Management Mariann Benke & Dr. Roland Schmuck University of Pécs, Faculty of Business and Economics •Organizational Development •and Change in a Global Economy Management Mariann Benke University of Pécs, Faculty of Business and Economics Source: Thomas G. Cummings - Christopher G. Worley •Part 1. •Introduction to •Organization Development and Change Introduction •Mariann Benke •E-mail: benkem@ktk.pte.hu –Research fields: –Change management –Organizational Development –Management and Organization –Organizational Behaviour • Mariann Benke - University of Pécs 3 •Mariann Benke - University of Pécs Learning Objectives •To provide a definition of Organization Development (OD) •To distinguish OD and planned change from other forms of organization change •To describe the historical development of OD •To understand how leadership is linked to change activities •To describe and compare three major perspectives on changing organizations. •To describe how planned change can be adopted to fit different kinds of conditions •To understand the different elements of a successful change program • • 4 •Mariann Benke - University of Pécs Burke’s Definition of OD •OD is a planned process of change in an organization’s culture through the utilization of behavioral science technology, research, and theory. 5 •Mariann Benke - University of Pécs French’s Definition of OD •OD refers to a long-range effort to improve an organization’s problem-solving capabilities and its ability to cope with changes in its external environment with the help of external or internal behavioral-scientist consultants. 6 •Mariann Benke - University of Pécs Beckhard’s Definition of OD •OD is an effort (1)planned, •(2) organization-wide, and •(3) managed from the top, to •(4) increase organization effectiveness and health through •(5) planned interventions in the organization’s “processes,” using behavioral science knowledge. 7 •Mariann Benke - University of Pécs Beer’s Definition of OD •OD is a system-wide process of data collection, diagnosis, action planning, intervention, and evaluation aimed at: (1)enhancing congruence between organizational structure, process, strategy, people, and culture; (2)developing new and creative organizational solutions; and (3)developing the organization’s self-renewing capacity. •It occurs through collaboration of organizational members working with a change agent using behavioral science theory, research, and technology. 8 Geert Hofstede •Gerard Hendrik (Geert) Hofstede (born 2 October 1928) •Dutch social psychologist, former IBM employee, and Professor Emeritus of Organizational Anthropology and International Management at Maastricht University in the Netherlands, •well known for his pioneering research on cross-cultural groups and organizations. • •Dimensions of national cultures: •Power distance index (PDI) •Individualism vs. collectivism (IDV) •Uncertainty avoidance index (UAI) •Masculinity vs. femininity (MAS) •Long-term orientation vs. short-term orientation (LTO) •Indulgence vs. restraint (IND) Mariann Benke - University of Pécs 9 Culture differences by Hofstede Mariann Benke - University of Pécs 10 Culture differences by Hofstede Mariann Benke - University of Pécs 11 Culture differences by Hofstede Mariann Benke - University of Pécs 12 •Mariann Benke - University of Pécs Organization Development is... •a system-wide application and transfer of behavioral science knowledge to the planned development, improvement, and reinforcement of the strategies, structures, and processes that lead to organization effectiveness. • 13 •Mariann Benke - University of Pécs •1950 1960 1970 1980 1990 2000 Today Five Stems of OD Practice • •Laboratory Training •Action Research/Survey Feedback •Normative Approaches •Quality of Work Life • Strategic Change Human Capital Approach from Garry S. Becker, Nobel Prise 1962 Resource-based view 1984 14 •Mariann Benke - University of Pécs •Part I: •The Nature of Planned Change The OD Practitioner • •Part II: The Process of Organization Development • •Entering & Diagnosing Diagnosing Collecting •Contracting Organizations Groups & Jobs Diagnostic • Information • •Feeding Back Designing OD Leading and Evaluating & •Diagnostic Data Interventions Managing Institutionalizing • Change Change 15 •Mariann Benke - University of Pécs • •Part III: •Human •Process •Interventions • •Individual, •Interpersonal, •& Group •Process •Approaches • •Organization •Process •Approaches •Part IV: •Techno-structural •Interventions • •Restructuring •Organizations • •Employee •Involvement • •Work Design • •Part V: •Human •Resources •Management •Interventions • •Performance •Management • •Developing and •Assisting •Members • • •Part VI: •Strategic •Interventions • •Competitive and •Collaborative •Strategies • •Organization •Transformation • • • •Part VII: Special Topics in Organization Development •Organization Development OD in Nonindustrial Future Directions •in Global Settings Settings in OD • 16 OD planned change: M&A activity •Mercedes + Daimler Benz = Benz&Cie à Mercedes-Benz (1926 - …) J 17 OD planned change: M&A activity Mariann Benke - University of Pécs 18 •BMW + Rover à (1994 – 1998) L OD planned change: M&A activity •Daimler + Chrysler = DaimlerChrysler (1998 – 2005) L • Mariann Benke - University of Pécs 19 OD planned change: M&A activity •Renault + Nissan à 1999 J • • • •Renault + Nissan + Mitsubishi à 2015 ? Mariann Benke - University of Pécs 20 •Mariann Benke - University of Pécs • Lewin’s Change Model (1954) •Unfreezing •Movement •Refreezing • • 21 Kotter’s 8-Step Process for Leading Change (1996) Mariann Benke - University of Pécs 22 •Mariann Benke - University of Pécs •General Model of Planned Change • • • • •Evaluating •and •Institutionalizing •Change •Planning •and •Implementing •Change •Diagnosing •Entering •and •Contracting 23 •Mariann Benke - University of Pécs Different Types of Planned Change •Magnitude of Change –Incremental –Radical •Degree of Organization –Over-organized –Under-organized •Domestic vs. International Settings • •https://www.youtube.com/watch?v=__IlYNMdV9E 24 •Mariann Benke - University of Pécs Critique of Planned Change •Conceptualization of Planned Change –Change is not linear –Change is not rational –The relationship between change and performance is unclear •Practice of Planned Change –Limited consulting skills and focus –Quick fixes vs. development approaches 25 •Mariann Benke - University of Pécs •Motivating Change •Creating Vision •Developing •Political Support •Managing the Transition •Sustaining Momentum •Effective •Change •Management Change Management Activities 26 •Mariann Benke - University of Pécs Motivating Change •Creating Readiness for Change –Sensitize the organization to pressures for change –Identify gaps between actual and desired states –Convey credible positive expectations for change •Overcoming Resistance to Change –Provide empathy and support –Communicate –Involve members in planning and decision making 27 •Mariann Benke - University of Pécs Creating a Vision •Discover and Describe the Organization’s Core Ideology –What are the core values that inform members what is important in the organization? –What is the organization’s core purpose or reason for being? •Construct the Envisioned Future –What are the valued outcomes? –What is the desired future state? 28 •Mariann Benke - University of Pécs Developing Political Support •Assess Change Agent Power •Identify Key Stakeholders •Influence Stakeholders 29 •Mariann Benke - University of Pécs Sources of Power and Power Strategies for Change Agents •Knowledge •Others’ Support •Personality •Playing it Straight • • • •Knowledge •Others’ Support •Personality • • • •Playing it Straight •Using Social •Networks •Going Around the •Formal System •Individual Sources of Power •Power Strategies 30 Examples for human power •Ford 1968: •https://www.youtube.com/watch?v=DZ509hHkHO8 • •Iron Lady (1979 – 1990): •https://www.youtube.com/watch?v=hZrAKdlX0SA • Mariann Benke - University of Pécs 31 •Mariann Benke - University of Pécs Managing the Transition •Activity Planning –What’s the “roadmap” for change? •Commitment Planning –Who’s support is needed, where do they stand, and how to influence their behavior? •Change-Management Structures –What’s the appropriate arrangement of people and power to drive the change? 32 •Mariann Benke - University of Pécs Change as a Transition State • • • •Current •State •Transition •State •Desired •Future •State 33 •Mariann Benke - University of Pécs Sustaining Momentum •Provide Resources for Change •Build a Support System for Change Agents •Develop New Competencies and Skills •Reinforce New Behaviors •Stay the Course 34 •Restructuring Organizations: Contingencies Influencing •Structural Design • •Environment •Organization •Size •Technology •Organization •Goals •Worldwide •Operations •Structural •Design Mariann Benke - University of Pécs 35 Structural Design •Functional Organization •The Divisional Organization •The Matrix Organization •The Process-Based Structure •The Network Organization Mariann Benke - University of Pécs 36 •Cummings & Worley, 8e (c)2005 Thomson/South-Western •14-37 The Reengineering Process •Prepare the organization •Specify the organization’s strategy and objectives •Fundamentally rethink the way work gets done –Identify and analyze core business processes –Define performance objectives –Design new processes •Restructure the organization around the new business processes. Management Dr. Roland Schmuck University of Pécs, Faculty of Business and