EFFECTS ON COMMITMENT TO CHANGE

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APPRECIATIVE VERSUS TRADITIONAL INTERNAL AUDITING:

EFFECTS ON COMMITMENT TO CHANGE

Master thesis, MScBA, specialization Change Management University of Groningen, Faculty of Economics and Business

August 23, 2012

ELISE DEGENHARDT Studentnumber: 1627805

De Meteoor 2 8251 AM Dronten tel.: +31 (0)6-11087683

e-mail: elise_degenhardt@hotmail.com

First Supervisor/ University:

Dr. C. Reezigt

Second Supervisor/ University:

Prof. Dr. J.I. Stoker

Supervisor/ Field of Study:

G. Hagenauw

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2 Appreciative versus Traditional Internal Auditing: Effects on Commitment to Change

ABSTRACT

Operational internal auditing is increasingly applied as a tool in managing organizational change, contributing to the development and improvement of organizations. Although there are many claims about the effects of internal auditing, no empirical research can be found on it. Therefore, the aim of the current research is to empirically examine whether internal auditing can contribute to managing organizational change by influencing change recipients’

reaction to organizational to change, and if so, which audit method best can be applied to do this. The two audit methods under study are the commonly used traditional audit method, which is based on the problem-solving perspective, and the relatively new appreciative audit method, which is based on the strength-based values of appreciative inquiry. In a field study conducted at a department of a local authority in the Netherlands, 63 employees were appreciatively or traditionally audited. A pretest, posttest, posttest design was used to test the effects of both audit methods on readiness and commitment to change, and the mechanisms through which these effects might occur. Results of this study indicate that the effects of appreciative and traditional auditing on commitment to change are significantly different over time, respectively eliciting a short term boost versus a short term collapse of commitment to change. However, these effects do not seem to last in the longer term. By being the first study providing empirical evidence on the effects of (appreciative and traditional) internal auditing on change recipients’ reaction to change, this study hopefully functions as a starting point for future research on this subject.

Keywords: (appreciative and traditional) internal auditing, appreciative inquiry, commitment to change, readiness to change

Acknowledgements. First of all, I want to thank Cees Reezigt for always being there for me during the whole process writing this paper and for his critical but constructive feedback.

Moreover, I am grateful to all auditees, for their co-operation in the audits and for completing

all three lengthy questionnaires! Furthermore, I want to dedicate a special word of

gratefulness to Gerrit Hagenauw and to Pim Staal, for all their support during and after my

internship. Finally, I want to show my sincere appreciation for all the amazing people around

me. I want to thank them all for all their support during the whole process.

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3 Appreciative versus Traditional Internal Auditing: Effects on Commitment to Change

4 Appreciative versus Traditional Internal Auditing: Effects on Commitment to Change

1. INTRODUCTION

Continuous and unpredictable change marks the environment in which most organizations operate today (Armenakis, Harris, & Mossholder, 1993; Armenakis & Harris, 2009; Bouckenooghe, Devos, & van den Broeck, 2009; Whitney & Cooperrider, 1998).

Change has always been a feature of organizational life, though many argue that the frequency and magnitude of change are greater now than ever before (Burnes, 2009).

Considering the accelerated rate and complexity of changes in the workplace, internal auditing has significant value for modern organizations (Herscovitch & Meyer, 2002; Wright

& Baker, 2005). Hence, internal auditing provides close oversight of vital organizational issues (Allen, 2008). Additionally, it provides corporate boards with timely, reliable, and relevant information for decision-making (Bailey, Gramling, & Ramamoorti, 2003).

Moreover, according to several authors internal auditing is increasingly applied as a tool in managing organizational change, contributing to the development and improvement of organizations (Bailey et al., 2003; Haagsma, 2008; Watson & Dow, 2010).

Two approaches to conduct internal auditing are the commonly used traditional audit method and the relatively new appreciative audit method. Haagsma (2009) states that within the field of internal auditing, audit subjects are predominantly approached from a negative perspective. The focus is on deficiencies and on negative deviance of procedures and norms (Chapagain, 2004; Fitzgerald, Murrell & Miller, 2003). According to several authors, this problem-solving approach typically unfolds through identifying a problem, performing an analysis of the causes of the problem, considering possible solutions, selecting one or more and then, finally, planning action (Bright, Cooperrider & Galloway, 2006; Wright and Baker, 2005). In this paper, traditional internal auditing refers to this commonly used approach of internal auditing. A different and relatively new approach to conduct auditing is the appreciative audit method. Appreciative auditing, a term which formally did not exist before 2008, is a combination of operational internal auditing and appreciative inquiry (Haagsma, 2008). It combines elements of both: conducting an audit by using characteristics of appreciative inquiry (Haagsma, 2009). According to Whitney and Schau (1998), appreciative inquiry is a positive, strengths-based organization development philosophy and methodology, considering people, organizations and situations from a positive perspective. Consequently, in contrast to the deficiency-based traditional audit approach, appreciative auditing focuses on the positive actions and best practices of an organization when evaluating and assessing it (Haagsma, 2008, 2009; Van de Wetering, 2007; Whitney & Cooperrider, 1998).

The research described in this paper focuses on internal auditing in its application as a tool in managing organizational change. Among others, internal auditing can contribute to managing organizational change by providing recommendations for improvement and development (Institute of Internal Auditors (IIA), 2008), which according to Haagsma (2009) can be considered as advice to change. Moreover, internal auditing can be applied to periodically evaluate a change process (IIA, 2008). However, according to field experts of appreciative auditing, the contribution of internal auditing to managing organizational change can be more than that. Based on their experience with internal auditing using the appreciative audit method, they claim that appreciative auditing can influence employees’ attitude and behavior (INK, 2008; Van de Wetering, 2007), and more specific, that it can increase employees’ readiness and commitment to change (Haagsma, 2009; Whitney & Cooperrider, 1998; Whitney & Schau, 1998). Haagsma (2009) argues that these effects on employees’

attitude and behavior towards change are a consequence of the characteristics of appreciative inquiry that are used to conduct auditing.

