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Chapter 1

Organization Development and Reinventing the Organization

Learning Objectives
1. Define the concept of organization development and recognize the need for change and renewal. 2. Describe organization culture and understand its impact on the behavior of individuals in an organization. 3. Understand the expectations of the psychological contract formed on joining an organization. 4. Describe the five stages of organization development.

Student Premeeting Preparation


1. Read Chapter 1. 2. Read and prepare analysis for Case: TGIF.

Instructor Preparation and Materials


1. Simulations: no special materials are required. 2. In general, this class begins in a unique way. Students are not usually asked about their expectations upon beginning a class, and they generally respond positively to this approach. Here you are beginning the practitioner-client relationship, sensing the need for change, and providing the framework for experiential learning. Open communication, high participation, an active role, and shared responsibility are course objectives. Chapter 1 Organization Development and Reinventing the Organization Copyright 2011 Pearson Education, Inc. Publishing as Prentice Hall 1

LECTURE OUTLINE
1) Learning objectives. (pg. 3)
a) Define the concept of organization development and recognize the need for change and renewal. b) Describe organization culture and understand its impact on the behavior of individuals in an organization. c) Understand the expectations of the psychological contract formed on joining an organization. d) Describe the five stages of organization development.

2) The challenges for organizations. (pg. 3)


a) Change is avalanching down on our heads. b) Tomorrows world will be different from todays world. c) Organizations will need to adapt to changing market conditions and at the same time cope with the need for a renewing rather than a reactive workforce. d) Organizations are never completely static and they are in continuous interaction with external forces. (See Figure 1.1, The Organization Environment)

3) What is organization development? (pg. 4)


a) Definition of OD. i) OD is long-range efforts and programs aimed at improving an organizations ability to survive by changing its problem-solving and renewal processes. ii) OD is: (1) Planned. (2) Organization wide. (3) Managed from the top. (4) Designed to increase organization effectiveness and health. (5) Planned interventions that use behavioral science knowledge. b) The characteristics of O D. (See Table 1.1, Major Characteristics of the Field of OD) i) Change is planned. ii) Collaborative approach. iii) Performance orientation. iv) Humanistic orientation. v) Systems approach. vi) Scientific method. 2 Chapter 1 Organization Development and Reinventing the Organization Copyright 2011 Pearson Education, Inc. Publishing as Prentice Hall

c) Why OD? i) Most cited reasons for beginning a change program: (1) The level of competition. (2) Survival. (3) Improved performance. ii) Primary goals of change programs: (1) Change the corporate culture. (2) Become more adaptive. (3) Increase competitiveness. d) Factors leading to the emergence of OD. i) The need for new organizational forms. ii) The focus on cultural change. iii) The increase in social awareness.

4) The only constant is change. (pg. 6)


a) Change occurs so fast that it is a moving target. b) Organizations must anticipate change and respond to changing demands. c) Todays managers need a new mind-set. i) Flexibility. ii) Speed. iii) Innovation. iv) Constantly changing conditions. d) Successful firms will share these traits: (See Figure 1.2, The Changing Organization of the Twenty-First Century.) i) Faster. ii) Quality conscious. iii) Employee involvement. iv) Customer oriented. v) Smaller.

5) The evolution of organization development. (pg. 8)


a) OD has evolved since the late 1940s. b) NTL Laboratory-Training methods. c) Survey research and feedback. d) The extent of OD applications.

6) Who does OD? (pg. 9)


a) OD practitioners consist of specialists and those applying OD in their daily work. Chapter 1 Organization Development and Reinventing the Organization Copyright 2011 Pearson Education, Inc. Publishing as Prentice Hall 3

b) OD specialists. i) Professionals trained in OD. ii) Sometimes called OD consultants. iii) Specialists are: (1) Internal practitioners from within the organization. (2) External practitioners from outside the organization. c) Managers and leaders applying OD principles and concepts. i) May not call what they do OD. ii) The activities include: (1) Team leaders developing and coaching teams. (2) Building learning organizations. (3) Implementing total quality management. (4) Creating boundaryless organizations.

