Amsterdam’s frequent re-organizations illuminated : a risk analysis of centralizing and stacking changes

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Amsterdam’s frequent re-organizations

illuminated; A risk analysis of centralizing and

stacking changes.

“One change always leaves the way open for the establishment of others.” (Nicolo Machiavelli1₎

Master Thesis Business Administration Managing and Leading People

Casper Burger (6166059) Supervisor: K. Goosseff Final Version (16-3-2015)

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Statement of Originality

This document is written by Student Casper Tim Burger, who declares to take full responsibility for the contents of this document.

I declare that the text and the work presented in this document is original and that no sources other than those mentioned in the text and its references have been used in creating it.

The Faculty of Economics and Business is responsible solely for the supervision of completion of the work, not for the contents.

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Preface

The thesis lying before you is the concluding piece of my Msc Business Administration- Managing & Leading People. The Msc in Business Administration is the second Master which I’m finishing, after a Msc in Politics – Administration & Policy. With this thesis a period of 5,5 year studying comes to an end. After a bachelor in Politics with a minor in Business both Masters where started and now finished. Due to my background in Politics the thesis aimed to find a topic on which this background could be used. The thesis ended up researching organizational change in a public organization. The aim of researching organizational change in public organizations added more complexity because most theories and research are aimed at private organizations. After writing my first thesis, which went quite supple, the second thesis became more of a struggle. The process of writing a Master thesis is difficult and hard especially when rolling from the first right into the second. As with all thesis’s there were moments I really did not know how and if I was ever able to finish the thesis. Fortunately, the thesis is now finished which pushes me right through to the next exciting challenge of finding a challenging and inspiring job. Furthermore, I would like to thank my supervisor, Kyrill Goosseff, for his patience and feedback which helped me to finish the thesis. Before you is lying a master thesis on organizational change in the public administration organization of the municipality of Amsterdam.

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Abstract

The Amsterdam audit service concluded that change in the Amsterdam’s public administration organization occurs frequent and with impact but without a lot of direction. The current study

researches change in the public administration organization from its frequent non-centrally organized change history and looks at the risks and effects from this history on the current ongoing change “Naar een sterker Amsterdam”. The study focuses on organizational level effects and individual level effects which influence the organizational level. The discussed organizational effects are split up between effects from being organized non-centrally and effects from frequently changing. The non-centrally organized possible effects include among others transaction costs & inefficiencies, lack of

communication, the presence of politics and possible obscurity for civilians. Discussed effects from frequently changing are among other a lack of coherence, a continuous internal focus and individual uncertainty which can affect the organizational level. The thesis contributes in looking at change in a continuous matter and provides a detailed description of change in the public administration

organization of Amsterdam. The thesis concludes that the trade-offs in change should get more attention because change seems to have become more important than stability.

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Introduction

1.1 Surviving in a Constant Changing World

To be competitive, to stay ahead and to outperform others, constant change may be needed. There seems to be consensus in business and in public services that standstill is decline and that

organizations need to change constantly (Mckinsey and Company, 2008; Beer and Nohria, 2000). The constantly changing external environment of organizations asks for frequent adoptions of the

organization to fit the new changed situation. “For society at large, and organizations in particular, the magnitude, speed, impact and especially unpredictability of change are greater than ever before” (Burnes, 2014, p. xii). Due to the need to constantly change, organizations have to think and act more quickly and make greater efforts to identify trends and anticipate the future. The growing pace of these changes can be partly accounted by the current timeframe we live in. In a highly Globalised world there is a high level of interdependence between countries, people and organizations. As Burnes (2014) states organizations in the last 20 years have had to cope with a high number and a lot of differing challenges. “These challenges range from globalization, rapid growth, mergers and acquisitions, the emergence of new technologies, new competitors, falling markets, depressed

economies, demergers and consolidations, the collapse of some customers, suppliers, competitors and even financial institutions which lend them money” (Burnes, 2014, p. xiii).

For public service organizations the political environment also should be included, which entails centralizations, decentralizations, changing political colors and among others differing political discourses. Some of these challenges cause the will to adapt or change while other challenges oblige the organization to act. In general the pressure to change or handle these challenges is big. In Amsterdam these pressures currently resulted in the biggest re-organization which includes every section of the organization. This overall re-organization will result in a totally different organizational structure and it was estimated by ‘Het Parool’ that about a quarter of the employees will lose their job. (Damen, 2014) Whether a quarter of the employees will lose their job is doubtfull, however, the quote does highlight the size of Amsterdam’s re-organization “Naar een sterker Amsterdam”.

1.1.1 Amsterdam’s civil service organization; cuts and decentralizations

Two major factors that caused the need for a re-organization of Amsterdam’s civil service organization are budget cuts and decentralizations of the government. Due to the 2008 economic recession the Dutch government budget deficit grew to 28 billion in 2013. Guidelines from the European Union (EU) state , however, that the deficit cannot be higher than 3% of a country’s Gross Domestic Product (GDP), the Dutch deficit exceeded this. For the Dutch government to reach this 3% target, a total amount of 9 billion euro’s should be cut. The “Centraal Plan Bureau” (CPB), however,

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9 stated that the government incomes also will decrease due to the cuts, which results in the estimation that about an extra 40% has to be cut. This resulted in the ambition of the Dutch government, provinces, municipalities and water boards to create a more compact government

organization.(Ministerie van Binnenlandse Zaken en Koninkrijksrelaties, 2012) The current

government program CRD (Compacte Rijksdienst) is a program which aims to structurally decrease the costs of public administration. The Dutch general Audit service (Algemene Rekenkamer, 22 oktober 2012) states that from 2015 onwards a structural 788 million will be saved. Furthermore, while municipalities get less money from the central government they get more tasks due to

decentralizations. (Bekkers, 2012) More and increasingly important policies are being transferred to the municipalities like for example tasks within the social domain. To deal with these challenges an increasingly effective and efficient civil service organization will be necessary, which leads to changes in the municipal administrative bodies and thus multiple re-organizations. These changes increase the reliance of society as a whole on their local administrations, not only because public organizations are funded with tax money, but also because decentralizations involve more tasks for local administrations within the public domain.