However, other authors are sceptical about this, among others because it appears that

little empirical evidence is available on appreciative auditing (Van der Haar & Hosking,

2004). They are particularly skeptical about the claim that appreciative auditing can increase

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5 Appreciative versus Traditional Internal Auditing: Effects on Commitment to Change

employees’ readiness and commitment to change. However, if these effects indeed could be achieved, the application of internal auditing as a tool in managing organizational change can be substantially extended. To investigate this, further inquiry is desired. It has to be examined if the claim is true that appreciative auditing indeed increases readiness and commitment to change. If true, it also has to be investigated if these outcomes are, as claimed, the effect of the characteristics of the appreciative inquiry philosophy that are used to conduct appreciative auditing, and not just the effect of auditing itself. Therefore, it also has to be examined what the effect is of traditional auditing on readiness and commitment to change. So far, it seems there has not been conducted any empirical research on this effect, possibly because influencing employees’ attitude and behavior towards change never has been a explicit goal of internal auditing.

This research is initiated to examine the points mentioned above. In summary, the aim of the research is to examine whether internal auditing indeed can contribute to managing organizational change by increasing employees’ readiness and commitment to change, and if so, which audit method best can be applied for reaching these effects. Additionally, the research aims to reveal some of the mechanisms through which these effects, if there are any, occur. Finally, if it turns out that readiness and commitment to change indeed could be increased by application of internal auditing, this research also aims to examine whether these effects are lasting for a longer period or not.

Moreover, because there has not been conducted any empirical research before on the effects of - both traditional and appreciative - internal auditing on readiness and commitment to change, this research will be mainly of exploratory nature. Hence, hopefully this research is providing a starting point and a direction for future research in this field. The research is divided in two studies.

The first study examines the effects of appreciative and traditional auditing on readiness and commitment to change on short term (two weeks after conducting the audit) and on a longer term (two till three months after conducting the audit). Moreover, in this first study, the effects of both audit methods are compared. The second study focuses on the mechanisms through which found effects, if there are any, occur. The influence of twelve concepts is examined, which according to literature are potentially mediating the relationship between internal auditing and readiness and commitment to change.

Both studies are conducted through a field experiment at a department of a local authority in the Netherlands. However, before proceeding to the methodology of the research, we will start with a literature study in the next section, to explore the main concepts presented in this research.

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6 Appreciative versus Traditional Internal Auditing: Effects on Commitment to Change

2. THEORETICAL FRAMEWORK

In this literature study, the main concepts underlying this research and their mutual relationships will be further explored. Firstly, we will consider the concept of internal auditing. The scope of this research within this broad concept will be defined and we will examine the two audit approaches under study and their underlying theoretical perspectives:

traditional auditing and its underlying problem based perspective and appreciative auditing and its strength-based perspective. Secondly, the concepts of readiness and commitment to change will be further explored and defined, and hypotheses will be formulated about the influence of appreciative and traditional auditing on these concepts. Moreover, twelve concepts will be examined which are potentially mediating the relationship between internal auditing and readiness and commitment to change. Finally, all of this will be presented in the conceptual framework at the end of this section.

2.1 Internal Auditing

The profession of internal auditing has evolved remarkably over the last 60 years and has gained an increasingly important role within organizations (Bailey et al., 2003; Haagsma, 2008). In the past, internal auditing exclusively has served purposes concerning the financial control function of organizations (Haagsma, 2008, Jeffrey, 2008). Currently, a shift can be observed within the field of internal auditing. Amongst others, Allen (2008) and Haagsma (2008) state that the role and responsibilities of internal auditing are expanding rapidly.

Moreover, they state that nowadays it comprises much more than purely providing financial oriented activities and internal control.

The profession’s expanding role and responsibilities can be recognized in the most recent definition of the Institute of Internal Auditors (IIA) (1999a): “Internal auditing is an independent, objective assurance and consulting activity, designed to add value and improve an organization's operations. It helps an organization accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control, and governance processes.” Moreover, the IIA has prescribed requirements for internal auditors to comply with. “Conformance with these International Standards for the Professional Practice of Internal Auditing is essential in meeting the responsibilities of internal auditors and the internal audit activity” (IIA, 2010). By explicitly stating that internal auditing is designed to add value and to improve an organization’s operations, the IIA confirms that within the requirements of the field, internal auditing can be applied for contributing to organizational change (Bailey et al., 2003).

Knowing now that contribution to organizational change is an application of internal auditing that falls within the scope of the field, let us proceed to explore the two audit approaches under study. Important to state here is that the scope of this research will be limited to operational internal auditing. Other forms of auditing, such as IT, financial, and compliance auditing, are left out of consideration. Therefore, in this study, the terms traditional and appreciative auditing both refer to conducting an operational internal audit.

However, both methods are approached from another perspective and therefore different in application. Traditional auditing is based on the problem-solving perspective. Appreciative auditing on the other hand is applied using characteristics of appreciative inquiry and has an underlying strength-based perspective. Before examining these underlying theories, first operational auditing needs to be defined.

Operational auditing. According to Reider (2007), operational auditing is the review of

operational processes of an organization by independent people. Additionally, Ellsworth

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7 Appreciative versus Traditional Internal Auditing: Effects on Commitment to Change

(1971) states that operational auditing examines the performance of selected aspects of an organization or an activity, beyond that inquired for the financial audit of the accounts.

Reider (2007) argues that in contrast to financial auditing, operational auditing is not just accounting for the numbers, but accounting for the functions and activities that produce the numbers. He states that while financial auditing provides an after-the-fact opinion, there is no assurance that the company’s operations are conducted in the most economical, efficient, and effective manner. This is where operational auditing comes in place. Ellsworth (1971) argues that the purpose of operational auditing is primarily to identify opportunities for greater efficiency and economy or for improved effectiveness in carrying out procedures or operations. “It is these very operations that produce the transactions and numbers that ultimately become the financial statement amounts” (Reider, 2007). A metaphor, using sport terms to clarify the distinction between operational and financial auditing, is that financial auditing shows the results of a sport game, while operational auditing observes how the game is played (Duijnborgh, 2004).