Economics Main source: Ellis-Williams: International Business Strategy •Part 2. •Global Economic Trends •and Hungarian Facts Introduction •Dr. Roland Schmuck •E-mail: roland@ktk.pte.hu •Research fields: –Strategic Management –Change Management –Quality Management –Business Consulting Roland Schmuck - University of Pécs 39 economic-classification Roland Schmuck - University of Pécs world_economy_cartogram_001-2 43 The „Triad” •1/5 of global population, 4/5 of world output (GNP) •More manufacturing/service divisions •Nationality of companies: outdated •National governments can’t stop the process •Raising import penetration: interlinked nature •Percentage growth of international trade is higher than growth of output •Main competitors are becoming the foreign companies Roland Schmuck - University of Pécs Some are trying to stop the process… 45 European Union •Population reduction •Slower and unbalanced technology growth influenced heavily by government •Economic policy in constant change, trying to adapt to the different national and regional markets of the Euro-land area •Interest rates and money growth that are compromises for the different needs of different parts of the EU •Government/cartel/regulation driven model in certain key sectors, linked to competition driven model in other parts Roland Schmuck - University of Pécs 46 USA •Fast growth •Fast technology growth •Economic policy geared to domestic requirements of large single market •Interest rates and money growth to facilitate growth •Free enterprise competition driven model 47 China •Continued rapid growth in output and per capita incomes •Trade liberalization •Growth of large domestic market for cars, household goods and other manufactured products •China accounts for: –76% of world exports of leather goods, –55% of textiles –32% of radio, TV and communications equipment. •Chinese economy continues to advance in the future Is it worth? BEFORE NOW BEIJING, CHINA 1990 2005 2050 52 Europe’s declining share of global output Estimated changes of global output Roland Schmuck - University of Pécs 53 GDP growth rates China USA European Union 1996 10.0% 3.7% 2.0% 1997 9.3% 4.5% 2.7% 1998 7.8% 4.2% 2.9% 1999 7.6% 4.4% 3.0% 2000 8.4% 3.7% 3.9% 2001 8.3% 0.8% 2.1% 2002 9.1% 1.6% 1.4% 2003 10.0% 2.5% 1.5% 2004 10.1% 3.6% 2.7% 2005 10.4% 3.1% 2.0% 2006 11.1% 2.9% 3.3% 2007 14.2% 1.8% 3.1% 2008 9.6% -0.3% 0.5% 2009 9.2% -2.8% -4.4% 2010 10.6% 2.5% 2.1% 2011 9.5% 1.6% 1.8% 2012 7.8% 2.3% -0.4% 2013 7.7% 2.2% 0.2% 2014 7.3% 2.4% 1.4% 2015 6.9% 2.6% 2.3% 2016 6.7% 1.6% 1.9% 54 Europe Intra-Europe 1214.0 $bn (35,4%) America Asia Intra-Americas 270.4 $bn (7.7%) Intra-Asia 413.5 $bn (11.8%) 236.4 $bn (6.7%) 174.7 $bn (4.9%) 152.7 $bn (4.4%) 153.6 $bn (4.4%) 129.3 $bn (3.7%) Key: = Exports to 184.8 $bn (5.3%) Others: 14.9% Figure 3.5. Projected merchandise trade in US$ billion and as a percentage of world trade for the year 2005 [GATT Report] 56 Direct investments •Problem: –Increasing costs at home country –Rising exchange rates making exports too expensive •Result: –Increasing foreign investments: •Accumulated incoming FDI: Hungary 119.800 millions USD; Czech Republic 147.600 millions USD …never has an economy passed so quickly as Japan from non-industrialized backwater, through industrial giant, and now towards threatened industrial dinosaur - all in one generation. 57 Foreign Direct Investments (2016) 60 FDI confidence index (2005) Roland Schmuck - University of Pécs The worst hyper-inflation in the world 1,000,000,000,000,000,000,000 Pengő 1 CZK = 12 Hungarian Forints 240.000 Forints = 20.000 CZK Monthly wages in regions 69 Dynamic adjustment Successful economy Richness, better education Higher wage costs Appreciated currency (exporting more expensive) Home manufacturing becoming less and less competitive Roland Schmuck - University of Pécs 70 Dynamic adjustment •Undermines the success of the previously rapidly growing economies •Enables new countries to become preferred production base •Trade protection: –Temporary solution –Removes the competitive pressure –After protection is removed: adjustment is more dramatic Roland Schmuck - University of Pécs 71 Winners and losers •The dynamics of the world economy create instability and change •Who is the winner and who is the loser? –„Winning” becomes increasingly expensive as wages and currencies are adjusted upwards. –Loser economies: unemployed workforce is available at reasonable cost and backed by a week currency, causing economic growth in long-term •The adjustment process is slow, with changes in political, technological and social factors. Roland Schmuck - University of Pécs Management Mariann Benke & Dr. Roland Schmuck University of Pécs, Faculty of Business and Economics •Thank you for your attention!