1.

1 INTRODUCTION
Barack Obama started his election campaign with a plan to renew America’s promise with the words “Change we
can believe in”. His Presidential campaign was marked by changes. He wanted to change a nation and its way of
acting. Throughout the campaign, Obama’s changes were aimed towards bringing a rapid end to the war in Iraq,
decreasing energy dependence, and providing universal health care. In his victory speech Obama said “change has
come to America”.

Up to now, not all his plans and ideas have proven successful and only the future will reveal their full potential. The
U.S. election was a change of the governmental position which was decided by the nation. In an admittedly smaller
world, every person in his or her life as well as every manager of an organisation is faced with changes or the
requirement to make changes every day. Let’s concentrate on the business world and have a look at what changes
mean?

Change is an alteration of a company’s strategy, organization or culture as a result of changes in its environment,
structure, technology or people. A manager’s job would be very straightforward and simple (not to say boring) if
changes were not occurring in these areas. Good managers have a competence to manage change in the company’s
environment. These changes can be alterations in structure (design of jobs, span of control, authority relationships or
coordinating mechanisms), in technology (equipment, work processes or work methods) as well as in people
(behaviours, perceptions, expectations or attitudes).

1.2 Reasons for Change

A complex structure like an organization is driven by external and internal factors in regard to the need for change.
There are a number of external forces that create the explicit need for change:

 Market situation or market place

 Technology
 Government laws and regulations
 Economics

The global marketplace has created a huge need for change because of internationalization and the more dynamic
situation. Some of this could not have occurred without the various and dramatic changes in technology. An example
of the changing marketplace is the deregulation of the telecommunications industry in the domestic market. By
deregulation, the competitive pressure was put on telephone companies such as the German Telecom which has
minimised monopolistic emplacement. Regarding this point, advances in technology have had a big impact on the
market.

Also, the affordability of equipment and software allows greater competition in the IT-sector.
Government laws and regulations can have a large impact on an organization such as with deregulation.
Organizations have to change because it is now prescribed. The new tobacco taxes and the legislation requiring
tobacco manufacturers to disclose the harmful effects of tobacco smoking have created huge pressures on some large
organizations. These organisations now have to change to ensure their economic viability.

Finally, these economic ups and downs have a dramatic effect on organizations as well on domestic markets as the
worldwide economic influence continues on organizations. This phenomenon could be seen during the last financial
crisis. The effects were recognized in the USA first; then they hit Europe, Japan and finally the rest of the world. As
a consequence, several automobile manufacturers have announced production cutbacks and reduced employment.

Parallel to the external reasons there are different internal forces for change:

 Corporate strategy
 Workforce
 Technology and equipment
 Employee attitudes

It is not unusual for an organization to change its strategy. It can lead e.g. to a large number of changes if the
organization decides to adopt a new distribution methodology or a new logistic strategy. Also a merger will change
an organisation’s way of acting. (For example, a company decides to enter the e-commerce business).

The introduction of new equipment or new technology is another internal force for change which affects an
organization. The implementation of new technology needs new processes or structures. Through this, employees
will have to be trained for new work processes or new jobs.

The composition of an organization’s workforce never stays static because it changes in terms of gender, age or
education. New employees join the organization and other people leave. With these changes, managers may need to
redesign work and work groups in order to ensure the job requirements match the skills of the people.

Lastly, employee attitudes such as the level of job satisfaction can lead to either negative or positive forces for
change. If employees are dissatisfied, then there can be an increased level of employee absenteeism which can lead
to changing practices or management of staff.

1.3 Origins of Change Management

Again, a distinction between change management as a result of changing technologies and change management
based on different management styles has to be made (in practice however, one factor is certainly influencing the
other).

Change management has his origins in the 1950s. In those days modern forms of management were introduced (e.g.
teamwork, autonomous groups) and the “war” between followers of top-down (change) approaches and bottom-up
(change) approaches began.

Top-down organizations are characterizes by the relatively low influence of subsystems. With the exception of the
top management, employees are placed in a given process pattern. The organisation’s units are co-ordinated within a
system of regulations and the organisation’s development is steered from top down

Bottom-up organizations are characterized by the relatively high influence of subsystems. The organisation’s
development is carried by involved employees. A structural partial autonomy is conceded to the single subsystems.
The organisation units are relatively independent in their execution of problems and could be basically capable of
surviving on their own. Regulations are found primarily in the form of general behavioural instructions and the basis
of “Common Sense. The organisation’s development is therefore developing itself bottom-up.