1.1.2 Successfully changing?

Besides the pressures to change, the literature on change shows that successfully changing is difficult to pull off. Some authors suggest that “the brutal fact is that about 70% of all change initiatives fail” (Beer and Nohria, 2000, p. 88). Although the empirical validity of this percentage, is debatable (Burnes, 2011) there seems to be consensus about some features of change which make successful change difficult. Hughes (2011) states that achieving change is difficult due to its ambiguous nature.

Changes have unanticipated outcomes and are in a lot of cases an ongoing process. This also makes it difficult to state whether a change is/was successful or not. Also the fact that a change process is often a power struggle and a political process should be taken into account. It should be questioned for which group of actors a specific change was successful and for which actors it was not successful. Furthermore, the context dependent nature of change becomes evident by the fact that each change, even content similar changes, have to deal with their own specific context. This has to do with the fact that a change is never a causal linear process with a clear starting and ending point. When there is no clear starting point and no clear ending point, it is difficult to measure what generated its success. Another point which Hughes (2011) makes is the fact that what is defined as success differs and is unclear. Hughes (2011) more or less suggests that each change is different due to these features. The thesis suggests that these aspects of change should be acknowledged which makes the analysis and evaluation of a change richer and more complete.

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1.1.3 Amsterdam’s civil service change culture

A critical rapport from the Amsterdam Audit service showed the high amount and little coordination of re-organizations in Amsterdam in the period of 2008 until 2013. From 2008 onwards the

Amsterdam city council reorganized there civil services at least 115 times with the main goals to increase effectiveness and efficiency. (Rekenkamer Amsterdam, 2013). Not all re-organizations were of equal size and impact and emerged in a lot of different separate civil service units. The Amsterdam Audit service conducted a research on the high number of re-organizations and researched whether Amsterdam had control over all of its re-organizations, whether Amsterdam learned from all previous organizations and whether Amsterdam limits the costs of redundancy during all of its

re-organizations. From their research they concluded that re-organizations in Amsterdam’s civil services happen often and with impact, but without a lot of direction. “Translated freely, the Amsterdam council reorganizes as a chicken without a head” (Bekkers, 2013, p. 1). Whether this change culture was and is present will be shown in chapter 4. The Amsterdam Audit service concluded that the Amsterdam civil service organization did not create enough conditions to safeguard an effective organizational development. (Rekenkamer, 2013) The Audit service focused mostly on the costs of redundancy of re-organizations and on how the costs of re-organizations can be decreased. Beer and Nohria (2000) state, herein, that the results of re-organizations are that they extort a heavy toll on the organization both human and economic. They argue that the accumulation and speed of

re-organizations pose important risks dangers and possibly opportunities for the organization as a whole. The thesis will look at these possible effects for the public service organization of the city of

Amsterdam.

1.1.4 The theoretical ambiguity in contemporary managing change theories

In the research field of organizational change, Pettigrew et al. (2001) argues that in the 90s, the literature was largely a-contextual, a-historical and a-processuel. Now, context, history and the fact that change is a process are important topics in managing change. With the increasing interest in context, history and change as a process it is also acknowledged that time must be an essential part of investigations of change if processes are to be uncovered. Pettigrew et al. (2001) argues that; “This interest in time and process also triggered a new curiosity about the pace and sequencing of action in change processes” (Pettigrew et al., 2001, p. 697). The literature moved away from generalizable best practices and acknowledged the idea of context specific change processes. In the body of literature focusing more on the sequence, timing and pace of changes a distinction between episodic and continuous change is made. (Pettigrew et al., 2001). Episodic change groups organizational changes that tend to be infrequent, discontinuous, and intentional. While continuous change is seen as a continuing, non-episodic process. A growing body of literature is focusing on what sequences and important topics need to be addressed first to successfully manage change. The thesis, however, aims

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11 to further develop the theories focusing on a longer timescale which includes a broader organizational development and transcends a singular change process with a clear starting and ending point. As Pettigrew et al. (2001) argued, the timing in the external environment and the timing and pace of a change process are receiving more attention, but there is still not enough literature on the effects of changes on changes. This, is thus not about the sequence and pace of a specific change process, but about the pace and sequence of changes within the organization over a longer period of time. The focus lies on the amount of separate changes and on how long it takes before a new change occurs.

Pettigrew (2013) argues, furthermore, that many social scientists researched change processes as separate events, artificially abstracted from their context and structures, while the context and structures of a change give the change meaning and dynamic. “Change and continuity, process and structure, are inextricably linked” (Pettigrew, 2013, p. 1). Therefore, it is necessary to look at changes in their specific contexts and structures. The timing of these separate changes also cannot be seen as continuous change, because at least in Amsterdam, all the separate following change processes are more or less intentional and have episodic characteristics. The thesis aims to look at change processes on a more continual scale instead of with an X starting point and a Y ending point.

Klarner and Raisch (2013) summarize this difficulty by discussing the change- stability paradox. “Organizations pursue change to enhance their competitive positions and adaptability in volatile markets. Simultaneously, they seek to reduce uncertainty, and therefore strive for stability. Substantial tensions arise between change and stability, yet both are essential for organizational effectiveness.” (Klarner and Raisch, 2013, p. 161; Meyer and Stensaker, 2006; Klarner, 2010) Fast change is necessary because it prevents an organization of becoming trapped in a spiral of inertia and it can facilitate the creation of routines of change. Inertia can lock organizations into inflexible, unchanging patterns of action which make the organization unable to adapt to a changing environment. While the creation of routines of change helps the organization to constantly be

adaptable to the environment because the organization learns and routinizes how to deal with change. Stability on the other hand is needed to translate experiences in routines and ensure that learning occurs. Routines need time to develop to transfer individual experiences throughout an organization and to translate collective experience into performance. Scholars have argued that learning which is slow, has a greater advantage (Levitt and March, 1988). The difference between the routines that occur from fast change and from stability is that routines from fast change are routines on how to cope with fast change while routines from stability are more based on routines of performing which then are learned throughout the whole organization. Stability is, furthermore, important because fast-paced change can lead to information overload and time compression diseconomies, which may harm firm performance. Information overload occurs when the information load exceeds the capacity to process the information adequately. (Klarner and Raisch, 2013) This is also transferable to the whole

organization, overload of change occurs when the amount or frequency of changes are higher than the capacity to routinize new processes and process each change in the organization. Klarner (2010) argue

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12 that this continuum is defined as the total number of changes over a certain period, or the frequency of change. This frequency can be high, low or even excessive as Stensaker et al. (2002) argue. Several scholars have found that increasing change frequency is negatively related to organizational

performance. The negative and positive effects of frequent change will be discussed in chapter 2.5., as will the consequences of when something is perceived as excessive change.