7) The organization culture. (pg. 10)


a) A system of shared meanings including: i) Language. ii) Dress. iii) Patterns of behavior. iv) Value system. v) Feelings. vi) Attitudes. vii) Interactions. viii) Group norms. b) Norms. i) Organized and shared ideas regarding what members should do and feel, how behavior is regulated, and what sanctions should be applied. ii) Pivotal norms - essential to accomplishing organizations objectives. iii) Peripheral norms - support and contribute to the pivotal norms but are not essential to the organizations objectives.

8) The socialization process. (pg. 11)


a) The process that adapts employees to the organizations culture. (See Figure 1.4, The Socialization Process) b) New employees become aware of the norms. c) Employees encounter the organization culture. i) Individuals need to understand things like power, status, rewards, and sanctions for specific types of behaviors. ii) The organization may be attempting to influence them. d) Adjustment to cultural norms and socialization occurs in 3 ways: (See Figure 1.5, Basic Responses to Socialization) i) Rebellion - rejection of all values and norms. ii) Conformity - acceptance of all values and norms. 4 Chapter 1 Organization Development and Reinventing the Organization Copyright 2011 Pearson Education, Inc. Publishing as Prentice Hall

iii) Creative individualism - acceptance only of pivotal values; rejection of others. e) Creative organizations encourage feedback and allow employees to examine openly the pivotal and peripheral norms.

9) Psychological contract. (pg. 14)


a) An unwritten agreement between individuals and the organization of which they are members. b) Open-ended so that issues may be renegotiated.

10) A model for organizational change. (pg. 14)


a) OD is a continuing process with emphasis on viewing the organization as a total system of interacting and interrelated elements. b) Five-stage model for OD process. (See Figure 1.6, Organization Developments Five Stages) i) Stage one: Anticipating need for change. (1) Someone, usually a key manager, recognizes the need for change. (2) There must be a felt need for change. ii) Stage two: Developing the practitioner-client relationship. (1) The OD practitioner enters the system. (2) Good first impressions and a match between the practitioner and client system are important. (3) The practitioner attempts to establish a pattern of open communication, a relationship of trust, and an atmosphere of shared responsibility. iii) Stage three: The diagnostic phase. (1) The practitioner and the client begin to gather data about the system. (2) The objective is to better understand the client systems problems, identify forces causing the situation, and to provide a basis for selecting change strategies. iv) Stage four: Action plans, strategies, and techniques. (1) A series of interventions, activities, or programs aimed at resolving problems and increasing organization effectiveness. (2) These programs apply such OD techniques as team building, intergroup development, goal setting, and job design. v) Stage five: Self-renewal, monitor, and stabilize. (1) As the OD program stabilizes, the need for the practitioner should decrease. (2) Monitor the results. (3) Stabilize the change. (4) Gradual disengagement of OD practitioner.

Chapter 1 Organization Development and Reinventing the Organization Copyright 2011 Pearson Education, Inc. Publishing as Prentice Hall

OD Applications
GEs Epicenter of Change (p. 7)
SUMMARY
GEs Leadership Center is the tool that the company uses to spread change throughout the organization. The Center is at the forefront of real-world application for organizational development, leadership, innovation and change.

MAJOR POINTS
The participants (around 10,000 annually) at the center include entry-level to the highest-performing executives. GE also invites customers to the center to help solve mutual problems. Courses typically run one to three weeks. Subjects include leadership and essential basic management skills such as team building and giving presentations. Executive courses incorporate subjects in leadership, innovation, and strategy. Participants typically are 50% non-U.S. and new centers have opened outside of the U.S. GE believes that building strong leaders is strategically imperative. GEs current challenges and future success depends in part upon how well their employees learned their lessons at the Leadership Center.

QUESTIONS
1. How does the Leadership Center serve as a center for change at GE? Answer: By bringing employees ranging from entry-level to top level executives and from GE operations world-wide, GE trains leaders for the future. Though initially the center concentrated upon leadership training, the center now uses the center as a tool to spread change throughout the company. The center is at the vanguard of cutting-edge thinking in organizational development, leadership, innovation, and change. Customers of GE are also invited to the center so that they and GE employees can jointly discuss and solve major issues. By building strong leaders, GE is strategically preparing for a turbulent and challenging future. 2. Visit GEs Web site to learn about the Leadership Centers current programs at www.ge.com/ and www.ge.com/company/culture/leadership_learning.html.

