Chapter 39 — Managing change

1. Introduction — why change matters

Businesses operate in an ever-changing environment. Change can come from outside the
firm (market shifts, new technology, regulation, competition) or from within (new
strategy, restructure, management change). The ability to anticipate, prepare for and
respond to change is essential for a business that wants to survive and remain
competitive.

Managing change is not just about reacting — successful businesses plan change
strategically, weigh the costs and benefits, and manage the people side carefully. In this
chapter we learn:

 causes and pressures for change

 different types of change (internal/external, incremental/disruptive)
 Lewin’s Force Field Analysis as a tool for managing change
 the value and risks of change
 how to build a flexible organisation (structure, contracts, information)
 barriers to change and frameworks (Kotter & Schlesinger) to understand and
overcome resistance.

2. Causes of and Pressures for Change

Businesses do not operate in isolation — they exist within complex and dynamic
environments. Every organisation, whether small or multinational, faces forces of
change that shape its decisions, structures, and strategies. Some changes arise externally,
from outside influences beyond the firm’s control; others are internal, driven by the
firm’s own leadership, performance, or culture.
The ability to recognise, anticipate, and adapt to these pressures determines whether a
business thrives or declines. Let’s explore these causes in depth.

A. External causes of change

External change comes from outside the organisation — it is uncontrollable, but

managers must respond effectively. These factors often appear in PESTLE analysis
(Political, Economic, Social, Technological, Legal, Environmental).

1. Political and legal factors

Definition: Changes in government policy, taxation, regulation, or trade laws that affect
how businesses operate.

Examples:

 New environmental laws may require factories to install cleaner production

equipment.
 Increases in minimum wage laws raise labour costs.
 Brexit (for UK firms) altered trading relationships and supply chains.

Impact and analysis:

Political or legal changes can increase costs (e.g., compliance) but also create
opportunities. For instance, renewable energy regulations forced oil companies to invest
in clean technologies — a cost in the short term, but essential for long-term survival.

2. Economic factors

Definition: Economic conditions affect costs, revenues, and investment. Changes in

inflation, interest rates, exchange rates, and overall GDP growth force firms to adapt.

Examples:
  A recession reduces consumer spending, pressuring firms to cut prices or costs.
 A strong currency makes exports more expensive, prompting firms to shift
production abroad.
 High interest rates discourage borrowing, reducing capital investment.

Analysis:
During downturns, businesses may restructure, close unprofitable units, or change their
product mix to cheaper alternatives. Conversely, during booms, firms may expand
capacity or recruit more workers.

3. Technological factors

Definition: New technologies change how products are made, sold, and delivered.

Examples:

 Artificial Intelligence (AI) and automation in manufacturing improve efficiency

but require new skills.
 E-commerce and mobile apps revolutionised retail distribution channels.
 Digital marketing (SEO, social media ads) changed promotional strategies.
 Data analytics transformed decision-making and forecasting.

Analysis:
Technology often acts as both a driver and disruptor. It can reduce costs and increase
productivity, but it can also make existing business models obsolete (e.g., Netflix
disrupting DVD rentals). Firms that fail to innovate fall behind.

4. Social and demographic factors

Definition: Changes in population, lifestyle, values, and consumer preferences that

influence demand.
Examples:

 Ageing populations increase demand for healthcare and leisure services but reduce
demand for youth-oriented goods.
 Changing family structures (more single households) alter consumption patterns
— smaller food packaging, more convenience meals.
 Increasing environmental awareness boosts demand for sustainable and ethical
products.
 Health-conscious consumers shift preferences from sugary drinks to healthier
options.

Analysis:
Businesses must track social trends to stay relevant. Marketing research becomes vital
— firms that identify early shifts (e.g., plant-based diets, diversity marketing) gain a
competitive edge.

Evaluation:
Social change can be gradual (allowing time to adapt) or sudden (e.g., viral campaigns
against plastic waste). Firms that ignore cultural shifts risk brand damage or irrelevance,
as seen when traditional fast-food chains had to introduce vegan menus.

5. Environmental factors

Definition: Ecological and sustainability issues, climate change, and stakeholder pressure
for ethical behaviour.

Examples:

 Increased regulation on carbon emissions.

 Pressure from customers, investors, and NGOs for green supply chains.
 Physical climate risks disrupting production (flooding, drought).
Analysis:
Environmental awareness has moved from being optional to strategic necessity.
Sustainable practices (renewable energy, waste reduction) can reduce costs long-term and
attract eco-conscious customers.

6. Competitive factors

Definition: The actions of rivals — pricing strategies, innovation, mergers — force

businesses to respond to protect market share.

Examples:

 A competitor introduces a cheaper substitute → firm must reduce prices or

differentiate.
 New entrants (enabled by technology) disrupt established markets — e.g., Airbnb
in hospitality.
 Mergers create powerful competitors with economies of scale.

Analysis:
Competitive pressure drives continuous improvement and innovation. However,
excessive competition can erode margins and create short-termism (e.g., focusing on
price wars rather than product quality).

7. Globalisation and international factors

Definition: The increasing interconnectedness of world markets, finance, and production.

Examples:

 Global supply chains create cost advantages but expose firms to geopolitical risk
(trade wars, pandemics).
  Cultural convergence increases global brand opportunities (e.g., Coca-Cola,
Apple).
 Exchange rate fluctuations affect exporters and importers.

Analysis:
Globalisation pushes firms to relocate production, outsource, or form international
partnerships. It also introduces new competitors from emerging economies with lower
costs.

8. Ethical and stakeholder pressure

Definition: Increasing pressure from society, media, and investors for ethical and
socially responsible practices.

Examples:

 Shareholders demand ESG (Environmental, Social, Governance) reporting.

 Boycotts against firms involved in unethical sourcing or labour practices.
 Employee activism pushing for diversity or climate action.

Analysis:
Ethical pressures lead firms to modify supply chains, reform governance, and increase
transparency. Reputation is a competitive asset — ethical firms attract customers and
talent.

Evaluation:
Ethical adaptation can be costly but pays off long-term through trust and brand strength.
For example, Patagonia’s environmental activism created loyal customers and
differentiated its brand globally.

B. Internal causes of change

Internal change originates from within the business — its leadership, structure,
performance, or culture. Unlike external pressures, management can control and direct
these changes more deliberately.

1. Leadership and management change

Definition: New leaders often bring new visions, priorities, and strategies.