Within looking at change in a more continual fashion the thesis aims to contribute to the literature in researching possible risks or effects from stacking or frequently changing. This is linked to the specific change rhythm of an organization. A change rhythm is characterized by the sequential timing of periods of repeated change and stability periods in organizations (Klarner, 2010). The thesis suggests that longitudinal research is necessary to contribute to these topics, however, due to the limited time and scope of the Master thesis the focus will be on the possible effects of stacking or frequently changing.

1.2 Research Question and Scope

The increasing pressures on public organizations, the difficulty of successfully changing, the theoretical need to look at changes in a more continual fashion, the effects of frequent change, the need for both stability and change and the high external pressures on the public administration body of the municipality of Amsterdam provide the thesis with a more than sufficient rich case. The thesis, therefore, decided to conduct a single-case study. Although the public administration body of Amsterdam consists of a lot of different separate sub-organization units the thesis chose to focus on the organization as a whole. The single-case is thus the broad public administration organization of the municipality of Amsterdam including the separate services and the city district administrative

organizations. The differences in different parts of the organization are not part of the thesis as the focus lies on processes which effect the broad entire organization. The organizational level is in this case the most relevant level of analysis because the current change processes are mostly focused on creating one unified organization (Plan Organisatieontwikkeling, 2013), which makes the

organizational level the appropriate level of analysis. The research question is the following:

What possible effects of Amsterdam’s frequent non- centrally organized organizational changes (could) emerge which could unintendedly interact with the present total centrally organized overall re-organization of the city of Amsterdam?

To answer the research question five separate sub-questions need to be answered.

The first question is; How can Amsterdam’s frequent non-centrally organized organizational change history be described?

The second sub-question is; What is the content of the present total centrally organized overall re-organization?

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13 The third sub-question is; What possible organizational level effects emerged, stemming from either stacking or frequently changing or from being non-centrally organized?

The fourth question is; What possible individual level effects, which appear to affect the entire organization, emerged?

And finally the fifth; How do the possible emerged effects (described in sub-question three and four) unintendedly interact with the present total overall re-organization “Naar een sterker Amsterdam”? These questions together will answer the main question.

The thesis follows Stensaker et al. (2002) who argue about objectively assessing whether a change is excessive; “Outside observers, not directly involved, could be incorrect in their assumption of what was normal by either over-estimating or under-estimating what appeared to them to be reasonable” (Stensaker et al., 2002, p. 302). The thesis aims to by acknowledging these possible problems to decrease problems of reliability and validity and aims that the thesis can be a contribution to the literature on effects of excessive or frequently changing. Due to the size of the re-organization “Naar een sterker Amsterdam” it would, further, not be feasible to go into depth for each possible effect whether it emerged and influenced the implementation of the re-organization. The aim is therefore evocative, the study should function as a starting point in suggesting some risks and effects which could emerge and could have an effect.

1.2.1 Research aims

The thesis may contribute to the literature on organizational change in discussing a change process from a broader view, although it is based on a single case study. Not looking at change processes separately but looking at the overall development in which change and continuity are of equal importance. This results in researching effects and risks of stacking changes. The conclusions may increase the toolbox of change agents in how to deal with risks and effects from a high frequency and sequence of changes. Furthermore, the thesis aims to provide some clarity on how the public

administration body of the municipality of Amsterdam deals with changes. Due to the size and amount of different services in the public administration body it is hard as an outsider to get an idea on how change is handled within the organization and it should also be acknowledged that due to the high number of separate autonomous organizational parts there also will not be ‘one’ uniform approach throughout the entire organization. However, some general suggestions can be made and the thesis aims to give insights in how change is dealt with in the public administration body of Amsterdam on the organizational level of analysis. The goal is thus reducing complexity and giving insights on the high number of re-organizations in Amsterdam’s public administration organization.

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1.2.2 Levels of analysis

In managing change processes and in Human Resource Management there are three relevant levels of analysis, namely the individual level, the group level and the organizational level. Each of these levels have their own dynamics and have specific relations with each other. These levels are of importance in achieving high levels of organizational performance. The individual level focuses on individual behavior which affects the organization as a whole. This level of analysis has to do with individual learning, motivation, creativity, cooperative behavior, individual job security and so on. Psychology is of particular importance on this level of analysis. At this level of analysis, the organization as a whole is seen as a sum of its individual parts. An organization can be influenced in such if for example individual employees become de-motivated because the organization is constantly changing which keeps the employees in a continuous state of uncertainty. Individual employees might not be able to perform at the desired level due to this de-motivation. The sum of all this underperforming is then the effect for the organization as a whole.

The group level of analysis focuses on the dynamics of groups, intra- and inter group conflict and cohesion, group norms, networks and so on. People in organizations work in groups or teams and these groups have their own dynamics and patterns to which individuals are expected to conform. Therefore, at this level of analysis to change an organization in its entirety the focus should be on changing the groups norms and behavioral patterns. At group level of analysis individuals are more, even or less than the sum of its parts depending on the group dynamics.

The organizational level of analysis is a step higher and thus also has a higher abstraction level. This level of analysis focuses on processes or systems which account for the whole organization. These topics like organizational culture, organizational structure, inter- organizational cooperation and conflict, external environment forces, overall vision and values and so on. These processes or systems are influenced by each other and by the external environment.

