Business 101: Principles of Management

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Organizational change can occur in response to internal or external factors. This lesson focuses specifically on those changes that occur in a company's internal environment, including structural, strategic, people and process changes.

Change in Organizations

Most organizations have to change as part of keeping up with the competition or adjusting to new market trends or technologies. Things such as mergers, restructuring, technological advancements, process enhancements, changing customer demands and new product lines are fairly common in today's business environments. If you recall, reasons for change can be attributed to an organization's external environment as well as their internal environment. This lesson will focus specifically on those changes that occur in a company's internal environment, including structural, strategic, people and process changes.

Organizational change can be attributed to external and internal environments.

Structural Change

Structural changes are those changes made to the organization's structure that might stem from internal or external factors and typically affect how the company is run. Structural changes include things such as the organization's hierarchy, chain of command, management systems, job structure and administrative procedures. Circumstances that usually create the need for structural change include mergers and acquisitions, job duplication, changes in the market and process or policy changes.

Mergers and acquisitions can create the need for structural change.

For example, let's say that Catelyn's Communications decided to merge with Cory's Communications. As a part of that merger, duplicate departments needed to be eliminated, employees from both companies needed to be reassigned to new positions or terminated, managers acquired new employees, duplicate management positions were eliminated, new policies and procedures needed to be created (and old ones retired) and job functions needed to be realigned to fit the new company structure. Likewise, if the merger was a result of changes in the marketplace, structural changes might also need to be made to respond to the market shift, such as creating new departments that can produce whatever the market is demanding from communication providers.

Strategic Change

Strategic change involves making changes to the overall goals, purpose, strategy or mission of an organization. It is a major upheaval to how the organization conducts business. The external environment of an organization can, at times, place significant demands on an organization that it must rethink its fundamental approach to business. Changes to things such as what products or services it offers, the target customer segments or markets it tries to reach, how the company distributes its products or services, its position in the global economy and who it will partner with for manufacturers, distributors and other logistical needs are just some examples of strategic changes.

Strategic change involves making changes to the mission or strategy of an organization.

If we go back to the example of a communication firm, let's say Catelyn and Cory want to change the way they operate by going from a site-based store to becoming a web-based provider. Because the two firms were used to operating out of a physical store location, making the strategic change to transfer to a web-based platform will undeniably change the manner in which they do business, their overall goal and of course, their strategy for servicing customers.

People Changes

People changes are directed towards improving employee performance, skills, attitudes, behavior and loyalty to the organization, as well as to enhance manager-subordinate relationships, group cohesion and employee sense of achievement. Changes to people can be large-scale, such as replacing all of the top-level managers in hopes of creating a new organizational culture, or small-scale, such as working to change employee attitudes though things such as team building or other behavioral activities.

People changes are directed towards improving employee performance and skills.

Because Catelyn and Cory are merging two companies into one and consequently two sets of employees into one, they will need to ensure that they make the necessary people-oriented changes to blend the two groups seamlessly. This might include holding some team building events, offering training for new job functions, providing leadership training to any employees who will now assume a management position and offering opportunities to allow employees to demonstrate their area of expertise to managers and co-workers.

Process Change

Process changes are used to improve the overall workflow efficiency and productivity within an organization. Process changes affect an organization's production operations, such as how it produces its products, how it delivers its services or how it handles everyday business practices. Switching from paper bills to electronic ones as part of changing to a web-based service is an example of a process change that Catelyn and Cory would implement at their communications firm.

Process changes improve the overall workflow efficiency and productivity of an organization.

Lesson Summary

Let's review. Reasons for change can be attributed to an organization's external environment as well as their internal environment. This lesson focused specifically on those changes that occur in a company's internal environment, including structural, strategic, people and process changes. Structural changes are those changes made to the organization's structure that might stem from internal or external factors and typically affect how the company is run. Strategic change involves making changes to the overall goals, purpose, strategy or mission of an organization. People changes are directed towards improving employee performance, skills, attitudes, behavior and loyalty to the organization, as well as to enhance manager-subordinate relationships, group cohesion and employee sense of achievement. Process changes are used to improve overall workflow efficiency and productivity within an organization.