Examples:

 A new CEO may shift from cost-cutting to growth or innovation.

 Family businesses transitioning to professional management often restructure
operations.

Analysis:
Leadership change can revitalise a business (fresh ideas, energy) or cause instability if
employees resist new directions.

2. Organisational culture

Definition: The shared values, beliefs, and behaviours that shape how work is done.

Examples:

 A company shifting from a bureaucratic culture to an innovative one must change

its reward systems, structure, and leadership style.
 Merger between two firms with contrasting cultures (e.g., startup vs corporate)
often triggers cultural integration challenges.

Analysis:
Culture influences employee behaviour, motivation, and openness to change. A “blame
culture” resists change; a “learning culture” embraces it.
3. Poor business performance

Definition: Declining profits, low productivity, or customer complaints signal need for
change.

Examples:

 Falling market share prompts rebranding or restructuring.

 Low employee morale leads to HR policy change.
 Inefficient processes trigger automation investment.

Analysis:
Crisis-driven change is often reactive, focusing on survival rather than long-term
strategy. Managers must balance urgency with strategic direction.

4. Growth and organisational size

Definition: As businesses expand, existing systems and structures may become

inefficient.

Examples:

 Start-ups often move from informal to formal structures as they scale.

 Rapid international expansion demands regional management and standardisation.

Analysis:
Growth causes strain on coordination, communication, and control. Restructuring or
decentralisation often becomes necessary.

5. Innovation and product development

Definition: New ideas, products, and processes drive internal change.

Examples:

 Launching new product lines requires marketing, production, and supply chain
changes.
 R&D breakthroughs may force reallocation of budgets and staff.

Analysis:
Innovation keeps firms competitive and can redefine their markets (e.g., Apple shifting
from computers to mobile devices).

6. Workforce and skill levels

Definition: Changes in workforce demographics or skill requirements create internal

pressures.

Examples:

 Older employees retiring — need for recruitment and training.

 Introduction of new IT systems — need for digital upskilling.
 Diversity goals — changes in recruitment and management style.

Analysis:
A skilled, adaptable workforce enhances competitiveness. Skill shortages, however,
constrain change implementation.

7. Financial performance and investment needs

Definition: Internal finances determine capacity to change.

Examples:

 Cash-rich firms can invest in technology or expansion.

 Highly indebted firms may have to restructure or divest assets.
Analysis:
Financial strength enables proactive change; weakness forces reactive retrenchment.

C. Interactions between internal and external factors

In reality, these forces interact. For instance:

 Technological advances (external) may require new training programs (internal).

 Economic recession (external) may expose poor cost control (internal).
 Leadership vision (internal) may position a firm to exploit demographic shifts
(external).

Managers must continuously monitor both environments and align internal capabilities
with external realities — this is the essence of strategic agility.

3. Types of Change

Change can vary in speed, scale, origin, and impact. Understanding these different types
helps managers choose the most suitable approach to manage transitions effectively —
whether they involve introducing new technology, restructuring departments, or
transforming company culture.

Change can be categorised in several key ways:

1. By speed and nature – sudden or gradual.

2. By scale – small adjustments or complete transformation.
3. By origin – internal or external.
4. By level – operational or strategic.

A. Change by Speed and Nature

1. Incremental (Evolutionary) Change

Definition:
Incremental change occurs gradually over time, involving small, continuous
improvements rather than major shifts. It is part of an organisation’s normal process of
learning and development.

Examples:

 A business introducing lean production to improve efficiency step by step.

 A retailer gradually adopting digital marketing tools.
 Continuous improvement programs such as Kaizen in Japanese manufacturing,
where employees regularly suggest ways to enhance productivity or quality.

Analysis:
Incremental change allows employees to adapt gradually, reducing resistance and
disruption. It builds on existing systems rather than replacing them entirely. Managers
can test, evaluate, and refine each change before moving to the next stage.

Diagram-in-words:
Imagine a staircase — each step represents a small improvement, leading to a higher
overall performance over time.

Advantages:

 Low risk and less resistance from employees.

 Easier to manage and monitor.
 Allows learning and feedback at each stage.

Disadvantages:

 May be too slow in fast-changing industries.

  Can lead to complacency, as major opportunities or threats might be missed.
 May not be enough if the environment changes drastically.

2. Disruptive (Revolutionary) Change

Definition:
Disruptive change — also known as radical or transformational change — is rapid,
large-scale, and often unexpected. It fundamentally alters the way a business operates.

Examples:

 A company replacing all manual systems with full automation.

 The shift from film to digital photography (Kodak’s challenge).
 The rise of streaming platforms replacing DVDs and cable TV.
 The COVID-19 pandemic, forcing instant remote work adaptation.

Analysis:
Revolutionary change usually occurs when a business faces an urgent external shock or
when incremental improvements are no longer sufficient. It may require new leadership,
new strategy, and new culture.

Diagram-in-words:
Imagine a sharp vertical jump on a graph — a sudden leap rather than a steady climb.

Advantages:

 Creates immediate transformation, sometimes necessary for survival.

 Can reposition the business as an industry leader.
 Breaks old habits and outdated structures.

Disadvantages:

 High risk and uncertainty.

  Can cause resistance, confusion, or job loss.
 Requires strong leadership and communication.

Evaluation:
Disruptive change is essential when a business faces crisis or major technological shifts.
However, it must be managed carefully to prevent chaos. Success depends on visionary
leadership, clear communication, and employee involvement.

Example:
Nokia failed to manage disruptive change when smartphones revolutionised the mobile
phone industry — it continued incremental updates while Apple and Samsung completely
redefined the market.

B. Change by Scale

1. Minor (Operational) Change

Definition:
Minor change involves small adjustments to day-to-day processes, systems, or policies —
usually within departments or teams.

Examples:

 Introducing flexible working hours.

 Updating software versions.
 Altering shift patterns or minor changes in job design.

Analysis:
Such changes are often reactive and aimed at improving efficiency or employee
satisfaction. They do not require major structural adjustments but still need
communication and training to ensure success.
Evaluation:
Minor change is common and low-risk, but when neglected, small changes can
accumulate into large inefficiencies. Managers should treat operational adjustments as
opportunities for continuous improvement.

2. Major (Strategic) Change

Definition:
Major change is large-scale and affects the entire organisation — its strategy, structure,
and culture.