Although the thesis empirically focuses on the organizational level of analysis the individual level will be included when the individual level appears to become relevant in effectting the entire organization. The group level of analysis will be fully left out of the analysis because the present re-organization is focused on the re-organizational level and the research focus lies on the effects of the previous frequent non-centrally organized organizational change history on the implementation of the present re-organization. Although effects on the group level might emerge from the previous change history, these effects cannot be researched properly when focusing on the organizational level, due to the many possible difference in and between groups in the public administration organization of Amsterdam. Out of practical concerns and the need to limit the scope combined with the limited time to conduct the research the thesis, therefore, decided to leave the group level out of the research. Schein (2014) argues about the importance of the group and individual level that; “all organizational problems are fundamentally problems involving human interactions and processes” (Schein as in:

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15 Burnes, 2014, p. 311), in which the individual level and group level are thus seen as the most

important analytical levels in explaining social processes. Due to limited time, however, a choice had to be made. The choice to focus on the organizational level is made because coming from a different point of view, the organizational level effects can provide a possible valuable starting point for future research on the subject matter which can deepen the understanding by focusing on the group and/or individual levels.

1.2.3 Research method

To answer the research question the thesis chose to conduct a case study which enables the research to give some insights in the important different processes going on in managing change in public

administration organizations. The empirical evidence is gathered through semi-structured interviews with a careful selected and balanced pool of experts of professionals working with re-organizations in Amsterdam (purposeful sampling). The semi-structured interviews with different experts on different spots within the organization will generate an overall image of how change is and was being handled. Furthermore, on the basis of their expertise they anticipate several effects of the established situation on the organization in general and on the present re-organization “Naar een sterker Amsterdam” in particular. The implication of this is that the anticipated effects might have a bias because each expert has its own opinion and value system with which he or she asses anticipated outcomes. However, due to their expertise and due to the balance of the pool of experts these anticipated effects are legitimate. How this approach affects the validity and reliability and how this is minimized as much as possible, is further discussed in chapter 3. It is, here, further argued that the thesis has an evocative aim. It should provide as a starting point in more attention in research towards stacking or frequently changing. The thesis aims to function as a starting point in which further research establishes effects on individual, groups, the organization and their interaction effects.

1.3 Outline of the Thesis

Chapter two will gave an introduction of the theory in organizational change. This is of importance because the literature on organizational change is quite diffuse and the thesis will outline how

organizational change is seen and defined in the thesis. The thesis decided to follow Pettigrew (1999) who split up the managing change process in four separate sections, content issues, process issues, context issues and outcomes. The thesis focuses on frequent change and how this influences the re-organization “Naar een sterker Amsterdam”, in which outcome issues will be left out of the picture. Chapter two, will continue with discussing some additional relevant issues in change, particularly in public organizations after which some theoretical suggestions about frequent sequential change will be made. Frequent change, continuity and the effects of stacking changes is a research subject which is currently more and more developing. However, because adequate empirical data in this matter is

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16 preferably gathered through longitudinal studies the empirical data is limited. The thesis, therefore, aims to enrich the empirical data and contribute to this subject matter. The research, further, aims to show the importance of these issues through an evocative study which stimulate other researchers to conduct sound empirical studies in these matters. Important issues on the organizational level when frequently changing are, further, complemented by issues that were relevant on the individual level of analysis. In chapter three the research method will be discussed which highlights that the empirical aim of the thesis will be on sketching an image of how is dealt with re-organizations in the public administration organization of Amsterdam and how this is related to the re-organization “Naar een sterker Amsterdam”. The focus, herein, will be on possible effects of a frequent non-centrally

organized organizational change history. After the empirical part in chapter 4 the thesis will, in chapter 5, discuss the implications from the empirical data combined with the theory discussed in chapter 2. Here, also some conclusions will be drawn which results in a general conclusion.

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H2 Literature Review

2.1 Introducing Organizational Change

To discuss organizational change it is important to define change and state why it occurs and why organizations feel the need to change. A first important attribute of change in the thesis is the fact that the thesis discusses planned or managed change. Lewin (as in: Weick and Quinn, 1999) states that there are five important assumptions about change which are relevant in deliberate change. “These five assumptions are (a) linear assumption (movement is from one state to another in a forward direction through time); (b) progressive assumption (movement is from a lesser state to a better state); (c) goal assumption (movement is toward a specific end state); (d) disequilibrium assumption (movement requires disequilibrium); and (e) separateness assumption (movement is planned and managed by people apart from the system).” (Weick and Quinn, 1999, p. 372) Change, in the thesis, is seen as a reaction from the organization on the changing environment or as a needed improvement. The thesis focuses on re-organizations, which means that the type of change which is discussed here is deliberate planned change, this does not say anything about the way it is handled but explains the reason to change. (Levy, 1986)

As Burnes (2014) states organizations change to be better able to deal with its environment. The goal of changes is thus always increasing organizational effectiveness. This vague concept, as Burnes (2014) states is one of the most frequently used (and misused) words in discussing

organizations. There is no universally accepted definition and set of criteria that allows the effectiveness of an organization to be measured. Although there is no universal definition Burnes (2014) states that in the private sector effectiveness mostly has to deal with increasing competitiveness and in the public sector it mostly deals with value for money.

The thesis focuses on Amsterdam’s civil services and it is therefore important to know what is defined as a re-organization within Amsterdam. In Amsterdam the definition of a re-organization is recorded in the so called NRGA (Nieuwe Rechtspositieregeling Gemeente Amsterdam). The NRGA is a document in which the rights of the officials are recorded. The fact that the definition of a

re-organization is recorded in the document which arranges the rights of the officials already shows the specific angle of this definition. In Amsterdam a re-organization is defined as each change in the structure of the organization which strikes one or more officials in their legal status of interest. The definition is, further, diverged into radical and non-radical re-organizations. A radical re-organization is a re-organization, which involves more service branches or involves more large parts of the district organization, in which a large sum of jobs are lost, in which important policy specific changes are made and in which privatization, corporatization or outsourcing takes place. In radical re-organizations the decision making capacity lies at the college of municipal executives (B&W) and in non-radical

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re-18 organizations this decision making capacity lies at the director of the specific service or district. (NRGA, 2015) Due to legal procedures of how to deal with officials and also how to deal with

participation of the Works Council (OR), Amsterdam pretty much needs a uniformed definition in this sense. This narrow definition of change, in this case through re-organizations, which focuses mainly on the structure and the legal status of interests of officials, does not include all aspects of change. However, it is argued, here, that in most changes at some point in time, the structure or the legal status of interest of officials will be affected and need to change as well. Therefore, this definition is suitable to use in the thesis.

