Leading Change: Key Factors for Success

Change Management:
Some preliminary key factors
to succeed in leading people

Authors: Pierre LE JEAN Tutor: Pr. Dr. Philippe DAUDI
Subject: Business Administration
Leadership and management Level and semester: Master's thesis, Spring 2
in International Context

Acknowledgment

First of all, i would like to thank two persons who especially helped me, without
whom the realization of the Master Thesis wouldn‟t have been possible, Philippe DAUDI and
Pierre JUHEL.

I would like to express my gratitude to my tutor, Mr Philippe DAUDI, for his support,
encouragement, availability and the advices‟ wealth. Throughout the realisation of my
Research, he gave me the motivation and a considerable energy. He offered me the
opportunity to complete this Thesis.

The second person that allows me to accomplish this Master thesis is my translator,
Mr. Pierre JUHEL. Since the beginning of this enterprise, he has shown reactivity and
availability.

Furthermore, they believed in me. I wish to thank all my family members for having
supported me and encouraged since the beginning of this adventure. Their presence offered
me the daily energy required until the end of the Thesis. I would like to give a particular
recognition to my father. His professional experience, skills and his advices have been a
precious help.

My dear friends also deserve to be well rewarded. We have always been used to see
each other often and they have perfectly understood my frequent unavailability along this
year. They have supported me and have shown me their presence without disturbing my work.
Their constant presence helped me to overtake rough times.

Thanks to all to have made it possible!

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Table of Content

Chapter 1 : Introduction .............................................................................................................. 7

1.1.Context of the research ......................................................................................................... 7

1.2.Why should managing the process of change be studied? ................................................. 7

1.3.Why should leadership in the process of change be studied? ............................................ 9

1.4.How is organization identity essential in the process of change? ................................... 10

1.5.Identity the change in organization needs to be managed ................................................ 11

Chapter 2 : Purpose of the research......................................................................................... 12

2.1. Research Questions............................................................................................................ 12

2.1.1. Main research question. ............................................................................................. 12

2.1.2. Related research questions. ........................................................................................ 12

2.3. Research objective ............................................................................................................. 13

Chapter 3 : Methodology ........................................................................................................... 14

3.1. Justification and motivation .............................................................................................. 14

3.2. Research approach ............................................................................................................. 15

3.2.1. Empirical research strategy........................................................................................ 15

3.2.2. Interpretive framework .............................................................................................. 15

3.2.3. Scientific approach ..................................................................................................... 16

3.3. Qualitative approach .......................................................................................................... 16

3.4. Data collection ................................................................................................................... 17

3.4.1. Primary data ................................................................................................................ 17

3.4.2. Secondary data............................................................................................................ 20

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Chapter 4 : Theoretical Framework ........................................................................................ 21

4.1. Understand the Change within Organizational and business Systems ........................... 21

4.2. Types of change ................................................................................................................. 27

4.2.1 Discontinuous and Continuous Change ..................................................................... 27

4.2.2. Endogenous and exogenous who lead to change ..................................................... 30

4.3. Change and rigidities to change ........................................................................................ 44

4.3.1. Typical Organizational Rigidities to Change ........................................................... 44

4.3.2. Resistant of Management Change and Transition.................................................... 47

4.4. Change implementation process and keys success factors ............................................. 51

4.4.1. Implement change, the Lewin's three -Step model. ................................................. 51

4.4.2. Keys success factor in change implementation ........................................................ 53

4.5. Human factor Management a leader's key success factor in the process of change...... 55

4.5.1. Identify the stages of competence development....................................................... 56

4.5.2. Identify the styles of management. ........................................................................... 58

4.5.3. What kind of management, and for what kind of associate? ................................... 60

Chapter 5 : Empirical study ...................................................................................................... 62

5.1. Case Study one: Yacht Brokerage Insurance Agency ..................................................... 62

5.1.2. Presentation of the case study .................................................................................... 62

5.1.2. Type and origin of change ......................................................................................... 67

5.1.3. Strategy and process of change ................................................................................. 68

5.1.4. Rigidities management strategy ................................................................................ 69

5.1.5. Conclusion .................................................................................................................. 69

5.2. Case Study two: French Company ................................................................................... 70




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5.2.5. Conclusion .................................................................................................................. 74

5.3. Case Study three: Spanish subsidiary ............................................................................... 74





5.3.5. Conclusion .................................................................................................................. 79

5.4. Case study four: French Multinational ............................................................................. 80





5.4.5. Conclusion .................................................................................................................. 82

Chapter 6 : Conclusion............................................................................................................... 84

Literature Review ....................................................................................................................... 86

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List of figures

Figure 1 - The Agreement Matrix ................................................................................................ 25

Figure 2 - Evolution and Revolution Dealing with the Paradox ................................................ 29

Figure 3 - Reengineering Work - Hammer ................................................................................. 29

Figure 4 - Scope of Frame-Braking Change - Tushman and Romanelli ................................... 30

Figure 5 - Evolution and Revolution as Organisational Grow ................................................... 33

Figure 6 - Organizational Life Cycles and Shifting Criteria of Effectiveness .......................... 34

Figure 7 - Organization Life Cycle .............................................................................................. 35

Figure 8 – Five Forces Michael E. Porter .................................................................................... 38

Figure 9 - The Relationship between Culture Types and Individual Consequences ................ 47

Figure 10 - Corporate transformations as a countercurrent process - Krüger ........................... 49

Figure 11 - Corporate culture and effectiveness in change implementation ............................. 50

Figure 12 - Lewin's Forcefield Analysis...................................................................................... 51

Figure 13 - Lewin's Three Step Model ........................................................................................ 52

Figure 14 - Keys success factors in change management .......................................................... 55

Figure 15 - Stage of Competence development - Hersey & Blanchard .................................... 57

Figure 16 - Styles of Management - Hersey & Blanchard ......................................................... 59

Figure 17 - Situational leadership - Hersey & Blanchard .......................................................... 61

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Chapter 1 : Introduction

1.1.Context of the research

Whatever the kind of organization, public, private or associative, it is impossible
nowadays to rest with one's achievements. The phenomenon of globalization generates an
enlarged competition which impacts on all sectors of activity and compels all types of
organizations to evolve and change much more quickly than in the past. The change is a state
that is part of the life of an organization and it incessantly becomes more difficult (Linstead
and Pullen 2009).

The expression "Organizational Change" historically refers to the alterations that may
occur in an organization. These transformations can be of structural, technological or strategic
orders .This concept of organizational change equally includes today the taking into account
of cultural values and cultural attitudes. The simple word "change" in all kinds of organization
deliberate or unexpected, internal or external, implies the taking into account of a great
number of variables whatever they may be financial, structural, cultural or behavioural. The
change has a direct influence on the conditions of work, the structure of the organization, the
roles and the behaviour of the organization.

Within a constantly evolutionary economic environment, the ability of an organization
to develop, to change, is compulsory, and it involves its viability for a more or less long
period. In order to survive, an organization must be able to change and adopt a flexible and
dynamic attitude to implement this change. In a highly competitive middle, the organizations
need to go ahead and control the change by being performing leaders. Considering that the
complexity of change management, a great deal of organizations have wonder on how
manage a change to come to a successful change.

1.2.Why should managing the process of change be studied?

The surrounding in which the organizations move has changed and progress since the
beginning whatever the technological, political, legal economic or social level might have
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been. Consequently, the numerous researches that have been conducted, the books, the
articles and magazines devoted to the theories of organization have also met deep evolutions.
In the middle of the 20th century, the economic context was characterised by an offer lower
than the demand of goods and services. This was giving the guarantee of a certain
stability that the majority of nowadays enterprises can no longer profit by as they are forced to
react to a permanent change, unlike the time when progressive evolutions took place.
Upheaval-oriented changes happened less frequently.

