more service-oriented and customer-focused way. This can be supported through programs and projects for personnel development.

Example: Deutsche Bahn

Deutsche Bahn has been undergoing a process of change for several years – from a state agency to a customer-oriented company. Railroad officials are now called service employees. The almost sovereign task of ticket validation has lost its importance. Above all, customers and rail passengers expect friendly service at their seats. The new demands for employees to change attitudes and behaviors are enormous.

In practice, several of these aspects often collide and lead to complex change projects. When a new product or technology is introduced, organizational structures usually have to be broken up and adapted, and processes have to be redesigned. They become more customer-focused and employees have to change their behavior. This results in an extensive mix of tasks, changes, and projects, which makes organizational development and change management so difficult.

Causes for change projects

Change projects can only really be initiated and planned once the reason for the change has been clearly identified. This is the only way to convince your employees to support you and participate in or approve of the change.

For more detailed insights into planned change in organizational development and examples on how to create change within your company, have a look at the Digital Leadership UNITE Innovation & Transformation model called Examples Of Exponentially Accelerating Change. This ambidextrous chart demonstrates how a company might organize around the 3 Horizons of Growth, catering to both the existing core organization, but also focusing on innovation & transformation and organization development & change. Get access to the 50+ UNITE Innovation & Transformation Models which are fully Open Source and entirely free to download!

The UNITE Business Model Framework: A Framework for Innovation Success

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THE UNITE Business Model Framework
Designed By: Digital Leadership AG

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