Leave No One Behind At Starbucks (p. 13)


SUMMARY
Starbucks unique culture and philosophy has been instrumental in their success. With the rapid expansion of the company and now confronted with new competitive 6 Chapter 1 Organization Development and Reinventing the Organization Copyright 2011 Pearson Education, Inc. Publishing as Prentice Hall

pressures, they face significant challenges of maintaining the formula that helped them become successful.

MAJOR POINTS
One of Starbucks formula for success is a CEO who communicates a strong and clear vision to their employees. The philosophy of Leave no one behind shows up in training, salaries, and benefit packages. Employees consistently rate Starbucks as one of the best companies to work for. Employee surveys found that the two principal reasons people work for Starbucks are opportunities to work with an enthusiastic team and to work in a place where they feel they have value. Starbucks looks for people who are adaptable, self-motivated, passionate, and creative team players. With a company of over 170,000 world-wide employees, maintaining an entrepreneurial spirit is a major objective. With increasing competition and challenging economic conditions, Starbucks is striving to create both value and quality while maintaining the precepts that made it successful.

QUESTIONS
1. What do you think Schultz meant when he said that Starbucks objective is Getting big and staying small? Answer: Schultz is likely trying to maintain the entrepreneurial spirit of Starbucks when they were a small and growing company. With a more mature company of around 170,000 employees, the challenge is not to allow the company to loose the culture that helped it become successful. 2. If possible, interview a present or former employee of Starbucks to get his or her impression of the company. 3. If you have visited a Starbucks, did you see any examples of teamwork among its employees? 4. Research the current lists of Fortunes 100 Best Companies to Work For and Americas Most Admired Companies. Information is available at www.money.cnn.com/magazines/fortune/fortune_archive/. 5. Research current information about Starbucks sales and revenue. Information and their annual report can be found at www.starbucks.com/.

Chapter 1 Organization Development and Reinventing the Organization Copyright 2011 Pearson Education, Inc. Publishing as Prentice Hall

Review Questions
1. How would you define organization development?
Answer: Organization development is a series of planned behavioral science intervention activities with the purpose of increasing the effectiveness of the system and developing the potential of all individual members. OD efforts are planned, systematic approaches to change that are carried out in collaboration with organization members to help find improved ways of working together toward individual and organizational goals.

2.

How does OD differ from a single-change technique such as management training?

Answer: OD represents a systems approach that is concerned with the interrelationship of various divisions, departments, groups, and individuals as interdependent subsystems of the total organization. A single technique such as management training is aimed at changing individual behavior, whereas OD is focused on the larger goal of developing an organization-wide improvement in managerial style. OD uses many different techniques and no single technique represents the OD discipline.

3.

Identify and demonstrate the uses of the psychological contract.

Answer: Psychological contract involves the expectations on the part of individuals and organizations to which they belong or in which they take part (i.e., work). Each side must understand that such a contract exists and that unless these expectations are met, there will be conflict.

4.

Explain the difference between pivotal and peripheral norms.

Answer: Pivotal norms are essential to accomplishing the organizations objectives. Peripheral norms support and contribute to the pivotal norms but are not essential to the organizations objectives.

5.

Explain three basic responses an individual may have to socialization.

Answer: Socialization is the process that adapts employees to the organizations culture. An individual may respond to the socialization in three basic ways. At one extreme, an individual may conform to all the norms of the organization, resulting in uniformity of behavior and complete acceptance of organization values. At the other extreme, an individual may rebel, reject all values, or leave the organization altogether. Another alternative between the two previous extremes is for an individual to accept the pivotal norms and seriously question the peripheral norms, which is called creative individualism.

6. 7.

Read a book or an article and identify the organizational culture and norms it embodies. Identify and explain the five stages of organization development.

Answer: Stage one is to anticipate a need for change. People in the organization perceive that the organization is in a state of disequilibrium or n eeds improvement. In stage

two, relations between the practitioner and organization members (the client)
8 Chapter 1 Organization Development and Reinventing the Organization Copyright 2011 Pearson Education, Inc. Publishing as Prentice Hall

develop. The practitioner attempts to establish a pattern of open communication, a relationship of trust, and an atmosphere of shared responsibility. Stage three is the diagnostic phase where the practitioner and client gather data and analyze the data to identify problem areas and causal relationships. In stage four action plans, strategies, and techniques are developed to resolve problems and increase organization effectiveness. The plans and techniques include total quality management (TQM), job design, role analysis, goal setting, team building, and intergroup development. Stage five, the last stage, is a period of self-renewal, monitoring, and stabilizing the OD program. In this stage the change program is monitored to make sure that the new behavior is stabilized and internalized. If this is not done, the tendency is for the system to regress to previous ineffective modes or states. The client system needs to develop the capability to maintain innovation without outside support.

Chapter 1 Organization Development and Reinventing the Organization Copyright 2011 Pearson Education, Inc. Publishing as Prentice Hall

KEY WORDS AND CONCEPTS


Define and be able to use the following words and concepts:
Action research model - collecting information, feeding back information to the client system, developing and implementing action programs to improve system performance. (p. 15) Change Agent - a person attempting to bring about planned change in an organization. (p. 10) Client System- the person or organization that is the subject of the change. (p. 10) Creative individualism - questioning of peripheral norms, accepting of pivotal norms. (p. 13) External practitioner - a person from outside the organization who serves as a resource for change. (p. 9) Internal practitioner - an internal resource for change, such as a manager or other member of the organization. (p. 9) Norms - the organized and shared ideas regarding what members should do and feel, how this behavior should be regulated, and what sanctions should be applied. (p. 10) Organization culture - a system of shared meanings, including language, dress, values, norms, and attitudes of an organization. (p. 10) Organization development - planned strategy to bring about change. (p. 4) OD practitioner - the people using, advocating, and assisting others to implement OD. (p. 6) OD specialist - professionals that have specialized and trained in organization development and related areas such as organization behavior, applied social sciences, interpersonal communications, and decision making. (p. 9) Peripheral norms - norms that support and contribute to the pivotal norms but that are not essential to the organizations objectives. (p. 11) Pivotal norms - norms essential to an organizations objectives. (p. 11) Psychological contract - expectations between an individual and an organization. (p. 14) Socialization - process of an individual adjusting to an organizations culture. (p. 11) 10 Chapter 1 Organization Development and Reinventing the Organization Copyright 2011 Pearson Education, Inc. Publishing as Prentice Hall

ADDITIONAL RESOURCES
Readings:
Beckhard, Richard, Organizational Development: Strategies and Models (Reading, Mass.: Addison-Wesley Publishing Co., Inc., 1969.) If you have difficulty locating this classic OD book, you might try amazon.com and ebay.com. Beckhard, Richard, Agent of Change: My Life, My Practice (San Francisco: Jossey-Bass, 1997.) Bennis, Warren G., Organization Development: Its Nature, Origins, and Prospects (Reading, Mass.: Addison-Wesley Publishing Co., Inc., 1969.) This Bennis and the Beckhard book are part of an Addison-Wesley OD series published in the late 1960s. Bennis, Warren G., The Essential Bennis (San Francisco: Jossey-Bass, 2009.) Schein, Edgar, Organizational Culture and Leadership (San Francisco: Jossey-Bass, 2004.) Tichy, Noel. M. and S. Sherman, Control Your Destiny or Someone Else Will (New York: HarperBusiness, 2001.)

Video:
The Target Shoots First, 2000, 70 minutes, documentary. Directed, written, produced, and filmed by the lead character, Christopher Wilcha. A recent 22 year old college graduate goes to work at Columbia House and video tapes his work and experiences. He is a production manager for the mail order record business at Columbia. Subjects include learning the culture, norms, and psychological contracts. This film was shown on the Sundance TV channel. It may have become available. This is a good film to lead off the semester. Additional information is available at http://www.imdb.com. The film is also appropriate for Chapters 3 and 16.

Chapter 1 Organization Development and Reinventing the Organization Copyright 2011 Pearson Education, Inc. Publishing as Prentice Hall

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SIMULATION PROCEDURES
Simulation 1.1 (p. 19) Auditioning For The Saturday Night Live Guest Host Spot
1. Student premeeting preparation: None.

2. Introduction:
a. Here we want to set a norm of participation, fun, and positive feedback.

3. Suggestions:
a. After a brief introduction, we begin sharing information about ourselves. b. A potential problem is one of class size, as it requires about five minutes per person for the introduction.