The review process of an operational audit consists of inquiry of documents and of interviews with people involved in the operational processes (Reider, 2007). In this study, traditional and appreciative auditing refer to these interviews taken in the organization within the scope of the operational audit.

Problem solving perspective. Traditional auditing is based on traditional theories of planned change. These theories are based on a deficit model of organizations in which problems are identified and corrected (Bright et al., 2006; Caza & Caza, 2008; Cummings &

Worley, 2005; Fitzgerald, et al., 2003). Cooperrider & Shrivasta (1987) state that within these theories, a problem is defined as a deviation from some standard. According to Caza & Caza (2008), organizational science is predominantly based on this deficit-correcting perspective.

They admit that there has been published research examining positive aspects of organizations, however, in comparison to the literature as a whole, such positively oriented research is relatively rare.

According to Cummings & Worley (2005), two traditional problem-oriented theories of planned change that have received widespread attention in the literature are Lewin’s three steps change model and the action research model. Important characteristics of these models are the focus on deficiencies and the focus on negative deviance from standards. An underlying thought of Lewin’s change model for example, is that establishing urgency to change usually involves a diagnosis of what is wrong within the organization, and that organizational members can be motivated to engage in change activities by providing information about the discrepancies between desired behavior and actual exhibited behavior (Buelens, Van den Broeck, Vanderheyden, Kreitner & Kinicki, 2006). The action research model on the other hand, originally developed to have a dual focus on change and knowledge generation, is based on the idea that the cycle of planned change unfolds among others through a process of problem identification, performing a diagnosis of the causes of the problem and planning for corrective action (Cummings & Worley, 2005).

Traditional auditing. Within the field of internal auditing, audit subjects are

predominantly approached from this problem-based perspective (Haagsma, 2009), and the

problem-based characteristics of this perspective are clearly reflected in the traditional audit

method. In his article, Ellsworth (1971) describes the approach to be followed in executing an

traditional operational audit. He states that the basic steps are obtaining background

information on the activity being examined, investigating the prescribed policies and

procedures established to govern the activity under examination, testing the effectiveness of

specific operation and administrative procedures and exploring the problem areas or

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8 Appreciative versus Traditional Internal Auditing: Effects on Commitment to Change

weaknesses encountered, and finally reporting back the results to those responsible.

Moreover, he states that the process of exploring the problem area’s includes identifying specifically what the problems are, obtaining information about each problem and evaluating it in terms of cause, effect and possible courses of corrective action. This process is almost identical to the cycle of planned change of the action research model mentioned earlier.

Additionally, the focus on negative deviance of standards was mentioned as an important characteristic of the traditional theories of planned change. This also can be recognized in the traditional audit method. Several authors state that auditors should check on compliance with prescribed policies and procedures, and that negative deviance should be reported (Dodwell, 1966; Ellsworth, 1971; Watson & Dow, 2010).

Finally, the influence of the traditional problem-based theories of planned change on the traditional audit method is emphasized by Dodwell’s description of the traditional audit method (1966). He states that the methodology for an (traditional) operational audit involves isolating critical problem area’s with a preliminary survey. It is argued that without precise diagnosis, any attempt to resolve the problem will likely fail as a result of not penetrating the surface symptoms to discover the true causes. This preliminary survey is followed by an in depth audit assessing the probable causative factors, to make significant recommendations for operating improvements.

Strength-based perspective. Appreciative auditing is applied using characteristics of appreciative inquiry, which in turn is based on strength-based theories of planned change.

According to Cummings & Worley (2005), these positive models of change are a reaction on the traditional problem solving models of change. These models represent a significant departure from Lewin’s model and the action research model. Contrary to these traditional models of planned change, with their focus on identifying and solving core organizational problems and deficits, the positive models focus on what the organization is doing right (Fitzgerald et al., 2003).

According to Cummings & Worley (2005), these positive models to change are consistent with growing positive movements in the social sciences. To develop a better understanding of the line of reasoning behind the positive change models, we will now reflect on two of these movements: positive organizational scholarship (POS) and positive psychology.

Cameron, Dutton & Quinn (2003) state that POS is primarily concerned with the study of especially positive outcomes, processes, and attributes of organizations and their members.

Moreover, they argue that POS does not reject traditional problem solving models. With its explicit focus on increasing the positive, rather than decreasing the negative, POS is an important complement to traditional organizational science (Caza & Caza, 2008). It is admitted that understanding and correcting poor outcomes in organizations is important, but Caza & Caza state that the overwhelming focus on these issues may deflect attention from more positive outcomes. Moreover, another argument is made for the explicit focus on the positive. Several authors argue that there is a difference between eliminating the negative and enhancing the positive (Cameron et al., 2003; Caza & Caza, 2008). Although Cameron et al.

(2003) do not deny the importance of removing problems and barriers, they state that it is

important to note that their elimination does not necessitate replacement by a corresponding

positive aspect. Moreover, the comparison is made with peoples’ health, and it is claimed that

there is a qualitative difference between not being sick and feeling healthy (Caza & Caza,

2008). Among others, Seligman & Csikszentmihalyi (2000) argue that the difference between

creating the positive and eliminating the negative in organizations is subtle, but potentially

powerful. Caza & Caza (2008) continue their argument for focusing on the positive with

stating that if an organization has pathological problems in its strategy or human resource

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9 Appreciative versus Traditional Internal Auditing: Effects on Commitment to Change

practices, correcting those problems is vitally important for the organization’s success, and it becomes the focus of attention. However, in line with Cameron et al. (2003), they argue that correcting problems may not be enough. In the same way that health is more than a lack of illness, the best possible outcomes may not suddenly appear with the correction of organizational deficits. For this reason, the explicit focus on increasing the positive, rather than decreasing the negative is seen as an important complement to traditional organizational science (Cameron et al., 2003; Caza & Caza, 2008).