Today, the phenomenon of globalization has modified the rules; the conditions of
success are not the same as in the past. The actual stake of an organization, more precisely of
an enterprise, is to react and adjust itself to the evolutions of the environment. Besides, the
organization must continuously search for new opportunities of development, of economies of
scale with the aim to further its profits and growth. These solutions intervene not, only to
answer to the pressures of the competition or of the technological steps, but also to anticipate
the change (Kerber and Buono, 2005). An organization that succeeds in implementing change
process will favoured its chances to generate profits. That is why to succeed in implementing
a change process has become crucial.

Although numerous researches have been led concerning the implementing change
process and how to successfully establish a change, these theories are not often applied or
partially applied by the organizations. Nowadays, a great number of projects of implementing
change process have still proved to be a failure. Several studies have proved that 70 per cent
of the implemented changes in an organization have met such failure (J.Kotter, 1995-
Beer&Nohria,2002-McKinsay&Company,2008). These results show an important rate of
failure in what concerns the accomplishment of the implementing of change and confirm the
relative complexity of its realization. However, the different studies concerning the change
implementation have also been criticised because they didn't have an appropriate approach.
Actually, they have been blamed for not taking into account the profitability, the costs, and to
have ignored the complexity of implementing the change in an organization
(MacDonald,1998-Kotter,1998-Abraham,2000). These observations have led to a recent
further development of researches on this subject.

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The proliferation of advice leads to a certain confusion when implementing the change
process and the means used to favour its implementing show to be heavy and important
whatever the human and economic level are concerned (Beer& Norhia-"cracking the code of
change",2002 ). Another reason why implementing change process failed would be caused by
a lack of leadership. The change may be generated not only by a steady evolving environment
but it may also be due to the life-cycle of the organization, its development, its growth
(LarryE.Greiner, 1972-RobertE.Quinn&and Quinn Cameron,1983), its ageing (buildings
,machines ,manpower). The strategy to develop and renew itself becomes then primordial at
all organization level, let it be individual or organizational. Thus, the change within an
organization may refer to any alteration in activities or tasks.

1.3.Why should leadership in the process of change be studied?

The five last decades have witnessed a spurt of writing about leadership. There are
several hundred theories of leadership (Nikkilä, 1994), but no one is defining “the best”
leadership practices, and leadership can be interpreted differently by each one. The leadership
could be defined as the capacity to reach high but nonetheless feasible objectives, having in
the same time the will and the ability to supervise and manage a person or a group of persons
in relation with the "job" or the function that has to be achieved (Hersey-Blanchard,1977).
Therefore, the leadership is tightly linked to the context in which the leader moves . « For
example, when one talks about leading a meeting, the meaning of leadership is portrayed
from the chairperson or somebody who facilitates it. With respect to leading a tour, a closer
consideration is given to the tour guide. However, leading a market may employ a leader in a
very real sense as the top player, unlike the two previous examples. This shows that leaders
should have qualities which may not be easily possessed by other players or leaders” (Ph.
Daudi, 2009). Philippe Daudy describes the leader as a person having rare abilities that allow
him to differentiate himself from the other actors of the economic world. The leader must
have a "high added value".

The changes in the actual economic environment never cease to increase .The more an
organisation is able to change the more it is liable to grow in a rather important way (Edward
E. Lawler III & Christopher G. Worley, « Reward Systems, Motivation and Organizational
Change », January 2006) .The changes in the organisation may aim to resettle its mission, to
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restructure and adopt new technologies ,a higher co-operation ,total quality management
programs, re-engenering ,mergers… (http://managementhelp.org/mgmnt/orgchnge.htm). In
this kind of situations, the role of the leader will consist in creating a structure able to answer
and adapt itself to change .The concept of transformational leadership is highly regarded as
being one of the best exemplary style of leadership. Eisenbach et. Al. (1999) has shown
through descriptive researches that the transformational leaders were those who adopted the
processes of change. In 1989, Ropo states that transformational activities are required mainly
to change things in the organization. Furthermore, transformational leadership aims at
reaching significant changes in the organization

1.4.How is organization identity essential in the process of change?

In addition to the issues discussed above, the issue of organizational identity is debated
through the role of leaders in moving the image and the culture of their organizations. In the
context of a fast changing world and increasing pressures from the environment, a solid but
flexible organizational identity is an important factor for the success of an organization.
Maintaining an effective organizational identity is becoming one of the major challenges
leaders have to face. “Opinions and impressions, feelings and fantasies, hopes and
expectations expressed by employees, suppliers, customers, shareholders, governments, and
their regulatory agents as well as community members, the general public, the media, and
political activists, whether positive or negative, all contribute to defining the identity of an
organization...”(Hatch and Schultz, 2004, p.1). Additionally, media is playing an important
role and indicates differences between corporate images and organizational actions. Through
new technologies, such as just-in-time inventory, other stakeholders are more closely involved
in the organization. This creates stronger dependencies between the organization and those
stakeholders. These two aspects lead to a higher openness to external parts of the
organization and its identity (Hatch and Schultz, 2004). Furthermore, Dutton and Dukerich
(2004) indicate that organizational identity is related to personal motivation. According to
many studies, identity is one aspect which is related to the successful outcome of an
organization. It is seen as a key factor to be successful in a situation of organizational change.
Understanding, responding to and managing change are primary skills increasingly required
of managers. However, change is reciprocal: changes that managers make to their
organizations can also affect the nature of managerial work Stewart (1991) describes how
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changes in organizations affect the kinds of jobs that managers have to do amid the shifting
nature of their lives and careers. These include: Wider networking, flatter hierarchies of
authority, reduced middle management cohorts with more responsible roles, less predictable
career paths and greater choices in their work and careers.

1.5.Identity the change in organization needs to be managed

To state that organizational identity is essential to be effective is not adequate by itself.
The issue is to know how to identify the change needs to be managed. In fact, identity is
related to human behaviour, it is a research field arising from the sociological and
psychological domains. Thus, it requires leaders to have specific skills concerning social
relationships in order to understand and to deal with actions and reactions of people. In that
sense, Chemers (1997) referred to Hour and Shamir (1993), who found transformational
leaders transform “the values, preferences, and aspirations of followers from self-interest to
collective interests” (p.89). As the organizational identity is based, influenced and
transformed by members of the organization, it would be interesting to investigate this in a
context of leadership and show how a leader can influence it. To adopt a transformational
leadership style is indicated to be important and successful in situations of change; it is
therefore interesting to study how the different characteristics of transformational leadership
can influence, adapt or transform an organizational identity. Moreover, several
recommendations for leaders are available on the way to implement change effectively in
organizations. Therefore, this study concentrates on gathering the key concepts of change and
focusing on the fundamental role of leadership and transformational leadership during the
process of change.

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Chapter 2 : Purpose of the research

Firstly I will set out the main questions to which I will try to answer throughout my
research together with the underlying questions linked to this study.
Secondly I will set out the objectives of my research together with its prospects.

2.1. Research Questions.

To begin with, I am going to set out the main questions which have guided my
research , and after ,the questions linked to the research question .

2.1.1. Main research question.

The theme of my research will be guided in order to answer two main questions: What
are the roles of the leader within an implementing change process? What is the place held by
the human factor within the implementing of change?
After I have defined a few basic elements of the implementation of change, I will underline
the role of the leader in this implementation together with his influence to successfully
manage a project. Afterwards, I will underline the role of the human factor when
implementing a change process within an organization.

2.1.2. Related research questions.

To deal with the roles of the leader and the importance of the human factor when
implementing a change process demands some beforehand acquired knowledges of the
subject consequently, the following questions will be answered in order to allow a complete
understanding of the subject.
What are the types of changes?
What are the reasons for change?
What are the main key-factors within an implementing change process?
What are the brakes when setting an implementation?

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Once all those questions will be given an appropriate answer, it will then be easier to outline
and define the roles of the leader in this implementation process, notably in what concerns the
role of the human factor and the ability to manage it in order to optimize the implementation
change success .

2.3. Research objective

As I have mentioned previously, my thesis aims to allow a global understanding of the
interest for a change within an organization, but also and above all, of the different variables
and factors which will have to be controlled by the leader to reach a change that will reveal to
be a success. We also accept a failure which on no account will prove to be a bad experience
as far as we shall draw good conclusions to avoid repeating the same mistakes in the future.
The change within an organization entails the taking into account and the control of the
different key elements which will be detailed in my theoretical framework. My
professional experiences have allowed me to participate to the implementation of change
within an enterprise and I have then realized how difficult it was to implement a change.
Furthermore, thanks to an active participation, these experiences have allowed me to analyse
and to notice that one of the main sources of failures or brakes to the progress of our projects
were due to the behaviour of some people taking part in the project. Afterwards my researches
have taught me that the problems encountered through my experiences were not isolated
cases.

My main objective when realizing this thesis will therefore be to give prominence to
the role of the manager leader in the managing of his teams, his ability to create a favourable
environment for work in order to allow a group cohesion and also reach the objectives the
organization aspires to.

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Chapter 3 : Methodology

3.1. Justification and motivation

“Methodology is a mode of thinking, but it is also a mode of acting. It contains a number of
concepts, which try to describe the steps and relations needed in the process of creating and
searching for new knowledge” Igeman Arbnor & Björn Bjerke

The objective of this chapter is to enumerate the choices which are going to direct the
approach of my research together with the specificities that are determining the interest of this
research. The aim of this part will also be to explain the method used to allow a total
understanding of the intrinsic characteristics linked to this very matter. This chapter will then
offer the opportunity to express my choices in the gathering of data by putting the stress on
advantages and disadvantages which will impact my research.

For a year and a half, my first professional experience has led me to participate to the
growth and implement change in a company; I then could confront the theoretical approaches
I came through during my training as Manager and Consulting, with a real practical situation.
This opportunity was therefore the occasion to observe the characteristics and expectations of
the senior manager of a small enterprise (10employees) by setting myself between the senior
manager and the employees of this enterprise.

I directed and realized these changes as an autodidact, and I have been deeply
surprised, dumbfounded and at the same time interested by the observation of obvious
dysfunctions. The various documentary researches undertook afterwards have allowed me to
isolate one of the main causes of failure when you manage a change, and that is the human
factor .This very human factor is, for the greatest part, the cause of the difficulties I met
through my professional experience. This is why I decided to go deeply into that matter.
Therefore, the main purpose of the research will hence to explicate and understand the
outstanding importance of the human factor in implementing change process.

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3.2. Research approach

3.2.1. Empirical research strategy

The objective of my research is to understand and analyse that one must take into
consideration the human factor in the implementing change process. I then build my research
through the help of tangible cases associated with the sharing of knowledge of
professionals who have been used to managing this implementing change process linked to
human factor. These people will have necessarily participated to the whole realization of
change project implementation or at least to its application.
It is with this perspective in mind that the empirical part of my research will be based
on two axles. The first one will be the analysis of a case study of establishing a change based
on my own enterprise experience. The second will result from the realization of interviews
with managers who are or have been confronted to implement change in their professional
life.

3.2.2. Interpretive framework

« Interpretive research methods are based on an assumption of subjective human experience
as ontologically real and accessible through dialogue within a qualitative framework »
(Terre-Blanche and Kelly, 1999)

In other words, the main interest of this concept of interpretation is to understand and
analyse all experiences gathered through a qualitative investigation.
As I previously explained, the realization of my thesis will be based on the use of a
case founded on my own experience in enterprise. In this context, I will be brought to express
the wishes, positions, and actions of my superiors and also of my subordinates. This precise
phase will lead me to develop the interpretation of the expectations and behaviours of people
working in my immediate vicinity.
Which is more, the choice I made to interview managers to obtain a better
understanding of their own role within the process of implementing change. The way I will
render these interviews will be mainly based on my ability to understand and interpret both
obligations and concerns of one another within their respective role.

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3.2.3. Scientific approach

« The systematic accumulation of knowledge is essential to progress in any profession…
however, theory and practice must be constantly interactive. Theory without practices is
empty and practice without theory is blind». Cross, 1981, p110

This sentence highlights the importance of the interdependency of theory and
empirical research. In other words, it is essential to master the positioning between the
theatrical part and the empirical research. In this way, it is primordial to choose de right
scientific approach, in accordance to the empirical research and vice versa, in order to write a
successful thesis. This approach unable me to switch between theories and practices
throughout my research. To reach this objective, my empirical research will be relying on
theoretical material through my literature review, what should lead me to formulate
hypothesis.

3.3. Qualitative approach

To establish a change in the very heart of a company is not an easy task. Actually, as it has
already been proved, there are plenty of variables to consider when implementing change.
These variables transform the change process into something complex and risky. The
important numbers of failures when launching a change justifies the interest that could be
borne with regards to this subject in order to identify the main cause of failure.
Considering this complexity, my research will be based on a qualitative approach through the
use of a concrete and real case which will show the interest to facilitate a perfect
understanding of the existence of human factor in the implementing. Although the use of one
single case will have the perverse effect of generalizing the results of this study, the tools used
for this purpose will nonetheless be able to be applied to all kind of organization.
That is why, keeping in mind the aim of going deeply into my research, the study of a case
will be completed by the carrying out of the interview managers. The interest of these
interviews will be to discern the way they apply implement change in a practical case, and the
place reserved as well as the developed arguments dedicated to human factors when
implementing change in their company.

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3.4. Data collection

3.4.1. Primary data

3.4.1.1. Case Study

The study, which is at the basis of the realization of my research, is an authentic case
and it will be founded on my very own experience in enterprise where I have been a salaried
for roughly more than one year and a half. The study of this case will consist on an objective
and impartial analysis. As this case is not officially published, and in order to protect the
confidentiality we shall call this enterprise "Alpha". This firm is a yacht insurance brokerage
agency.
The building trade of insurance brokerage agency is to found the best insurance at the
lower price for their clients. To reach this objective, the insurance brokerage company
develops agreements with national or international insurance companies to allow him to sell
insurance products. In facts, an insurance brokerage agency is an intermediary between his
clients and insurance companies.

Alpha has been bought out by the actual owner in 2008. When the actual owner
bought this agency, all the management of the firm was made without management software
and with a poor marketing investment. This confronts the actual owner to reorganize the
major part of the management of the firm, implementing a specific management software
package (controlling all the process of new contract creation, contract renewal, the
accountancy process, the cost control management, insuring the transparency regarding
insurance companies‟ requirements...) and developed the major marketing tools in order to
increment our visibility at an national and international level according to our product
specificity.

This special study case seems very interesting to me because of my specific role in this
enterprise. Actually, my main target was to establish solutions in partnership with my superior
and then to develop and apply them. This opportunity has therefore allowed me to better
conceptualize the relationship between an enterprise manager and his employees. In fact, this
strategic position gave me to understand the needs, the expectations, the concerns of

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a manager, and to confront them to the needs, the expectations and the preoccupations of his
employees.
The chapter 5 of this thesis will then be centred on the analysis of this practical case of
implementing change inside this enterprise. Besides, this chapter will offer the opportunity to
confront the methods of implementing change with the theories of the implement of change
quoted in my Literature Review.

To describe the methods of management with the theories of this implementing of
change will offer the interest of analysing and confronting the methods of management with
the different analyses and researches realized by well-known and acknowledged authors.
To establish the differences of the researches realized by famous theoreticians, based on
various experiences and analyses having led to the final result of the established theories, with
the methods and uses of these theories will offer the interest to measure the use of these
theories in the methods of the actual management. The aim of this analysis will then be to
evaluate the use of the theory for a manager moving in a logic of implementing change
process.

3.4.1.2. Interviews

The settlement of this change is a complex process to lead and approach because of
the multiplicity of the elements to take into consideration as the change is being operated
.That is why it has appeared to me important to contact and interview professionals who had
been confronted to this type of problematic .

A great deal of studies and articles reveal that the greatest part of the failures when
implementing change was mainly due to a bad estimation of the human factor in the driving
of the change (McKinsey2003).

Of course, these interviews will only give a partial view of the way to implement
change together with the taking into consideration of the human factor in an implementing
change process; nonetheless, they will allow a better comprehension and interpretation of a
true reality.
The analysis of these interviews will then permit to understand the theoretical approach of
implementing change in a practical case.
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The interest of it all will then be to underline where the theory and the reality meet.

First Interview:

Interview with Christophe RAMON, IT Systems manager in a French multinational.
The firm is a company founded in 1959. At that time, the activity of this company was
specialized in processing of maerl (seaweed‟s fragment rich in limestone). Since then the
company has continued to develop, this enterprise has a turnover of 2 milliards Euros,
employs more than 6000 persons among which more than 50% work abroad in more than 60
countries into 13 business lines: Agro-supplies, professional hygiene, Mineral and industrial
products, Magnesite, Plastics, Garden products, Food phosphates, marine biotechnologies,
Operation and transformation of seaweed, Naval equipment, Pastries, Cooked meat and
seafood.
Mr Ramon has been working in this firm for roughly 20 years. In this interview, he
will explain the complexity of change management in an IT change process, the issues they
met and the results of one IT change project.

Second Interview:

Interview with G. L.J. , Chief Executive Officer in the same French multinational than
in the first interview.
As I present previously, this firm is a multinational developed in different line of
business. With this CEO, we will focus on, a Spanish subsidiary of this multinational, bought
in January 2000 by the French multinational (60%) and a Grecian Compagny (40%).
This subsidiary is a firm which produces and commercializes two kinds of magnesia:
- Caustic magnesia for animal feeding, fertilizers and varied industrial uses such as
pulps or flames retarding panels.
- Fireproof Magnesia for iron and steel industry.

This firm extracts its raw materials from its own mine then transforms them according
to complex industrial processes before the commercialization of fully or semifinished
products. Therefore this firm is depending on the natural resources of this mine.

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Few years ago, the firm has to face to a major problem: the resources of their mine. G.
L.J. will speak us about the projects of found new mines, optimize production machinery and
develop sale forces.

Third interview:

Meeting with A. RAGUET, operational manager in a French Company.
Created in 2000, the firm is specialized in the manufacture of effervescent granulated
powders sold as such in bags or under the shape of tablets. These enterprise products are
aimed at industrial partners working food, dietetics, pharmaceuticals, cosmetics, veterinary
nets or nutritious complements for animals. This company employs 7 persons.
If the work instrument of production of this firm is rather complex, the different
circuits of information‟s flows is on the whole rather simple. The main need concerning the
follow-up of information and the total traceability are imperative in what concerns this sector
of activity, and of course this applies for each batch of manufacture.
During this interview, A. RAGUET will explain us the change management process he
apply in an Information System Management change.

3.4.2. Secondary data

The use of pertinent data gathered in books, news articles and internet sites allows a
better theoretical understanding of the subject as a whole. The books selected in the literature
review have then given me the possibility to increase not only my knowledge‟s but also to
build a strong theoretic framework. The use of news articles and internet sites give access to
snippets of informations often focused on one part of a precise subject from which emerge
both concepts and hypotheses .By their simplicity of creation and publication, unlike books,
they give the opportunity to compare with subjects connected with actual facts .The
combination between books, news articles and internet sites then give access to complete as
well as to partial researches which ,once they have been put together ,give access to a
theoretical basis rich in informations.

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Chapter 4 : Theoretical Framework

4.1. Understand the Change within Organizational and business
Systems

This research proposes that in the actual economic world, change management is a
critical issue for each type of organizations. Since the industrial revolution, the stakes of
handling change have never been so high.

In the actual economic environment, most traditional and successful organizations
have accepted the fact that they are constraint to constantly evolve or be doomed to disappear;
they have to change or die (Beer and Nohria, 2002). Due to endogenous and/or exogenous
causes, changes have to be implemented within each organization at some stage of their
existence. It can also be introduce in order to meet certain market growth expectations, or to
predict and adapt to eventual problems, etc. The ability to adapt and change is the key to
survive for organizations and it is particulary true for private firms. Elrod and Tippert (2002)
maintain that change is “pervasive - it is a constant and common element that impacts
humankind individually and organizationally, day in and day out” (p.273).

As De Wit and Meyer (2004) argued in their book “Strategy: Process, Content,
Context: an International Perspective”, “It is not a question of whether firms should change,
but of where, how and in what direction they must change. Firms must constantly be aligned
with their environments, either by reacting to external events, or by proactively shaping
the businesses in which they operate” (p.164).

Therefore, a distinction can be made between planned and unplanned change.
Planned change is a deliberate and conscious decision to improve a part or the whole
organization. It allow to change the system in a more deep and fundamental way. An
unplanned change happens when the organization is constrained to react to some
unanticipated external change, coming from the firm's environment. In unplanned change, the
answer is adaptive and habitually spontaneous.

Organizations and firms in particular are complex, multifaceted and no one is
similar. In order to have a clearer outline and understanding of implications of change for

21

these firms, a clear distinction has to be made between organizations which conducts their
own business, handle and manage their limited resources, and organizes the production of
services, and products, and how it is able to create value to customers. The organizational
structure refers to the division of tasks and people into smaller clusters. According to De Wit
and Meyer (2004), “all organizations need at least some division of labour in order to
function efficiently and effectively, requiring them to structure the organization in smaller
parts”. They also argue that the organizational system would considered “how the individuals
populating a firm (organization) have been configured, and relate to one another, with the
intention of facilitating the business system.” (De Wit and Meyer, 2004, p.165).

The structural changes concern the parts and configuration of the organization.
When the structure has to be changed, some functions and/or departments have to adapt
themselves to the new structure and appropriate it. Some department or function can be giving
up or transferred due to their inefficiency or their inaccuracy, etc. Several techniques can be
used by the manager leader to realise organisational change, and the following methods are
the most used in the corporate world for restructuring (Robbins and Cenzo, 2005).

The first method which can be used is downsizing. The main objective is to focus
all the efforts of the enterprise on the most beneficial activities and give up the other ones
which are not profitable, or not profitable enough. It means focus on the core business of the
organization, with the goal of cutting costs and maximising profits. The second method is
delaying. This step requires to concentrate all efforts on the most profitable activities and to
transfer those that impede the functioning of the activity to other parties (competitors,
suppliers or subsidiaries). The third method is divesting. This technic means the sale of all
unneeded equipment. This is relatively common in situations of organisation grows or when
merger occur. The impacts of these changes are directly visible on the organisational structure
level of the firm and the corporate culture level as well. When reorganisations occur on a
structural level, "the authority relationships within the hierarchy are temporarily or definitely
modified" - Franziska Fritz & Philippe Massart (2007 - The Process of Change: The Role and
Impact of Leadership). These changes disrupt the status quo, the company's employees are
therefore constrained to adapt to a new emergent order and hierarchy. The emergence of new
responsibilities could change levels of hierarchy. After the change, a phase control can be
implemented by either the top or bottom of the organization. On the ground, the control is
frequently achieved by lower levels for large organizations, whereas in a small organization,
control is exercised by higher levels.
22

About management system, it is interesting to compare the modern western
management models and other models of existing management. For example, the Japanese
management model and the Swedish model. According to Masaaki Imai in his book "Strategy
process, content, context” (De Wit and Meyer, 2004), the Japanese management system is
characterized by a continuous improvement process, incorporating the professional life, social
and family life. Job functions from the Japanese perception include all segments of the
organization and involve improvement and maintenance. “Consensus, the hidden code of
Swedish leadership is a book written to highlight the enigma of the Swedish leadership style
of getting everyone to agree at all levels of decision making” (Alexander, 2008). This
incorporates a strong attention on team-work, non-confrontational style of communication,
and coaching. These characteristics could be described as a Swedish model on management
styles. However the western management system is consider as vertical and individualistic,
often standardized and rather inflexible.

When changes occur within the organization, taking into account the expectations
of employees has become indispensable. “The difference between failure and success in
implementing change in an organization depends highly on the people themselves” Franziska
Fritz & Philippe Massart (2007). This concept shows the importance that must allocate the
agent of change on identifying the expectations of employees, observing their attitudes and
behavior during the implementation of change. Therefore the change agent now incorporates
changes at the individual level in order to encourage the organization to move in a new
direction. In their publication "The tools of change in cooperation", Christensen, Marx and
Stevenson, 2006 states that “managers can use a variety of carrots and sticks to encourage
people to work together and accomplish change. Their ability to get results depends on
selecting tools that match the circumstances they face”. (p.73). According to the authors, the
main key in change management is that it is imperative to make each stakeholder working
together in a methodical way. In this article, Christensen and al. presents the example of Durk
Jager, former CEO of Procter and Gamble. D. Jager unfortunately failed in implementing a
restructuring program which had the aim of changing Procter and Gamble‟s culture. The main
reason of that failure is that Jager did not include the employees in the process of change
which is, according to the authors, “a vital requirement of all change campaigns”
(Christensen et al., 2006, p.73).
According to Christensen, Marx and Stevenson (2006), the preliminary step before any
change initiative is to assess the level of agreement. This concept is evaluated along two

23

dimensions. The first dimension is “the extent to which people agree on what they want: the
results they seek from their participation in the enterprise; their values and priorities; and
which trade-offs they are willing to make in order to achieve those results” (Clayton et al.,
2006, p.74). The second dimension is “the extent to which people agree on cause and effect,
which actions will lead to the desired outcome. When people have a shared understanding of
cause and effect, they will probably agree about which processes to adopt” (Christensen et
al., 2006, p.73). Their “Agreement Matrix” sketched those dimensions. The vertical axis
represents agreement by firm‟s people on what they need; the horizontal axis represents their
agreement on cause and effect. The salaried are represented on the upper-left quadrant (A),
for example, share requirements for what they will benefit from taking part of the firm, even
if everyone can have a different vision of the type of actions that will be needed to meet these
expectations. People are result oriented, “just do it” (Service Management Art -
http://www.itsmf.ca/documents/show.php/2854/ITIL%20and%20Management%20Commitme
nt%20v1.pdf). In the upper right quadrant (B) are organizations whose employees agree on
what they hopes and how to implement to get there. Employees are Automatic Group thinking
(Service Management Art). “A clear consensus on the two dimensions makes the
organization’s culture highly hard to change because the people are generally satisfied with
what they get out of working in the organization and agree strongly about how to maintain
that status quo” (Christensen et al., 2006, p.73). Several organizations on the lower-right part
of the matrix (C) are those that involve a mess of contractors. Employees show little
investment to achieve the objectives of the company, but the procedures are strictly adhered
to, if they believe that their actions will achieve the desired results. People understand the
causes and effects of improvement (Service Management Art). Finally, the left lower quadrant
(D) represents employees who do not agree on what they want and do not understand how the
world works. People show disparate interest in improvement (Service Management Art).
There is no best position in the matrix and the relevance of this tool is to identify where the
organization is. For the leader, the agreement matrix helps him to know the degree of the
people‟s acceptance for change (figure 1).

Another aspect of change from an individual perspective is better recruitment,
selection and replacement (Burke, 2002).

The selection method‟s goal is to recruit the right people to assign them the right
function and employment. This is done to ease the major change effort and to seek and find
people with the ability to integrate the firm with a positive and participative dynamic.
24

The replacement approach is to recruit a new leader from within the organization.
But in reality, the new leader are coming from outside in most cases. This move brings new
input, approaches and leadership style to the organization.

Broad consensus
Extent to which people agree on what they want

A B

D C
No consensus

No consensus Broad consensus

Extent to which people agree on cause and effect

Figure 1 - The Agreement Matrix - Source: Franziska Fritz & Philippe Massart (2007) figure based on “The tools of
cooperation and change”, Christensen, Clayton M., Marx, Matt and Stevenson Howard H., Harvard Business review,
Oct 2006, p.84, www.hbr.org

Technological changes also have an important impact on the functioning of the
firm. In effect, these gives rise to new methods and new work processes that it is imperative to
define when implementing changes. For example, the introduction of new software often
leads to new techniques of work and will requires adaptation regarding company‟s employees.

The organization does not evolve alone, it interacts with its environment. Changes in
the external environment require companies to pay attention to these evolutions in order to
stay in the competition. In this context, the organization may be anticipating changes in its
environment, so as to create new opportunities or react to these changes to stay competitive.
For example: “The organization might change its technology in order to stay competitive in
the market or to become a first-mover” (Franziska Fritz & Philippe Massart - 2007).

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However, if the concept is easy to understand, the reality is far from simple. The
company who has devoted significant investment both financially and human, show some
difficulty with new changes.The company could be “investment lock-in” and “Any gradual
movement away from the past investment will increase the risk of not earning the big amount
of sunk cost” (De Wit and Meyer, 2004, p.172). In addition, organizations can also be
“system lock-in […] into an open standard (e.g. sizes in inches, GAAP accounting rules) or
proprietary system (e.g. Windows operating system, SAP enterprise resource planning
software). Once the firm has implemented a standard or system, switching to another
platform could not be done gradually or at low cost” (De Wit and Meyer, 2004, p.172).

In addition, changes can be seen at the business system level. A private or public organisation
has its own way of creating value-added. They turn or add an input to commercialize its own
products and services (output). A business system is unique for each organization. Therefore,
Company's organization is closely linked to its business system. Organizational changes will
have an impact on the business system of the firm, and vice versa. It is therefore clear that a
"business system is successful only if it creates superior value for the buyers” (De Wit and
Meyer, 2004, p.164). The characteristics of the business system are threefold on which the
organization can focus on change situation (De Wit and Meyer, 2004) :
- First characteristic: the value proposition. “In order to attract more customers and to
fit more closely their needs, an organization should be able to supply a particular
product or service. To be attractive, these outputs must target a particular segment of
the market and have superior attributes compared with other ones (e.g. the price, the
image…)” (De Wit and Meyer, 2004, p.231). I for some reason, products or services
sold do not meet consumer expectations, the organization will necessarily have to
decide to change.
- Second characteristic: the value chain. The organization must have the ability to
develop and deliver its products or services and create value effectively (R & D,
logistics ...). At this stage, technology is a point that we should not underestimate.
When the production system becomes obsolete, the organization should be replaced
with newer equipment.
- Third characteristic: stock of assets. the element of a business system consists of the
base of the resource needed to perform the value-adding activities (know-how,
relationships). These elements can serve as a basis for a superior product/service

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offering. In order to create a competitive advantage, an “alignment must be achieved
between all three elements of a business system”.

Change can be concentrated on this these three characteristics of the business system.

4.2. Types of change

4.2.1 Discontinuous and Continuous Change

Experts tend to agree on the fact that the distinction between discontinuous and continuous
Changes has led to our current approach of the Change process.

The common assumption then consists in differentiating two kinds of changes:
 Continuous change based on an evolutionary approach
 Discontinuous change, based on a revolutionary approach

De Wit and Meyer qualify these two elements as “the dichotomy between discontinuous
renewal perspective and the continuous renewal perspective.” (De Wit and Meyer, 2004,
p.182).

It can occur that an immediate change would be more appropriate than a continuous one,
according to the situation to be dealt. The characteristics of the discontinuous renewal
perspective are revolution over evolution, disruptive innovation, creative destruction, radical
pace of change, sudden break of the status quo, a stable and unstable alternation of states and
a punctuated equilibrium. (De Wit and Meyer, 2004, p.182)
This former approach has been mainly adopted in western companies, or in companies from
the MEDCs (more economically developed countries). An example of a discontinuous
renewal perspective is the Splitting of the British gas in 1997; The liberalization of residential
market consumption played a big role in this radical move (from a continuous to a
discontinuous approach). For instance, British Gas Company radically changed its retailing
policy, from a simple gas supply to essential household services, as the best way to ensure
their sustainability.

27

This move enabled the company to make a step toward a competitive environment while
asserting their competitiveness, and reorganized their structure in a more customer orientated
way, appearing as a service provider.

Within 3 years, the company has broaden its product range which now integrates everything it
needs to, keeping in mind the slogan: care of the essential. By 2001, 90% of its operations
were represented by service supplies to customers (British household).

Nevertheless, it can occur that a continuous change would be rather more efficient
that an abrupt one. The main characteristics of this approach are: Evolution over revolution,
uninterrupted improvement, organic adaptation, moderate and undramatic change, gradual
and steady pace of change, continuous adjustment, and a persistent transient state and gradual
development. (De Wit and Meyer, 2004). This style of change is usually the one preferred in
Japan.

The concept of Revolutionary change is used to describe an immediate and radical change
that occurs in a rather short while. The goal of such a change is to get rid of the status quo
situation and to replace it with new orientations.

Revolutionary change usually takes place to put a final point to the common way of doing
things and thinking about the company‟s tactics. For instance, reacting to deeply rooted habits
and routines no longer suitable for the company, no other change (at a smaller scale) would
have been as efficient as a revolutionary one. Indeed, such routines or habits can paralyze the
company in a rigid business and organizational system.
According to De Wit and Meyer, 2004, the main factors which will trigger a revolutionary
change are the following: competitive pressure, regulatory pressure and first-mover
advantage. Willing to adapt to our post-modern era, organizations have to deal with as much
chaos as order and change is a constantly dynamic. (Kavanagh and Ashkanasy, 2006).

A number of theoretical and conceptual models and theories to be used and developed as
analytical tools of the process of change are shown below:

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1. Evolution and Revolution Dealing with the paradox are presented in figure 2

Evolution and Revolution
Dealing with the paradox

Figure 2 - Evolution and Revolution Dealing with the Paradox - Source: Synthesis from De Wit and Meyer (2004)

2. Reengineering work by Hammer (1993). According to this former,
reengineering is: “a fundamental rethinking and drastic redesign of business processes to
accomplish dramatic improvements in critical, contemporary measures of performance: in
cost, quality, service and speed”. Figure 3 presents a tool haw to reengineering work by
Hammer (1990).

Reengineering work
The Essence

Figure 3 - Reengineering Work - Source: Synthesis from Hammer (1990), as cited in De Wit and Mayer (2004)

29

3. Convergence and Upheaval is presented by Tushman and Romanelli (1985) stated scope of

Reformed mission and core values

Altered power and status

Reorganization

Revised interaction patterns

New executives
Frame-Breaking Change in the model is shown below:

Figure 4 - Scope of Frame-Braking Change - Source: Tushman and Romanelli (1985)

4.2.2. Endogenous and exogenous who lead to change

A. Endogenous change forces

Endogenous forces to change in an organization are often due to its life cycle. The
publication in 1972 of "Evolution and Revolution as Organizations Growth" (Harvard
Business Review -50) by Larry E. Greiner has identified five main phases ("The five phases
of growth") which require changes during the growth of an organization:

Phase 1: Creativity...
This phase corresponds to the creation of an organization during which its main
objectives are: to create a new product and a new market. At that moment, the organization
is characterized by a physical and mental investment dedicated to product and selling and in
the same time it shows certain contempt for management. The communication is frequent and
in a way informal. As the company grows, the increases of production ask for a better
organization all together with an increase of the number of employees both on the production
level and on the management level.

30

The organization cannot then be simply managed by the means of an informal
communication, it has to be structured. The founders of this organization are then facing a
situation that impels them to assume responsibilities of management they do not wish. It is at
that moment, according to L.E Greiner that the leadership crisis arises. During that time the
founders of the company will have to delegate some responsibilities by the employment of a
business manager having knowledge and skill. This makes up one of the first phases
of important change in an organization.

Phase 2: Direction...
This phase of "Direction" is characterized by the setting of partitions between the
different services of the organization. It is also at this moment that the control of buying,
stocks and budgets creation is settled. Communication becomes more formal and impersonal
as a hierarchy of titles and positions builds. The forward integration of a new hierarchy causes
an evasion of power towards the management authority; lower- level supervisors are losing
autonomy and lower-level employees find themselves restricted by a centralized hierarchy. At
this moment a crisis of autonomy arises.

Phase 3: Delegation...
The following stage of the growth of an organization develops after the successful
establishment of its decentralization. The organization finds itself in a favourable situation
and the managers feel motivated to penetrate new markets, develop new products and
improve their reactivity. At this stage, serious problems may occur. The top executives feel
that they face a situation in which they lose control while confronted to an increased
diversification. The favourable results of the organization make the managers refer to certain
autonomy and consequently act on the fringe of the company without aiming to the
coordination of new projects and schemes of investment...within the company. “Freedom
breeds a parochial attitude ". Therefore, the top management has difficulty in getting back to
the control of the company.

Phase 4: Coordination...
This phase is characterized by the implementing of new systems allowing a better
coordination .For instance: establishing formal plans, procedures, controlled expenditures...we

31

can also observe that stock-options and company-wide profit sharing are settled in order to
endeavour a spirit of organization towards everybody.
These new systems of organization permit a better allowance of resources and at the same
time they make the capacity of control easier.
Therefore, the managers find themselves compelled to justify their actions, increasing then the
loss of confidence between line and staff, and between headquarters and the fields. So,
the excess of using systems and programs create a "red-tap crisis"; the line managers as well
as the staff directions both criticize the administrative cumbersomeness developed in the
organization.

Phase 5: Collaboration...
The phase of collaboration is characterized by its endeavour to solve the red-tap crisis
showed in phase 4. To reach that, the organization is given to favouring a greater spontaneity
by creating teams made of people having complementary abilities. The target of implementing
this kind of teams is to combine competences inner to each individuality to solve problems,
conflicts but also to manage projects...
The collaboration phase is then built within and around a more flexible environment based on
a management of the behaviours.

Larry E Greiner illustrated these 5 phases according to the following chart:

Please, refer to the next page.

32

Figure 5 - Larry E. GREINER – “Evolution and Revolution as Organisational Grow” - 1972

Robert E. Quinn and Kim Cameron has realized a study also based on the life cycle of
the organisation "Organizational Life Cycles and Shifting Criteria of Effectiveness: Some
Preliminary Evidence" Management Science 29(1983). That study can, in a very interesting
manner, lead to complete the study made by Larry E.Greiner.
In this study article, Quinn and Cameron define the life cycle of an organization according to
four major bases emerging from the analysis of the following nine theories of the life cycle of
the organization:
- Downs : Motivation for Growth (1967)

- Lippitt & Schmidt : Critical Managerial Concerns (1967)

- Scott : Strategy and Structure (1971)

- Greiner : Problems Leading to Evolution and Revolution (1972)

- Torbert : Mentality of Members (1974)

33

- Lyden : Functional Problems (1975)

- Katz & Kahn : Organizational Structure (1978)

- Adizes : Major Organizational Activities (1979)

- Kimberly : Internal Social Control, Structure of Work and Environement Realations

(1979)

Therefore, it is through these nine approaches that Quinn & Cameron have developed the four
phases of the life cycle of the organization:

1.Entreprenarial Stage 2.Collectivity Stage 3.Formalization and 4.Elaboration of Structure

Control Stage Stage

 Marshalling of  Informal  Formalization of rules  Elaboration of structure

resources communication  Stable structure  Decentralization

 Lots of ideas  Sense of collectivity  Emphasis of efficiency  Domain expansion

 Entrepreneurial  Long hours spent and maintenance  Adaptation

activities  Sense of mission  Conservatism  Renewal

 Little planning and  Innovation continues  Institutionalized

coordination  High commitment procedures

 Formation of a

« niche »

 « Prime mover » has

power

Figure 6 - Robert E. Quinn & Kim Cameron “Organizational Life Cycles and Shifting Criteria of Effectiveness: Some
Preliminary Evidence” - 1983

The synthesis of these two studies allows a modelling of the life cycle of the entire

organization, thus taking into account the majority of the factors of endogenous change in

relation with the growth of an organization.

34

Figure 7 - Organization Life Cycle - Adaptation from Bertrand Venard - Audencia Scool of Management

B. Exogenous change forces

The organization does not evolve by itself but in interaction with a very active circle.
A great deal of researches has proved that this circle imposes the operational and strategic
choices that the organization will make. This circle is called environment and it is the one that
will have to condition the markets through its direct influence one the organizations. As a
rule, the organization environment is defined as the whole elements external to the
organization but in relation to its activities (CERAM, 2008- The influence of environment on
the enterprise).

In a world which is becoming more complex and global (Shein, 2009 – the corporate
culture survival guide – Revised edition. Jossey-Bass, USA), organization has to face a
constantly evolutionary environment. In 1979, Michael Porter (Porter, M.E. (1979) How
Competitive Forces Shape Strategy, Harvard business Review, March/April 1979) listed five
variables having an influence on the organizations:
- The power of the client negotiation.
This client‟s power on a given market is characterized by the ability of the buyers to
negotiate. The clients degree of concentration grants them more or less power. That
stands, for instance, on an oligopsony market, (a little number of buyers are facing a
35

great number of providers thus giving them a greater power of negotiation)The
customers power of negotiation is strong when they stand all together ,when their
providers are disorganized ,when there exist products of substitution and also when the
cost of transport from one supplier to the other is low.

- The power of negotiation of the providers.
The production of an industry is bound to the providing of raw materials. Thus, there
is a battle of wills between clients and providers. Clients want to buy at the lowest
price when providers want to sell at the highest one. The power of negotiation of the
providers implies the ability of a provider to impose high prices. The resources in raw
materials, the concentrated proximity of providers, the existence of products of
substitution and the cost of transport from one provider to the other are as many
variables that will determine the power of the providers.

- The risk to see new competitors appear.
Theoretically, every enterprise should be able to enter or leave a market and that is a
threat for any firm inside any kind of market. Nonetheless, the risk to see new
competitors appear can be limited by what is commonly called "Entry Barriers". There
are different sorts of "Entry barriers":
o The entry contribution which represents the amount of necessary investments
to launch a project and also the time needed to make them profitable.
o The patents meant to protect an exclusive "know-how", thus allowing a
competitive advantage.
o The technical norms and standards, for instance UE which is compulsory to be
obeyed to distribute a product in Europe.
o The protectionist measures established by the country.
o The existence of enterprises firmly established on the market and having a
good reputation or significant market shares.
o The specific guarantee of current assets required for the production. When
specific technologies are necessary, the potential incomers are hesitant to
acquire active assets they may not resell or convert.
o The cultural barriers.

36

In the same time, obstacles to the way out are also present and must be evaluated when
wishing to enter a market. It may be difficult to leave a market when the enterprise is
made up of specific current assets, when the cost of leaving is high or when the
enterprises are interdependent.

- The existence of substitution goods
According to Porter's approach, the substitution products apply to those which come
from another industry but nonetheless able to satisfy similar needs. Porter thought that
the risk of using a substitute arises when a product is affected by the fluctuation of a
substitution product. The price elasticity of a product is directly affected by the
substitution products. As and when there are more products of substitution, the
demand becomes flexible because the consumers have a greater number of choices.
Besides, the more a substitution product satisfies a similar need, the more it becomes
difficult for an enterprise to increase its prices.

- The competitive pressure in-house the market.
The competitive pressure in-house the market can be evaluated through the
concentration of industries on the same market, in other words, through the percentage
of holding shares of this market. If the concentration ratio is high this means that the
major parts of the market share are hold by big firms. If you have a smaller number of
enterprises holding a major part of the market shares, then this sector of market is
concentrated and regarded as little competitive. On the other hand, when the
concentration ratio is low, it means that the sector of market is characterized by a great
number of competitors. Enterprises move on a competitive market. On such market,
the competition can vary in intensity (fierce, intense, moderate or weak) and it is based
on the aggressiveness of the enterprises to attempt to possess one or several
competitive advantages.

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Figure 8 – Five Forces Michael E. Porter -Sharon Larsen - February 18th, 2009

This organization chart describes perfectly the pressures that the economic
environment can cause to an organization. Nonetheless, this approach of environment can be
completed by other variables directly affecting the functioning of an organization. Bertrand
Venard (Audencia School Management-2007) describes the organizations environment
according to 10 points:

1- The competitors, the size of the industry, the level of competition.
As shown in Porter's analysis, Bertrand Venard uses again the concept of the competition
in his definition of the environment which has an influence upon the life and the strategy
of the organization.

2- The providers, producers, estate agents, services.
The "variable" providers is active too in this analysis, nevertheless the concept of estate
agents and services has been added.
The estate cost is an important factor in the environment of an enterprise. It can act as an
opportunity or as a brake not only in what concerns the strategy of an enterprise, but also
for the strategy of its competitors or new potential in-comers.
The concept of services is then added by Bertrand Venard. In 1979,Porter's analysis aimed
mainly on the industry sector, but since then, the services sector has been considerably
38

developed, either as a service associated to the sale of a product or as the market of the
services itself. Keeping in mind the Porter's analysis on the industrial sector, we see that
the service associated to the sale of a product, provided it is a reliable one, can proved to
be a real competitive advantage.

3- The labour market, interim agencies, universities, high schools, other enterprises'
employees, trade unions.
The labour market which was not studied in Porter's analysis represents an important
factor of the enterprises environment. Actually, depending on the countries where the
enterprise is situated or in which it wishes to develop its business, the enterprise will have
to possess a perfect knowledge of the labour market. Does it provide the necessary
manpower? The required competences? What is the working flexibility? How powerful
are the trade unions?
o Concerning the competences, the education standards are primal as they allow
to know if the population of a given country has got the necessary required
skills for the functioning of an organization. This point is primordial because
the qualifications and skills vary rather much and often as the workers are not
polyvalent. Consequently, the supply and the demand of labour are not
necessarily situated in the same geographic spot.
o In a country where the labour flexibility is low, for instance France, the
presence of interim agency gives the enterprises the possibility to employ a
person for a specific or renewable period. This helps to diminish the fixed
costs of an organization which can then manage its staff either in accordance
with the seasonal possibilities of its activity sector or to adapt its working
power in case of unexpectedness.
o The power of the trade unions must also be taken into consideration. In
Europe, if we take France and Sweden as an example, the role of the trade
union is totally different. Which is more, the rate of unionization of these two
countries cannot be compared: 9.7% in 2001 for France, versus 78% for
Sweeden in 2002 (European Community -2004)

39

4- The financial markets, banks, private investments.
The rate of money acts directly on the corporate organization strategy. It then becomes
unavoidable to take into account the financial market within the organizations
environment.

5- The consumers, customers and potential users.
As showed in Porter's analysis and with the same logic, customers' or negotiation
power‟s customer are studied at that moment. The notion of users or of potential
buyers is then added to this variable. It is important to know the capacity of a market
to seduce new users. On a saturated market, new potential users are very few, the
prospects of developing market shares are therefore compromised contrary to a new or
flourishing market which offers growth perspectives concerning promising market
shares for an enterprise.

6- The techniques of production, sciences, research centres.
Within a view of toward international trade, the production techniques, sciences and
research centres for a clearly defined market are often concentrated on
specific geographic areas. For instance, concerning the pharmaceutical sector,
Germany has at its disposal strong enterprises moving in this middle and it are one of
the most powerful international actors with regards to pharmaceutical research.
Furthermore, the use of specific techniques of production limits the eventuality of new
incomers on the market. Actually, the use of specific equipments involves important
investments in current assets which become hard to convert again, and it acts as barrier
to the “natural” entry.

7- Recessions, economic growth, inflation, investment level, unemployment.
The economic context in which an organization moves or wishes to move must also be
scrupulously known. Actually, a country in which the economic rhythm of growth is
being slowed does not offer the same perspectives as an economy in expansion.
Another important factor of the economic environment is the exchange rate stability.
Indeed, to work and to develop a business trade in a country subject to a durable prices
increase leads to a loss of purchasing power of the money for the organizations as well
as for the couples (INSEE).

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The level of investment on a market or on a precise geographic area is also a factor to
be taken into consideration. If the level of investment is important it implies that the
market is in expansion. Consequently, it will be easier for an organization to find the
possibilities of financing either through a bank or by means of private investors.
Finally, the last point of this part will deal with unemployment level. Unemployment
may have several different impacts on an organization and on the consumers. For
instance, a high rate of unemployment can lead to an increase of the contributions not
only for the organization but also for the busy workers: the State has then to finance
unemployment and more particularly must guarantee an income to the unemployed.
An unemployed person without any income is a person who does not consume, and
that cannot be envisaged for the economy of a country.

8- International and local regulations, taxes, legal and political systems.
Whatever it is international or local, the regulation is given to
establishing characteristic norms and rules of functioning. At international level, the
main organisms are OMC, FMI and the World Bank. On the local level, the European
Union, l'ALENA, l'ASEAN are in charge of the settlement of economics rules and
norms of functioning suitable to the countries of these organizations.
This implies that with regards to the country or some local agreements, the
organizations have not to respect the same legal rules, policy or taxes...
Within European Union, for instance, "since 1993, the free circulation of goods is
guaranteed within the EU. Fiscal and customs formalities linked to inta-communotary
frontier crossing have been abolished. Any person may buy, for his own use, any kind
of goods in another State member of EU without any restriction of quantity or value ".
(Service Public.fr – Administration).
This liberalization of exchanges can reveal to be a true opportunity but at the same
time a risk for an organization that is to say, the risk to see enter the market
competitive products or products of substitution in countries where the costs of
production are lower .

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9- The population age, its social & moral values, the level of education, the influence of
belief, the ethics of work, the consumers mobility.
Each kind of population has its own specificities, history and culture. Nevertheless, if
we except History that cannot be changed, population behaviours evolve... The public
authorities have to answer, anticipate and find the solutions for these changes.
Concerning the age of the French people in the middle of the 20th century, the
population was rather young, but, nowadays France is undergoing an ageing one
which implies fundamental changes for the state as far as the legal side is concerned
(Policy of retirements, employments management...) The organizations must also
answer these developments, adapt themselves to new laws, new policies of human
resources management...
Keeping France as an example, we observe that the increase of the Muslim belief
population has driven the food mass distribution to create displays of Halal meat.
In this context Muslim populations have offered new opportunities for the enterprises.
This constitutes the emergence of a new market for France.

10- The competition of foreign enterprises, the ability of penetration of foreign markets,
the evolution of the risks of exchange rates.
The risk of seeing new incomers as Porter stated is a variable also considered in this
approach of environment. This risk is mainly focused on the arrival of foreign
incomers. Nevertheless the risks of seeing new incomers appear together with the
barriers at their entry remain at the same time unchanged.
Nonetheless, this approach includes a new variable which is: the rates of exchange that
might intervene in favour of the new incomers who produce in countries where the
value of the money is depreciated with regard to the referred market. Actually this
allows to export towards another country, goods of lower prices than those which are
locally produced. It is on the contrary for the countries which have a strong money. An
enterprise will have difficulties in commercializing its products if the prices are high.

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International Context Environment

10-
International
Sector
9- Socio- 1- Industrial
Cultural Sector Sector

2- Raw material
8- State Sector Sector

Organisation

7- Economic's 3- Human
condition resources
Sector Sector

6- 4- Finacial
Technological ressources
Sector Sector
5- Market
Sector

Figure 9 - International Context environment – Bertrand Venard – Audencia School of Management

The economic environment of a market must be entirely controlled by an organization
as it has to anticipate and answer the evolutions of its environment. "Our environment
compels us to change permanently: to change means to exist tomorrow" (Atlas du
Management).
In other words, the ability for change, of an organization, and to stick to its environment
encourages its capacity to remain competitive.
To anticipate and react to the environment evolutions comes up from the ability of the
organization managers to be aware of the environment in which they move. Keeping that in
mind, the manager will be the one who will decide and successfully implement the change
with regard to his environment. Doing this, he will finally develop what will be considered as
a competitive advantage for the organization.

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4.3. Change and rigidities to change

“I'm not interested in preserving the status quo; I want to overthrow it.” Niccolo
Machiavelli (Brainy Quote, 2010)

4.3.1. Typical Organizational Rigidities to Change

Just one year after Lewin passed away, that is to say in 1948, Coch and French (1949)
published an innovating paper entitled “Overcoming Resistance to Change” (Coch and
French 1949). They conducted their research in a pyjama factory, implemented in Virginia,
USA: the Harwood Manufacturing Company (Coch and French, 1949).

This study, which led to a large number of further ones, emphasises the two following stakes:
 Understand the latent explanations to such a strong people‟s resistance to change.
 Draw alternatives that will help overcoming this resistance.

The authors concluded that resistance to change is omnipresent in the work place, where it
can be observed in very different ways, attitudes or behaviors.
Nevertheless, this resistance affects the environment in rather common prejudices, such as
“grievances, high turnover rates, low efficiency levels and restriction of output”. (Elrod II
and Tippett, 2002, p. 273).
Through this study, the authors highlighted the importance of participatory
management in the process of softening the resistance to change. They assumed that the direct
involvement of employees in that process was compulsory to successfully implement change
within the organization without having to face an active resistance to change.
The effects of not involving employees, who are directly concerned by the implications of
change, can be devastating. It can waste the potential of the change and even intensify an
issue.
According to Coch and French (1949), “because individual and group behaviour in an
organization are largely determined by a group norms (fundamental to the organization’s
culture), the changing of certain of these norms and their accompanying values that are
integral to culture needs to be a major focus on an organization change effort” (As cited by
Burke, 2002, p.52).

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Besides, employees‟ resistance to change is often linked with the uncertain and
ambiguous future which characterizes the change (Burke, 2002). Indeed, the more employees
are installed in deeply rooted routine and habits, the less reactive they will be to continuous
improvement. They will not feel new management methods as a plus but as a threat for their
existing system. Quoting Deal and Kennedy (1982), Elrod II and Tippett (2002) wrote: “the
significant barriers are raised whenever change is not recognized as loss, as the death of the
old” (p. 273). Actually, people who do not recognize the loss shall be condemned to stay in
the “denial state”: this is what occurs in the majority of the models of change. The process of
change must pay a great attention to make employees understand, feel and accept the change.
According to Kegan (n.d.), this employees‟ involvement in the process would give them a
more global point of view, necessary to make them apprehend the change as a natural
progression rather than a rupture. In that way only, people may begin to accept change, “if
not, actually welcome it.” (As cited in Elrod II and Tippett, 2002, p. 273).
This idea of a global view will help employees to see the company as a common
workplace rather than compartmentalized in several self-interest. Moreover, De Wit and
Meyer (2004) state that “the stronger the organizational culture is, the more efficient in terms
of performance it is”. In another hand, if the strength of the organizational structure can
increase the resistance to change. For instance, taking the eventuality that a company, pushed
by situational factors, need to change radically its organization, the efforts for change may be
weakened by a too strong culture. “Therefore, in short, organizational culture is a double-
edged sword. People can also become immune or reluctant to change” (Franziska Fritz &
Philippe Massart - 2007).
The difficulties of implementing change can be strengthened if people have common
(and usually wrong) assumptions about the market and the way to adopt change: change
mentalities when the whole group agree upon the same can turn out to be hard.
Managers must reshape this organizational belief in order to relieve the resistance to
change. Nadler states that “for effective change to occur, and in particular cultural change,
there is no substitute for the active engagement of the CEO and executive team. Top leaders
must assume the role of chief architect of the change process” (Kavanagh and Ashkanasy,
2006, p. 83).

The authors ranked the leaders‟ actions and influences as a top priority.
Nevertheless, as we underlined above, managers must take into consideration employees‟
involvement in the change process (participative management) in order to smooth the change.

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Leading Change: Key Factors for Success

Leading Change: Key Factors for Success

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