Another important point is that organizational change is a complex and ambiguous process. In the academic literature this complexity and ambiguity lead to the fact that there is no clear consensus on an overlapping grand theory. The field is overwhelmed with specific best-ways to manage change. Young (2009) suggests that this complexity and ambiguity comes from the fact that in managing change there is a big difference between knowing and doing. Like Young (2009) states, within change management there is a continuing challenge to those who seek simplicity or clarity on how to manage change processes. The wide range of different perspectives and the lack of consensus on a broad model for managing change led to a so-called rift between theorists and change agents. The knowledge production from theorists has not been able to act as a large contribution in the actual process of managing change. On the other hand, learning by doing and a pragmatic approach has some flaws as well. “The result can be the generation of popularist science which addresses a relevant theme but fails to do so with any degree of rigour.” (Young, 2009, p. 525) Young (2009), therefore, suggests an alternative approach where the issues of importance arise from practice but academic skills and standards are applied in developing definitions, comparing literature and data from across

organizational settings, and suggesting generalizable frameworks for further sensemaking. (Young, 2009) The thesis will follow this pragmatic approach to science in change processes because these processes have to do with influencing the future, which is in its core unpredictable. A general framework which describes the best and only way to manage change is, therefore, not possible and also unwanted because of unanticipated outcomes. A too pragmatic approach, however, is like denying that some approaches are more successful than others. As Dunphy and Stace (1993) argued, there is no one approach which is suitable for all circumstances and objectives.

2.2 Managing Change

Although there is no consensus between scholars on an overarching framework to analyze

organizational changes, Armenakis and Bedeian (1999) suggest that relevant organizational change topics can be structured by three overarching themes which are common to all organizational change efforts, namely content, process and context.

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2.2.1 Content issues of organizational change

The content theme in the typology of Armenakis and Bedeian (1999) deals with the substances, or the ‘what’ question, of change. This theme includes the nature of a change and factors which relate to an organization’s effectiveness. Issues in this category primarily focus on an organizations long-term relationship with its environment and has thus to deal with an organizations overall character, mission and its direction. One primary distinction which researchers made regarding the type of change and thus its content is the difference between a first-order and second-order change (Bartunek and Moch, 1987; Watzlawick, 1978). Other scholars have adopted similar dichotomous distinctions like

incremental or fundamental change (Walker and Armenakis, 2007), Continuous or discontinuous change (Hinings and Greenwood, 1988), transactional or transformational change (Burke and Litwin, 1992), continuous or episodic change (Weick and Quinn, 1999) and convergent or radical change (Tushman and Romanelli, 1986). Although these dichotomous distinctions are not perfectly similar they are in its core the same. First-order changes refer to small-scale and less drastic changes that help the organization overcome stagnation and enhance efficiency. They occur incrementally through adjustments aimed at improving the organization without affecting its core. Second-order changes, however, are more radical and revolutionary and involve the complete transformation of the organization.”(Devos and Buelens, 2007, p. 610)

Burke and Litwin (1992) distinguish transformational change from transactional change in that transformational change is caused by interaction with environmental forces, both internal and external. This type of change asks for entirely new behavior sets of employees. Transformational change is caused by adaption of the organization to forces like a changing competitive environment, government regulations or technological breakthroughs. Transactional change is defined as relatively short term reciprocity among people and groups. The dichotomous distinction of Burke and Litwin is inspired on the continuum of transformational and transactional leadership of Burns (1978). Burns (1978)

distinguished ‘transactional’ and ‘transformational’ leadership by stating that the latter induced higher motivation in followers, and the former depended on the exchange of a reward in return for the compliance of subordinates. ‘Transformational’ leadership should be seen as a mutual relationship between the leader and follower which changes and shapes both the leader and the follower continuously for their shared purpose. “Leaders inducing followers to act for certain goals that represent the values and the motivations – the wants and needs, the aspirations and expectations – of both leaders and followers” (Burns, 1978, p. 19). On the other hand, ‘transactional’ leadership can be seen as an arrangement where both parties work together to reach their own respective purposes. (Stewart, 2006). From this it becomes clear that in transactional change all actors change or work together to reach their own personal success but that the underlying structures remain intact. While in transformational change fundamental different behavior is needed.

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20 Weick and Quinn (1999) define the distinction between the type of change as episodic and continuous change. Episodic change tends to be infrequent, discontinuous and intentional and occurs during periods of divergence when organizations are moving away from their equilibrium conditions. Divergence happens when there is a misalignment between an organization’s current structures and its perceived environmental demands. Weick and Quinn (1999), further, discuss three important features of episodic change, namely inertia, triggers of episodic change and replacements. Inertia are seen as the defensive forces which protect the existing system. Inertia are the forces that arise because a “system of interrelated organizational parts is maintained by mutual dependencies among the parts and competitive, regulatory, and technological systems outside the organization reinforce the legitimacy of managerial choices that produced the parts” (Romanelli and Tushman, 1994, p. 1144). It is, therefore, suggested by Weick and Quinn (1999) that to alter a system a revolution is needed due to the tightness and density of the interrelations, which thus require large interventions to realign them. Furthermore, triggers of episodic change are the environment, performance, characteristics of top managers, structure, and strategy. Finally, they suggest that in episodic changes replacement is an important feature. In episodic changes the idea of change is mostly that the new situation should replace the old situation. The old situation does not become the new situation, but the old situation is replaced. A change then becomes; define the old situation, define the replacing situation (with as most important feature, not being the old situation), remove the old situation, implant the replacing situation. This, however, seldom works. The problem with such logic is that it restricts change to either-or thinking (Weick and Quinn, 1999).