An emphasis on positive phenomena is not unique in the social sciences. According to Cameron et al. (2003), other traditions also have examined positive dynamics. In fact, they state that POS among others has gained momentum from positive focused literature in the psychology field. Since its inception at the beginning of this century, this positive psychology movement has generated a huge following (Money, Hillenbrand & Da Camara, 2008).

Positive psychology is the study of the conditions and processes that contribute to the flourishing or optimal functioning of people, groups and institutions (Gable and Haidt, 2005).

Moreover, the line of reasoning of POS is clearly influenced by the line of reasoning of positive psychology. The mission of positive psychology is to focus more attention on the study of strength and virtue and not just the study of pathology, weakness and damage. Thus, positive psychology is about nurturing what is best in human nature and not solely fixing what is broken (Cameron et al., 2003; Money et al., 2008; Seligman & Csikszentminhalyi, 2000). Additionally, positive clinical psychology is concerned not just with treating or preventing ‘disorders’, but also with promoting ‘mental health’ (Maddux, 2008). Consistently, Seligman & Csikszentminhalyi (2000) argue that studying people should be about identifying and nurturing the strongest qualities of people, what they own and are best at, and helping them to find niches in which they can best live out these strengths.

The underlying thought of POS and positive psychology - that a positive focus gives rise to extraordinary outcomes - is corresponding with the line of reasoning behind the strength-based theories of planned change. Consistent with POS and positive psychology, these strength-based theories are not focused on eliminating the negative, but on enhancing the positive. Having outlined this line of reasoning, let us now proceed to the process through which these theories primarily have been applied to planned change.

Appreciative inquiry. Appreciative inquiry (AI) is an organization development philosophy and methodology that grows out of social constructionist thought and its applications to management and organizational transformation (Cooperrider, Whitney &

Stavos, 2008).

FIGURE 1

Definitions ‘To Appreciate’ and ‘To Inquire’

Note. Adapted from Cooperrider et al. (2008)

Ap-pre’ci-ate, v., 1. to value; recognize the best in people or the world around us; affirm past and present strengths, successes, and potentials; to perceive those things that give life (health, vitality, excellence) to living systems. 2. to increase in value, e.g., the economy has appreciated in value. Synonyms: value, prize, esteem, and honor.

In-quire’, v., 1. to explore and discover. 2. to ask questions; to be open to seeing new potentials and possibilities. Synonyms: discover, search, systematically explore, and study.

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“AI is based on the principle that organizations change in the direction of what they study. It is argued that inquiry - whether it is an organization survey, a question posed by a manager at the start of a meeting, or the analysis used to redesign a work process - is fateful, because it plants the seeds of the future” (Whitney & Schau, 1998: 11).

This ‘new’ process and approach to change management has recently received a substantial amount of attention among consultants and change agents (Haagsma, 2008;

Srivastava & Cooperrider, 1999). AI differs from other approaches to change in that it explicitly contains a positive value orientation to analyzing and changing organizations (Cummings & Worley, 2005). With its deliberately positive assumptions about people, organizations, situations and relationships, AI transforms the ways to approach questions of organizational improvement and effectiveness (Cooperrider et al., 2008). The case for change comes through the discovery, dream, and design of positive possibilities that are so inspiring that they energize and provoke action in their direction (Whitney & Cooperrider, 1998).

Moreover, Whitney & Schau (1998) argue that by assuming the best of people, organizations, situations, and relationships, AI leaves deficit-oriented approaches behind and offers affirmative processes for organization development. Additionally, AI assumes the preexistence of a basic level of organizational fitness and inherent abundance of potential resources. This latter assumption provides a basis for inquiry that discovers, explores, and builds on past successes and existent strengths (Bright et al., 2003). In summary, AI can be defined as “The cooperative search for the best in people, their organizations, and the world around them. [Appreciative inquiry] involves systematic discover of what gives a system ‘life’

when it is most effective and capable in economic, ecological, and human terms. AI involves the art and practice of asking questions that strengthen a system’s capacity to heighten positive potential” (Cooperrider & Whitney, 2005: 8).

AI is based on five principles, that can be considered as the foundation of the philosophy and methodology (Cooperrider et al., 2008), (see table 1).

TABLE 1

The Five Key Principles of Appreciative Inquiry

Principle Description

The constructionist principle Based on post-modernist European philosophy that reality is socially constructed.

The principle of simultaneity The idea that inquiry and change occur simultaneously, and that inquiry (the nature of the questions asked) has a determining impact on the nature of change.

The poetic principle A metaphor that human organizations are more an open book than a machine.

The anticipatory principle The idea that the organization’s collective image of the future guides behavior, and that positive images of the future lead to positive actions.

The positive principle Reflected in the role and influence of the positive

questions. The more positive the question, the more long lasting and successful the change effort.

Note. Adapted from Sorensen & Yeager (2004)

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These theoretical underpinnings of AI can be traced back to two central themes: the philosophical school of social constructionism and the theory of positive expectancy (Fitzgerald et al., 2003). “Social construction is an approach that is concerned with the processes by which people construct, maintain and change social and organizational reality”

(Burnes, 2009: 601). Moreover, Cooperrider et al. (2008) state that human knowledge and organizational destiny are interwoven. It is argued that we are constantly involved in making sense of the world around us, and to be effective, we must understand organizations as living social constructions. Meaning is made in relationship using words, language, and questions as primary tools of creation. Fitzgerald et al. (2003) argue that social constructionism provides the foundation for three of the five principles central to AI: the constructionist principle, the principle of simultaneity and the poetic principle. The second foundation of AI is positive expectancy. It is based on “the formidable power of creating images of the future to stimulate and direct organizational action” (Fitzgerald et al., 2003: 6). Positive imagery leads therefore to positive action. Positive expectancy provides the foundation for the last two principles of AI: the anticipatory principle and the positive principle.

AI’s five underlying principles come to life through the design of the basic AI process.

This change process is referred to as the ‘AI 4-D cycle’ (Cooperrider et al., 2008), in which four key phases can be identified (see figure 2): discovery, dream, design, and delivery (Whitney & Schau, 1998). The first phase in this cycle is the discovery phase. In this phase, essential information is gathered from the organization’s members. This can be done by means of appreciative audit interviews.

