From change management to change readiness
Does your organization manage change, or is it ready for it?
Change readiness (CR) is a measure of a firm's abilities to do three things in response to environmental opportunities and threats in its industry:
1. Trigger identification
2. Gearing up to take action (preparation); and
3. The action's degree of novelty.
However, here we propose an alternative conceptualization for CR - one that takes into account both internal and external variables. This proposed CR concept derives from specific behaviour rather than attitude towards change, and is a strategy-oriented construct that demonstrates the capacity of an organization to respond effectively to new developments in its environment.
Most previous studies have associated change readiness with flexibility, and noted its importance to achieving a strategic advantage in an increasingly turbulent business environment. However, though change readiness is strongly related to business and marketing strategy (i.e. how and when to respond to marketing opportunities or threats), studies of this aspect of it are limited.
This article explores the concept of CR, and asks the following questions:
1. What does it mean to be ready for strategic change in response to environmental triggers?
2. What distinguishes organizations that are good at it?
Inertia versus flexibility
The concept of inertia centres on structural and bureaucratic elements that organizations develop over time. These limit change and are classed as weaknesses. Flexibility, on the other hand, is the extent to which new and alternative decisions are built-in to strategic planning and execution, enabling positive changes and adaptations to a turbulent environment. Flexibility focuses on managerial and organizational abilities to respond quickly to environmental forces, traits that are strengths.
Readiness for change is a cognitive precursor to behaviours of either resistance to or support for change, and efforts to implement it. Moreover, CR has been highly associated with an individual's attitude towards change as well as his or her perceptions, feelings, and beliefs surrounding an organization's change readiness. Alternatively, others have stated that readiness for change reflects an individual's unique interpretation of the situation. Recent studies have defined CR as more of an active competency. The construct of perceived organizational readiness for change (PORC) refers to the belief of employees that the organization is engaged in practices that will lead to successful change.
The first element in a firm's readiness to cope with change is trigger identification. Identification of an environmental trigger with a likely strategic impact on the firm is a key signal for change action. In dynamic environments, it is important to respond quickly to external triggers. With rapid environmental changes (i.e. technology, markets, and regulations) and globalization, leadership is highly associated with pioneering, and thus requires early identification and quick decision making in the face of external changes.
An effective identification mechanism requires specific organizational and managerial properties. First is the need to properly monitor the environment and intercept signals for trigger sources. Second, this information needs to be processed to separate a meaningful development from random noise. There is also a need to assess the expected likelihood of occurrence, impact, and timing. The third stage requires substantial attention on the part of higher management to translate the findings into a managerial conclusion that some response is necessary.
Gearing up to take action
The second element in a firm's readiness for a change is gearing up to take action (preparation). Recognizing a need, or an opportunity, is a necessary but insufficient condition for undertaking strategic change. The second variable therefore deals with the time it takes to respond. The time response variable is not detached from the environment-monitoring variable: If the organization is slow in identifying an environmental threat, then the time available for preparing action might be quite short. Response time is assessed by two parameters:
1. Time to start; and
2. Preparation time.
The first parameter refers to the lag between the recognition of the need to change and the start of active preparation. This lag reflects the organization's readiness for taking change action, i.e. being overly occupied with current projects or crises, or finding it difficult to put aside existing activities. Organizations that tend to postpone making key decisions are likely to have a long lag prior to the start of action preparation.
Preparation time encompasses two discrete components:
1. The time it takes for the change; and
2. Prioritization policy.
The former is content-related, i.e. if a new technology requires an extensive adaptation process, then a long preparation time is inevitable. The latter component reflects the organization's priority for dealing with the specific strategic changes needed.
“The streams of new opportunities and risks challenge managers to find new effective responses in a way that will preserve and sustain an organization’s potential for growth.”
The action’s degree of novelty
The third element of the CR construct is the action of response, or more specifically, the degree to which the firm's response to the environmental triggers is novel or innovative. In turbulent environments, effective strategic change is highly associated with renewal of competencies, product innovations, and diversified and innovative response to external triggers. Firms may defend their market positions with incremental and limited responses such as reducing prices or launching a “me too” product. However, such activity reflects tactical flexibility, and may be less effective for the long haul, particularly for organizations looking to lead dynamic markets.
We measure a strategy's novelty by its evolutionary versus revolutionary scope. Evolutionary changes have a low degree of innovation: They do not require changes in paradigm or a major shift in managerial behaviour; they have been tried before and are therefore familiar to the organization; they require limited deviation from organizational inertia. Revolutionary changes, on the other hand, are based on a new pattern of response. Such changes have to overcome natural resistance both inside and outside the organization. A strong, committed leadership is needed to implement action that is completely new to the organization and its affiliates. There are, of course, intermediate situations, wherein the organization has been experimenting with an innovative approach on a small scale prior to its adoption on a large scale.
An organization capable of executing a response that is somewhat more innovative is assumed to have a high degree of change readiness. This of course does not mean that a revolutionary response is always desirable. A major deviation from past behaviour is more likely to be needed when the outside threat or opportunity has a high potential impact on the firm and when the environment is dynamic and turbulent.
The implications for managers
In McKinsey Quarterly (April 2008), executives surveyed worldwide reported that, though most of them recognized the importance of global environmental trends and changes for corporate strategy, they felt that few companies actually addressed these challenges successfully. Under globalization and increasingly turbulent environments, organizations need to prepare to make strategic changes. However, the right attitude is not enough: To be successful in responding to outside events, an organization needs certain capabilities in order to act.
Our research revealed that managers who ranked their organizations high on our multi-dimensional construct reported significantly better performance than did those who ranked their organizations low on the scale. We assert, therefore, that change readiness can be improved. This study found that management's entrepreneurial orientation and decentralized decision-making contribute positively to CR. Technology and innovativeness, both in the production and service processes, also have positive effects on a firm’s CR. Environmental hostility and difficulties, on the other hand, were found to deteriorate a firm’s CR, yet managers can find ways to overcome these barriers.
The increasing changes in the business and technological environments make the concepts of change readiness more critical. The streams of new opportunities and risks challenge managers to find new effective responses in a way that will preserve and sustain an organization’s potential for growth.
Specific implications for managers include the following:
- Monitoring the environment informally is not sufficient. The firm has to set up a more formal system to recognize and assess potential threats and opportunities;
- The second dimension of CR – mobilization for action - is a critical variable due to the inherent inertia in many organizations. Thus, one needs to quickly translate the knowledge about threat and opportunity to actionable response; and
- The third dimension of CR is innovative or novel action.
This requires a change from the natural patterns of response in most organizations. However, innovative action can take time to design and implement, and that will be in conflict with quick mobilization. Organizations should work on developing a portfolio of innovations in advance. Product innovation, use of new technology, and proactive management all positively correlate with change readiness, so build these capabilities into your strategy.
This is a shortened version of “Change readiness: an alternative conceptualization and an exploratory investigation”, which originally appeared in EuroMed Journal of Business, Volume 5, Number 2, 2010.
The authors are Yaron Timmor and Jehiel Zif.