ORGANIZATIONAL CHANGE CAPACITY
Factors of influence on organizational change capacity
Jolinde Fledderus
University of Groningen
FACTORS OF INFLUENCE ON ORGANIZATIONAL CHANGE CAPACITY
Master thesis, MScBA, specialization Change Management
University of Groningen, Faculty of Economics and Business
July 9, 2013
Jolinde Fledderus
1800302
Supervisor/university
Dr. J. Rupert
Supervisor/field of study
G. Bus
Accenture, Amsterdam
ABSTRACT
This study examines the factors of influence on organizational change capacity. The variables trust in management, change history, effective communication, transformational leadership, learning culture and accountable culture are tested as predictors of organizational change capacity. Furthermore, the mediating effect of trust in management on the relation between change history and organizational change capacity is tested, as well as on effective communication and organizational change capacity. Additionally, the moderating effect of performance management on the relation between an accountable culture and organizational change capacity is tested. The study is conducted at Accenture, a global management consulting, technology service and outsourcing company. The sample consisted of 70 change management consultants, active at 36 different companies, within various industries. Support was found for the expected positive, direct effects of the independent variables on organizational change capacity. The mediating and moderating relations, however, were not supported.
TABLE OF CONTENTS 1. INTRODUCTION ... 6 1.1 Research background ... 6 1.2 Research question ... 7 1.3 Readers guide ... 8 2. THEORY ... 9 2.1 Organizational change ... 9
2.2 Organizational change capacity ... 10
2.3 Attitudes of organizational members ... 14
2.3.1 Trust in management ... 14 2.3.2 Change history ... 17 2.4 Organizational systems/processes ... 19 2.4.1 Effective communication ... 20 2.4.2 Transformational leadership ... 23 2.5 Organizational culture ... 25 2.5.1 Learning culture ... 25
2.5.2 Accountable culture and performance management ... 27
3. RESEARCH METHODS ... 30
3.1 Data collection and sample ... 30
3.2 Survey ... 31 3.3 Measurement scales ... 31 3.3.1 Factor analysis ... 32 3.3.2 Reliability analysis ... 33 3.3.3 Dependent variable ... 33 3.3.4 Independent variables ... 34 3.3.5 Control variables ... 36 3.4 Data analysis ... 37 3.4.1 Preliminary analyses ... 37 3.4.2 Multicollinearity ... 37 3.4.3 Regression analysis ... 38
4. RESULTS ... 40 4.1 Correlations ... 40 4.2 Regression analysis ... 41 4.3 Empirical model ... 45 5. DISCUSSION ... 46 5.1 Results ... 46
5.2 Limitations and further research ... 47
5.3 Practical implications ... 48
6. CONCLUSION ... 50
7. REFERENCES ... 51
APPENDIX A. Questionnaire ... 64
1. INTRODUCTION
“It is not the strongest of the species that will survive, nor the most intelligent, but the one most
responsive to change” - Charles Darwin
Change has become the rule rather than the exception in contemporary organizations (Daly, Teague & Kitchen, 2003; Elving, 2005; Sørensen, Hasle & Pejtersen, 2011). The intense global competition, economic recession, rapid developments in information and communication technology, the growing awareness of the fragility of the planet and the limited and shrinking natural resources are powerful external factors that have compelled organizations to start drastic change processes (Buono & Kerber, 2010; Daly et al., 2003; Bennebroek Gravenhorst, Werkman & Boonstra, 2003; Grunberg, Moore, Greenberg & Sikora, 2008; Shipton, Budhwar & Crawshaw, 2012). The importance, frequency and speed of changes have increased enormously (Burnes, 2009; By, 2005; Miller, 2004; Moran & Brightman, 2001). A clear indicator of this is the Fortune 1000 list of companies, which shows that between 1973 and 1983, 35 percent of the companies were new. This has increased even further, to 60 percent, when the figures are compared between 1993 and 2003. If this trend has continued, the list will show over 70 percent change from 2003 to 2013 (Lawler & Worley, 2006). The ability to cope with the more challenging environment has become a key determinant of competitive advantage and organizational survival (Judge, Naoumova & Douglas, 2006; Klarner, Probst & Soparnot, 2008; Lawler & Worley, 2006; Meyer & Stensaker, 2006). Organizations can differ greatly in their ability to develop and implement suitable changes to continually adapt to the environment. Even if organizations make similar analyses of their environment and initiate the same strategic changes, there still will be differences in terms of what they actually are able to do and will achieve. These differences can be related to the change capacity of organizations (Meyer & Stensaker, 2006). This study focuses on this relatively new construct in the organizational change literature; organizational change capacity.
1.1 Research background
than three-quarters of the Fortune Global 500. This research is carried out in the Talent & Organization service line (T&O). The T&O service line is part of Accenture management consulting and focuses on human capital and change management issues. The research is initiated in the change management department, to create a model which can assess the change capacity of organizations. Thus far, change capacity is often not formally assessed in change planning and discussed with clients before the project starts. Clients and consultants both have an idea of how change should be implemented and how much capacity the client organization brings to the change program themselves. However, these perceptions are often not rooted in an objective assessment of the actual change capacity of the organization and often influenced by factors such as pride in the organization. Sometimes managers do not recognize or admit that the organizational change capacity is low and have the tendency to overestimate the current change capacity to keep the program costs low. Therefore, an elaboration of the concept of organizational change capacity and the predictors of an organization’s change capacity would be useful in determining the change capacity of clients. Moreover it can be used as a starting point for developing further change management capabilities. A shared view between client and consultant of the existing capacity of an organization to implement change would help Accenture in establishing the optimum amount of (additional) change management activities or resources required to implement change.
The aim of this research is to get a better understanding of organizational change capacity and the factors that influence the change capacity of organizations. A clear and complete picture of the factors of influence on the change capacity of organizations can help Accenture with the assessment of the change capacity of clients in order to determine the required change management effort.