FIGURE 2

Appreciative Inquiry 4-D Cycle

Note. Adapted from Whitney & Schau (1998)

Appreciative auditing. As mentioned before, appreciative auditing combines the elements of operational internal auditing and appreciative inquiry: conducting an audit by using characteristics of appreciative inquiry (Haagsma, 2009). The influence of the strength- based perspective on this approach of auditing is clearly recognizable. In contrast to the deficiency-based traditional audit approach, appreciative auditing focuses on the positive actions and best practices of an organization when evaluating and assessing it (Haagsma, 2008, 2009; Van de Wetering, 2007; Whitney & Cooperrider, 1998).

An important note here is made by Van de Wetering (2007). She states that people

regularly have the misconception that within appreciative auditing problems and non-

conformities are ignored. Van de Wetering invalidates this misconception. She argues that

within appreciative auditing problems and non-conformities are not ignored, however, they

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are investigated in an appreciative way. Additionally, she argues that problems state something about what is wrong and undesirable in an organization, but they do not say anything about what is desired on the other hand. Therefore, appreciative auditing indentifies non-conformities and subsequently place them in a positive perspective of possibilities and chances for improvement. It is argued that by focusing on what is desired, the organization already starts changing in this desired direction. (Van de Wetering, 2007).

In order to distinguish between traditional and appreciative auditing, it is important to highlight the differences between the two methods. The differences can be clustered in three audit elements (see Table 2).

TABLE 2

Differences between the Traditional and Appreciative Audit Interview

Traditional audit interview Appreciative audit interview

Focus

 Procedures and norms

 Negative deviance, problems, and deficiencies

 Causes

 Consequences and risks

 Corrective action

 Storytelling

 Positive actions and best practices

 Possibilities for improvement/change

 Benefits from improvement/ change

 Steps in desired direction

 Ideal situation

Nature of questions

 Formal

 Closed questions

 Restricted to format

 Informal

 Open, positive questions

 Only the scope is determined in advance. Questions emerge during the interview by input of both the auditor and auditee.

 Interview in form of a dialogue

 Encouraging starting question

Purpose and desired results

 Discover possibilities for improvement

 Gain understanding of the control of the critical process steps

 Check whether process is realized according to conventions

 Determine risks

 Discover possibilities for improvement

 Inspire people

 Stimulate learning and reflecting

 Increase intrinsic motivation to change

 Engage people and increase their commitment

Firstly, the traditional audit interview focuses on procedures and norms, negative deviance,

problems, and deficiencies, causes, consequences and corresponding risks, and finally,

possible corrective action (Dodwell, 1966; Ellsworth, 1971; Watson & Dow, 2010). The

appreciative audit interview on the other hand, focuses on storytelling, positive actions and

best practices, points that need to be improved/changed, potential benefits from these

improvements/changes, small, realizable steps in the desired direction, and finally, the ideal,

desired situation (Haagsma, 2009; Van de Wetering, 2007). Secondly, the traditional audit

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questions are formal, mainly closed, and the auditor is restricted to the format drawn up in advance (Doesema, 1996; Metha, 1994; Spenser Pickett, 2005). The appreciative audit interview on the other hand, always starts with an encouraging starting question. This first question is important, because, as mentioned before, it is believed that inquiry (the nature of questions asked) has a determining impact on the direction of change (the simultaneity principle). Moreover, the interview is more informal than the traditional audit interview and the questions are mainly open and ventilated in a positive way. Additionally, only the scope of the interview is determined in advance, the exact elaboration of the questions emerges during the interview by input of both the auditor and auditee. In fact, in the appreciative audit interview there is a real dialogue taking place between the auditor and auditee (Bijker, 2009;

Morris, 2008; TNO Management Consultants, 2009). Finally, the third difference between both methods is on the purpose and the desired results of the interviews. The traditional audit interview has the purpose to obtain understanding of the control of the critical process steps, and aims to check whether the process is realized according to made conventions (Dodwell, 1966; Watson & Dow, 2010). The appreciative audit interview on the other hand, has the purpose to discover possibilities to improve, as well as to inspire people, to stimulate learning and reflecting, to increase the intrinsic motivation to change, and finally to engage people and increase their commitment (Haagsma, 2009; Van de Wetering, 2009).

As mentioned before, field experts of appreciative auditing claim that appreciative auditing can influence employees’ attitude and behavior (INK, 2008; Van de Wetering, 2007), and more specific, that it can increase employees’ readiness and commitment to change (Haagsma, 2009; Whitney & Cooperrider, 1998; Whitney & Schau, 1998). Haagsma (2009) argues that these effects on employees’ attitude and behavior towards change are a consequence of the characteristics of appreciative inquiry that are used to conduct auditing.

An example of such a characteristic of AI that influences employees’ attitude and behavior towards change is the fact that “AI is a high-involvement process” (Whitney & Schau, 1998:

14). Whitney & Cooperrider (1998: 23) state “that acceptance of the [change] plan and commitment to it as a path forward for the company is greatly enhanced through high involvement [of the employees] in the appreciative interviewing process”. Moreover, Whitney

& Schau (1998: 15) argue that “by participating in the design process, organization members quickly reorient and realign themselves to the changing organization and business environment”.

Although there are many claims made on the effects and values of AI, little empirical research can be found on these effects (Van der Haar & Hosking, 2004). Additionally, also no empirical research can be found on differences in effects of AI on the short term and on the long term. Hence, given this lack of empirical research as well as the growing popularity of AI, Van der Haar & Hosking claim that the call for evidence on potential effects (both on the short term and on the long term) is increasingly urgent. Therefore, we will proceed with examining literature on the concepts underlying these claims. Firstly, the concepts of readiness and commitment to change will now further be explored and defined. Moreover, it will be examined how these attitudes and behaviors towards change can be influenced positively according to previous research.