4. Discussion points:
a. What norms have emerged? b. Did you learn more about the interviewer or the interviewee? c. Do you feel more comfortable with the class?

5. Total time suggested: 60 minutes


You will need to adjust these times to fit your specific schedule and class plans. Minutes 20 40 60

Steps 1 and 2 Steps 3 and 4 Total

Notes

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Chapter 1 Organization Development and Reinventing the Organization Copyright 2011 Pearson Education, Inc. Publishing as Prentice Hall

Simulation 1.2 (p. 21) The Psychological Contract


1. Student premeeting preparation: None

2. Suggestions:
a. If possible, the class should be seated in a circle. How you handle the questions will help to determine the development of the course. Students are sometimes hesitant to ask meaningful questions and, at other times, to bring out serious issues as a test of how you will respond. Anything you can do to handle these issues openly will have a long-term payoff. b. The issues that are likely to emerge, or that you may want to present, are those of preclass preparation, exams, and grading. A critical problem for courses of this type is premeeting preparation. Sometimes students are under pressure in more structured courses and feel they can let this course-work slide. The timing of the simulations is such that when people fail to do the prework, it slows and delays the class and degrades the learning process. You very likely, on the other hand, will not feel comfortable in the role of police person (checking on homework), so this issue needs to be confronted. c. At this point, students are usually emphatic about two things: they dont like exams and they dont like to write papers. How you deal with these issues may well be a factor in your student / professor relationship. We leave the options open to the class, but explain the position of the previous class and that the simulations are important to learning. The prework is left up to the class, but it has never posed a serious problem.

3. Discussion points:
a. b. c. d. Expectations. Roles. Goals and rewards. Grades.

4. Total time suggested: 15 to 115 minutes depending on parts used


You will need to adjust these times to fit your specific schedule and class plans. Part A, Steps 1 to 3 Part A, Step 4 Part B, Steps 1 to 3 Part B, Step 4 Part C, Steps 1 and 2 Part D, Steps 1 and 2 Part D, Step 3 Total Minutes 15 20 15 20 15 15 15 115 13

Chapter 1 Organization Development and Reinventing the Organization Copyright 2011 Pearson Education, Inc. Publishing as Prentice Hall

Notes

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Chapter 1 Organization Development and Reinventing the Organization Copyright 2011 Pearson Education, Inc. Publishing as Prentice Hall

CASE TEACHING NOTES T.G.I.F. (p. 28)


I. Problems
A. Macro 1. Employees drinking alcohol while at work pose liability problems to Quantum, especially when the alcohol is furnished by the company. 2. As Quantum grows, the potentially out-of-control beer busts may be only a symptom of rapid growth. 3. How to deal with motivation and esprit de corps in the face of rapid growth and change. B. Micro 1. Stan shows indications of being unwilling to deal with potential problems and hear divergent points of view.

II. Causes
1. Rapid growth. 2. A degree of immaturity from some employees.

III. Alternatives
1. Maintain status quo. 2. Still have TGIF parties but dont serve beer or other alcoholic beverages. a. Explain the legal problem very openly to employees. b. Introduce alternatives such as better food as a replacement for beer. c. Have team sports such as softball or volley ball. 3. Use no-host bar. a. This will likely not remove legal responsibility. b. Might be seen as being cheap by the employees. 4. Use designated driver or company bus. 5. Explain the problem to employees and ask for suggestions.

IV. Recommendations
Remove the alcohol from the parties. The legal responsibilities are too great a risk. A combination of alternatives 2 and 5. Ask for suggestions as to a replacement for the alcohol.

Chapter 1 Organization Development and Reinventing the Organization Copyright 2011 Pearson Education, Inc. Publishing as Prentice Hall

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STUDENT PREPARATIONS FOR THE NEXT CHAPTER


1. Read Chapter 2. 2. Read the instructions for OD Skills Simulation 2.1. Before coming to class, complete Part A, Steps 1 and 2, which includes completing the Profile Survey, Profile Form, Class Performance Form, and Objectives Form. Familiarize yourself with the Instructions for Developing OD Practitioner Roles and Skills at the end of the simulation. 3. Read and analyze Case: The NoGo Railroad.

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Chapter 1 Organization Development and Reinventing the Organization Copyright 2011 Pearson Education, Inc. Publishing as Prentice Hall