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March 06, 2007

New Perspectives

Is Your Organization Ready for Change?


In this month’s Academic Forum, Professors Larry Chonko and Buddy LaForge discuss organizational change and how direct selling companies can ensure their change programs succeed. Send your comments or questions about this month’s discussion to professors@directsellingnews.com.

Buddy:It’s good to get back together. What is the subject of our conversation this month?

Larry: Last week I was in an academic meeting and the conversation got around to managing and leading change. Most there said the primary reason that change programs fail is people are inherently resistant to change. I don’t agree with that, and I’d like to visit with you about why I think this way.

Buddy: OK, but remember you were talking to a bunch of academics who generally don’t like to have their lives disrupted.

Larry: I know, but most would also likely say that they want to improve, to get better, and that implies they are willing to change if the right conditions exist. It is my view that the characteristics of an organization must support and reinforce change for change to be successful. Organizations must create conditions that are conducive to change.

Buddy: I’ll play. What are some of those conditions?

Larry: Let’s start with the big picture: Organizations must learn. Two elements of culture-market orientation and entrepreneurship-and three elements of climate-facilitative leadership, organic structure and decentralized strategic planning-are needed to help employees see the value of change. If an organization’s culture and climate are not conducive to change, change initiatives will fail. Thus, peoples’ actions and interactions will be largely unaffected by any attempts at leading and managing change if the program is not communicated well and the values of the change program are not evident. One means of bringing about lasting change is to develop a set of organizational working conditions in which people can operate more effectively.

All five of the culture and climate variables are indicators of organizational readiness for change. Each one of these tends to be proactive or externally focused and thus change-oriented. The more an organization possesses these features, the more likely its members will individually and collectively regard the organization as having a greater readiness for change.

Buddy: Let’s dissect these. We know an organization’s culture is the deep-rooted set of values and beliefs that provide norms for behavior. Culture is a set of basic assumptions that an organization and its people learned as it solved its problems. They have worked well enough to be considered valid and, therefore, to be taught to members as a good way to perceive, think and feel in relation to problems.

Larry: That’s right. An organization’s culture is influential in the acceptance of change. Every organization learns consequences, positive and negative, based on behaviors. Change can only occur if individuals learn and the organization encourages them to learn.

Buddy: So how does an organization encourage learning through its culture?

Larry: One way is being market oriented. In our October 2006 article, “Unlocking Customer Value,” we talked with Prof. Tom Ingram of Colorado State University about customer value. A market-oriented organization places the highest priority on the profitable and creative maintenance of superior customer value.

Buddy: Everyone talks about this, but how does one really know a firm is market oriented?

Larry: Market orientation provides norms for behavior regarding organizational change and responsiveness to market information. Truly market-oriented organizations learn beyond their customers by embracing learning sources like suppliers, consultants, universities and organizations in other industries.

Buddy:
So when organizations learn, they can be entrepreneurial because they are ahead of the curve concerning what customers are thinking.

Larry: That’s right. Entrepreneurial activity involves creating products ahead of both competitors and the explicit needs of customers. Entrepreneurial firms often work with key customers to improve their learning.

Buddy: You mentioned some other organizational factors that are conducive to change. You referred to an organization’s climate, which describes how an organization puts its culture into practice.

Larry: Organizational climate is kind of a level of organizational support, an openness in the organization, a supervisory style, a quality of relationships and conflicts among members of the organization. Three items are key elements of an organization’s climate. One is facilitative leadership. Leaders must raise the awareness of organization members, customers and others about important issues.

Buddy: It may sound trivial, but it must establish a vision that communicates behavioral and knowledge-seeking norms and guidelines. Vision provides clear purpose for learning.

Larry: That’s not trivial at all. Such leadership is typically practiced by transformational leaders and servant leaders, the kind of leaders who place high value on the worth and contribution of others. If people do not feel valued, they underachieve and are unwilling to engage in different activities. An organic organizational structure helps, too. An organizational architecture that’s decentralized with fluid job responsibilities and considerable lateral communications helps people feel valued and makes them more accepting of change.

Buddy: What things are needed for learning to occur?

Larry: First, frequent communication increases performance. Second, the use of informal communication between the two individuals helps people feel they are valued. Again, it may sound trivial, but the importance of talking with folks cannot be underestimated.

Buddy: How about decentralized strategic planning? We know from academic literature that this kind of planning is especially effective in an environment that is dynamic-like that facing direct selling organizations today.

