Change Structure before Strategy

Guest Post by Patrick Ow (first posted on CERM ® RISK INSIGHTS – reposted here with permission)

Organisations are systems that consist of sub-systems like sales and production. Change impacts the organisational system and subsystems in different ways and speeds – sales may react quickly to the changing external environment, but production may take time to change the process. Unfortunately, people are the hardest to change.

When organisational subsystems change at different speeds caused by external changes, it creates gaps or cracks in the system. This is where the system gets disintegrated.

The higher the rate of change, the faster the organisational system gets disintegrated. When disintegration occurs, it is manifested as organisational problems – for example, production is a problem because it cannot match sales.

Change causes disintegration in the organisational system. Disintegration creates organisational problems. And problems cause stress amongst organisational members.

To keep up with the constant change in their external environment, organisations need to institutionalise a continuously adapting process that proactively identifies and overcomes risks and issues well before they manifest into problems and destructive conflicts.

Management aims to create a continuously integrated organisation that is organic, flexible, and agile; and has interdependent elements that continuously work together complementarily, cooperatively, and synergistically. The outcome is a healthy organisation that has a constructive and collaborative culture.

Organisations that have an unhealthy culture where disintegration occurs will require a significant and continuous culture change from the inside.

Organisational culture change is hard work, especially if you want to achieve lasting, significant change. Organisations are like living organism that wants to maintain homeostasis against a changing environment. It is no accident that the term “culture” derives from “cultivation”.

The four building blocks of change

Organisational cultural change and transformations stand the best chance of success when they focus on the following four key actions to change mindsets and behaviour, as shown in the diagram below: (Basford and Schaninger, 2016)

• Role modelling – When organisational leaders walk the walk and role model desired mindset and behaviour shifts, it is more likely that employees will follow suit. Leaders can enlist help from influential employees at all levels to champion the change.
• Fostering understanding and conviction – If organisational members understand the reasoning behind the changes they are asked to make, they are more likely to act in support of these changes. There is a compelling change story across the organisation. Members know why changes need to happen and what they will involve. This ensures that the change story is meaningful and relevant.
• Developing talent and skills – When organisational members have the skills required to act in a new way, they are more inclined to make the desired changes to mindsets and behaviours. Organisations can develop their talent and help build new skills by assessing current and closing any capability gaps. They can offer a range of targeted development opportunities that equip employees to perform in support of the changes.
• Reinforcing change through formal mechanisms – Structures, systems, and processes are all formal mechanisms that can support employees’ efforts to adopt new mindsets and behaviours. Organisations can reinforce desired changes by adjusting mechanisms like setting individual and organisational performance goals and motivating people through both financial and non-financial incentives, so they align with the required changes.

Organisations that manage well need to create an internal environment where organisational members have mutual trust and respect for each other – treating and loving others like friends (as opposed to just colleagues) and learning from each other.

Conflicts are natural in healthy organisations. They come from differentiated styles and the disparity of interests amongst organisational members. Mutual respect for each other can overcome the conflict that stems from style differentiation, while mutual trust overcomes the conflict that stems from the disparity of interest.

The key to keeping an organisation healthy that is integrated (as opposed to disintegration) is to manage natural conflicts and organisational performance effectively and efficiently in the short and long term.