1.2 Research question
stream of literature on this subject is rising, the understanding of this construct is still in its infancy. Sufficient empirical evidence on organizational change capacity is lacking (Judge & Douglas, 2008; Klarner et al., 2008). Studies have shown that approximately 70 percent of planned organizational change initiatives fail (Beer & Nohria, 2000). Judge and Douglas (2009) argue that the lack of reliable and valid diagnostic instruments to assess and track an organization’s capacity for change is one of the primary causes for these unsuccessful change implementations. A few studies have researched the concept of organizational change capacity, focused on the dimensions necessary for building an organization’s change capacity. However, there is no consistency between these results. Besides, empirical evidence is lacking. Therefore, this research seeks to a better understanding of organizational change capacity. In order to predict an organization’s change capacity this study pays attention to the determinants/influencers of organizational change capacity. This research is conducted among change management consultants of Accenture, based on their viewpoints about the situation at their clients. The central research question in this study is:
Which factors influence the organizational change capacity?
The following variables are included in this research as predictors of organizational change capacity: trust in management, change history, effective communication, transformational leadership, learning culture, accountable culture and performance management.
1.3 Readers guide
2. THEORY
This study will investigate the influence of factors on the change capacity of organizations. In this part the existing literature on organizational change capacity will be reviewed and factors will be identified that might be important predictors of organizational change capacity. The factors that have been selected to be researched will be elaborated upon by literature research and hypotheses will be drawn. First, there will be a short introduction of organizational change, followed by a discussion of the dependent variable (organizational change capacity) and the independent variables (trust in management, change history, effective communication, transformational leadership, learning culture, accountable culture and performance management). 2.1 Organizational change
There are many different definitions of organizational change. According to Cawsey, Deszca & Ingols (2012) organizational change is a planned alternation of organizational components to improve the effectiveness of organizations. Another study explains change as the process of modifying people’s actions, reactions, and interactions to move the organization from its existing state to a desired state (Madsen, John & Miller, 2006). Burnes (2009) indicates that change is an ever-present feature of organizational life, both at an operational and strategic level. Obviously, this illustrates that organizational change is a comprehensive concept. By (2005) argued that the successful management of change is crucial to any organization in order to survive and succeed in today’s highly competitive and continuously evolving business environment.
(Armenakis & Bedeian, 1999; Burnes, 2009; By, 2005; Cummings & Worley, 2008). However, Walker, Armenakis and Bernerth (2007) argue that following the steps in these models does not necessarily guarantee organizational change success and point out that change managers also need to be conscious of factors specific to the changing organization.
Although the planned change approach is still employed in recent change initiatives, there seems to be consensus among current scholars that the benefits from planned change do not last (By, 2005). According to Meyer and Stensaker (2006) viewing change processes as isolated events that have a clear beginning and end may limit the understanding of the more complex and dynamic aspects contemporary organizations deal with in change processes. What is suggested as a better approach is emergent change, which is described as the ability to change continuously in a fundamental manner to keep up with the fast-moving pace of change (Burnes, 2009). According to scholars, the organizational change capacity focuses on multiple changes, instead of the traditional view of change as isolated events (Klarner et al., 2008; Meyer & Stensaker, 2006). This implies that the organizational change capacity is related to emergent change. In the next part, the organizational change capacity concept will be described in depth.
2.2 Organizational change capacity
Organizational change capacity is often mentioned as an important organizational capability and is positively associated with firm performance. Judge and Elenkov (2005) suggest that organizational change capacity is a perceptual construct. This implies that change capacity is determined by perceptions of people about the organization’s ability to accomplish change projects. Because the organizational change capacity is expected to be different from the perspective of management and frontline workers (Judge & Elenkov, 2005), the organizational change capacity is unlikely to be experienced uniformly (Shipton, et al., 2012). Thus, it is not like a shared mental model that provides the framework of a common interpretation of reality (McFerrin & Adkisson, 2012) or a pattern of beliefs and expectations shared by the organization’s members, indicating a shared perception which applies to an organizational culture (Burns, 2009).
and practitioners, no commonly accepted definition of change capacity exists (Meyer & Stensaker, 2006). Below four different definitions of organizational change capacity that are used in scientific articles are explained. The first definition is used by Judge and Douglas (2009), who describe organizational change capacity as “a combination of managerial and organizational capabilities that allow an enterprise to adapt more quickly and effectively than its competition to changing situations”. Other authors define change capacity as “an organization’s ability to develop and implement appropriate organizational changes to constantly adapt to its environment” (Klarner et al., 2008; Meyer & Stensaker, 2006; Soparnot, 2011). In line with this definition, Buono and Kerber (2010) explain change capacity as “the ability of an organization to change not just once, but as a normal response to changes in its environment”. According to Bennebroek Gravenhorst et al. (2003) the term change capacity refers to “the degree to which aspects of an organization and aspects of a change process contribute to or hinder change”. A comparison of the various definitions shows that there is still ambiguity about the change capacity concept. However, except of the definition of Bennebroek Gravenhorst et al. (2003) all the other scholars mentioned above (Judge & Elenkov, 2005; Meyer & Stensaker, 2006; Klarner et al., 2008; Buono & Kerber, 2010; Soparnot, 2011; Judge et al., 2009) see organizational change capacity as a dynamic capability. Dynamic capabilities are some of the most valuable and rare organizational capabilities (Judge et al., 2009). Dynamic capabilities enable organizations to cope with the treats and opportunities of its environment. Dynamic capabilities are idiosyncratic to organizations because they evolve from contingencies that come together in a unique way (Judge & Elenkov, 2004). Since change capacity is seen as a dynamic capability, we can conclude that an organization’s change capacity is not easily substitutable across organizations.
processes. The definition that captures all of this is the definition of Buono and Kerber (2010) who define organizational change capacity as “the ability of an organization to change not just once, but as a normal response to changes in its environment” (Buono & Kerber, 2010, p.5).
According to Cozijnsen (2004) an organization’s change capacity is determined by the contextual factors of the organization that positively or negatively influence change processes. Organizational aspects that facilitate change can accelerate the process of change (Bennebroek Gravenhorst et al., 2003). Because change capacity is seen as the degree to which the organization is able to change not once, but as a normal response to changes in the environment,
this study is focused on predictors of organizational change capacity in the long term. The expected predictors studied in this research are attitudes of organizational members at
have included both systems thinking and learning culture in their model, however because systems thinking is seen as part of organizational learning, overlap between these constructs is expected. Hence, systems thinking is excluded in this research.
FIGURE 1 Conceptual model
2.3 Attitudes of organizational members
2.3.1 Trust in management It has already been proven that trust is essential in the context of organizational change
(Michaelis, Stegmaier & Sonntag, 2009; Morgan & Zeffane, 2003; Sørensen et al., 2011). Especially transformational changes challenge trust, specifically the employees’ trust in management, because transformational changes are often introduced by the management of the organization (Sørensen et al., 2011). According to Bouckenooghe and Devos (2007) one of the hardest things employees experience when faced with change are the uncertainty, the ambiguity, the complexity and stressfulness associated with the change process and the outcomes. And the
(Sørensen et al., 2011). The amount of trust is determined by the factors that enable trustworthiness. The attributes that are frequently mentioned in literature are ability, benevolence and integrity (Mayer, Davis & Schoorman, 1995; Rudolf, 2009). Ability in this context is defined as skills and competencies of management that contribute to well being (i.e. effectiveness, knowledge of work, quality of decisions). Benevolence is the extent to which the management has the best interest in the organization and its employees. Integrity is the extent to which the management is believable and does what they say (Mayer et al., 1995; Rudolf, 2009).
There are many different definitions to describe the concept of trust, which vary according to different contextual levels; ranging from the individual, to the organizational and the sociocultural (Rudolf, 2009). The definition frequently used in scientific papers is Rousseau’s definition of trust, which is “a psychological state comprising the intention to accept vulnerability based upon positive expectations of the intentions or behavior of another” (Rousseau, et al., 1998). According to this definition, trust consists of two elements: A belief that the other is trustworthy (e.g. the beliefs about another’s integrity and/or competence) and, consequently, a willingness to be vulnerable to his or her actions (Kim, Ferrin, Cooper & Dirks, 2004). This definition implies the perspective of an individual. Remarkable is that trust has mainly been researched from the individual perspective, as individual interpretations of interpersonal relational signals (Six, 2007), while there are hints in literature that trust develop as shared group interpretations. For instance, Sørensen et al. (2011) claim that the development of trust also depends on the interpretation of signals such as strategy plans and policy statements, signals not necessarily mediated through interpersonal contacts, and trust therefore may develop as shared group interpretations of such signals. Besides they emphasize that employees interpret and discuss management behavior and initiatives (e.g. events, policies, documents and systems) as symbols of trustworthiness and that such interpretations of signals are shared in groups as collective constructs. Based on this assumption, this study examines trust at the organizational level as a collective phenomenon. Therefore, the following definition is used in this paper: “An attitude held by employees toward the leadership of the organization that indicates a willingness to be vulnerable to the management” (Korsgaard, Sapienza & Schweiger, 2002, p. 500).
Klarner et al., 2008; Kotter & Schlesinger, 2008; Rudolf, 2009). Trust in management is demonstrated to be essential in implementing strategic decisions and seen as a crucial driver of employee’s openness toward change (Bouckenooghe & Devos, 2007). Employees with a high degree of trust in management believe that the intentions of the management are trustworthy and feel they are respected by the organization. Moreover, they feel there is room to protect their own interests and they are not afraid to be the target of negative initiatives or manipulation (Michaelis et al., 2011). Hence, employees are more likely to focus on the positive side of organizational change projects instead of questioning or criticizing them all the time (Michaelis et al., 2011). This is expected to significantly increase the employee motivation to become involved in change projects.
However, a lack of trust in management can be an obstacle to change and is expected to negatively affect the organizational change capacity. If employees do not trust the change initiators, their acceptance of the change is unlikely (Buono & Kerber, 2010; Klarner et al., 2008; Morgan & Zeffane, 2003). Management plays an important role during organizational change as behavior example. When management does not act conform to what they say and promise, trust in management among employees will decrease (Bouckenooghe & Devos, 2007). This will result in less credence that change is necessary, a loose of confidence in the realization of change benefits and a drop in motivation to support the change (Kotter, 1995). All in all, employees rather think the change might cost them more than they will gain (Kotter & Schlesinger, 2008).
Thus, trust in management can be considered as extremely important for employee involvement during organizational change and the motivation of employees to support the change. Considering that management (e.g. the trustee) depends on the employees’ actions (e.g. the trustors) to accomplish the goals and the objectives they have set (Six, 2007). Management that is perceived as trustworthy makes the change implementation easier, since the employees are more likely to follow the decisions of the management (Klarner et al., 2008). Because of that, organizations with a high level of trust in management are expected to be more capable to change in contrast to organizations with a lower level of trust in management. Therefore, it is reasonable to expect that trust in management positively relates to organizational change capacity.
2.3.2 Change history
Change management research has largely ignored the effects of organizational change history in shaping employee reactions to current organizational events (Pettigrew, Woodman & Cameron, 2001). Previous research has mostly focused on understanding employee responses to one particular change process and overlooked the fact that prior changes play an important role in shaping employee attitudes and behavior to current change processes (Bordia et al., 2011). The organizational change history should be taken into account in order to understand the role contextual forces have in shaping the reactions to change. In this study change history is defined as “the successful or unsuccessful implementation of previous organizational changes” (Bouckenooghe, 2012, p. 580).
The expectancy theory of Vroom (1964) presumes that the beliefs or expectancies of employees about the possibility of successful organizational change are crucial drivers of employee’s motivation to change (Bouckenooghe & Devos, 2007). According to Pettigrew, et al. (2001) “the history of changes in an organization is carried forward in the human consciousness”. What they actually mean with this is that employees with gained experience in change draw on their previous experience to interpret subsequent changes (Randall & Procter, 2008). These experiences are accompanied by feelings which generate positive or negative expectations of future changes (Lau & Woodman, 1995). This frame of reference, based on the past experiences of employees, determine how employees judge and react on current events (van den Bos, Burrows, Umphress, Folger, Lavelle, Eagleston & Gee, 2005) and the extent of efforts they will invest in the change (Lau & Woodman, 1995).
If the past experiences with change have been positive, employees can increase their efforts, while negative experiences with change can result in a limitation of employees’ investments (Bouckenooghe, 2012). The organization’s successful or unsuccessful history in dealing with change therefore strongly influences the commitment to subsequent changes (Bouckenooghe, 2012). Thus, in case of poor change management practices, this not only hurts the change being implemented but can also have damaging effects on future change initiatives (Bordia, et al., 2011). So the employees’ effort to change, which is influenced by the change history, affects an organization’s change capacity. Therefore, change history is tested as a predictor of organizational change capacity.
However, because several authors argue that change history has influence on subsequent changes, it is plausible to assume that there is a connection between change history and organizational change capacity. This influence could be positive or negative. Negative experience with earlier changes is expected to have negative effects on the organizational change capacity. The individual change related experience in an organization will have a significant impact on the feelings of employees towards change (Bordia et al., 2011). If employees perceive the implemented changes as unfair, they will be unwilling to embrace a new change process (Meyer and Stensaker, 2006). Negative experience because of a history of unsuccessful changes or a loss of faith in the change leader has been found to result in cynical feelings (Bordia, et al., 2011; Reichers et al., 1997; Stensaker & Meyer, 2012; Miller, 2004; Walker et al., 2007). Cynicism about organizational change can be described as a pessimistic viewpoint about change efforts being successful because those responsible for making the change are blamed for being unmotivated, incompetent, or both (Bordia, et al., 2011). Organizations that are dominated by a critical mass of individuals who are cynical, will encounter more problems with employee engagement during change initiatives. (Reichers et al., 1997). Hence, cynicism among employees makes it more difficult for organizations to successfully implement changes.
Although exposure to frequent organizational changes can lead to cynicism or change fatigue, it may also generate more positive attitudes towards change (Stensaker & Meyer, 2012). Employees who have undergone a series of changes become used to change and recognize the process which could positively influence the organizational change capacity (Klarner et al., 2008; Stensaker & Meyer, 2012). They suggest a learning effect whereby potentially change capabilities can be developed by 1) transferring specific skills or knowledge and by 2) absorbing and applying new knowledge more efficiently. Managers may transfer experience from an earlier change process to the next, and consequently develop change management skills (Klarner et al., 2008; Meyer & Stensaker, 2006).
In sum, the effects of a negative perceived change history are expected to have a negative effect on the organizational change capacity. On the contrary, the effects of a positive perceived change history are expected to have positive effects on the organizational change capacity because of obtained experiences, skills and knowledge.
As shown in §2.3.1 there is a relation assumed between trust in management and organizational change capacity. It is assumed that the level of trust in management positively influences the organizational change capacity. Trust is developed gradually and incrementally, reinforced by trusting behavior and positive experiences in the past (Bordia et al., 2011; Dirks & Ferrin, 2002; Mayer, et al., 1995; Six, 2007). A study of Grunberg, Sarah, Greenberg and Sikora (2008) explored the several ways employees are affected by far-reaching and complex organizational change. The authors surveyed 525 white- and blue-collar workers during which time the organization experienced, for example, a difficult financial period, several large downsizing events, the implementation of new technologies, and a move toward a ‘flatter’ management structure. They found that in case of downsizing, layoff survivors loss trust in management. A decline in trust, and especially the creation of distrust, may influence subsequent change processes. Bad history of change management will result in lower levels of faith in the ability of the management to manage change and less confidence regarding the successful implementation of changes. Thus, making it more difficult for management to implement intended changes (Bordia et al., 2011; Miller, 2004; Sørensen et al., 2011).
Dirks and Ferrin (2002) conducted a meta-analysis of the determinants and consequences of trust in leadership and found that a history of participative decision-making and fairness of procedures, treatment and outcomes resulted in more trust in the leader. Positive past experience with change provides a sense of safety and trust in management (Bordia et al., 2011; Hopkins & Weathington, 2006; Stensaker & Meyer, 2012). Employees who have been gone through transfers and downsizing argued that it is easier to accept a change that is taking place when previous changes are managed in a good way (Stensaker & Meyer, 2012). Improving the level of trust may reduce the impact a negative decision, such as downsizing, has on the employees (Hopkins & Weathington, 2006). According to Sørensen et al. (2011) trust can be seen as a buffer, preventing negative attitudes such as change cynicism and employee dissatisfaction in periods of change, which may otherwise emerge. Therefore the mediation function of trust in management between change history and organizational change capacity will be tested.
2.4 Organizational systems/processes
2.4.1 Effective communication Both scientists and practitioners generally agree that communication is a central process in planning and implementing change (Armenakis, Harris & Mossholder, 1993; Bordia, Hunt, Paulsen, Tourish & DiFonzo, 2004; Conway and Monks, 2008; Elving, 2005; Field, 2007; Jones, Watson, Garnder & Gallois, 2004). The word ‘communicate’ is historically related to the word ‘common’. It comes from the Latin verb communicare, which means ‘to share’, ‘to make common’. When people communicate, they make things common, whereby shared knowledge or ‘common sense’ is increased (Rosengren, 2000). The definition of Daft (1997) describes this perfectly and will be used in this paper. He defines communication as “the process by which information is exchanged and understood by two or more people, usually with the intent to motivate or influence behavior” (Daft, 1997, p. 560). This definition implies that effective communication consists of two elements; openness (through the disclosure of information) and persuasive (in order to influence the behavior of other people).
Lewis (1999) argues that “the communication process and organizational change are inextricably linked processes”. Previous research often discussed communication as a factor that determines the attitude towards change (Bennebroek Gravenhorst, Elving & Werkman, 2005; Elving, 2005; Elving & Bennebroek Gravenhorst, 2005; Goodman and Truss, 2004). For example, Armenakis et al. (1993) claim that readiness for change can be created by effective communication of the change message. Furthermore, Elving (2005) argue that resistance to change can be reduced or even prevented through effective communication. Finally, many studies have researched the extent to which the provision of information and communication minimizes uncertainty about change (Bennebroek Gravenhorst et al., 2005). Uncertainty has been defined as “an individual’s perceived inability to predict something accurately” (Allen, Jimmieson, Bordia & Irmer, 2007). Research has shown that uncertainty can be assigned to ambiguous or contradictory information, or simply a lack of information (Allen et al., 2007). Because the success of the change is determined by the actions of its members, the organization is only able to change when members’ behavior changes (Elving, 2005). Thus, when readiness for change is high among organizational members and uncertainty and resistance to change levels are low, the effectiveness of the change effort is expected to be higher.
has received less attention so far. Although, the link between effective communication and organizational change capacity has already been made, especially with transparency (Buono & Kerber, 2010; Field, 2007; Judge, 2009; Klarner et al., 2008; Meyer & Stensaker, 2006).
Open and persuasive communication is expected to positively affect the organizational change capacity (Homburg, Klarmann & Staritz, 2012). These authors describe three characteristics of open communication; the disclosure of information about the change must be proactively, promptly and completely. Proactive disclosure of information about the change initiative is necessary to avoid that the management will be suspected of hiding something. Prompt provision of information refers to a timely response to new developments, as ‘subsequent stories never catch up with the original’. Finally, complete disclosure of information is necessary to reduce the risk of false rumors.
Previous studies have identified appropriate communication as an important factor in helping employees understand both the need for change and the personal effects of the change initiative (Goodman & Truss, 2004; Kotter & Schlesinger, 2008; Klarner et al., 2008; Meyer & Stensaker, 2006). This has been regarded as a particularly important prerequisite for successful implementation of the change program (Goodman & Truss, 2004). Previous research is mainly focused on the content of the change message and the communication media (Bennebroek Gravenhorst et al., 2005). For instance, Armenakis and Harris (2002) describe five key components a change message must address for effectively informing and influencing employees. Lengel and Daft (1988) investigated the relationship between richness of communication medium and communication effectiveness. Klein (1996) has examined the specific tactics about what and how to communicate to help facilitate change. These studies have researched how to effectively inform employees and persuade them to take the perspective of the management.
meaningful interactions about change and can result in enthusiasm and commitment to change within the organization. This implies that only one-way communication from the top is not enough to change successfully, since two-way communication will increase the involvement and commitment of employees to change.
In a nutshell, effective communication from management to subordinates, in terms of open and persuasive communication within the organization, will positively influence the attitudes of employees toward change and reduce negative attitudes such as uncertainty and resistance to change. This in turn, is expected to contribute to the organizational change capacity. Therefore, a positive correlation between effective communication and organizational change capacity is expected.
Previous studies have shown that open and persuasive communication is crucial in order to ensure the trustworthiness of the management (Buono & Kerber, 2010). Communication from management can help employees understand the events regarding changes, and can raise levels of trust in management and commitment to changes (Tourish, Paulsen, Hobman & Bordia, 2004). Elving (2005) argues “communication aims for the creation of mutual understandings and trusting relationships”. Michaelis et al. (2009) claim that trust in management is created through open communication and disclosure, because this may give employees a sense of control by feeling protected by the good intensions of management. Based on these findings, trust in management is assumed to explain a part of the effect that effective communication has on an organization’s change capacity. This mediating relationship of trust in management and effective communication on organizational change capacity is expected to have the same effect: the more effective the communication, the higher the level of trust in management.
Hypothesis 3a: The more effective communication, the higher the organizational change capacity
2.4.2 Transformational leadership There is growing evidence that the role of leadership in the change process does significantly influence the success of the change (Conway & Monks, 2008; Cozijnsen, 2004; Higgs & Rowland, 2005, 2010, 2011; Kotter, 1995, 1996; Soparnot, 2011). However, only a few studies have empirically examined the relationship between the role and behaviors of leaders and their followers’ reactions to organizational change (Eisenbach, Watson & Pillai, 1999; Higgs & Rowland, 2010, 2011; Oreg & Berson, 2011). The transformational leadership model developed by Bass (1996) has been one that has been the subject of much empirical research. These studies demonstrated clear linkages between transformational leadership behavior and follower behaviors, but mainly fail to link directly with the change literature (Higgs & Rowland, 2011). The studies of Higgs and Rowland (2000, 2005, 2011) have investigated leadership behaviors and their impact on successful change implementation. Leadership can be described as a social process of influencing the orientation of other people towards the achievement of goals (Shanker & Bin Sayeed, 2012). The following definition of change leadership is used in this study: “The ability to influence and enthuse others, through personal advocacy, vision and drive, and to access resources to build a solid platform for change” (Higgs & Rowland, 2000, p. 124).
Therefore, transactional leaders are generally most effective in stable, predictable environments (Lowe & Kroeck, 1996).
The pace of change organizations are facing nowadays requires more adaptive and flexible leadership (Bass, Avolio, Jung & Berson, 2003). Adaptive leaders make sense of the challenges the organization is confronted with in the rapidly changing environment, and appropriately respond to those challenges by generating creative solutions to complex problems with their followers (Bass et al., 2003). This adaptive style of leadership is referred to as transformational (Bass, 1985).
Two case studies of Klarner et al. (2008) and Soparnot (2011) have shown a positive relation between a transformational leadership style and organizational change capacity. Literature on both organizational change and leadership confirm that especially transformational leadership capabilities are appropriate for leading changes (Eisenbach et al., 1999). Stoker, Grutterink & Kolk (2012) argue that transformational leaders are naturally change agents, because they have the ability to show the future toward subordinates and inspire them to achieve this new future. Oreg and Berson (2011) claim that transformational leaders challenge subordinates to accept innovative solutions to problems and to challenge the status quo. Nemanich and Keller (2007) also argue that transformational leaders are essentially effective in situations of crisis or uncertainty.
Schlesinger, 2008). Besides transformational leaders act as role models for changes, consistently and transparently practice what they preach in order to overcome resistance to change created by the perception that “the boss tell us to do it but do not support it” (Elving, 2005; Oxtoby, McGuiness & Morgan, 2002). These characteristics of transformational leaders are assumed to positively influence employees’ attitudes toward change and in turn will increase the organizational change capacity. Therefore, a positive correlation is expected between transformational change leadership and organizational change capacity.
2.5 Organizational culture
An organizational culture can be defined as a complex set of values, beliefs, assumptions and symbols that define the way in which a firm conducts its business (Barney, 1986). Organizations typically emphasize a culture of stability, predictability and execution (Buono & Kerber, 2010). However, several authors argue that a change- facilitative culture is characterized by fluidity, openness and learning (Buono & Kerber, 2010; Lawler & Worley, 2006; McLagan, 2003). In the next part, a change-facilitative culture will be explained more in depth.
2.5.1 Learning culture Because the pace of change is accelerating as never before, organizations have to cope with the
increasingly complex environment. To cope with the growing complexity the promotion of collective learning is crucial to organizational success (Burns, 2009; Oxtoby et al., 2002). Therefore, knowledge is becoming increasingly important. Organizations that are good in discovering, spreading and managing knowledge are better able to respond and innovate (McLagan, 2003). A learning orientation is an aspect of organizational culture and means that all employees should be committed to learning, be open-minded about the way their work is done, and share a common vision of the purpose and direction of the company (Oxtoby et al., 2002). A learning culture can be defined as “an organization skilled at creating, acquiring and transferring knowledge, and at modifying its behavior to reflect the new knowledge and insights”
(Garvin, 1993, p. 80). What can be derived from this definition is that new ideas are essential for learning to take place (Gravin, 1993). Innovativeness can be considered as an important aspect of a learning culture. Hurley and Hult (1998) define innovativeness as “the concept of openness to new ideas as an aspect of an organization’s culture” (Hurley & Hult, 1998). Jones, Jimmieson and Griffiths (2005) claim that employees who perceive their organizational culture as dynamic and innovative are more likely to have positive attitudes towards organizational change.
According to Buono and Kerber (2010) a stakeholder orientation that emphasizes learning and information sharing, encourages experiments and questions, appreciates alternative viewpoints and tolerates mistakes in the interest of learning are fundamental for an organization’s change capacity. Klarner et al. (2008) suggest that an organization capable of learning facilitates change capacity, because of its ability to constantly evaluate its practices to improve and renew them. The related process of experimentation and development reinforces the perception of employees that change is necessary (Duden, 2011). The reason for this is the ability of reflection. Buono and Kerber (2010) claim that there should not be a focus on simply getting things done at the first time. They argue that experimentation and reflection are necessary in today’s rapidly changing environment. Learning is like a critical view in the mirror and looking to the current behavior. A learning culture ensures that employees evaluate their behavior and processes (Duden, 2011). Because of the critical view of employees on their work practices, employees are more likely to see the need for change and are expected to be more open to new ideas. Marsick and Watkins (2003) identified 7 dimensions of a learning organization. According to their framework, a learning organization (1) provides continuous learning opportunities, in terms of education and growth; (2) promotes inquiry and dialogue to support questioning, feedback and experimentation; (3) encourages collaboration and team learning; (4) establishes systems to capture and share learning; (5) empowers people to have a collective vision; (6) connects the organization to the environment, in order to use information to adjust work practices; and (7) has leadership that support learning. So, a learning culture includes an environment where teamwork, collaboration and innovative practices are stimulated (Joo, Song, Lim & Yoon, 2012).
capacity to understand new ideas. According to Dombrowski et al. (2007) also the encouragement to share knowledge and ideas openly among employees and across business units will contribute to openness to new ideas. Thus, the elements that characterize a learning culture are believed to enhance the openness to new ideas. Therefore, it can be expected that employees working in organizations with a learning culture have a more positive attitude towards change. Hence, it can be assumed that the organizational change capacity will be higher. So, a positive relationship between a learning culture and organizational change capacity is expected.
2.5.2 Accountable culture and performance management
Accountability in organizations is generally defined as being evaluated on what we do and how well we do it (Rieley & Carkson, 2001). Accountable cultures are focused on the outcomes of results, the organization tracks for example whether a deadline was reached or whether activities were executed within budget (Judge, 2011). According to Ulrich, Zenger and Smallwood (1999) this results in on-time projects and productivity. Edgelow (2012) found that there need to be a group of people inside the changing organization that see themselves and are seen by everyone else as entirely in charge of change. Therefore, Edgelow (2012) emphasizes the importance of clear lines of responsibility as a requirement for change. When applying this perspective to the context of organizational change, accountability can be defined as; “whether appropriate managers and employees are held responsible for the consequences of not making needed change” (Smither and London, 2009).
diminish intrinsic motivation. Though, in case of change this seems not to have the same effect. Judge (2011) argues that an organizational culture that supports and encourages accountability is essential for making an organization more change capable. He points out that employees need to be held accountable for delivering results on time and within budget, with the help of effective control and reward systems. As Smither & London (2009) said: “If there are no consequences and no accountability for the needed change, why would the individual change?” Ford and Greer (2005) noticed that a formal control structure is necessary for effective execution of a planned change. Kotter and Schlesinger (2008) also argue that carefully monitoring during implementation is essential to change achievement. Hiatt (2006) emphasizes that building accountability into normal business operations is essential for effective changes, accompanied by performance evaluation programs or compensation systems.
So, this stream of research suggests a positive effect of monitoring and control practices during change implementation. This relation is expected to be reinforced by performance management, through the alignment of the performance expectations with the individual responsibilities. The performance management system can be used to hold employees accountable for the change by including this in their individual performance plans as well (Smither & London, 2009). Performance management refers to “a process that makes sure that individual goals are aligned with the new organizational goals and behavior that supports the change is rewarded” (Alfes & Truss, 2010). It provides a way of conveying employees a desired future direction, the expectations and the required capabilities (Shipton et al., 2012). Performance measurement systems have been identified as one of the common success factors for managing change (Epstein, Manzoni & Davila, 2010). According to Oakland and Tanner (2007) performance measurement enables organization to assessing the levels of performance both before and after the change, and to providing a control during the change. Shipton et al. (2012) suggest that feedback provided during the appraisal process results in a recognition of the gaps between performance and targets, whereby employees are motivated to work innovatively. Conway and Monks (2008) claim that performance management may contribute to the development of continuous commitment to change.
organizational change capacity, which means multiple changes over time. However, it is plausible to expect that the positive relationship between accountable culture and planned change, also applies to an organization’s change capacity. Since these studies show that accountability is beneficially for change, it is expected that an environment that promotes accountability will positively influence the ability to change as a normal response to the environment. Hence, a positive correlation between an accountable culture and organizational change capacity is expected, where performance management is assumed to moderate this relationship.
Hypothesis 5b: The more an organization has an accountable culture, the higher the organizational change capacity
3. RESEARCH METHODS
This chapter describes the research methods that are used in this study in order to test the conceptual model. First, the method of data collection and the sample of this study are explained. Afterwards, the data analysis is described.
3.1 Data collection and sample
Quantitative research has been done to test and refine the conceptual model using a questionnaire. The sample consisted of consultants of the Talent & Organization service line at Accenture. This service line consists of consultants involved in Change Management. The sample consisted of 70 consultants from the BeNeLux and France. In the survey the consultants were asked to recall their last completed change project for answering the questions in the questionnaire. The results are based on change projects at 36 different companies. Since Accenture’s clients are mostly multinationals, the answers were mainly based on change projects at large organizations with many different departments, active in different industries and located in different countries. As the consultants were located throughout The Netherlands, Belgium, Luxembourg and France, data were collected through an online survey. All consultants received an email with the survey link from the researcher inviting them to participate in the study and ensuring the confidentiality of their answers. In addition, an email was sent by the Senior Executives of the Talent & Organization service lines of BeNeLux and France, encouraging employees to participate by stressing the importance of the study to the organization. Finally, the researcher sent two reminder mails to non-respondents.
3.2 Survey
A self-administered survey was used to conduct the research (Keller, 2008). The questionnaire consisted of 53 items. First, a couple of questions were asked about the executed change project. Followed by statements measuring the dependent variable organizational change capacity and the independent variables trust in management, change history, effective communication, transformational leadership, accountable culture, learning culture and performance management. Finally, the control variables gender, age, work experience and nationality were asked. The demographic questions were deliberately asked at the end of the questionnaire to avoid negative feelings about the provision of personal information, which could negatively affect the answering behavior or preparedness of respondents to answer questions (Lietz, 2010).
Established scales were used to measure the constructs. The original scales were written in English, as well as the scales included in the questionnaire. The respondents were asked to rate their opinions on a 7-point Likert scale ranging from (1) strongly disagree to (7) strongly agree. The questionnaire was kept as short as possible to encourage respondents to complete the survey (Keller, 2008). Therefore, some original scales were reduced to a lower number of items (see 3.3.3 dependent variable and 3.3.4 independent variables). Before the survey was sent out, a pre-test was done with 3 consultants. As a result, a few adjustments were made in the questionnaire in the order of the questions and some small additions to the items (see 3.3.4 independent variables; change history scale and performance management scale), in order to make the questionnaire logically constructed and more understandable. The questionnaire can be found in Appendix A. Questionnaire.
3.3 Measurement scales
TABLE 1
Measurement scales per variable
Variables Measurement scale(s) per variable
Organizational change capacity Organizational Efficacy Scale (Bohn, 2010) Trust in management Ellis and Shockley-Zalabak (2001)
Change history DINAMO (Metselaar, 1997)
Effective communication OCQ-C,P,R (Bouckenooghe, Devos & van den Broeck, 2009)
Transformational leadership Leader Behavior Scale (Podsakoff, MacKenzie, Moorman & Fetter, 1990)
Learning culture DLOQ (Marsick and Watkins, 2003) & IOCC (Judge and Douglas, 2009)
Accountable culture IOCC (Judge and Douglas, 2009)
Performance management Discretionary HR Practices Scale (Gavino, Wayne & Erdogan, 2012)
3.3.1 Factor analysis
A factor analysis was performed to define the underlying structure among the variables with the objective of grouping highly intercorrelated variables together (Hair, Anderson, Babin & Black, 2009; Malhotra, 2010). The principal component analysis was conducted to test the validity of the scales using the Varimax rotation technique. On beforehand the appropriateness of factor analysis was examined by testing if a substantial number of correlations between the variables were greater than 0.3, if the Bartlett’s test of sphericity was significant at p< .05 and the Kaiser-Meyer-Olkin (KMO) value was higher than 0.6 (Hair et al., 2009). The data met all these statistical requirements. Therefore it was decided to proceed with the factor analysis.
time. Therefore, the factor analysis has been conducted in 4 times. First, the items for the dependent variable organizational change capacity and the items for the independent variable trust in management were included. The second analysis contained the items for change history, effective communication and performance management. The third analysis contained the items for learning culture and accountable culture. Finally, the items for transformational leadership were put together in the last analysis. The analyses are presented in Appendix B. Factor Analyses.
The factor analyses based on Eigenvalue > 1.0 were run. The variables were identified as significant if the loading on one factor had a minimum value of 0.5 and a maximum value of 0.3 on the other factors. The items with cross-loadings – a loading above 0.3 on more than one factor – and low difference between two or more factors were deleted. During the factor analyses the reliability of the scales was monitored carefully.
3.3.2 Reliability analysis The reliability of the scales was measured with Cronbach’s Alpha to check the internal consistency reliability. A Cronbach’s Alpha of .70 or higher is considered to be acceptable (Hair et al., 2009).
3.3.3 Dependent variable
3.3.4 Independent variables
Trust in management – To measure trust in management the scale developed by Ellis and Shockley – Zalabak (2001) was used. The original scale consists of 6 items. An example of an item is: “Management is sincere in their efforts to communicate with employees”. During the factor analysis these items loaded within its own component. The scale has an alpha (α) of .85. Change history – For measuring change history a shortened version of the scale developed by Metselaar (DINAMO: 1997) was used. Bouckenooghe and Devos (2007) made a reduction of the scale of Metselaar (1997) to 4 items. These items have also been selected for this research. An example of an item is: “The organization has always been able to cope with new situations”. As a result of the pre-test, two adjustments suggested by the test group were made, to make the items more concrete. The item “Past changes generally were successful” was adapted to “Past change programs in the organization generally were successful” and the item “The company has proven to be capable of major changes” was slightly adapted to “The company has proven to be capable of implementing major changes”. The items loaded in the same component during the factor analysis, with an alpha (α) of .78. Although item 3 showed a cross loading of .36 in the effective communication scale, it was decided to enclose the item because of a high main loading on change history and a decrease of the alpha from .78 to .76 when this item was deleted.
Transformational leadership – For measuring transformational leadership the 23-item scale of Podsakoff et al. (1990) was used. Stoker et al. (2012) suggested a reduction of the scale of Podsakoff et al. (1990) to 6 items to measure overall transformational leadership. This shortened version was also used in this research. In line with the study of Stoker et al. (2012) the subdimensions were combined to one scale, because examining the different subdimensions of transformational leadership was not relevant for testing the hypothesized effect. An example of an item is: “The leader inspires others with his/her plans for the future”. The items related to the leader are adapted to items related to the organization’s leadership, where organization’s leadership was described as the line management of the organization. During the factor analysis the items not loaded in one component. Therefore, the items 4, 5 and 6 were deleted whereby the alpha (α) was increased from .76 to .83.
loading (smaller than .50) and after removing these items the alpha (α) slightly increased with .1. to .75.
Accountable culture – For measuring an accountable culture, the scale developed by Judge and Douglas (IOCC: 2009) was used. The scale comprises 4 items measuring an accountable culture. An example of an original item is: “Employees throughout the organizational unit experience consequences for outcomes of their actions”. Because some of these items are difficult to answer for consultants, the items are adapted in such a way so that consultants can easily assess whether the organization has an accountable culture. An example is of an item is: “In the organization, people are held accountable for outcomes of their actions”. During the factor analysis these items loaded within the same component. The scale has an alpha (α) of .82.
Performance management – Performance management was measured with the scale developed by Gavino et al. (2012). The original scale consists of 4 items measuring performance management. A sample item is: “Employees have frequent discussions with their manager about their performance”. The definition of performance management used in this paper is ”a process that makes sure that individual goals are aligned with the new organizational goals and behavior that supports the change is rewarded”. Because this definition also includes rewarding, the pay for performance scale developed by Gavino et al. (2012) is used in the questionnaire as well. An example of an item is: “There is a link between how well employees perform their job and the likelihood of receiving a raise in pay”. From both scales 2 items has been selected for this research. As a result of the pre-test, the item “Employees understand what their performance will be based on” was slightly adapted with an addition of the word ‘evaluation’ to make the item more concrete. This resulted in the following item: “Employees understand what their performance evaluation will be based on”. The factor analysis showed that the performance management items loaded within its own component with an alpha (α) of .77. Although item 4 showed a cross loading of .37 in the change history scale, it was decided to enclose the item because of a high main loading on the performance management scale and a decrease of the alpha from .77 to .72 when this item was deleted.
control variables are used to test whether they may affect the outcomes in order to look if the findings are generalizable in every respect (Cooper & Schindler, 2008). However, the correlation analysis showed that the control variables were uncorrelated with the other variables. Therefore, the control variables were not used during the regression analysis.
3.4 Data analysis
The statistical program SPSS version 20.0 was used to analyze the gathered data in order to test the hypotheses. First of all, the surveys that were partially completed were removed from the database. Hereafter the negative formulated items were reversed in positively formulated items. These recoded items are marked (*) in Appendix A. Questionnaire. Next to this, a missing value analysis was conducted, which revealed no significant missing values. The questions that were not answered by the respondents were indicated as missing value, so that they were not included in the analysis. Furthermore, an analysis of potential outliers showed no problematic cases.
3.4.1 Preliminary analyses A descriptive analysis was performed to check the demographics of the sample. Subsequently, a correlation analysis was performed with the Spearman’s Rho correlation coefficient. This correlation coefficient indicates the direction and strength of the relation between two variables (Hair et al., 2009). The analysis has been done 1-tailed, as the hypotheses are all positive formulated.
3.4.2 Multicollinearity Before starting the regression analysis, there should be tested whether there is multicollinearity. Multicollinearity exists when there are very high intercorrelations among the independent variables (Malhotra, 2010). To test for the presence of multicollinearity, the Variance Inflation Factor (VIF) and the tolerance values were checked for all variables. The VIF should be <10.0 and the tolerance value should be >.10 indicating a low degree of multicollinearity. The values indicated low and acceptable levels of multicollinearity. Therefore, all variables were included in the regression analysis. The independent variables were standardized prior to the analysis to minimize the impact of multicollinearity (Aiken & West, 1991).
3.4.3 Regression analysis A regression analysis was performed to the test the hypotheses to see whether they should be accepted or rejected. Some assumptions of linear regression were considered before the regression analysis could be performed, including linearity, normal distribution, homoscedasticity and independence of errors. According to Green (1991) the general rule for applying regression is a minimum of 50 participants, where the sample size for testing multiple regression should be at least N ≥ 50 + 8 m (m is the number of independent variables). Therefore, the hypotheses were tested with 9 singular regressions.
3.4.4 Mediation and moderation procedures
In this section the procedure for testing hypotheses including a mediation or moderation effect is briefly described. In paragraph 4.2 Regression analysis can be found whether the mediator and moderator hypotheses are supported.
Mediation – A variable is said to function as a mediator to the extent that it accounts for the relation between the independent variable and the dependent variable (Baron and Kenny, 1986). A variable functions as a mediator when it meets four conditions (see Figure 2. Mediational model). First of all, there should be a significant relation between the independent variable and the mediator (Path a). Secondly, there should be a significant relation between the mediator and the dependent variable (Path b). Thirdly, there should be a significant relation between the independent variable and the dependent variable (Path c). Finally, when the mediator is included in the regression analysis, the previously significant relation that existed between the independent and dependent variable should not be significant anymore. Thus, when the significant relation between the independent variable and the dependent variable totally disappears, then the variable fully functions as a mediator.
Moderation – A variable is labeled as a moderator when it affects the direction and/or strength of the relation between an independent variable and a dependent variable (Baron & Kenny, 1986). The moderator model is displayed in Figure 3. Path a shows the impact of the independent variable on the dependent variable. Secondly, path b shows the impact of controllability the variable has as a moderator. Finally, path c shows the interaction between the independent variable (predictor) and the moderator. The moderator hypothesis is supported if the interaction (Path c) is significant. Additionally, it is desirable that the moderator variable be uncorrelated with both the independent variable and the dependent variable (Baron & Kenny, 1986).
