Organizational change occurs when a company makes a transition from its established way of business to implement a desired future state. Companies need to undergo changes almost constantly in order to remain competitive. Such changes can be relatively minor, such as installing a new software program, or extremely significant, such as a shift in the focus of an overall marketing strategy, a fight against a hostile takeover, or a transformation of a company in the face of persistent foreign competition.
Organizational change initiatives often become necessary when a company is faced with problematic situations. However, there are cases when enlightened leaders recognize and exploit new potentials dormant in an organization or its circumstances, prompting positive change. Some observers call this a "performance gap" that able management is inspired to fill. According to Daniel Wischnevsky and Fariborz Daman, the three main areas of organizational change are strategy, structure, and organizational power. Others also include technology or the corporate population. All of these areas are related and often when companies attempt to make changes in one area they must institute changes in all of them.
Strategic change can take place on a large scale, for example when an organization shifts its resources to enter a new line of business, but can also be small scale, for example when a company improves productivity in order to cut costs. The first basic stage in a strategic change is the realization that the current strategy is no longer suitable for the business's situation. It then establishes a vision for its future direction and the final stage is the implementation of change and the setting up of new systems to support it. Technological changes often form part of these large strategies, but can also be introduced on their own. An important aspect of technology change is determining who in the organization will be threatened by it. In order for a technology change to be successful, it needs to be incorporated into the company's overall systems, while a management structure must be created to support it.
Strategic changes can also cause structural changes, for example when a company acquires a new business and must integrate it. Operational changes or changes in managerial style can also prompt structural changes. Such a case is when a company wishes to implement more participative decision making, and might need to change its hierarchical structure. It may need to implement personnel changes, or sometimes may simply seek to change employees' attitudes and behaviors in an attempt to improve their effectiveness or to encourage individual or team creativity. Changes in human resources are almost always the most difficult and important part of the overall change process. The science of organization development was created to deal with changing people on the job using such techniques as education and training, career planning, and team building.
However, organizational change can be resisted and fail. The cause for the failure may be the manner in which change has been visualized, announced and implemented, or from internal resistance to it. Employees may try to stop changes they consider a threat to their own interests. Managing organizational change must be planned and implemented in such a way as to minimize employee resistance and cost to the business, and maximize effectiveness of the change effort. A manager looking to implement a change, regardless of its extent, should expect to encounter some resistance from within the organization because people cling to the status quo and to their working habits. Organizational change causes anxieties about the future. People must be motivated to change their habits, but this must take place in stages so that "managed change" can seem like "natural change." Once people start perceiving the future after the change positively, resistance will decline. The key ways to minimize negative reactions are through education and communication. The company can use reports, memos, group presentations, or individual discussions to inform employees about the nature of the change and the logic behind it. Employees can also be invited to participate and get involved in the design as well as implementation phases of the change effort, which will help overcome resistance. The company can also deploy organized forms of facilitation and support.