The Challenge for Organizations:The Growth and Relevance of OD

OD: A Unique Change Strategy:OD consultants utilize a behavioral science base >>

OrganizationDevelopment MGMT628

Lesson 01

The Challenge for Organizations

We live in a world that hasbeen turned upside down.Companies are pouring money, technology, and

managementexpertise into regions thatwere once off limits, acquiring new enterprises, formingjoint

ventures,creating new global businessesfrom the ground up. Many major companies are goingthrough

significant changes, including outsourcing, downsizing, reengineering, self-managed workteams, flattening

organizations,and doing routine jobswith automation and computers.Some experts contend that if you

candescribe a job precisely or write rules for doingit, the job will probablynot survive.

Change is avalanching down upon ourheads and most people areutterly unprepared to cope withit.

Tomorrow'sworld will be different fromtodays, calling for new organizational approaches. Organizations

willneed to be adapting to these changesmarket conditions and at the same time coping with the needfor

a renewing rather than reactive workforce.Every day managers areconfronting massive andaccelerating

change. As one writer comments,"Call it whatever you like reengineering, restructuring, transformation,

flattening, downsizing, rightsizing, a quest forglobal competitiveness it's real, it's radical and it's arriving

everyday at a company nearyou."

Globalcompetition and economicdownturns have exposed a glaring weakness in American organizations:

the fact that many organizationshave become overstaffed, cumbersome,slow and inefficient. To increase

productivity,enhance competitiveness and contain costs, organizations arechanging the way they are

organizedand managed.

Thesuccessful twenty-first century managermust deal with a chaoticworld of new competitors and

constantinnovation. In the future the onlywinning companies will be the ones that respond quickly to

change.Preparing managers to copewith today's acceleratingrole of change is the centraltheme/purpose

of my lectures (concern of this book).Modern manager must notonly be flexible andadaptive in a

changingenvironment but must also be able to diagnose problemsand implement changeprograms.

TomPeters suggests that "the time for 10 percent staffcuts and 20 percent quality improvement is

past".

Organizationsare never completely static. They are in continuous interaction with external forces (see

figure below). Changing consumer lifestylesand technological breakthroughs all act on the organization to

cause it to change. The degree of change may vary from one organization to another, but all face the need

for adaptation to external forces. Many of these changes are forced upon the organization, whereasothers

aregenerated internally. Becausechange is occurring so rapidly, there is a need for new ways to manage it.

Figure: 01 The OrganizationalEnvironment:

The Growth and Relevance of OD:

Organizationsmust adapt to increasingly complex and uncertain technological, economic,political, and

cultural changes. The rapidlychanging conditions of the past few years have shown that the organizations

are in the midst of unprecedented uncertainty andchaos, and nothing short of a management revolution

willsave them. Three major trendsare shaping change in organizations: globalization, information

technology, and managerialinnovation.

OrganizationDevelopment MGMT628

First: globalization is changing the markets and environments in which organizations operate as the way

they function. New governments,new leadership, new markets,and new countries areemerging and

creating a new global economy. Thetoppling of the Berlin Wallsymbolized and energized the reunification

of Germany: entrepreneurs appeared in Russia, the Balkans, andSiberia as the former SovietUnion

evolves, in fits and starts, intoseparate, market-oriented states; and China emerged as an open marketand

as the governance mechanism overHong Kong to represent a powerful shift in global economic influence.

Second:information technology is redefining the traditional business model by changing how work is

performed, how knowledge is used, andhow the cost of doingbusiness is calculated. Theway an

organization collects, stores, manipulates,uses, and transmitsinformation can lower costs or increase the

valueand quality of products andservices. Information technology, forexample, is at the heart of emerging

e-commercestrategies and organizations.Amazon.com, E-Trade, areamong many recent entrants to the

informationeconomy, and the amount of business being conducted on the Internet is projected to grow at

double-digitrates for well over ten years. Moreover, the underlyingrate of innovation is notexpected to

decline.Electronic data interchange, a state-of-the-art technology application a few yearsago, is now

consideredroutine business practice.The ability to move informationeasily and inexpensively throughout

andamong organizations has fueled the downsizing, delayering, and restructuring of firms. The Internet

and the World Wide Web haveenabled a new form of workknown as telecommuting; organization

memberscan work from theirhomes or cars without ever going to the office. Finally,information

technology is changing how knowledge is used.Information that is widelyshared reduces the concentration

of power at the top of the organization. Organization members now share the samekey information that

seniormanagers once used to control decision making. Ultimately,information technology willgenerate

newbusiness models in which communication and information sharing is nearly free.

Third:managerial innovation hasresponded to the globalization andinformation technology trendsand

hasaccelerated their impact on organizations. New organizational forms,such as networks, strategic

alliances,and virtual corporations, provideorganizations with new ways of thinking about how to

manufacturegoods and deliver services.The strategic alliance, forexample, has emerged as one of the

indispensable tools in strategy implementation. No single organization, not even IBM,Mitsubishi, or

General Electric, can control the environmentaland market uncertainty it faces.Sun Microsystems'

network is so complex that some products it sellsare never touched by a Sunemployee. In addition,new

methods of change, such as downsizing andreengineering, have radically reduced the size of organizations

andincreased their flexibility,and new large-group interventions,such as the search conferenceand open

space,have increased the speedwith which organizational changecan take place. Managers, OD

practitioners, and researchers argue thatthese forces not onlyare powerful in their ownright but are

interrelated. Their interaction makes for a highly uncertain and chaoticenvironment for all kinds of

organizations,including manufacturing and service firms and those in the public andprivate sector. There

is no question that these forcesare profoundly affecting organizations.

Fortunately, a growing number of organizations are undertaking the kinds of organizational changesneeded

to survive and prosper in today'senvironment. They are making themselves more streamlinedand nimble

andmore responsive to external demands. They are involving employees in key decisions and paying for

performance rather than for time. Theyare taking the initiative in innovating and managingchange, rather

than simply responding to what has alreadyhappened.

Organization Development is playing an increasinglykey role in helpingorganizations changethemselves.

It is helping organizations assessthemselves and their environments, and revitalize and rebuildtheir

strategies,structures, and processes. OD is helping organization members go beyond surface changes to

transform the underlying assumptions andvalues governing theirbehaviors. The different OD concepts

andmethods increasingly arefinding their way into government agencies, manufacturing firms,

multinational corporations, service industries,educational institutions, andnot-for-profit organizations.

Perhaps at no other time has OD beenmore responsive and practically relevant to organizations' needs to

operateeffectively in a highly complex andchanging world.

What is Organization Development(OD)?

Whatmakes one organization a winner,whereas another fails to makeuse of the same opportunities? The

key to survival and success liesnot in the rational, quantitativeapproaches, but rather in a commitment to

irrational, difficult-to-measure things like people, quality,customer service, and moreimportantly, develop

the flexibility to meet changing conditions. For example, in a study thatexamined the "high tech-high

touch" phenomenon at Citicorp, the crucial component in adapting to technological change was the human

factor. Employee involvement and commitment is the true key to successfulchange.

OrganizationDevelopment MGMT628

DefiningOrganization Development(OD):

Thewords organization development refers to something about organizationsand developing them. "An

organization is the planned coordination of the activities of a number of people for the achievement of

some common explicit purpose or goal,through division of laborand functions, and through a hierarchy of

authorityand responsibility." Organizations aresocial systems possessingcharacteristics and OD effortsare

directedtoward organizations or major subparts of them.

Development is the act, process, result, or state of being developed which in turn means to advance, to

promote the growth of, to evolve the possibilities of, to further, to improve, or to enhance something.

Twoelements of this definition seemimportant: first, development may be an act, process, or endstate;

second, development refers to "bettering'something.

Combiningthese words suggests that organization development is the act, process, or result of furthering,

advancing, or promoting the growth of organization. According to this definition, organization

development is anything done to "better" an organization. But this definition is too broad and all-inclusive.

It can refer to almost anything done in an organizational context that enhances the organization hiring a

personwith needed skills, firing an incompetent, merging with another organization, installing a computer,

removing a computer, buying a new plant,and so on. This definitionserves neither to identifyand specify

nor to delimit (perhaps something done to "worsen" an organization would be ruled out). The term

organization development must be given added meaning,must refer to something morespecific, if

productivediscourse on the subject is desired.

Anotherway of defining OD is to examine the following definitions whichhave been (suggested in the

literature).

Definition of Organization Development(OD):

OD is an effort (1) planned, (2) organization-wide, and (3) managedfrom the top, to (4)increase

organization effectiveness and health through(5) planned interventions in the organization's "processes,"

using behavioral science knowledge. (RichardBeckhard)

Analysis of the definition suggests that OD is not just "anything done to better an organization"; it is a

particular kind of change processdesigned to bring about a particular kind of end result.

OD thus represents a unique strategyfor system change, a strategy largely based in the theory and research

of the behavioral sciences, and a strategy having a substantial prescriptive character. OD is thus a

normative discipline, it prescribes how planned change in organizations should be approached andcarried

out if organization improvement is to be obtained.

In summary, OD is a process of planned system change that attempts to make organizations (viewed as

social-technicalsystems) better able to attain their short- and long-term objectives.This is achieved by

teaching the organization members to manage their organization processes and culture moreeffectively.

Facts,concepts, and theory from the behavioral sciences are utilized to fashion both the process and the

content of the interventions. A basic belief of OD theorists and practitioners is thatfor effective, lasting

change to take place, the systemmembers must grow in the competence to master their ownfates.

Finally, it is important to note that OD has two broad goals: organization development and individual

development. Although it is not statedexplicitly in the above definitions,improving the quality of lifefor

individuals in organizations is a primary goal of organization development. Enhancing individual

development is a key value of OD practitioners and a key outcome of most OD programs.

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