2.2 Readiness and Commitment to Change

Change recipients’ reactions to organizational change are a main determinant of the

extent to which any change can succeed (Oreg, Vakola & Armenakis, 2011). Indeed,

Armenakis & Harris (2009) argue that since changes must ultimately be implemented by

change recipients, it is essential to understand their motivations to support organizational

change. Additionally, Bouckenooghe et al. (2009) state that creating a basis that supports

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change is a key issue in managing and planning organizational change. This evokes the question what change recipients do consider when they make their decision to embrace and support a change effort or reject and resist it. A substantial amount of research has been conducted to examine change recipients’ reactions to planned organizational changes. Two important concepts involved in employees’ support for change initiatives are readiness to change (Armenakis et al., 1993; Holt, Armenakis, Field and Harris, 2007) and commitment to change (Herscovitch & Meyer, 2002; Meyer & Allen, 1991).

Readiness to change. Research conducted to examine change recipients’ reactions to planned organizational changes dates back to the work of Coch and French (1948) and to the work of Lawrence (1954). This early work on organizational change referred to employees’

negative reactions to organizational change in terms of resistance to change (Armenakis &

Harris, 2009). The term readiness to change on the other hand, was introduced by re- interpretations of the Coch and French study by Bartlem and Locke (1981) and Gardner (1977) (Armenakis & Harris, 2009). Additionally, Armenakis & Harris argue that using the term readiness instead of resistance is preferred, because readiness fits better with a positive approach to framing change.

Moreover, according to Paul, van Peet, & Reezigt (in press), “explanations of (resistance) behavior in organizational changes are often based on an attitude approach – attitudes as precursor of behavior”. This thought fits with the claim of Armenakis et al.

(1993), who argue that readiness to change is a precursor of the behavior of either resistance to, or support for, a change effort.

Furthermore, Bouckenooghe et al. (2009) argue that when readiness to change exists, an organization is primed to embrace change and resistance to change is reduced. Additionally, they state that if organizational members are not ready, the change may be rejected, and organizational members may initiate negative reactions such as sabotage, absenteeism, and output restriction. This corresponds with the work of Holt et al., who define readiness to change as “the extent to which an individual or individuals are cognitively and emotionally inclined to accept, embrace, and adopt a particular plan to purposefully alter the status quo”

(Holt et al., 2007: 235). In summary, “readiness to change is reflected in organizational members’ beliefs, attitudes, and intentions regarding the extent to which changes are needed and the organization’s capacity to successfully undertake those changes” (Armenakis et al., 1993: 681).

Moreover, in confirmation with Bouckenooghe et al. (2009), in this research readiness to change is conceived as a multifaceted concept that comprises a cognitive, an emotional, and an intentional dimension of readiness to change. Bouckenooghe et al. (2009: 561) argue that “this multifaceted view of readiness to change - as a triadic attitude instead of unifaceted operationalization - is better at capturing the complexity of the phenomenon”. Firstly, in this multifaceted concept cognitive readiness is defined as “the beliefs and thoughts organizational members hold about the outcomes of change. Additionally, emotional readiness is defined as

“the feelings about a specific change project being introduced”. Finally, intentional readiness is defined as the “the effort and energy organizational members are willing to invest in the change process” (Bouckenooghe et al., 2009: 576).

Commitment to change. Another important concept involved in employees’ support for change initiatives is commitment to change (Herscovitch & Meyer, 2002; Meyer & Allen, 1991). Indeed, Conner (1992: 147) describe commitment as “the glue that provides the vital bond between people and change goals”. Moreover, it is argued that a lack of commitment by the people is the most prevalent factor contributing to failed change projects (Conner &

Patterson, 1982).

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15 Appreciative versus Traditional Internal Auditing: Effects on Commitment to Change

In their research, Herscovitch & Meyer (2002) compare several definitions of commitment. They state that “all of the definitions of commitment in general make reference to the fact that commitment (a) is a stabilizing or obliging force, that (b), gives direction to behavior (e.g., restricts freedom, binds the person to a course of action) (Herscovitch &

Meyer, 2002: 301). Additionally, it is argued that commitment is different from motivation or general attitudes. It is suggested that “commitment influences behavior independently of other motives and attitudes and, in fact, might lead to persistence in a course of action even in the face of conflicting motives or attitudes” (Herscovitch & Meyer, 2002: 301).

The construct of organizational commitment has been studied extensively over the years, and it is widely accepted that employee commitment to organizations can take different forms (Meyer & Allen, 1997). Additionally, Meyer & Allen argue that acknowledging these different forms enables researchers to make more precise predictions about the impact of commitment on behavior. One of the forms that organizational commitment can take is commitment to change. In their research, Herscovititch & Meyer (2002) have demonstrated that this construct of commitment to change is a better predictor of behavioral support for a change than is organizational commitment. Therefore, in this research we will use their three- component model of employee commitment to organizational change (Herscovitch & Meyer, 2002), which is an application of an earlier model of organizational commitment, developed by Meyer & Allen (1991).

In accordance with the definition of Herscovitch & Meyer (2002: 475), the concept of commitment to change is defined as “a force (mind-set) that binds an individual to a course of action deemed necessary for the successful implementation of a change initiative”. Following Meyer & Allen’s (1991) original conceptualization of organizational commitment, Herscovitch & Meyer (2002) suggest that this force or mindset can take different forms:

desire (affective commitment), perceived cost (continuance commitment), or obligation (normative commitment). More extensively, “the mind-set that binds an individual to a course of action can reflect (a) a desire to provide support for the change based on a belief in its inherent benefits (affective commitment to change), (b) a recognition that there are costs associated with failure to provide support for the change (continuance commitment to change), and (c) a sense of obligation to provide support for the change (normative commitment to change)” (Herscovitch & Meyer, 2002: 475). Additionally, it is suggested that employees can experience varying combinations of all these three mindsets simultaneously (Herscovitch & Meyer, 2002). In summary, employees can feel bound to support a change because they want to, have to, and/or ought to.