Examples:

 Mergers and acquisitions.

 Entering a new international market.
 Shifting from product-based to service-based business model.
 Complete digital transformation.

Analysis:
Strategic change requires planning, resources, and long-term commitment. It often
involves several smaller operational changes to support the overall transition.

C. Change by Origin
1. Internal Change

Definition:
Internal change originates within the organisation — caused by leadership decisions,
culture, performance, or innovation.

Examples:

 A new CEO changing the company’s vision.

  Adoption of new technology to improve efficiency.
 Internal restructuring to reduce costs or improve communication.

Analysis:
Internal change is usually planned and controlled, giving management more influence
over its pace and direction. It may arise from the need to improve productivity, morale, or
competitiveness.

2. External Change

Definition:
External change originates from outside the organisation and is often unpredictable or
uncontrollable.

Examples:

 Economic recession.
 New government regulations.
 Technological disruption by competitors.
 Pandemics or geopolitical conflicts.

Analysis:
External change is usually reactive — businesses must adapt quickly to survive.
Managers must use contingency planning and environmental scanning to anticipate
and minimise risk.

D. Change by Level
1. Strategic Change

Definition:
Strategic change affects the overall direction and objectives of a business. It involves
rethinking how the organisation competes, serves customers, and creates value.
Examples:

 Diversifying into new industries.

 Changing corporate mission or vision.
 Shifting from low-cost leadership to differentiation strategy.

Analysis:
Strategic change is long-term and typically led by senior management. It may require
major investment, restructuring, and cultural change.

2. Structural Change

Definition:
Structural change alters the organisation’s design — its hierarchy, reporting lines, or
division of work.

Examples:

 Moving from functional departments to product-based divisions.

 Decentralising decision-making.
 Flattening the management hierarchy to improve communication.

Analysis:
Structural change improves efficiency and adaptability, especially as firms grow.
However, it can disrupt established relationships and create uncertainty.

3. Technological Change

Definition:
Technological change involves adopting or upgrading new systems, machinery, or digital
tools that alter how work is performed.

Examples:
  Installing automated machinery.
 Adopting AI-based customer service.
 Implementing an enterprise resource planning (ERP) system.

Analysis:
Technology can improve accuracy, speed, and cost efficiency, but it requires investment
and retraining. Employees may fear redundancy, causing resistance.

4. Cultural Change

Definition:
Cultural change involves transforming the organisation’s shared values, attitudes, and
behaviours — “how things are done around here.”

Examples:

 Moving from risk-averse to innovative culture.

 Encouraging collaboration instead of competition.
 Shifting from hierarchical to open communication.

Analysis:
Culture influences every aspect of performance and adaptability. Cultural change is often
the hardest to achieve because it challenges people’s beliefs and habits.

E. Planned vs Unplanned Change

1. Planned Change

Definition:
Planned change is deliberate, systematic, and controlled — initiated by management to
achieve specific objectives.

Examples:
  Strategic rebranding.
 Launching a new IT system.
 Moving to remote working after careful trial and consultation.

Analysis:
Planned change allows preparation, communication, and employee engagement.
Managers can identify risks and design training or incentives to smooth the process.

2. Unplanned (Emergent) Change

Definition:
Unplanned change occurs suddenly and without preparation, usually due to unforeseen
events or crises.

Examples:

 Natural disasters disrupting supply chains.

 Sudden resignation of key leaders.
 Technological failure or cyberattack.

Analysis:
Unplanned change requires quick decision-making and flexibility. Managers must
stabilise operations and then design long-term adjustments.

Evaluation:
Unplanned change tests leadership and organisational resilience. It can be chaotic but
may also lead to creativity and innovation under pressure.

F. Balogun and Hope Hailey’s Model of Change

Balogun and Hope Hailey (2004) classified change along two dimensions:

1. The speed of change (incremental or big-bang).

 2. The nature of change (realignment or transformation).

This produces four types of change:

Appropriate
Type Description Example
when

Incremental, realignment Continuous

Stable
Adaptation change — small adjustments improvement
environment.
within existing strategy. programs.

Moderate
Incremental, transformational Building innovation
Evolution external
— gradual cultural shift. culture over years.
pressure.

Big-bang, realignment — rapid Urgent

Restructuring after
Reconstruction reorganisation without cultural performance
profit fall.
overhaul. issue.

Big-bang, transformational —
Radical digital Crisis or major
Revolution complete overhaul of strategy
transformation. disruption.
and culture.

G. Evaluating the Nature and Type of Change

When deciding the right approach, managers must consider:

1. The urgency – is the change needed immediately (e.g., crisis) or gradually?

2. The scale – does it affect one department or the entire organisation?
3. The resources – is there funding and leadership capacity to manage it?
4. The culture – will employees support or resist it?
5. The risk – what are the consequences if it fails?

4. Lewin’s Force Field Analysis — A Practical Tool for Managing Change

Managing change is one of the most challenging responsibilities in business leadership.
While some employees embrace new ideas and systems, others resist due to fear,
uncertainty, or habit.
Kurt Lewin’s Force Field Analysis (1951) provides a structured way to understand,
plan, and manage change, by identifying the forces that support and oppose it.

A. The Core Idea

Lewin argued that any organisation exists in a state of dynamic equilibrium — a

balance between:

 Driving forces (that push for change), and

 Restraining forces (that resist change).

Change will only occur when the driving forces become stronger than the restraining
forces.

So, to successfully manage change, a manager must:

1. Identify the relevant forces.

2. Assess their strength.
3. Strengthen the drivers and/or reduce the barriers.

When this balance shifts, the business can move from the current state to the desired
future state.

Diagram-in-Words

Visualise Lewin’s Force Field Analysis as two sets of arrows pushing against each other:

Driving Forces → | Current State | ← Restraining Forces

If driving forces become stronger, the current equilibrium moves toward change.
B. The Steps in a Force Field Analysis

Lewin’s model provides a five-step process for analysing and managing change
effectively.

Step 1: Define the Change

Clearly state what change is proposed and what the desired outcome looks like.

Example:
A manufacturing company wants to introduce automation to improve productivity and
reduce costs.

Goal:
Move from manual processes (current state) → automated production (future state).

Step 2: Identify Driving Forces

Driving forces are pressures or motivations that make change necessary or desirable.
They can come from inside or outside the organisation.

Examples of Driving Forces:

Type Example Explanation

External Technological advancement Competitors adopting automation.

External Economic pressure Rising labour costs reducing competitiveness.

Internal Leadership vision New CEO pushing innovation.

Internal Employee frustration Staff wanting easier, safer processes.

In our example:
  Rising wage costs,
 Competitor efficiency,
 New technology availability,
 Leadership’s strategic goal to improve productivity.

Step 3: Identify Restraining Forces

Restraining forces are barriers that make change difficult. These might be
psychological, organisational, or resource-based.

Examples of Restraining Forces:

Type Example Explanation

Organisational Cost of automation High initial investment.

Human Employee resistance Fear of redundancy or skill loss.

Cultural “We’ve always done it this way.” Inflexible culture.

Resource Lack of training Staff unable to operate new machines.

In our example:

 Financial constraints,
 Employee resistance,
 Skills gap,
 Risk of production downtime.

Step 4: Assess the Strength of Each Force

Lewin suggested giving each force a numerical score (typically from 1 to 5 or 1 to 10) to
reflect its relative strength.
This allows managers to visualise whether driving forces outweigh restraining forces.

Example Table:

Driving Forces Strength Restraining Forces Strength

Rising labour costs 4 High cost of automation 5

Leadership support 3 Staff resistance 4

Competitor technology 5 Skills shortage 3

Efficiency pressure 4 Fear of change 2

Total = 16 Total = 14

Here, the driving forces (16) slightly outweigh restraining forces (14), suggesting the
change may succeed but will face some resistance.

Step 5: Develop a Strategy for Action

Once the forces are understood, managers can plan how to:

 Strengthen the driving forces, and/or

 Reduce the restraining forces.

Examples:

Strategy Type Action

Strengthen Increase communication of benefits; highlight cost savings; set clear

drivers targets.

Provide training; offer job security guarantees; phase implementation

Reduce restraints
gradually.
In our automation example, management might:

 Launch a training programme to reduce fear and skill barriers.

 Provide clear communication about job redeployment (not job loss).
 Use pilot testing to show success before full rollout.

C. Practical Example — Force Field Analysis in Action

Case Study: Tesco’s Digital Transformation

 Change: Adoption of self-service checkouts and online systems.

 Driving forces:
o Consumer demand for faster service.
o Technological advancements.
o Cost reduction goals.
o Competitive pressure from Amazon and Aldi.
 Restraining forces:
o Older staff resistance.
o Customer frustration with technology.
o IT system costs.
o Need for cyber-security training.

Analysis:
Tesco balanced the model by investing in staff training, providing customer support,
and phasing introduction gradually. Over time, restraining forces decreased as staff
became familiar with the technology and customers saw convenience benefits.

Outcome:
Change succeeded — self-checkouts became a standard feature, improving efficiency and
customer satisfaction.
D. Theoretical Significance — Why Force Field Analysis Matters

Lewin’s framework is both diagnostic and prescriptive — it helps managers understand

why people resist and what to do about it.

1. It clarifies the situation.

Instead of guessing, managers systematically list and prioritise forces.
2. It highlights leverage points.
Managers can focus resources on the most influential forces.
3. It promotes discussion and participation.
Involving employees in identifying forces helps increase buy-in and reduces
suspicion.
4. It supports evidence-based decision-making.
Quantifying forces makes change management more objective and measurable.

E. Applying Force Field Analysis to Different Types of Change

Lewin’s model applies to incremental and disruptive change alike, but the strategies
differ:

Type of Change How Force Field Analysis Helps

Incremental Identifies small barriers (e.g., poor communication, habits) and

change allows gradual reinforcement of new behaviour.

Helps anticipate major resistance (e.g., redundancies, uncertainty)

Disruptive change
and plan large-scale communication or support.

Reveals deep-rooted attitudes that may not be visible in data —

Cultural change
useful for identifying cultural inertia.
 Type of Change How Force Field Analysis Helps

Technological Highlights skills gaps and fear of obsolescence — guides training

change priorities.

F. Evaluating Lewin’s Force Field Analysis

Strengths

1. Clear and Simple Framework

o Easy to understand and apply to many contexts.
o Visual and structured approach supports management communication.
2. Encourages Participation
o Involving employees in identifying forces increases motivation and
ownership.
3. Quantitative Element
o Scoring forces gives objectivity and allows progress tracking.
4. Focuses on Balance and Strategy
o Reminds managers that change is not only about adding drivers but also
removing obstacles.
5. Adaptable
o Can be used for organisational, departmental, or even personal change (e.g.,
introducing new working hours).

Limitations

1. Subjectivity in Scoring
o The strength ratings are based on judgment and may vary among managers.
2. Static Snapshot
o The model captures forces at one point in time, but these forces can change
rapidly.
3. Over-Simplification
 o Complex psychological and cultural barriers may not be fully captured by a
simple diagram.
4. Ignores Emotional and Political Aspects
o Focuses on rational forces but underestimates emotions, power struggles, or
hidden agendas.
5. No Guidance on Implementation
o Identifies what needs changing but not how to change (this is where
Kotter’s 8-Step Model complements Lewin’s theory).

G. Integrating Lewin’s Model with Other Change Theories

Lewin’s Force Field Analysis is often paired with:

1. Lewin’s Three-Stage Change Model (Unfreeze → Change → Refreeze).

o Force Field Analysis helps during the unfreezing stage to identify what
must shift before new behaviours can be adopted.
o Example: identifying employee fears before rolling out new IT systems.
2. Kotter’s 8-Step Change Model.
o Lewin explains why people resist; Kotter explains how to lead them through
change.

Integration Example:

 Use Force Field Analysis to identify forces.

 Apply Kotter’s model to design communication, leadership, and reinforcement
strategies.

5. The value of change

Change creates value when it improves competitiveness, reduces costs, opens new
markets, or increases customer satisfaction. But change also brings costs and risks.
Potential benefits

 Cost reduction — automation, process improvements.

 Revenue growth — new products, market expansion.
 Increased flexibility — ability to respond to opportunities quicker.
 Improved quality and customer service — better systems, training.
 Strategic repositioning — moving into higher-margin segments.

Costs and risks

 Direct financial costs — capital expenditures, consultancy fees.

 Human costs — redundancies, loss of morale, industrial action.
 Operational disruption — implementation can reduce output temporarily.
 Execution risk — failed change can damage reputation and financial position.

Balance and evaluation

When analysing a change, always weigh net benefits and consider time horizon. Some
changes (like brand repositioning) pay off slowly; others (automation) may have big
upfront costs but clear medium-term payback. Also consider strategic fit — change
should align with long-term goals.

6. Building a Flexible Organisation

6.1 The meaning of flexibility

Flexibility refers to a business’s ability to respond quickly and effectively to changes

in its internal and external environment.
These changes might include:

 Fluctuations in customer demand

 Advances in technology
 Shifts in competition
  Economic or political uncertainty
 Changes in workforce expectations or labour laws

A flexible organisation can adapt its structure, workforce, and processes without
major disruption or excessive cost.
It avoids rigidity — meaning it’s less likely to be “caught out” when the environment
changes.

Flexibility increases a firm’s resilience and its ability to survive in dynamic markets.

6.2 The importance of organisational flexibility

In today’s business environment — characterised by globalisation, rapid technological

development, and customer power — flexibility offers several advantages:

Advantage Explanation

Improved Flexible firms can adjust quickly to meet customer needs and
competitiveness keep up with rivals.

Using flexible working or outsourcing allows firms to save on

Cost efficiency
fixed costs.

Employees often value flexible working arrangements,

Enhanced motivation
improving morale and productivity.

A flexible organisation can bring products to market faster or

Faster response times
resolve problems more efficiently.

Openness to change encourages creativity and innovation among

Better innovation
employees.

6.3 Types of flexibility

There are four main types of flexibility in an organisation. A truly flexible business will
often combine several of these.

1. Functional flexibility

This refers to employees being multi-skilled and able to perform a variety of tasks.

 Staff can be redeployed where they’re most needed.

 Reduces dependency on any single employee or department.
 Encourages teamwork and continuous learning.

Example:
In a hotel, staff may be trained to handle both reception duties and restaurant service
during busy periods.

Advantages:

 Increases efficiency and productivity.

 Improves job variety and motivation.
 Helps cover absences and seasonal demand.

Drawbacks:

 Requires training investment.

 Some employees may resist frequent job changes.

2. Numerical flexibility

This involves adjusting the number of employees to match changing business needs.
It can be achieved through:

 Part-time and temporary contracts

 Zero-hours contracts (staff only work when needed)
  Seasonal hiring

Example:
Retailers often hire temporary staff during Christmas.

Advantages:

 Labour costs become more variable — easier to manage during downturns.

 Reduces waste from overstaffing.
 Allows firms to expand quickly when demand surges.

Disadvantages:

 May reduce staff loyalty and commitment.

 Temporary workers may have lower skill or motivation levels.

3. Financial flexibility

This refers to a firm’s ability to alter its pay and rewards system according to business
performance or individual contribution.

Methods include:

 Performance-related pay (PRP)

 Bonuses and profit-sharing schemes
 Temporary pay freezes or cuts during difficult periods

Example:
During a downturn, a manufacturing firm might freeze salaries rather than lay off staff.

Advantages:

 Aligns employee rewards with company goals.

  Helps control costs in tough times.
 Motivates staff to improve performance.

Disadvantages:

 If pay varies too much, employees may feel insecure.

 Unpredictable income can reduce morale.

4. Structural flexibility

This involves changing the organisational structure to make it more adaptable.

Traditional hierarchies can be replaced with flatter, team-based or networked
structures.

Examples:

 Using project teams or matrix structures.

 Outsourcing non-core functions (e.g., cleaning, IT support).
 Forming strategic alliances or joint ventures.

Advantages:

 Quicker decision-making.
 Better communication and collaboration.
 Allows firms to focus on core competencies.

Disadvantages:

 May create confusion over roles and responsibilities.

 Outsourcing can reduce internal control and quality.

6.4 Methods of achieving flexibility

Businesses use a combination of strategies to become more flexible:

(a) Part-time and temporary employment

 Helps match labour supply to seasonal or fluctuating demand.

 Reduces wage costs during quiet periods.
 Often used in retail, hospitality, and tourism industries.

However:

 Too much reliance on temporary workers may reduce service quality.

 May harm long-term culture and loyalty.

(b) Flexible working arrangements

Modern technology has expanded options such as:

 Remote working (teleworking)

 Flexible hours or flexitime
 Job sharing
 Career breaks and sabbaticals

Benefits:

 Attracts and retains skilled staff (especially parents or carers).

 Reduces absenteeism.
 Improves work–life balance and productivity.

Challenges:

 Harder to monitor remote workers.

 May reduce team cohesion or communication.
(c) Delayering

This means removing layers of management to flatten the hierarchy.

Advantages:

 Faster communication and decision-making.

 Greater employee empowerment.
 Reduces management costs.

Disadvantages:

 Managers may become overstretched.

 Fewer promotion opportunities can lower morale.
 Remaining staff may face heavier workloads.

(d) Outsourcing and subcontracting

Firms may outsource non-core tasks to external specialists.

Example:
A manufacturer may outsource logistics or payroll functions.

Benefits:

 Focus on core business strengths.

 Lower overheads and access to specialist expertise.
 Easier to scale up or down output.

Drawbacks:

 Less control over quality.

 Potential security and confidentiality issues.
  Long-term dependency on external suppliers.

(e) Empowerment and decentralisation

Giving employees greater responsibility and autonomy in decision-making increases

flexibility.

 Encourages faster problem-solving.

 Boosts innovation and motivation.

However:

 Requires trust and strong communication.

 Not all employees are comfortable with more autonomy.

6.5 The flexible firm model (Atkinson, 1984)

Atkinson proposed that a business can achieve flexibility by structuring its workforce into
three main groups:

Type of
Description Example
Workforce

Permanent, full-time employees with essential

Core workers Engineers, managers
skills. They provide functional flexibility.

Peripheral Part-time, temporary, or subcontracted Agency workers,

workers employees. Provide numerical flexibility. seasonal staff

Outsourced Cleaning, catering,

External firms carrying out non-core activities.
workers IT services

This model helps firms:

  Keep fixed labour costs low.
 Maintain stability in key functions while adapting to demand changes.
 Respond rapidly to external shocks.

Criticisms:

 May create a “two-tier” workforce where peripheral workers feel undervalued.

 Overuse of temporary staff can harm morale and service quality.

6.6 Evaluation: Is flexibility always beneficial?

Benefits Drawbacks

Lower costs and greater efficiency Risk of lower employee loyalty

Faster adaptation to change Possible decline in service quality

Higher motivation through autonomy Communication challenges in flexible teams

Enhanced competitiveness Legal and ethical issues with zero-hour contracts

7. Managing information and knowledge

Information and knowledge are strategic assets. Effective management ensures decisions
are data-informed and lessons are retained.

Types of knowledge

 Explicit knowledge: codified (manuals, databases).

 Tacit knowledge: skills, experience, culture, hard to codify.

Why it matters

 Better decisions (faster, more accurate).

 Reduced duplication of effort.
  Retention of expert knowledge when staff leave.
 Enables innovation by combining data and employee insight.

How to manage it

 IT systems — databases, cloud platforms, analytics tools.

 Knowledge-sharing culture — incentives for collaboration, training programs.
 Documentation and processes — standard operating procedures.
 Communities of practice and mentoring — transfer tacit knowledge.

Risks/challenges

 Cost of systems.
 Security and data privacy.
 Overload of information: managers need tools to filter noise.
 Cultural barriers: hoarding knowledge for job security.

8. Barriers to Change — Why Resistance Happens

Change is often essential for business survival, but it is rarely easy.

People — whether employees, managers, or other stakeholders — tend to prefer familiar
routines, structures, and habits.
When these are threatened, resistance can occur.

Understanding why resistance happens helps managers plan smoother transitions,

reduce opposition, and maintain productivity.

8.1 The nature of resistance to change

Resistance to change is the opposition or pushback that occurs when individuals or

groups perceive a change as:

 Unnecessary, threatening, or risky,

  Poorly communicated, or
 Lacking in personal benefit.

It can manifest in different forms, ranging from subtle to overt.

Forms of resistance:
Type Description Example

Open opposition to the

Active resistance Employees protest, complain, or strike.
change.

Staff comply superficially but work

Hidden or indirect
Passive resistance slower, make errors, or ignore new
opposition.
procedures.

Organisational Resistance embedded in Bureaucratic processes or rigid

resistance systems or culture. hierarchies block new initiatives.

Resistance is natural, not necessarily a sign of disloyalty. It often reflects fear of the
unknown and lack of trust in leadership.

8.2 Common causes of resistance

Resistance can arise for psychological, cultural, or structural reasons.

Let’s examine these in detail:

(1) Fear of the unknown

Change creates uncertainty.

Employees may worry about:

 Whether they can cope with new technology or tasks.

 Potential job losses.
  Their future role and security.

Humans tend to seek stability — it provides a sense of control.

When this is disrupted, anxiety and defensiveness appear.

(2) Loss of control or power

Change can shift authority, decision-making, or influence.

Middle managers, in particular, may fear losing their power if structures are flattened or
processes become automated.

(3) Bad communication

Poor or unclear communication is one of the biggest barriers.

If employees don’t understand why change is happening or how it affects them, rumours
and misinformation spread quickly.

Consequences:

 Misunderstanding of motives.
 Distrust toward leadership.
 Low morale and higher turnover.

(4) Lack of trust in leadership

If employees don’t trust management’s motives, they may see change as self-serving
(e.g., to cut jobs or boost executive bonuses).

(5) Loss of job security

Perhaps the most powerful cause of resistance.

Change often brings restructuring, automation, or outsourcing, which can threaten
people’s livelihoods.
Example:
When a business introduces AI systems to replace administrative tasks, clerical staff may
feel insecure.

Managerial approach:
Offer reassurance, retraining, or redeployment where possible.
Involve trade unions early to negotiate fairly.

(6) Poor organisational culture

If a firm’s culture values stability and tradition, any innovation or restructuring will feel
like a violation of its identity.

Example:
A family-owned business with a long history of “doing things our way” might reject
suggestions from new management or external consultants.

Managerial approach:
Cultural change must start gradually — with visible leadership commitment and role
modelling.

(7) Different stakeholder interests

Change can produce winners and losers.

For instance:

 Shareholders may benefit from cost cuts.

 Employees may lose bonuses or perks.
 Customers may face higher prices or reduced service.

Each group assesses change through its own interests, so resistance may emerge from
competing priorities.
Managerial approach:
Identify key stakeholders, communicate benefits specific to them, and seek compromise
where possible.

(8) Previous experiences with failed change

If a business has a history of unsuccessful or disruptive change, employees may

become cynical and assume “this will fail too.”

Example:
If two past reorganisations were abandoned halfway, a third attempt may face ridicule or
disengagement.

Managerial approach:
Acknowledge past mistakes, show what will be different this time, and celebrate early
wins to rebuild confidence.

(9) Poor timing or excessive pace

Too many changes in a short time can lead to change fatigue.

Employees feel overwhelmed, unable to keep up, or exhausted by constant adaptation.

Example:
After merging departments, introducing a new IT system immediately may create
overload.

Managerial approach:
Plan gradual transitions with realistic timelines and support systems.

(10) Inadequate resources or training

Even if employees support the change, they may lack the skills, time, or tools to
implement it effectively.
Example:
Rolling out new software without sufficient training can frustrate staff and reduce
productivity.

Managerial approach:
Provide ongoing training, mentorship, and access to help desks or user support.

8.3 Kotter and Schlesinger’s Model of Overcoming Resistance

To systematically handle resistance, Kotter and Schlesinger (1979) identified six

approaches to reduce opposition:

Strategy Description Example

Education and Explain the logic and benefits behind Hold briefings or
communication the change to gain understanding. workshops.

Participation and Involve employees in planning and

Form staff committees.
involvement implementation.

Provide emotional and practical

Facilitation and Offer coaching or flexible
support through training or
support deadlines.
counselling.

Negotiation and Pay rises or bonuses for

Offer incentives to gain cooperation.
agreement those affected.

Manipulation and co- Selectively involve opinion leaders to Invite respected staff to
optation influence others. join the change team.

Explicit and implicit Use authority or threats to enforce “Adopt the change or face
coercion compliance (last resort). redundancy.”

Evaluation:
  Soft strategies (education, participation) build long-term trust and commitment.
 Hard strategies (coercion) may deliver quick compliance but risk resentment.

8.4 Organisational barriers (structural and cultural)

Resistance doesn’t just come from individuals — sometimes the organisation itself
becomes a barrier.

Organisational
Description Example
Barrier

Decisions take too long to travel Large corporations with

Rigid hierarchy
up and down the chain. multiple management layers.

Departments focus on their own Marketing and production not

Functional silos goals rather than the whole coordinating new product
business. launches.

Lack of systems for No procedures for testing new “We’ve always done it this
innovation ideas. way” attitude.

Leaders fail to inspire or clarify Unclear direction during

Weak leadership
vision. restructuring.

8.5 Cultural barriers (values and norms)

Culture represents the shared values and beliefs of an organisation.

Strong cultures can be powerful — but they can also resist change fiercely.

Common cultural barriers:

 Group norms that discourage risk-taking.

 Strong informal leaders who undermine new directions.
 Reward systems that favour the status quo (e.g., seniority-based pay).
Example:
In a company where “stability and loyalty” are prized, innovation may be viewed as
reckless.

Solution:

 Align culture with strategy.

 Recognise and reward behaviours that support change.
 Promote role models who embody the new values.

8.6 The psychological contract and resistance

The psychological contract is the unspoken agreement between employer and employee
— the set of expectations about fairness, loyalty, and respect.

When change breaks this contract (e.g., redundancies, new working conditions),
employees feel betrayed, leading to:

 Anger or withdrawal
 Reduced motivation and performance
 Open opposition

Managerial approach:
Rebuild trust through honest dialogue, involvement, and visible fairness.

8.7 Summary: Key insights on resistance to change

Cause of Resistance Nature How to Overcome It

Fear of unknown Psychological insecurity Communicate clearly, provide reassurance

Loss of control Power shift Involve staff in decisions

Poor communication Misinformation Transparent and regular updates

Cause of Resistance Nature How to Overcome It

Lack of trust Past leadership issues Build credibility and consistency

Job insecurity Threat to livelihoods Retraining and redeployment

Cultural rigidity Traditional values Gradual cultural shift

Change fatigue Too many initiatives Prioritise and pace changes

Lack of training Skill gap Offer support and development

8.8 Evaluation: Why overcoming resistance matters

Resistance is not just an obstacle — it’s feedback.

It reveals what people value, fear, or misunderstand.

Firms that treat resistance as a learning opportunity can:

 Build stronger employee relationships,

 Improve change strategies,
 Achieve deeper, lasting transformation.

However, ignoring or suppressing resistance can lead to:

 Lower morale,
 High turnover,
 Implementation failure, or even
 Reversal of progress.

9. Kotter & Schlesinger — four reasons for resistance and six ways to overcome it

Part 1: The Four Reasons for Resistance to Change

Kotter and Schlesinger (1979) argued that resistance is predictable, NOT random.
They identified four core reasons why individuals or groups push back against
organisational change.

1. Self-Interest (Parochial Self-Interest)

People resist because they believe the change will harm them personally, even if it
benefits the business.

 People ask: “How does this affect me?”

 They focus on their own job, pay, workload, power, or comfort.
 Even if the change improves organisational performance, employees may resist if
they think they will lose something.

2. Misunderstanding and Lack of Trust

Resistance emerges when employees do not understand:

 Why the change is happening, or

 Its likely consequences.

This is rooted in poor communication and low organisational trust.

People assume the worst-case scenario when information is unclear.

3. Different Assessment of the Situation

Employees resist because they disagree with management’s interpretation. They believe:

 The problem isn’t serious,

 The solution won’t work, or
 There are better alternatives.
🔍 What this means

People are not being difficult; they simply:

 Have different information,

 Have more frontline experience,
 Or genuinely think the change is flawed.

4. Low Tolerance for Change (Fear of Inability)

Some people resist because they doubt their ability to cope with new skills, systems, or
routines.

🔍 What this means

This includes:

 Fear of failure
 Anxiety about learning new technology
 Loss of confidence
 Stress and change fatigue

Part 2: The Six Methods for Overcoming Resistance

To deal with the four causes above, Kotter & Schlesinger propose six strategies.
These range from soft approaches (building commitment) to hard approaches (coercion).

1. Education and Communication

This is the most effective method when resistance comes from:

 Misunderstanding,
 Different assessments, or
  Lack of information.

What it involves

 Explain the need for change clearly

 Present data, evidence, and results
 Hold workshops, meetings, Q&A sessions
 Use transparent, two-way communication

2. Participation and Involvement

Involvement reduces resistance because people feel ownership of the change.

 Employees help design new systems

 Worker committees participate in change planning
 Managers consult staff before decisions

3. Facilitation and Support

Best for resistance due to fear, anxiety, or low tolerance for change.

 Training programmes
 Mentorship and coaching
 Emotional support
 Phased implementation
 Reduced workload during transition

4. Negotiation and Agreement

Used when people will lose something due to the change.

 Offering incentives to reduce resistance

 Financial compensation
  Promotion opportunities
 Better working conditions elsewhere

5. Manipulation and Co-optation

A more subtle (and ethically questionable) method.

 Selectively using information

 Offering a symbolic role to influential resistors
 Getting informal leaders on your side

6. Explicit and Implicit Coercion

This is the forceful approach and used only when time is short.

 Threats of job loss

 Disciplinary action
 Enforcing new policies immediately
 Telling employees: “Comply or face consequences.”

10. Kotter’s 8-Step Change Model

Overview of Kotter’s 8-Step Model

Kotter argues that organisational change fails mainly because leaders:

 Fail to create urgency

 Fail to build coalitions
 Fail to communicate well
 Fail to embed change into culture

His model addresses these weaknesses by offering a detailed roadmap with eight stages
that move from planning → implementation → cultural embedding.
Step 1: Creating a Sense of Urgency

What this means

Before change can happen, people must feel that remaining the same is more
dangerous than changing.
Without urgency, staff feel comfortable, indifferent, or resistant.

Why this step matters

 Breaks complacency
 Motivates people to act
 Builds emotional drive for change

How managers create urgency

 Show data on declining sales, market share, or customer satisfaction

 Highlight competitive threats (e.g., new entrants)
 Present financial forecasts showing potential failure
 Share customer complaints or market research

Step 2: Forming a Powerful Guiding Coalition

What this means

Leaders must build a team of influential people who support the change — NOT just
senior managers, but:

 Department heads
 Opinion leaders
 Skilled specialists
 Respected employees
This group becomes the driving force behind the change.

Why this step matters

 Change requires coordinated leadership

 No single leader can drive change alone
 Influential staff reduce resistance by influencing others

Step 3: Developing a Vision and Strategy

What this means

A clear vision gives people:

 A picture of the future

 Direction
 Motivation
 Something to align decisions with

The strategy outlines how the vision will be achieved.

What a good vision does

 Simplifies complex decisions

 Motivates stakeholders
 Creates alignment
 Offers long-term direction

Step 4: Communicating the Vision

Communicating the vision is more than announcing it in a meeting.

Leaders must repeat it consistently, clearly, and in many forms.
Why communication is crucial

 Reduces misunderstandings
 Builds understanding
 Overcomes resistance
 Creates emotional connection

How leaders should communicate

 Staff meetings
 Social events
 Emails
 Posters
 Training sessions
 One-to-one conversations

Key idea from Kotter:

“Leaders must communicate 10 times more than they think necessary.”

Step 5: Empowering Employees and Removing Obstacles

Change fails when employees want to support the vision but feel blocked by:

 Rules and bureaucracy

 Old processes
 Unhelpful managers
 Lack of training
 Lack of resources

This step removes those barriers.

How managers empower employees

 Change structures that slow down decisions

 Train employees to use new technology
 Encourage risk-taking
 Replace managers who block change
 Provide funding and time

Step 6: Generating Short-Term Wins

What this means

Change takes time — without early wins, people lose motivation.

Kotter argues that leaders should plan and celebrate small victories early in the process.

Why short-term wins matter

 Boost morale
 Reduce criticism
 Prove that change is working
 Build momentum
 Convert sceptics

Step 7: Consolidating Gains and Producing More Change

What this means

After short-term wins, businesses must push forward — NOT declare victory too early.

Many organisations make the mistake of relaxing too soon.

Kotter argues that this is when change is most vulnerable.
What consolidation involves

 Use credibility from early wins to tackle bigger changes

 Keep investing in improvements
 Keep aligning systems with vision
 Continue to challenge resistant staff
 Strengthen internal champions

Step 8: Anchoring New Approaches in the Culture

What this means

Real change only lasts if it becomes part of the organisational culture — the shared
values, norms, and behaviours.

If change is not embedded in culture, employees may revert to old habits.

How to anchor change

 Reinforce new behaviours in performance reviews

 Promote people who embrace change
 Train new employees in the new culture
 Change reward systems to match new behaviours
 Leaders model the new values consistently
1. Explain one reason for the low price of oil.
(5 marks)
One reason for the low price of oil was the excess global supply of oil relative to demand. The
data states that the US had become a net exporter of oil due to advances in fracking, meaning it
produced more oil domestically and imported less. This increased global supply.

At the same time, demand for oil was weakening because major economies such as China were
experiencing slower economic growth, reducing consumption.

With supply rising and demand falling, there was an oversupply in the market. According to
basic economic theory, when supply exceeds demand, the price of a commodity falls. Therefore,
this imbalance drove oil prices down to around $65 per barrel, making it the lowest level in five
years.

2. Analyse the possible effects of the changes

made by BP on its stakeholders. (9 marks)
BP’s restructuring — including $1 billion in restructuring costs, selling $43 billion in assets, and
cutting jobs — affects multiple stakeholders:

Employees

 Negative effect: Job cuts will create insecurity, reduced morale, and redundancy for
many workers. The data notes planned ongoing job reductions, which may create fear and
resistance among staff.
 Positive effect: Remaining employees may benefit from a more financially stable
company in the long run if restructuring improves competitiveness.

Shareholders

 Positive effect: Selling off non-core businesses and improving efficiency may raise
profitability in the long term. Lower costs can help protect dividends.
 Negative effect: Short-term profits may fall due to the large $1 billion restructuring
charge and depressed oil prices.

Customers

 Customers may experience continued reliability and safety, as BP emphasised that

restructuring should not divert attention from these areas. Improved focus on core
operations may enhance product quality or service reliability.

Suppliers

 Suppliers may lose contracts as BP divests assets and reduces project investment.
Reduced capital expenditure could mean fewer orders and lower revenue for upstream
suppliers.

Communities / Governments

 Communities, especially in the UK and other countries where BP employs many workers,
may suffer from rising unemployment.
  Governments may see lower tax revenue if BP becomes smaller or less profitable.
However, greater long-term competitiveness may ensure BP continues to contribute
economically.

Overall

The effects differ between stakeholders: some experience hardship (employees, suppliers), while
others may see long-term benefits (shareholders). The impact is therefore mixed.

3. To what extent are the changes such as

those BP is planning to make bound to face
employee resistance? (16 marks)
BP’s changes — substantial job cuts, divestment of assets, restructuring costs, and a shift toward
core operations — are highly likely to generate employee resistance, though not inevitably in
all areas.

Reasons resistance is likely

1. Job losses create fear and insecurity

The data highlights ongoing job reductions. Employees are naturally resistant to restructuring
when redundancies are involved because they risk losing income and career stability. This is a
major source of resistance.

2. Change in organisational structure

Selling off $43 billion of businesses and streamlining operations means roles, departments, and
reporting lines will change. Employees may resist due to uncertainty and disruption to
established routines.

3. Low morale due to external conditions

The collapse in oil prices and a tougher trading environment means employees may already feel
insecure. Additional restructuring may feel like increased pressure, encouraging resistance.
Reasons resistance may be limited
1. Clear strategic justification

The Chief Executive emphasised the need to focus on core business, maintain safety, and
improve competitiveness. If employees see the restructuring as necessary for long-term survival,
some may be more supportive.

2. Strong organisational culture and communication

BP is a large multinational with established HR processes. Effective communication,

consultation, and support during redundancies (e.g., retraining, severance packages) can reduce
resistance.

3. Safety and reliability focus maintained

The text states BP will not divert attention away from safety. Employees in a high-risk industry
may value this stability, reducing anxiety in certain operational areas.

4. Some employees may benefit

Remaining workers may view the streamlined organisation as more efficient, secure, and focused
on long-term survival, reducing long-term resistance.

Conclusion: To what extent?

Employee resistance is very likely, mainly due to job cuts, uncertainty, and the scale of
restructuring. These factors typically produce both individual and collective resistance.

However, the extent of resistance may be reduced if BP uses strong communication, provides
support packages, and if employees believe the changes are essential given the low oil prices and
tough trading environment.

Overall, resistance is likely to be significant, but not universal, and its severity will depend
on BP’s management of the change process.