The best known concepts of top-down management are business process re-engineering and business re-engineering

The concept of business process re-engineering is aimed at changes concerning quality, service, cost and processing
time. The core idea is process orientation. The concept of business process re-engineering takes into consideration
strategy creation as well as process creation without describing, however, methods and instruments in detail. The
documentation of the actual and the planned processes remain at a relatively coarse level and the main weight lies
with few identified core processes.

Business re-engineering is aimed at the radical redesign of enterprise strategies or essential enterprise processes. Its
purpose is the improvement around scales in significant and measurable achievement dimensions in the areas of
costs, quality, service and time. The implementation of this concept requires a “strong manager” who not only
initiates the changes but also encourages the employees to make the necessary changes. Business re-engineering,
therefore, is based on order and control, while the comprehensive knowledge of the organisations development and
the participative system’s creation is maintained.

The best known concepts of bottom-up management are kaizen and lean management.

Kaizen (Japanese for “improvement” or “change for the better”) focuses upon continuous improvement of processes
in manufacturing, engineering, development, marketing etc. (main business processes), supporting business
processes and management. Kaizen as a management approach is based on the idea that no actual status (of a
process or an organisation) is good enough to be kept. Kaizen refers to a continuous improvement of all functions
and involves all employees from the executive board to the assembly line workers. It also applies to processes, such
as purchasing and logistics and always involves the entire organization. Kaizen was first implemented in several
Japanese businesses after the Second World War, influenced in part by American business and quality management
teachers who visited the country. It has since spread throughout the world
Lean Management explains how to link the advantages of batch-producing organizations (speed, low unit cost) with
the benefits of a customer-oriented organisation (high flexibility, customizing, quality).

“Lean” must be understood as “Lean Enterprise, an enterprise with customer-oriented organisation which values
customers, suppliers and employees. Principles of lean management are a gradual approach, group orientation, own
responsibility, constant feedback in lower management levels and a long-term orientation. Other ideas of lean
management are enterprise-wide improvement of the quality, acceleration of the development, harmonious
integration of the enterprise into the society as well as outsourcing and concentration on specific strengths of the
organisation. The focus lies on the soft factors. Also in relation to a process-oriented thinking and strategy creation,
lean management uses the Kaizen approach. Nevertheless, the concentration on a few, significant core processes is
strongly stressed here.

Comparing the bottom-up and top-down approaches, the advantage of a bottom-up orientation lies with the
possibility of adapting the rhythm of the development and the capacity of the organisation for development. Small
changes can be achieved at short notice or immediately, while lasting changes run smoothly and could guarantee a
constant improvement of the problem solution capacity of the enterprise. On the other hand, permanent change
processes and the constant restlessness linked with such change processes can also affect negatively the
organisation, as possibly no clear direction is recognizable any longer.

Few enterprises are ready for a radical change in their orientation as demanded in a top-down approach. No
organisation is able to reorganize itself and the whole value-added chain ad hoc. Frequently the longevity of the soft
factor “enterprise culture” is underestimated. Changes in the enterprise culture need time and, hence, are an object of
evolutionary and participative approach and not a revolutionary and authoritarian process. The advantages of the
top-down approach are the straight-forward attempt of comprehensive, department-covering thinking and action and
the focus on the central processes.

Nowadays, within modern change management approaches, top-down and bottom-up approaches are mixed. As
shown in fig. 1, analysis and the strategy development is mainly done top-down whereas continuous process
improvement is driven from the bottom-up. Constant dialogue between the involved parties guarantees a constant
improvement and focusing on the core requirements
Figure 1 : Modern change management – Bottom -up meets Top – Down

So change management is the:

 Correct understanding of the organizations that want or need to be changed

 Correct understanding of the people are willing or forced to change
 The effectively realization of change
 Understanding the dynamics of change

Changes should be facilitated by the organizational structure because this enhances adaptation and flexibility. A
simple organizational structure will reach a simple dynamic environment or, on the other hand, a simple dynamic
environment needs a simple structure only. For a complex dynamic environment an adhocracy will be needed.
Adhocracy means more democracy and less bureaucracy.
One of the most important points is the people, because they form the organization. The culture of organization
includes their way of working, attitudes and norms. These facts are at the core of every change and they are difficult
to handle. Personal modifications regarding attitudes or skills in leadership or communication are hard to identify
but ineffectiveness can be indicated by problems and conflicts in the management of human resources.