Having defined the concepts of readiness and commitment to change, it appears that there is substantial overlap in the conceptualization of both concepts. This evokes the question what the essential difference is between the two. Therefore, before proceeding to examine the relationship between internal auditing and readiness and commitment to change, we will first further explore the concepts of readiness and commitment to change and try to clarify the essential distinction between both.

Distinction between readiness and commitment to change. Comparing literature on the constructs of readiness and commitment to change, it turns out that both are described as an attitude or mind-set as reaction to change, that influences change recipients’ behavior of either support for, or resistance to, a change effort (Armenakis et al., 1993; Armenakis, Harris, &

Field, 1999; Bouckenooghe et al., 2009; Herscovitch & Meyer, 2002; Oreg et al., 2011).

Having a closer examination of both concepts, it appears that the difference between both is

situated in the stage of the change process where the reaction to change is positioned. It is

argued that readiness to change is arguably one of the most important factors involved in

employees’ initial support for change initiatives (Armenakis et al., 1993; Armenakis et al.,

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1999), while commitment to change on the other hand reflects internalization of a change program, the end result of a change process (Conner, 1992). In other words, commitment to change reflects support for change in a later phase in the change process.

Moreover, this difference in stages where readiness and commitment to change are positioned is emphasized by Armenakis et al. (1999). They emphasize the distinction between readiness and commitment to change in their model that depicts the stages of a change process. Consistent with most models of a change process, their model is built around Lewin’s (1951) stages of unfreezing, moving, and freezing. Armenakis et al. (1999) describe the stages of change as readiness, adoption, and institutionalization. It is argued that readiness to change is similar to Lewin’s concept of unfreezing (Armenakis et al., 1993). Additionally, Armenakis et al. (1999) argue that “when readiness for change exists, the organization is primed to embrace the change and the adoption stage begins. (If organizational members are not ready, the change may be rejected, and organizational members may initiate negative reactions, such as, sabotage, absenteeism, and output restriction.) Adoption is the act of behaving in the new way, on a trial basis. That is, the change can still be rejected. And finally, institutionalization is reflected in the degree of commitment to the new way, the post-change state of the system” (Armenakis et al., 1999: 103). Moreover, Armenakis et al. (1999) argue that in terms of Lewin’s (1951) metaphor of ‘unfreezing - moving - freezing’, an institutionalized change is one that is frozen and the process of creating that institutionalization is freezing. Additionally, they argue that this process of creating institutionalization is the process of building commitment to the changed state.

Having further clarified this essential distinction between readiness and commitment to change, let us now proceed to examine the relationship between internal auditing and readiness and commitment to change.

Existing literature on relationship between internal auditing and readiness and commitment to change. In existing literature regarding internal auditing and change management, it appears that nothing is written about the relationships between traditional auditing and readiness and commitment to change. Additionally, it seems there has not been conducted any empirical research on these relationships, possibly because influencing employees’ attitude and behavior towards change never has been an explicit goal of internal auditing. On the other hand, although it also seems that there has not been conducted any empirical research on appreciative auditing, there nevertheless has been written about it and its positive effects on readiness and commitment to change by field experts, based on their own experiences (Haagsma, 2008; Van de Wetering, 2007; Whitney & Cooperrider, 1998;

Whitney & Schau, 1998).

For example, Whitney & Schau (1998) argue that the appreciative interview creates a positive energy, which is important for mobilizing people. Additionally, they claim that using characteristics of AI in the change process results in a high alignment on actions to be taken.

Haagsma (2008) confirms this in his work by stating that appreciative auditing increases the acceptation of the recommendations for improvement that result from the audit. This alignment on and acceptation of the actions to be taken might be considered as an increase of (emotional) readiness to change. Moreover, Van de Wetering (2007) argues that asking appreciative questions increases people’s intrinsic motivation to improve things, which also might be considered as an increase of (emotional and intentional) readiness to change.

Whitney & Cooperrider (1998) argue that commitment to the change plan on the other

hand, is greatly enhanced through high involvement of the employees in the appreciative

interviewing process. Additionally, they state that commitment and confidence are created in

the organization by liberating the ideas and opinions of the auditees. Moreover, Haagsma

(2009) states that with appreciative auditing a positive dialogue is created by asking people

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for the things they are proud of and by asking for how they envision the organization to be in a few years. He argues that this positive dialogue in turn will increase people’s commitment, and that they are more inclined to take on things together. Finally, according to Van de Wetering (2007), the participative approach of appreciative auditing encourages feelings of responsibility, and stimulates employees’ learning and commitment.

In summary, despite the lack of empirical evidence, it is suggested in the work of several AI authors that appreciative auditing might increase employees’ readiness and commitment to change. On the other hand, nothing is written in existing literature about the relationship between traditional auditing and readiness and commitment to change.

Predicted differences between effects of both audit methods on readiness and commitment to change. Albeit there is no empirical research conducted to assess the effects of appreciative and traditional internal auditing on readiness and commitment to change, there nevertheless is a source of empirical evidence on the factors that influence change recipients’

attitude and behavior. For example, there is some empirical evidence from positive psychology and positive organizational scholarship (POS) that positivity, one of the main characteristics of appreciative auditing, influences people’s attitude and behavior. Since both readiness and commitment to change were described as ‘an attitude or mind-set as reaction to change, that influences change recipients’ behavior of either support for, or resistance to, a change effort’ (Armenakis et al., 1993; Armenakis, Harris, & Field, 1999; Bouckenooghe et al., 2009; Herscovitch & Meyer, 2002; Oreg et al., 2011), it is plausible to argue that when this attitude can be influenced positively, readiness and commitment to change might be increased. Moreover, several authors have reported that exposure to positive practices produces positive emotions in individuals (Fineman 1996; Fredrickson, 1998, 2001;

Seligman, 2002; Staw, Sutton & Pelled, 1994; Tutu, 1999), also referred to as positive affect.

