Change management and culture

1 . Introduction: why organisations must change

All organisations have to change in response to drivers such as:

• New technology – including, today, the digital technologies and generative AI covered in Chapters 16 and 17

• Political and economic events

• Competitor action and market disruption

• Legal and regulatory changes

• Sustainability pressures – decarbonisation, circular-economy expectations and the demands of investors, regulators and customers (Chapter 4 covers sustainability as a driver of change in the ecosystem)

In general, a refusal or inability to change and adapt where necessary leads to the failure of the organisation. Not even a virtue such as ‘quality’ or ‘service’ is sacred, as the growth of no-frills airlines demonstrated: airlines once took pride in their in-flight catering and seat room even on short-haul flights – then discovered that many passengers preferred cheaper fares with lower service standards.

Deciding what changes are necessary is the business of strategic analysis and choice (the earlier chapters). This chapter deals with implementing change: assessing its impact on the organisation and its culture, understanding resistance, and choosing change-management methods, styles and leadership – the syllabus’s strategic-control requirements on change (E3E3).

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2 . Types of change: assessing the impact of a strategy

The first step in managing change is to assess how big and how fast the change needs to be. Balogun and Hope Hailey classify change on two dimensions – the scope of change (how fundamental: a realignment within the existing paradigm, or a transformation of it?) and the nature of change (its speed: incremental or ‘big bang’?):

• Adaptation – slow, limited change. The biological metaphor helps: many small adjustments within the existing way of doing business. Because the steps are incremental, the process can be halted or reversed if it goes badly – relatively low risk.

• Evolution – slow but ultimately fundamental change: the organisation transforms over an extended period through many planned stages. Still comparatively low risk, for the same reason.

• Reconstruction – fast change of limited fundamental consequence, such as a rapid cost-cutting programme or restructuring. Speed means things can go wrong, but as the paradigm is untouched the damage is usually containable and reversible.

• Revolution – fast, fundamental change, typically forced by crisis or sudden disruption. The highest-risk type: there is no time for participation and learning, and if it goes wrong it goes wrong in a big way.

Assessing the impact of a proposed strategy therefore means asking: which parts of the organisation (and which partners) are affected, is the fundamental way of doing business being changed, and how quickly must it happen? The answers drive everything that follows – the change path, the style, and the leadership required.

3 . Culture: the context in which change lands

3.1 What culture is

Charles Handy defined corporate culture as ‘the way we do things around here’. Everyone is sensitive to it: on changing jobs, we all tread carefully for a while to learn the level of formality, the dress code, how people address each other, the length of the working day. Culture matters to this chapter for one central reason: change programmes succeed or fail in a cultural context. A change that fights the culture will be resisted; a change that fundamentally alters ‘the way we do things’ – transformational change in section 2 – is really an attempt to change the culture itself, and culture changes slowly.

3.2 Diagnosing culture: the cultural web

Johnson and Scholes’ cultural web describes the influences that determine corporate culture. Before attempting change, map the existing web – it shows what the change will collide with, and which levers are available:

• Symbols and titles. Do board members have reserved parking and very large offices, or do they share open-plan space with everyone else?

• Power structures. Does your boss simply tell you what to do, or is consensus the norm? Where does real influence sit?

• Organisational structure. Tall, narrow hierarchies tend to produce bureaucratic, formal cultures; wide, flat shapes less formal ones.

• Control systems. How tightly are people controlled and measured? How much initiative is allowed?

• Rituals and routines. Some telephone-sales firms ring a bell whenever a sale is made; induction programmes, award ceremonies and the Friday meeting all carry cultural messages.

• Stories and myths. How the company once beat a powerful competitor; the founder’s legendary frugality.

• The paradigm (organisational assumptions). At the centre of the web: the taken-for-granted beliefs – ‘we are the best’, ‘we never miss a deadline’, a hospital’s assumption that healthcare is provided whatever the cost.

The outer elements are the easiest to observe – power relations, controls, symbols reveal themselves quickly – but they are relatively superficial. The most important element is usually the paradigm, and it is the hardest to identify, precisely because it is assumed rather than stated. In change management the web is used twice: map the web as it is, then describe the web the strategy requires, and the differences are the change agenda – and the likely sources of resistance.

3.3 Classifying cultures – and what each means for change

Handy’s four-way classification remains the easiest way to characterise a culture, and each type responds differently to change:

3.4 The impact of change on culture

The syllabus asks specifically about the impact of change on organisational culture. Realignment-scope change (adaptation, reconstruction) works largely within the paradigm: symbols, systems and structures may alter but the underlying assumptions survive. Transformational change (evolution, revolution) demands a new paradigm – and that is why it is hard: every element of the web (stories, symbols, routines, power structures) keeps pulling behaviour back towards the old assumptions. Practical consequences: cultural change lags structural change, so plan for a long reinforcement period (see refreezing, section 7.3, and Kotter’s final steps, section 7.4); use the web’s outer elements as levers (new measures, new rituals, new symbols, new stories); and expect the defenders of the old paradigm – often previously successful managers – to be the strongest resisters.

4 . The McKinsey 7S model

The McKinsey 7S model sets out the areas of an organisation that need attention – and need to stay consistent with each other – when the organisation changes to adopt a particular strategy:

The three ‘hard Ss’ (strategy, structure, systems) are relatively easy to capture, write down and communicate. The three ‘soft Ss’ (style, staff, skills) are harder to define and communicate. Holding them all together in the centre are shared values – close to the cultural paradigm above: what people believe the organisation is for and how it should act.

The model is a consistency checklist: change one S and the other six must be reviewed. For example, if the chosen generic strategy is cost leadership:

• Strategy – cost leadership.

• Structure – wide, flat, simple; few managers and a lean head office.

• Systems – focused on automation and efficiency.

• Style – directive: get on with the job; close monitoring of performance and efficiency.

• Staff – paid competitively but no more than the job requires.

• Skills – training tightly task-oriented; little general development.

• Shared values – provide a basic product at the lowest possible cost; costs watched carefully; tough budget enforcement.

5 . The business change life-cycle and POPIT

5.1 The business change life-cycle

There are several versions of the stages that make up a business change; a typical life-cycle is:

1. Planning. Define the goals – what will be achieved as a result of the change? – and allocate responsibilities.

2. Analyse existing activities. The essential starting point: existing systems may not be perfect, but they achieve at least the bare minimum and can be built on; identifying their problems points to where improvement is needed.

3. Design a new or improved process: explore alternatives and choose the redesign that best achieves the goals.

4. Development. Redesign products, services and processes in detail, and devise the measures by which success will be judged (Chapter 12).

5. Implement/transition – including training employees and overcoming resistance (sections 6–7).

6. Review the success of the new business process against the measures set.

5.2 The POPIT model

POPIT is a completeness check for change design: four elements must all be considered – change one and the others are affected:

• People – roles, job descriptions, competences, motivation, rewards, culture.

• Organisation – capabilities and structure: are they suitable for the changed business?

• Processes – how the core business processes are carried out; analyse the value chain, the activities and their linkages.

• Information technology – IT architecture and capabilities, controls, software and information provision.

Any proposed change also has to be assessed for feasibility: the costs and benefits of the change, technical feasibility, operational feasibility and social acceptability.

6 . Resistance to change

The normal assumption is that change will be resisted. The main sources of resistance:

• Self-interest and fear – of losing jobs, status, pay or valued colleagues; of being unable to cope with new skills or systems.

• Misunderstanding and mistrust – people fill an information vacuum with the worst interpretation, especially where past change was handled badly.

• Different assessments – employees may genuinely believe the change is wrong, and they are sometimes right: front-line staff often see flaws that planners miss.

• Cultural inertia – the web of section 3: routines, stories and assumptions all pull behaviour back to the old ways.

• Low tolerance of change – uncertainty itself is uncomfortable, and change fatigue is real where initiatives follow one another endlessly.

Even when resistance is mild, expect a period of unsettled performance. The change curve (based on coping-cycle research) describes the typical emotional journey of individuals through significant change:

Morale and performance typically dip through shock, denial and frustration before recovering as people experiment with, accept and finally integrate the new ways. Managers should expect the dip, support people through it (communication, training, quick wins), and not mistake the low point for failure of the change itself.

7 . Methods of managing change

7.1 Balogun and Hope Hailey: the change kaleidoscope

The change kaleidoscope makes one central point: there is no universal recipe for change – the right design depends on context. It sets out eight contextual features to analyse, and then the design choices they inform.

First, the contextual features – the variables that determine the nature of each change situation:

Then the design choices made in the light of those features:

• Change path – the type and sequence of change (section 2), timescales, and how achievement of outcomes will be recognised.

• Change start point – top-down imposition, or bottom-up: asking employees to propose the changes needed (or pilot sites that spread success).

• Change style – from highly directive to highly participative (section 9).

• Change interventions – the levers used: education and communication, cultural interventions (team building, new rituals and symbols), political levers, and technical/structural levers.

• Change roles – who is responsible: the chief executive personally, a project team with a leader, outside consultants (section 8)?

7.2 Lewin: force field analysis

Lewin pictured any current situation as an equilibrium between forces for change and forces resisting change:

The wrong approach, according to Lewin, is simply to push harder for change: the resisting forces push back equally hard, conflict escalates, and the result can be serious industrial unrest. Instead, management should aim to weaken the resisting forces:

• Communication. Resistance often exists because people simply do not know what is happening. If there are no plans for redundancy, say so; if people fear the new system, promise and deliver training; and always explain why change is needed – ‘if we don’t change we can’t compete, and if we can’t compete the business will contract.’

• Participation. Explain why change is needed and invite suggestions on how (a bottom-up approach). People find it very difficult to resist proposals they made themselves – and their proposals are often better, because they know the operational detail.

7.3 Lewin: the three-step model

Lewin’s second contribution treats change as three stages:

1. Unfreeze the current situation: explain why change is needed, create dissatisfaction with the status quo, and get people ready – ideally eager – for change.

2. Change (move): carry out the change itself. This can be a long period of retraining, restructuring and learning new behaviour.

3. Refreeze: let things settle and stabilise in the new form – reinforce the new behaviour with measures, rewards and routines so that people do not slip back into old patterns.

7.4 Kotter’s eight steps

Kotter’s widely used model expands the same journey into eight steps, and doubles as a checklist of why change programmes fail (each step names a classic omission):

1. Create urgency – build a genuine sense that staying still is dangerous, using market and competitive evidence.

2. Form a powerful guiding coalition – a group with enough position power, expertise and credibility to lead the change.

3. Create a vision of the future state that is clear enough to steer decisions.

4. Communicate the vision – repeatedly, through every channel, and by the coalition’s own visible behaviour.

5. Empower others to act – remove obstacles: unhelpful structures, systems and, where necessary, blocking managers.

6. Plan for and create quick wins – visible short-term successes that maintain momentum and disarm cynics.

7. Consolidate improvements and keep going – use the credibility of early wins to tackle the bigger, harder changes; do not declare victory too soon.

8. Institutionalise the change – anchor the new behaviour in the culture: recruitment, promotion, rewards and the organisation’s stories (compare refreezing, and the cultural web’s outer elements).

8 . The change agent

A change agent is the person who drives and champions the change process – often an outside consultant, though internal managers can take the role. Consultants are expensive, but there can be considerable advantages in hiring one to oversee the whole process:

• Process expertise. They are skilled in the process of change itself: they know people will be unsettled, they know the value of communication and participation, and they have run such programmes before.

• Content knowledge. A consultant might see half a dozen organisations a year, so they know which management structures suit which situations and which processes can successfully be outsourced – expertise about the change as well as the changing.

• Independence. They arrive with a clean pair of hands: not creating a comfortable job for themselves, not settling scores with rivals, not defending changes they themselves put through years earlier – and they are perceived as fair.

• Risk transfer and reassurance. If the change goes wrong the consequences are serious, and management may want expert advice to lean on – and to be able to say afterwards: ‘we took the best advice money could buy and did everything we could to get this right.’

9 . Styles of managing change

The styles below form a spectrum from most to least participative – to some extent a reworking of the kaleidoscope’s design choices. They are not mutually exclusive: most change programmes use a mixture.

Which style is right depends on the contextual features (section 7.1). If the company faces bankruptcy, coercion may be the only style fast enough. But where the response required is complex – new markets, new technology – coercion is dangerous: it drives away the best people, and it silences the workforce, who may hold the best ideas and the expertise the change needs. In that context education, communication, collaboration and participation succeed far more often.

10 . The role of the leader in managing change

The syllabus explicitly requires discussion of the change leader’s role, with communication at its heart. Whether the leader is the chief executive, a divisional head or a designated change agent, the role has five strands:

• Own and model the vision. The leader personifies the change: people watch what leaders do far more than what they say, so the leader’s visible behaviour must match the message (Kotter’s ‘communicate the vision’ includes deeds).

• Communicate relentlessly. Explain why change is needed, what will happen and what it means for each group; repeat the message through many channels; be honest about bad news – trust, once lost to spin, does not return. Communication is two-way: leaders must listen, because feedback exposes flaws early and participation converts resisters.

• Build the coalition and empower others. Assemble the guiding group, give middle managers and teams the authority, resources and training to act, and remove blockers.

• Sustain momentum. Celebrate quick wins, support people through the change-curve dip, and keep reinforcing until the new behaviour is anchored in the culture.

• Judge the style. Read the context (time, readiness, power – section 7.1) and choose where on the education-to-coercion spectrum to operate, shifting style as the situation develops.

11 Test your knowledge

Two short exercises close the chapter in the online notes: ten flashcards on the terms and frameworks above, and ten practice questions with worked feedback on every option. Work through the cards first, then the questions.