Determining Forces of Organizational Change

Organization as a system, depend on many interdependent factors which influence it’s day to day functioning, strategic decisions and future action plans for facing the competitive challenges successfully. These factors can be both internal and external in nature and determine an organization’s readiness for change as well as it’s preparedness.

External Forces of Organizational Change

The external forces of change stem up from the external environment. These forces have been described below:

Political Forces: With the rapidly changing global political scenario and the upheavals in the global politics, the worldwide economy is equally undergoing a quick change and presenting several challenges before the organization in the form of changes in regulations, policies and also the economic framework in the form of globalization and liberalization.

Economic Forces: The economic forces influence organization’s change management strategy by either presenting opportunities or challenges in the form of economic uncertainties or growing competitive pressures.

Various factors such as changes in the business cycle, prevalent inflation or deflation rate in the economy, fluctuation in the interest rates, economic recession, changes in the economic policies or tax structures, import/export duties, fluctuation in the oil prices globally, financial stability of the country and also loss/increase in the consumer confidence towards the economic conditions of the country are some of the crucial factors.

For example change in the global market, economies create a ripple like effect and affect the Indian markets too in terms of fluctuations in the capital markets, employment opportunities and rise or fall in the consumer demand.

Technological Forces: Technological advancements and innovations in communication and computer technology, have revolutionized the organizational functioning by facilitating newer ways of working and added in newer range of products/services thus creating a need for developing a framework for managing change effectively and proactively responding to the challenges as a result of these changes due to the technological forces.

Advancements in the technological field greatly contribute to the overall economic development in the country and also the organization’s success or failure in the competitive environment.

One of the glowing examples is Singapore, which has emerged as one of the powerful economies within recent times in spite of no natural resource availability.

With the usage of Information Technology in the strategic decision making and overall planning, today Singapore holds the status of being the world’s first completely networked economy in which all homes, administrative offices, schools/colleges/professional institutions, businesses and government branches are connected electronically.

Governmental Forces: Governmental regulations and also the extent of intervention may influence the need for change.

The following governmental forces have been described below which determine the need for organizational change:

  1. Deregulation: Deregulation is associated with decentralization of power or economic interventions at the state level or lessening of the governmental intervention in the economy.

    For example, as an outcome of deregulation few sectors/industries like insurance, banking, petroleum and many others which were previously under the direct control of the government, are now being handed over to the private players or companies.

  2. Foreign Exchange: Foreign exchange rates directly affect the international trade, as the variations in the exchange rates influence the currency payment structure.

    Issues or constraints with the foreign exchange rate may compel the government in moving ahead with the imposition of import restrictions on selected items or deregulating the economies for attracting the foreign exchange for investment purposes.

  3. Anti-Trust Laws: Anti-Trust laws are enforced by most of the governments for restricting/curbing unfair trade practices. For example, these restrictions have been enforced in India by enacting an act called Monopolies and Restrictive Trade Practices (MRTP), 1971.

  4. Suspension Agreements: Suspension agreements are the agreements which are finalized between the governments to waive off anti-dumping duties.

  5. Protectionism: Due to the growing competitive pressures, most of the governments try to enforce certain regulations or intervene for safeguarding their threatened industries.

    For example, by enforcing certain trade barriers, the Indian government protects the local industries such as Handicrafts and Textiles. These trade barriers may take the form of either anti-dumping laws, levy of tariffs or import duties, quantity quotas, and various government subsidies.

Competitive Pressures: The increase in the global competition and the challenges enforced due to the competitive pressures, force the organizations in changing their strategies for ensuring their global presence.

Japanese majors like Nissan, Toyota and Mitsubishi, have been continuously relocating their manufacturing as well as their assembling operations to South East Asian countries for achieving a competitive advantage in the form of reduced cost of labour and economies of scale.

Changes in the Needs and Preferences of Customers: Changes in the needs of the customers are compelling the organizations to adapt and innovate their product offerings constantly for meeting the changing demands of the customers.

Internal Forces of Organizational Change

Systemic Forces: An organization is made up of a system and several subsystems which are interconnected, just like the way in which a human system functions.

The subsystems of an organization are in direct interaction and influence the organizational behaviour as well. A change in any subsystem, result in a change in the existing organizational processes and the complete alignment as well as the relationship.

Inadequate Existing Administrative Processes: Each organization function by following a particular set of procedures, rules, and regulations.

With the changing times, an organization needs to change it’s rules and existing administrative processes, failing which the administrative inadequacy might result in organizational ineffectiveness.

Individual/Group Speculations: In anthropological terms, it is understood that man is a social animal whose desires and requirements keep changing with the changing times, which result in differences in individual as well as group expectations.

Various factors on the positive front such as how ambitious an individual is, achievement drive, career growth, personal and professional competencies and negative factors such as one’s own fears, complexes and insecurities are some of the inter-individual as well as inter group factors which influence an organizational functioning on a day to day basis and also its overall performance.

Structural Changes: These changes alter the existing organizational structure as well as its overall design. Structural changes can be regarded as a strategic move on the part of the organization’s to improve profitability and for achieving a cost advantage.

These changes may take the form of downsizing, job redesign, decentralization, etc. For example, IBM for introducing reforms in its existing system and procedures and for achieving cost effectiveness has enforced downsizing strategy.

Changes in the Technology: Within an organization, the technological changes may take the shape of changes in the work processes, equipment, level/degree of automation, sequence of work, etc.

People Focused Change: In this context, the major focus is laid on people and their existing competencies, human resource planning strategies, structural changes and employee reorientation and replacement of an employee which mean shifting an employee to a different work arena where his/her skills are best suited.

It may also be involving establishing new recruitment policies and procedures in line with the changes in the technology.

Issues with the Profitability: This can also be one of the primary causes which compel an organization to restructure (downsize or resize) or to reengineer themselves. The organization may have profitability issues either due to a loss in revenue, low productivity or a loss in the market share.

Resource Constraint: Inadequacy of the resources, may result in a powerful change force for the organization.

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Change Management