Continuous change tends to be ongoing, evolving and cumulative and is often the realization of a new pattern which emerged without a priori intentions. Change is just seen as continue improving and experimenting which through repetition and sharing over time can produce perceptible and striking organizational change. “There is no deliberate orchestration of change here, no technological inevitability, no dramatic discontinuity, just recurrent and reciprocal variations in practice over time” (Orlikowski, 1996, p. 66). Weick and Quinn (1999) discuss three images that are of importance for continuous change, namely, improvisation, translation and learning. Improvisation is of importance because the ongoing variations which emerge frequently, even imperceptibly, in the slippages and improvisations of everyday activity replace the use of standard procedures which through repetition can lead to restructuring (Weick and Quinn, 1999). The issue of translation stems from Latour’s observation of “the spread in time and place of anything is in the hands of people; each of these people may act in many different ways, letting the token drop, modifying it, deflecting it, betraying it, adding to it, or appropriating it”(Latour as in: Weick and Quinn, 1999, p. 376). In which the actor at the end of a string is of the same importance than the actor who originated an idea/change. Learning is of importance for continuous change because organizations possess a repertoire of activities and knowledge wherein learning is thus an increase of an organizations response repertoire. This is of importance because continuous change is thus not a replacement but can also occur through

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21 strengthening existing skills within an organization. Furthermore, in continuous change continuity and scale are of particular importance. Continuity is associated with organizational culture. Organizational culture is of importance for continuous change because it holds the multiple changes together,

legitimizes nonconforming actions which improve the adaptability and embeds the know-how in norms and values. (Ibid) Culture servers as a scheme of expression that constrains what people do and how their actions are evaluated. However, when the culture definition moves away from being a social control system, it also becomes less relevant for continuous change. The authors suggest that scale is important because in critiques on continuous change it is often argued that the micro-changes are too small to actually generate fundamental organizational change to keep up in a hyper turbulent

environment. Complexity theory, however, suggest that small changes do not stay small and that due to the interconnectedness of these changes a marginal change does not exists. Furthermore, Weick and Quinn (1999) state that incremental changes provide the platform for transformational changes and the means to institutionalize it. “Depictions of successful revolutions, however, tend to downplay the degree to which earlier sequences of incremental changes made them possible. This oversight is serious because people tend to attribute the success of revolution to its break with the past and its vision of the future, whereas that success may actually lie in its connection with the past and its retrospective rewriting of what earlier micro-changes meant” (Ibid, p. 379).

Another issue of importance in the content of a change is a dichotomy defined by Beer and Nohria (2000) which differentiates between economic-driven transformations and changes to support organizational capabilities. They argue that economic-driven changes are directed on creating economic value by focusing on structures and systems and thus on reducing costs. This type of changes mostly involve layoffs of employees which thus threatens the job security of employees which has a devastating effect on morale, attitudes and well-being even when the employees own jobs are not being threatened (Beer and Nohria, 2000; Devos and Buelens, 2007; Armstrong-Stassen, 2002). Changes directed on organizational capabilities, on the other hand, focus on culture, behavior and attitudes and employees are more open for these types of changes because these types of changes less often threaten employees´s job security. (Devos and Buelens, 2007)

The different dichotomous definitions differ in on which aspects they focus and on whether transactional/incremental/continuous change or transformational/fundamental/episodic change is favored. A transformational change is seen as positive because due to a clear vision it induces higher motivation of employees while continuous change is seen as more positive because it is seen as continuous improving and experimenting. These different definitions can thus help explaining different aspects. When organizational change is seen as continuous it is seen as positive while transactional change highlights the downsides of smaller change steps.

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2.2.2 Process issues of organizational change

The process theme in the typology of Armenakis and Bedeian (1999) is about the actions change agents take to implement a change. The process theme covers the ‘how’ of a change. There seems to be consensus among scholars that a change process develops through different phases, however, there does not seem to be an overarching dominant framework. Different scholars propose different phases in which change agents manage the change process. The most influential model in this sense is Lewin’s (1947) 3-step model. Lewin (1947) argued that a successful change project should involve three steps, namely unfreezing, moving and freezing. The first step, unfreezing, is of importance because Lewin (1947) believed we live in a quasi-stationary equilibrium supported by a complex field of driving and restraining forces. To unlearn a specific old behavior the equilibrium situation needs to be destabilized. Lewin (1947) did not believe this was easy, but “to break open the shell of

complacency and self-righteousness it is sometimes necessary to bring about an emotional stir up” (Lewin, 1947, p. 229). Unfreezing is not a goal in itself but should create the motivation to learn but does not necessarily control or predict the direction of a change. The moving phase is, therefore, an iterative process in which through trial and error and evaluation all the possible options should be explored. This process makes it possible for employees and groups to move from a less acceptable set of behavior to a more acceptable set of behavior. Finally, this new set of behavior should be refrozen to form a new quasi-stationary equilibrium. (Burnes, 2004; Lewin 1947)

Another influential process model is Kotter’s (1995) eight step model for change agents. Change agents should “(a) establish a sense of urgency by relating external environmental realities to real and potential crises and opportunities facing an organization, (b) form a powerful coalition of individuals who embrace the need for change and who can rally others to support the effort; (c) create a vision to accomplish the desired end-result; (d) communicate the vision through numerous

communication channels; (e) empower others to act on the vision by changing structures, systems, policies, and procedures in ways that will facilitate implementation; (f) plan for and create short-term wins by publicizing success, thereby building momentum for continued change; and, (g) consolidate improvements and change other structures, systems, procedures, and policies that are not consistent with the vision; and (h) institutionalize the new approaches by publicizing the connection between the change effort and organizational success.”(Armenakis and Bedeian, 1999, p. 301). Both these process models are heavily criticized but are still an influential starting point when talking about phases of managing change. Next to these two models there are a dozen other step-models which help change agents successfully implementing a specific change. However, none of these models is broadly applicable and each change situation asks for its own specific approach. These two models are shortly described because they show the common logic behind most step-models.