Positive affect can be defined as “a pleasant feeling state or good mood” (Isen, Estrada &

Young, 1998: 118). Isen et al. (1998) argue that positive affect on its turn, fosters openness to ideas and flexibility. Moreover, Avey, Wernsing & Luthans (2008) argue that employees’

positive emotions are associated with relevant attitudes, such as engagement. Additionally, it is argued that these positive emotions foster commitment to the organization (Grant, Campbell, Chen, Cottone, Lapedis, & Lee, 2007). This is confirmed by Bono & Ilies (2006), who demonstrate that leaders who foster positive emotions also generate more commitment and satisfaction among their employees. In their article, Cameron et al. (2011) state that several researchers have reported that when employees observe displays of positive practices among fellow employees, this among others results in enhanced commitment. Moreover, it is claimed that positive practices provide an amplifying effect and that positivity eventually becomes self-reinforcing (Cameron, Mora, Leutscher & Calarco, 2011). Additionally, POS authors Caza & Caza (2008) argue in their research that emphasis on positive processes and states in organizations is an important stimulus for action to be taken, in other words, a stimulus increasing the readiness to change. Finally, Van de Wetering (2007) states that asking positive questions invites for learning and reflection, which is the first step in a process for improvement. On the other hand, asking employees more negative questions about causes of problems might raise a defensive attitude, and does not invite for learning and reflection.

Furthermore, there is also empirical evidence that participation in decision making, another main characteristics of appreciative auditing, influences peoples’ attitude and behavior. For example, DeCotiis & Summers (1987) suggest that a decision making process that encourages member participation may affect felt responsibility and role involvement, and therefore commitment. This is confirmed by Kirmizi & Deniz (2009) and by Abdullah &

Ramay (2012), who demonstrate in their researches that participation in decision making has

a significant positive effect on respectively affective and organizational commitment.

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18 Appreciative versus Traditional Internal Auditing: Effects on Commitment to Change

In conclusion, it might be assumed that positivity and participation in decision making have a positive influence on readiness and commitment to change. Because these factors are significantly more present within appreciative auditing than within traditional auditing, it is hypothesized that conducting an appreciative audit will result in stronger increases of the levels of readiness and commitment to change than conducting a traditional audit does.

Having explored and defined these concepts, let us now examine more extensively the concepts that are potentially mediating the relationship between internal auditing and readiness and commitment to change.

For research purposes, in the next section the concepts of readiness to change and commitment to change will be bundled together. In confirmation with the termination used by Oreg et al. (2011) in their study, we will use the term ‘change recipients’ reactions to organizational change’, abbreviated: ‘reactions to change’ to refer to the concepts of readiness and commitment to change.

2.3 Mediating Mechanisms

Considering the propositions that ‘appreciative auditing has a positive influence on change recipients’ reactions to organizational change’ and that ‘conducting an appreciative audit probably results in stronger increases of the levels of readiness and commitment to change than application of traditional auditing does’, the question evokes how these effects of internal auditing do come about. In other words, through which mechanisms do the effects of internal auditing on change recipients’ reaction to change occur? To determine these mechanisms, let us now proceed to examine existing literature about antecedents of change recipients’ reactions to organizational change.

Moreover, over the years, a substantial amount of research has been conducted to determine antecedents of change recipients’ reactions to change. “As is often the case, however, different researchers have taken different perspectives” (Oreg et al., 2011: 462).

Hence, several researchers have tried to summarize existing research and to provide an overarching view of change recipients’ reactions to organizational change. Although it is beyond the scope of this article to offer a comprehensive review of all existing models, we will reflect on four of the leading studies on reaction-to-change-antecedents: Armenakis et al.

(1993, 1999, 2009), Bouckenooghe et al. (2009), Holt et al. (2007), and Oreg et al. (2011).

Firstly, we will compare the models in these four studies and reflect on similarities and differences between antecedent-categories. Additionally, we will reflect on the similarities and differences between the antecedents themselves. Based on this comparison of existing research, we will select antecedents for our study and divide them into antecedent-categories.

Antecedent-categories. Let us start with the comparison of the antecedent-categories of the different researches (see table 3).

Firstly, we will reflect on the work of Holt et al. (2007). In their work, four antecedent- categories are distinguished. It is suggested that change recipients’ reactions to change are influenced simultaneously by the change content (i.e., what is being changed), the change process (i.e., how the change is being implemented), the change context (i.e., circumstances under which the change is occurring), and the individuals (i.e., characteristics of those being asked to change) involved”.

Secondly, Oreg et al. (2011) on the other hand, make a distinction in their work between

prechange antecedent categories (i.e., conditions that are independent of the organizational

change and which existed prior to the introduction of the change) and change antecedent

categories (i.e., aspects of the change itself that influence change recipients’ explicit

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reactions). Within the group of prechange antecedent categories, they distinguish two categories: change recipient characteristics (i.e., characteristics of the recipient that predict and help explain their reactions) and internal context (i.e., aspects of the prechange

organizational environment). Within the group of change antecedent categories on the other hand, Oreg et al. distinguish the categories of change process (i.e., the manner in which change was implemented), perceived benefit/ harm (i.e., the extent to which the change is perceived as personally beneficial or harmful), and change content (i.e., the mere nature or type of change).

Thirdly, Bouckenooghe et al. (2009) divide the antecedents in their work in two

categories: the climate of change (i.e., the internal circumstances under which change occurs) and the process of change (i.e., the process of how change is dealt with).

Finally, although Armenakis et al. (1993, 1999, 2009) do mention several antecedents of change recipients’ reactions to organizational change, they do not classify these antecedents into separate antecedent-categories. Nevertheless, they explicitly do acknowledge the influence of ‘change recipients’ characteristics’ and the influence of ‘the internal context’

on change recipients’ reactions to organizational change, which are labelled in other researches as antecedent-category (Holt et al., 2007; Oreg et al., 2011). Moreover, although not explicitly mentioned, other categories can be conducted from their work. Implicitly, Armenakis et al. (1993, 1999, 2009) do refer to characteristics of the change process, to capabilities of the change recipient and the organization, and to the added value of the change.

EFFECTS ON COMMITMENT TO CHANGE

APPRECIATIVE VERSUS TRADITIONAL INTERNAL AUDITING: