This eBook has been created ahead of the Process Transformation Week, in order to examine the reasons driving change in enterprise, common ways that change efforts fail, and explores a simple formula to help you better manage the “change equation”.

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Management Insight
for effective
organisational
change
PEX Network Article
Compilation
By: DR. Robert Swaim

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INTRODUCTION
Overcoming resistance to change is usually cited as
one of the biggest challenges in the work of a
continuous improvement practitioner. Yet, as
volatile markets and technological disruption
continue to accelerate the pace at which
companies must respond to change, it is clear that
companies must get better – and faster – at
dealing with it.
It was originally published as a series of 4 articles
on PEXNetwork.com. To read the original articles,
please visit:
www.pexnetwork.com/columnists/the-druckerfile/
All too often, the challenges associated with
organisational change are attributed to a problem
with people. People are said to be resistant to or
afraid of change. But are they really?
Why people aren’t as afraid of change as you think
We have to make changes all the time in our
personal lives. Many of these – starting a new job,
the purchase of a new house, getting married – are
the cause of celebration and eagerly anticipated.
Sometimes, though, more difficult changes need
to be adopted.
We hope that you enjoy this article compilation.
Organisational change is a well trodden path; the
key is to learn to apply the lessons of those who
have gone before.
This article compilation, of a series of columns
authored by Dr. Robert Swaim published on
PEXNetwork.com, explores the enduring truths on
managing change in the works of management
consultant Dr. Peter F. Drucker – who has been
hailed as one of the greatest management thinkers
of the last hundred years. It examines the reasons
driving change in enterprise, common ways that
change efforts fail, and explores a simple formula
to help you better manage the “change equation”.
9 reasons organisations need to change
Eight reasons change efforts fail
Four steps to managing the change equation

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“People are not stressed
because there’s too much
change in organisations,
but because of the way
change is made.”
- Rd. Peter F. Drucker, Management
Challenges for the 21st Century

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DRUCKER STRATEGIES FOR EFFECTIVE
ORGANISATIONAL CHANGE
By Dr. Robert W. Swaim
Organisations change for a number of different
reasons, so they can either react to these reasons
or be ahead of them. These reasons include:
external environment.
#1. Crisis:
Mergers and acquisitions create change in a
number of areas often negatively impacting
employees when two organisations are merged
and employees in duel functions are made
redundant.
Obviously September 11 is the most dramatic
example of a crisis which caused countless
organisations, and even industries such as airlines
and travel, to change. The recent financial crisis
obviously created many changes in the financial
services industry as organisations attempted to
survive.
#2. Performance gaps:
The organisation's goals and objectives are not
being met or other organisational needs are not
being satisfied. Changes are required to close
these gaps.
#3. New technology:
Identification of new technology and more
efficient and economical methods to perform
work.
#4. Identification of opportunities:
Opportunities are identified in the market place
that the organisation needs to pursue in order to
increase its competitiveness.
#5. Reaction to internal & external pressure:
Management and employees, particularly those in
organized unions often exert pressure for change.
External pressures come from many areas,
including customers, competition, changing
government regulations, shareholders, financial
markets, and other factors in the organisation's
#6. Mergers & acquisitions:
#7. Change for the sake of change:
Often an organisation will appoint a new CEO. In
order to prove to the board he is doing something,
he will make changes just for their own sake.
#8. Sounds good:
Another reason organisations may institute certain
changes is that other organisations are doing so
(such as the old quality circles and re-engineering
fads). It sounds good, so the organisation tries it.
#9. Planned abandonment:
Changes as a result of abandoning declining
products, markets, or subsidiaries and allocating
resources to innovation and new opportunities.
WHAT ORGANISATIONS CAN CHANGE
What organisations can change fall into the
following broad areas:
#1. Mission, vision, & strategy:
Organisations should continually ask themselves,
"what is our business and what should it be?"
answers to these questions can lead to changes in
the organisation's mission (the purpose of its
business), its vision for the future (what the

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If business as usual isn’t working, it’s time for change
organisation should look like), and its competitive
strategy.
#2.Technology:
Organisations can change their technology (for
example the way they produce whatever they sell)
in order to increase efficiency and lower costs.
#3.Human-behavioural changes:
Training can be provided to managers and
employees to provide new knowledge and skills, or
people can be replaced or downsized. As result of
the recent financial crisis, many organisations
downsized creating massive unemployment that
continues to this day.
#4.Task-job design:
The way work is performed in the organisation can
be changed with new procedures and methods for
performing work.

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#5.Organisational structure:
Organisations can change the way they are
structured in order to be more responsive to their
external environment. Again, to be more
responsive to the marketplace, this also includes
where decisions should be made in the
organisation (centralized or decentralized).
#6.Organisational culture:
Entities can attempt to change their culture,
including management and leadership styles,
values and beliefs. Of all the things organisations
can change, this is by far the most difficult to
undertake.
These are the major elements that organisations
can change. It is important to note that changes in
one of these elements will usually have an impact
on another element. As an example, changing
technology may require changes in the humanbehavioural area (new knowledge and skills on
how to use the technology).
WHY PEOPLE AREN’T AS AFRAID OF
CHANGE AS YOU THINK
Peter Drucker spoke of the need for organisations
to become “change leaders.” In today’s rapidly
changing environment, he stressed that mangers
must be able to anticipate, plan and lead change
efforts in their organisations. Managers must also
be able to create an organisational environment
where change is seen as an opportunity, not a
threat and resisted.
Drucker also stated, “The organisations most likely
to suffer the most are those with the delusion that
tomorrow will be like yesterday.”
This section deals specifically with why many
change efforts are resisted or why some feel
people are afraid of change. Concepts from the
field of organisation development are also
included to supplement Drucker’s views.
For a more comprehensive discussion of managing
complex organisational change including change
strategies, tactics and the
action research model please refer to the author’s
book, the Strategic Drucker.
ARE PEOPLE AFRAID OF CHANGE?
Are people really afraid of change? Why do they
resist change? Witness the riots in the streets of
Athens a few years ago as a result of the
government’s efforts to deal with Greece’s
financial crisis. These groups were resisting the
efforts of their government’s leaders and fearing
personal loss as a result of the changes being
proposed. We have also seen governments
resisting change in the Middle East and North
Africa such as in Egypt and Syria where they have
relied on armed force to quell these change
leaders.
On the other hand, if people are really afraid of
change, how do we explain the election victory of
a little known junior senator from Illinois, Barack
Hussein Obama, whose 2007 platform was based
on hope and change with the slogan of “change we
can believe in”?
RESISTANCE TO CHANGE AND
PERCEIVED LOSS
It’s not accurate to say that people are “afraid of
change”. Rather, those who will be impacted by
the change effort may resist the change effort for
numerous reasons such as in the previous
examples of the mobs.
In actuality, though, I prefer to state there is no
such thing as resistance to change but rather there
is perceived loss or what people think they will
lose as a result of the change effort or in some
cases, actual loss.
These major sources of resistance to change
include:
Source #1: Uncertainty about the causes and
effects of the change
People avoid uncertainty (risk); established
procedures are well known and predictable.

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
Lack of trust – distrust of any changes
instituted from above.

Need new skills – may need to learn new
skills or information. Could have an initial
negative impact on performance and
impact
rewards
(compensation,
promotion).

Negative performance – change may be
interpreted as not doing present job well.
Loss of power, prestige, salary, quality of work,
and other benefits (security) - the riots in Athens,
and London can be attributed to this factor. These
mobs are all going to lose certain benefits as a
result of their governments’ attempt to deal with
their financial crisis and massive debt.
Source #3: Awareness of a weakness in changes
being proposed

Potential problems overlooked by
initiators of the change (“we tried this
before and it didn’t work.”)

Plan to introduce the change considered
to be too complicated, costly, and too
time consuming. May also disrupt current
operations.

Lack of credibility of the change leader change leader may not be respected by
the organisation or have credibility. Has
Source #2: Unwillingness to give up existing
benefits (perceived loss)
Unwillingness to give up tasks and relationships the massive restructuring of the U.S. healthcare
industry through the passage of “Obamacare” has
been highly resisted as many feel they will lose the
relationship they have with their present
physician.

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this person been able to produce results
before? What experience does the
change leader have in previous change
efforts?
INCREASING RESISTANCE TO CHANGE
All of these factors contributing to resistance or
perceived loss will increase if:

Change perceived as threatening – change
is seen as threatening if not perceived as
helpful.

Change not requested by impacted group
– change will be opposed by the impacted
group unless they have specifically
requested it.
The previously described mobs all strongly resisted
because of these two factors. The change agents
(government leaders) did a relatively poor job of
communicating why the changes would be helpful
to their counties and state as well as why there
was a sense of urgency to prevent a financial crisis
and national disaster. Once again this deals with
not managing the “change equation” properly as
will be covered shortly.

Line management did not request change
– change will be opposed by management
as a real or imaginary threat to their
prestige and authority unless they have
specifically requested the change.

Group opposition – group opposition is
usually more than the sum total of
individual’s opposition (2 + 2 = 6).

Magnitude of the change – the greater
the change, the greater the opposition by
the impacted groups. Once again, the
mobs’ opposition was greater than any
one individual’s and particularly impacted
by the magnitude of the changes required
to avert the financial crisis facing their
governments.
These factors that increase resistance can be
potentially
reduced
by
communicating the benefits of the change and
that there is also continuity with the change. Also,
the greater the prestige of the manager supporting
the change effort, or that of the change leader, the
greater influence he or she can exert for the
change.
Providing information as to the seriousness of the
situation now and the potential benefits of in the
future as a result of the change can substantially
reduce this resistance. Involving members of the
impacted groups in the planning process can also
create internal pressure for the change as they will
have ownership in the change effort and therefore
be more committed to the change – selling the
benefits of the change to their other group
members.
WHY CHANGE EFFORTS FAIL:
According to Drucker, people really do not resist
change. It is the way changes are introduced in
organisations that they often object to. What then
are some of the errors that are made when a
change effort is introduced which creates
resistance and hinders the success of their change
efforts?
These errors, which are presented
organisational change context include:
in
an
Error #1: Not establishing a great enough sense of
urgency
Opportunities are lost because the organisation
fails to establish a sense of urgency as to why the
change is needed.
Error #2: Not creating a powerful enough and
guiding coalition
Organisations fail to assemble a group with
enough power and prestige to lead the change
effort and also may not have top management’s
commitment and full support.
Error #3: Lacking a vision
Organisations fail to create a vision for the future
to help direct the change effort – what will be

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different after the change? What will be
preserved? What is the strategy and objectives for
achieving the vision?
Error #4: Under-communicating the vision
Organisations fail to communicate a vision for the
future. What the organisation will look like as a
result of the change? The vision has to be
presented as an opportunity, not a threat.
Error #5: Not removing obstacles to the new
vision
Systems, policies, or structures that seriously
undermine the vision are not dealt with and
removed.
Error #6: Not systematically planning & creating
short-term wins
resistance.
Also, in addition to describing the vision (what the
organisation will look like after the change), it is
important to communicate what will be preserved.
Equally important, is communicating the
relationship or linkage between the planned
change and the overall direction of the
organisation. That the change is consistent with
the organisation’s mission, vision and values.
“When you introduce change, it’s very important
to maintain continuity and the commitment to
fundamental values, which don’t change,” said Dr.
Peter F. Drucker
DRUCKER AND WHAT ORGANISATIONS
SHOULD NOT CHANGE
Individuals are not recognized or rewarded for
performance improvement as a result of their
change efforts.
There are a number of things, according to
Drucker, that organisations should not change.
These things are mainly in the human-behavioural
area and include:
Error #7: Declaring “victory” too soon
The need for recognition:
Organisations fail to monitor the progress of their
change efforts and evaluate results. Oftentimes,
victory is declared when the change has not been
totally implemented.
Employees need to be recognized for their
contribution. Although changes may be required in
the organisation, employees must be assured that
they are doing some things “right” and that the
changes being made are not as a result of, or a
reflection of their performance.
Error #8: Not anchoring
organisation’s culture
changes
in
the
Organisations fail to have employees accept the
change as the way things will be done from now
on and as such, they revert to their old familiar
ways of doing things.
CHANGE AND THE NEED FOR
CONTINUITY
According to Drucker, change should also be
accompanied with continuity. Education and
communications are extremely important relative
to changes the organisation plans to implement.
Part of these communications must include what is
going right in order to reinforce morale, protect
self worth, build creditability, and reduce potential
The need for respect:
Regardless of what changes may be required,
individuals in the organisation must continue to be
treated with respect. One way of providing respect
is to continually communicate why the change or
changes are necessary.
The need for trust:
Employees must continue to have trust in their
management. One way of maintaining trust when
change efforts take place is to communicate to
employees what will be preserved and that the
changes are consistent with the organisation’s
mission, objectives, vision and strategy.

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Compared to this, the formula for managing change is quite simple!
The need to feel productive:
work.
According to Abraham Maslow and his “hierarchy
of needs theory,” people strive for self
actualisation, the need to be able to utilise their
knowledge and skills in performing meaningful
work. Although changes may be taking place, there
needs to be continuity with respect to people’s
Changes which are being implemented must
appear to be consistent with the direction and
vision of the organisation and individual
contributions.

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The need to grow:
Organisations must continue to provide their
managers and employees with an opportunity to
learn and grow. Change can be a very positive
opportunity to provide personal learning and
growth opportunities.
A FORMULA FOR HANDLING CHANGE
The following is a discussion of a tool that can be
used early on in analysing and planning the change
effort, the “change equation” as depicted in the
following equation:
C= (F-N) X P > R
Change = (Future - Now) X Plan > Resistance
It is important to note for the mathematically
inclined that the equation is used for illustrative
purposes and cannot be quantified. The elements
of the equation include:

c - the desired change

f - the situation in the future (desired
state or vision) as a result of the change

n - the situation now

p - the plan of how to get from the now to
the future

r - potential resistance to the change
It should be noted that the r could also be denoted
as pl or perceived loss. That is, what those who will
be impacted by the change effort perceive they
will lose as a result of the change (power, prestige,
benefits, reporting relationships, authority and
responsibility, etc.) as discussed in the previous
section.
If the sum of the future minus the present is
positive, and multiplied by the change plan is
greater than the potential resistance, the change
effort will be successful.
MANAGING THE CHANGE EQUATION
The following is a discussion of each element of
the equation and how the change leader can
manage it.
Change Equation Step 1 – Managing the “n”
The first step in managing the change equation
deals with “n” or the situation “now.” The change
leader must create dissatisfaction with the present
situation and create an awareness of a need for
change.
As an example, “customers are complaining about
our products’ poor quality. We are losing sales and
good customers as a result. If this continues we
may have to close the plant, lay off workers, etc.”
The job here is create as much dissatisfaction with
the present situation as possible (deficits or (-)).
Using education and communication and
involvement and participant tactics are
recommended here. Share information with those
that will be impacted by the change such as results
from customer surveys, task forces, focus groups,
etc.
As Drucker pointed out, it is also important to
acknowledge what is going right and that not
everything needs to be changed. This is important
to reinforce morale, protect other’s self-worth,
build creditability in the change leader, and helps
to reduce resistance.
Change equation step 2 – managing the “f”
Managing the “f” presents a vision for the future –
what will things be like after the change? Here it is
necessary to show the benefits of the change as
well as what will be preserved. The goal is to
create and present the value (+) of moving to the
future, that deficits (-) will be removed,
organisational needs will be satisfied, and value
will be obtained. Also, convert any potential
perceived loss (resistance) into gain.
In communicating the future, the communications
campaign should include:

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
Whether the way people work will
change.

What new skills may be required and how
they will be provided.

Whether people will have to behave
differently.

Whether the change will present a good
opportunity for the people or there may
be some negative consequences.

Link the change effort to show
consistency with the organisation’s
mission, vision, and values.

How
the
change
supports
the
organisation’s business direction and
objectives.

Focus on people – they need to feel
valued and included.
The figure below illustrates how the first two
elements of the change equation (now, and
future) should be managed:
Change Equation Step 3 – managing the “r”
Managing the “r” deals with those who will be
impacted by the change effort and overcoming
potential resistance or perceived loss or what
people think they will lose as a result of the change
effort. Participation and involvement strategies
and tactics are most appropriate to use here –
involving those who will be impacted by the
change or representatives of those groups in the
change planning process in order that they gain a
sense of ownership in the desired change. Care
must be taken however to ensure that the horse
does not become a camel because of their
involvement.
Change Equation Step 4 – Managing the “p”
As pointed out, having an incomplete plan can
contribute to resistance to the change effort.
Therefore, it is essential that the plan meet the
following criteria:
1.
The plan must not be complicated and
should be easily understood.

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2.
The plan must be perceived as doable and
present the credibility of the change
leader.
3.
The plan must not consume large
amounts of time or resources or be
disruptive to operations.
4.
The plan must indicate what will be
preserved.
Other criteria includes involving those who will be
impacted by the change effort in the planning
process and communicating that the plan will be
successful and produce the desired results.
Elements of the plan
The change effort plan should include the
following elements:
1. Description of the “n” & “f” – What the
organisation looks like today and what you want it
to look like after the change.
2. Communications plan – Informing everyone
about the change, as well as keeping them up-todate as your change effort evolves.
3. Recognition plan – How you will celebrate
successes and reward those employees that
support you and your change effort?
4. Guidelines – Defining processes, roles and
responsibilities in order to reduce conflict and
potential power struggles.
5. Measurements – Identifying accountability and
tracking success.
There are many benefits to having a good change
effort plan. First, it acts as a roadmap and lets
everyone know where we are going, how to get
there, and when we have arrived.
Second, it is a communications tool that lets
everyone know why the change is needed, clarifies
any misunderstandings, tells employees what they
need to do, and what they can expect of you.
Third, it is a marketing tool to help sell the
employees on the change effort. Other benefits
include; a quality assurance tool to provide quality
control of the change effort, a credibility builder to
let employees know you are in charge and in
control, and a resistance reducer providing
evidence that the change effort will be a success.
As can be seen, the change equation can be a good
diagnostic tool in analysing and planning a change
effort. Experienced change leaders use this tool
early in the process to help determine what groups
might be impacted and potentially resist the
change effort and thus select the appropriate
change strategies and tactics.
But, if at the end of this series you still have any
hesitations about your ability to make change
happen, I refer you to this quote by Peter F.
Drucker: “To try to make the future is highly risky.
It is less risky however, than not to try to make it.”

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“This is a new era of
opportunity, but only for
those who are willing to
accept change as an
opportunity, not for those
who are afraid of it.”
- DR. Peter F. Drucker

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ABOUT THE AUTHOR
Dr. Robert W. Swaim was a colleague and personal friend of Dr. Peter F.
Drucker for nearly thirty years and worked with him for five years prior to his
death to develop both the Drucker EMBA and executive development
programs that are now offered in china. He is no doubt the foremost authority
in Asia on Drucker’s work and in this article he attempts to relate a number of
Drucker’s concepts to today’s present uncertain environment – what would
Drucker have said about this and would his concepts still be applicable? Dr.
Swaim also expands on these views in his new book that was released in 2010,
the strategic Drucker: peter Drucker’s strategies for business growth published
by John Wiley and Sons (Asia) PTE Ltd.

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INTERESTED IN LEARNING MORE?
The themes explored in this article compilation will be
discussed in more detail at Process Transformation
Week 2014 as Senior Process Executives from across
Europe and the Middle East will come together to debate
the issues and identify solutions to today’s most pressing
process challenges 7-9 April 2014 in London, UK. Find
out how process excellence can help support and
accelerate transformational change.
HOT TOPICS AT PROCESS TRANSFORMATION WEEK 2014:

Driving process innovation for breakthrough business performance and competitive
advantage

Breaking down functional silos to manage processes end-to-end and enable greater
business agility

Taking advantage of next generation technologies - big data, cloud, mobile, social - to
create the business operations of the future

Transforming culture and employee behaviours to embed operational excellence and
customer focus throughout your organisation
To find out more about the event, and find the sessions that will help your change initiatives
deliver greater business value please visit:
http://www.processtransformationweek.com/Brochure.aspx