Armenakis and Bedeian (1999), further, discuss two basic lessons that can be learned from these different implementation models, namely that a “change process typically occurs in multiple

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23 steps that take a considerable amount of time to unfold and efforts to bypass steps seldom yield a satisfactory result and that mistakes in any step can slow implementation as well as negate hard-won progress” (Armenakis Bedeaian, 1999, p. 303). Furthermore, Walker and Armenakis (2007) argue that in the process of organizational change open and honest communication is of particular importance. In communicating a change message they argue it is important to stress a couple of components. An adequate change message should involve an explanation of the gap between the current state of the organization and its desired state. Further, there should be communicated that the change, the content, is appropriate to reach this desired state. There should be a focus on the factors guiding the choice of a given change effort in comparison with other possible courses of action and the confidence in the efficacy of a change should be communicated. It is also important that the leaders of an organization, both internal and external, are behind the change and that a change is not seen as just another ‘program of the month’. Finally, it is important when communicating a change message that employees see personal valence in a change. They should see the benefits for themselves and the organization to be able to perform their job better, pay might increase, or long-term job security may increase. (Walker and Armenakis, 2007; Kotter, 1995).

When discussing the process of organizational change and what steps to go through to be more successful it becomes clear that one of the most important factors are the employees, because they have to change their behavior for an organizational change to be successful. However, “researchers have examined that issues such as managing organizational change, downsizing, and outsourcing influence feelings of insecurity in employees and affect survivors’ levels of commitment, intended turnover, and productivity” (Ito and Brotheridge, 2007, p. 41). Devos and Buelens (2007) argue that to reduce these feelings of uncertainty and insecurity the participation of employees is an important tool. Several studies have indicated that employee participation is central to increasing employees’

acceptance to change. (Ito and Brotheridge, 2007; Devos and Buelens, 2007; Kotter, 1995)

Participation does not entail that the decision power lies with the employees but rather states that for renewal efforts to succeed, employees must believe that their opinions have been heard, respected and considered (Devos and Buelens, 2007).

2.2.3 Context issues of organizational change

Next to content and process issues that influence organizational changes, context issues are of importance. Context issues are the pre-existing forces in an organizations external and internal

environment which influence organizational changes. The external environment includes among others factors as competitive pressures, regulations and deregulations and legislative and technological changes. The internal environment includes among others factors of the levels of professionalism, managerial attitudes toward change, managerial tension, technical knowledge resources, slack

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24 1999) In the development of the context issues influencing organizational change, contingency theory was of particular importance. Contingency theory will be discussed due to its important contribution that each change is unique and has its own contingency.

2.2.3.1 Contingency theory

The Contingency Theory is of particular importance to the influence of the external environment. Contingency Theory is an organization theory which emerged in the 1960s. Burnes (2014) suggests that Contingency Theory is in essence a rejection of the ‘one best way’ approach which previously dominated organization theory (Burnes, 2014). Contingency theory follows from that no two organizations will face exactly the same situation and as their situations are different so should their structures and operations. Contingency theorists base their approach on systems theory, adopting the premise that organizations are open systems whose internal operations and effectiveness are dependent upon the particular situational variables. (Burnes, 2014) Organizations are open to and dependent on the systems in which they operate. A core idea stemming from system theory is the fact that the interconnectedness of the elements which make up a system means that changes to one part affects other parts and in turn the whole system. (von Bertalanffy, 1972) This also entails that each organization is unique and should be handled differently because an exactly similar environment would not be possible.

In Contingency theory the three most important contingencies are environment, technology and size. (Burnes, 2014) Burns and Stalker (1961) were one of the first authors within Contingency theory to identify the importance of one’s environment. They identified the environment on a scale moving from stable environments to least predictable environments and coupled this with two ideal forms of structure, namely an organic and a mechanistic structure. They argued that in a stable environment a more mechanistic structure would be advisable, which means more specialization of tasks, more closely defined duties, a clear hierarchical structure and the fact that importance and prestige are determined by the position in the hierarchy. On the other side of the continuum, in the least predictable environment an organic structure would be advisable. In which more job and task flexibility, adjustment and continual redefinition of tasks, lateral consultation based on information, advice rather than instruction and decision and the fact that importance and prestige are determined by an individual’s contribution to the tasks of their work group. (Burns and Stalker, 1961; Burnes, 2014) `

Furthermore, Lawrence and Lorsch (1967) argued that not only the relationship between environment and a company’s overall structure but also how individual departments within companies responded to and organized themselves to cope with the aspects of the external environment are of importance. They analyzed these departments in terms of differentiation, the degree in which a department sees itself as separate and has distinct practices procedures and structures, and integration, the level and form of collaboration that is necessary between departments to achieve their individual objectives. Cummings and Huse (1989) argue about the need for differentiation or integration that; “in a rapidly changing environment, the conditions faced by individual departments may differ greatly and

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25 a high degree of differentiation may be necessary. However, the need for integration is also likely to be great, but the diversity and volatility of the environment are likely to push individual departments in the opposite direction.” (Cummings and Huse, 1989; as in: Burnes, 2014, p.78). This leads to three conclusions, first a department in a more dynamic uncertain environment will ask for a higher level of differentiation. Secondly, although the environment is becoming more dynamic and uncertain, a high level of integration is as important as ever, and thus a goal. And finally, in essence differentiation and integration have a antagonistic relation, but achieving high levels of both simultaneously is possible and is an attribute of high performing organizations. (Lawrence and Lorsch, 1967)

The second contingency of importance is technology, like the environment the nature and the level of technology can influence the structure that is needed within an organization. Charles Perrow (1967) drew attention to two major dimensions of technology, the extent in which the work is variable or predictable and the extent to which the technology can be analyzed and categorized. The first dimension refers to whether unexpected problems appear and whether they are unique and difficult to solve. The second dimension refers to whether an individual task can be broken down and tightly be specified and whether problems can be solved by routine procedures or whether non-routine

procedures should be invoked. This results in a continuum ranging from routine stable work tasks to non-routine least predictable work tasks. This continuum can be combined with Burns and Stalkers (1961) continuum ranging from a mechanistic to an organic structure.