Larry: This kind of planning tends to allow firms to extrapolate from the present or deal with incremental change that occurs within existing strategies. In my view, when constant learning is occurring, firms can mostly avoid things like change crises and perceived need for radical change. Words like radical and crisis are just not conducive to good change management and leadership, in my opinion. They create senses of urgency that may not be necessary.

Buddy: So are you saying that learning strategies are most effectively created through somewhat unstructured, emergent processes in which managers provide guidance?

Larry: Yes. Organizations that can adapt to changing internal and external conditions should be especially successful at learning and subsequent successful change. What they learn from experience will facilitate agility, the subject of our September 2006 article, “The Need for Speed: Agility Selling,” and improve their ability to recognize the need for change.

Buddy:
Are there any other things an organization can do to facilitate change?

Larry: Yes. One is to provide leadership support. This is different than facilitative leadership, which seeks to articulate a vision within employees, vivify their latent needs and values and heighten their awareness. Leadership support is about daily operations-the degree of encouragement and consideration people receive from managers.

Buddy: That makes sense. Perceptions of support represent a reciprocal relationship between the individual and the organization in which change may be viewed as less threatening. Through supportive activities, management fosters an environment in which change is viewed as an opportunity rather than a threat.

Larry: We know that leaders can be influential in the acceptance of team goals and performance. Team leaders who are supportive of their people rely on them as contributors.

Buddy: Then, these leaders create an environment that fosters performance, ensures coordination and focuses on the organization rather than the individual.

Larry: To some degree, that’s true. But, these leaders also are strong in their articulation that organizational success leads to individual success. They also know the opposite can be true. High-performing people contribute to the success of the organization.

Buddy: Earlier you talked about learning.

Larry: A learning orientation is reflected in a set of values that allows existing knowledge and ways of doing things to be questioned. A learning orientation is likely to increase the rate of change in a firm as people become aware of new information and changes in the marketplace.

Buddy: If an organization places minimal value on learning, employees are not likely to take the initiative to learn, and little learning will likely occur.

Larry: Yes, and without learning, effective change is hampered. Here a real challenge is that organizations must encourage unlearning. The continued use of obsolete knowledge and strategies is likely to make it harder for firms to adapt as they move forward and the obsolete knowledge and practices become more firmly embedded in culture.

Buddy: That is why a market orientation is critical. It directs and prioritizes learning activity.

Larry: Yes. Market orientation is a continuous process of interpreting memory, the success of which depends on decision rules for accepting and rejecting new information. Whether such an organizational environment is fostered, though, is likely to be a function of the degree to which an organization manifests a learning orientation.

Buddy: Managing an organization’s ability to support change relies on many things. Are there organizational policies that can help the change process?

Larry:
Absolutely. Simply stating that change is forthcoming is not sufficient. Two policy elements critical to salesforce perceptions of change readiness are training and rewards.

Buddy: We know that performance is a critical organizational goal. Therefore, it makes sense to target training toward the behavioral changes required to implement organization-wide change strategies for improved performance.

Larry: But it is important for organizations to distinguish between awareness training and behavioral training. Only after behavioral skills are learned can emphasis be placed on training to enhance change effectiveness. People must know what to do, but also be able to recognize when to do it. Change often necessitates the acquisition of new skills, leading to a need for training and adjustments in employee skill portfolios.

Buddy: This sounds especially important as competition intensifies. Organizations and their people must be adept at coping with the associated change. As competition intensifies, the need for training increases. It seems that many organizations could do much more in areas that affect training effectiveness, including the organization’s commitment to training and rewards for learned behaviors.

Larry: You bet! Management must create an atmosphere in which trust, openness and innovation are paramount if employees are to perform at high levels. Management that is trained to provide appropriate rewards for high performers would encourage people to want to perform at high levels.

Buddy: We’ve known for a long time that motivation plays a key role in directing performance. People attach high levels of importance to various rewards including pay raises. But we also know that no one reward package is universally acceptable. So management has to be creative in providing motivating rewards and motivating training.

Larry:
That’s right. Well, we’ve certainly talked about a lot, but there is much to be done if organizations are to lead and manage successful change programs. I hope we haven’t overwhelmed our readers.

Buddy: They know they can get in touch with us if they have any questions or comments by sending us an e-mail at professors@directsellingnews.com.

Raymond (Buddy) LaForge is the Brown-Forman Professor of Marketing at the University of Louisville. Larry Chonko is the Holloway Professor of Marketing at Baylor University. E-mail your questions and comments to professors@directsellingnews.com