Finally, the contingency size also matters. “The Aston Group found that size was the most powerful predictor of specialization, use of procedures and reliance on paperwork. The larger the organization the more likely it would adopt (and need) a mechanistic (bureaucratic) structure and the reverse.”(Burnes, 2014, p. 68). This relationship can be explained in two ways. First, the Adam Smith argument, increased size offers greater opportunities for specialization and thus higher efficiency. Secondly, managing the ever larger numbers of staff in a personalized, centralized style of management is highly inefficient, which results in a more decentralized system with impersonal control mechanisms. (Burnes, 2014) The idea of unique contingencies for organizations also goes for change processes, each organization thus will need to address its unique contingencies to manage and change effectively. However, an important critique on Contingency theory is that structure is not the only important attribute which effects performance. Contingency theory focuses too much on structure and the importance of the three contingencies discussed. The general message is, however, of

importance for looking at organizations. It is, therefore, suggested that although there is no such thing as a ‘one best way’ there are instead of ‘best practices’, ‘better practices’. Coming from Contingency Theory, it is argued that each specific organization and change situation asks for a specific approach, but that some practices are more successful than others and knowledge of these practices and shaping them towards the specific situation will thus be successful.

Armenakis and Bedeian (1999) pose some suggestions which complement contingency theory in discussing the context issues of organizational change. The authors conclude on the basis of Kelly

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26 and Amburgey (1991) that there are five major conclusions which underscore the impact of context on varying organizational responses. “First, environmental change does not necessarily increase the probability of strategic re-orientation. Second, older organizations are less likely than their younger counterparts to undergo change in their product-market strategy. Third, organizational size is not necessarily associated with a decrease in organizational responsiveness to change. Fourth, organizations are more likely to repeat changes they have previously experienced. And, finally, changes in product-market strategy do not necessarily contribute to organizational failure.”

(Armenakis and Bedeian, 1999, p. 298) Although these factors differ a bit for public organizations, which will be discussed later on, these factors are still of importance in understanding the influence of context issues on organizational change. The principal message of context issues is thus also broader, and is supported by Damanpour’s (1991) principal finding that a successful change effort may depend more on the congruency or fit between content, contextual and process considerations than the nature of an intended change (Armenakis and Bedeian 1999).

2.3 Managing Change in Public Organizations

In the thesis, it is also important to acknowledge the fact that these changes emerge in a public organizational context instead of a private organizational context. The public sector can be defined as the part of the economy controlled by national, state or local government to provide a range of critical public goods and services to members of society. These goods and services are named ‘public’ because they provide both individual and collective benefits to people in society. Most of these goods are also non-exclusive in the sense that their benefits can be accessed by all members of society, like for example street lighting. The thesis discusses the public administration body of the municipality of Amsterdam, which is the direct executive organization of Amsterdam’s political board. The public sector also involves organizations which are privatized but still act in the public sector. The issues with privatized public organizations or partnerships are, in this thesis, left out of the picture because these organizations have their own specific dynamic in acting as a private organization who aims to be profitable while guaranteeing a specific level of quality and accessibility of a public good. Here, the public context is applied and discussed as involving a public administration body like the municipality of Amsterdam, this bureaucracy is directly governed through Amsterdam’ politics and is the executive arm and implementing arm of political ideas. The public sector and especially public administration is guided by national and local politics and gets most of its funds through taxes.

2.3.1 The difference between the private and the public sector

The biggest difference between organizations operating in the private sector and public organizations is that the strategic direction of an organization is decided by politics. This makes it more important for public organizations to be flexible and to be ‘in touch’ with political movements,

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27 and less about making clever strategic decisions (Cameron and Green in: Macleod and By, 2009). Macleod and By (2009) further, argue that in these type of organizations a clear distinction between ‘politics’ and ‘administration’ should be made. “The notion of public administration suggests a clear division between elected and appointed officials with the former making strategic policy decisions based upon their election manifesto, while the latter, the bureaucrats, administer these decisions in a disinterested way, according to clear public interest rules and procedures. Its principal organizing mode is through hierarchically organized bureau or bureaucracy.” (Massey and Pyper as in: By and Macleod, 2009, p. 7). These multiple roles and values which are important for bureaucrats highlight the difference between a private context and a public context. Public organizations have a greater degree of openness to their environment and higher levels of public scrutiny and monitoring, which results in that public organizations have a much broader range of stakeholders than their private counterparts (Truss, 2008). In essence, private companies solely need to survive and be profitable, which does not entail they do not have stakeholders, but suggests that in principle the goal always will be surviving or generating profit. While for a public organization its principle goal is satisfying its stakeholders and acting according a set of principles which are of particular importance for bureaucracies like for example reliability and good governance.

In discussing change management, it is further important to describe the difference between change management processes in public and private organizations because it is argued that public organizations have their own unique dynamics. Change is evidently a multi-level and multi-faceted phenomenon, which is indicative that the often-discussed differences between the two sectors could be relevant (Rusaw, 2007). The challenges of public organizations are different, especially in terms of public accountability, demonstrating value for money, and in meeting the increasing expectations, regarding service levels and quality, of both the general public and politicians (Coram and Burnes, 2001). Also the dominance of central government over all public organizations through auditing and target-setting, combined with central control over resources, sets limits on managerial discretion and on the degree of strategic choice within public organizations (Truss, 2008). Cameron and Green (2009) also highlight the difficulty of goal complexity, objectives are more diverse and harder to specify, in public organizations. In private organizations there is often a simpler agenda such as profitability, return on capital employed or shareholder value. While delivering social outcomes, with scarce resources, to a community that has seemingly never ending desires for consuming the offered services is much more complex (Cameron and Green, 2009). Also the rationale that local authorities only have to balance their budget instead of generating a profit makes it hard to assess the success of public sector organizations. They also do not have the option to leave a particular market when a market is not profitable enough. Public sector organizations focus on balancing and improving instead of winning and growth. Furthermore, the political process also plays an important role. Political decision makers are always aware of achieving re-election, this means that on the one hand some changes need to be enacted very quickly towards the beginning of the tenure, while on the other hand

Amsterdam’s frequent re-organizations illuminated : a risk analysis of centralizing and stacking changes