The Six Levels of Change Management in Organisations
Did you know that there are 6 hierarchical levels in Change management? The higher the level, the more important! Read this bog to know more!
The Six Levels of Change Management in Organisations
Many organisations see that we live in a rapidly changing world. For instance, there is energy transition, autonomous cars, robotisation, artificial intelligence, block chain technology, climate change, political changes etc. I could mention even more changes, but I guess you get the point.
All of today’s changes are a result of an action taken sometime in the past.
In making a statement such as this, you also have to explain the relationship between past, present and future. And that’s what I did in my recently published book, “How Change Works”. The book, about the Z-model of Change®, has had all its theories confirmed by scientific research. One of the assertions of the Z-model of Change® is that there are seven levels of change management in organisations.
Level 0: The Market / Society
The ground floor in change management is the level of the environment (market or society). Changes are present in our organisation's environment that might influence our company. That influence can be a direct influence, and what we call competition. On the other hand, that influence can be indirect - what we call "environmental influence". For instance, changes in the law affect the market, but the law is not a competitor. But there might also be changes in the environment that do not have an impact on our company.
The market, by the way, is not static. The market develops, and we, as a company, can also make choices in which market we want to operate. Ansoff’s growth strategy shows that we can influence the market by making decisions about markets and products. Some companies even create new markets (Uber, AirBnB etc.) that influence other existing markets (Taxi, hotels).
So, it is clear that the environment (or market) of our company might influence our company, and that by the choices we make as a company we clearly influence our market and environment. We can keep this in mind as we move on to the next levels.
Level 1: The Product
By creating the right product and market combinations, a company can have an enormous impact on their market. Google, Apple, Tesla, and Uber are all organisations that have challenged the status quo of existing markets by creating a new product. So, the first floor of change management is the product (or service) level. The product is the only thing we can see and it is objectively true. If you visualise a factory, you can see raw materials entering the building, you can see employees entering the building and you can see products coming out. The rest is a black box that will be discussed later on another level.
Looking at products from a change perspective is very interesting. We realise that existing products have to be improved and we also see that new products have to be developed to fit the changing standards of the environment. We have to get rid of products that the market no longer asks for. The BCG Matrix is useful on this level and, at the same time, the standard of the environment makes a major impact. Changing the standards of the environment is the reason for massive improvement on the product or services level. The changing of the standard to care for the environment gave Tesla the opportunity to enter the automotive market with a radical new concept. The changing of the standard to ”make things easy for customers,” gave AirBnB and Uber the possibility to enter their market and become big companies without owning any rooms or cars.
The conclusion is the changing standards of the environment create a pull market for improving existing products or create a window of opportunity for new competitors the moment the older existing companies do not apply to those standards with their products and services.
Level 2: Abilities
The 2nd floor in change management is the organisation. In the previous level, the organisation was described as the black box; now we’ll delve into that black box and discover what is happening. The abilities level of the organisation is what is needed to create the products or services that meet market standards. On this level, we see the classic business definition of an organisation:an organisation is a group of people, working together in a certain structure according to processes and procedures in the direction of a goal.
In this level, we have to be aware of three equally important topics:
1. The structure of the organisation
2. The processes of the organisation
3. The people in the organisation
Structures often follow business processes using the classic structure of sales, purchasing, operations, logistics and finance. However, I have witnessed many other structures that work well because they were process oriented.
An organisation’s processes are, of course, important, because standard processes guarantee a standard quality. On this level LEAN and QRM are great tools to improve those processes. Notably, the people in the organisation are the most important element of an organisation’s ability. The abilities of individual employees can mean the difference between a smooth process and a process that is prone to many mistakes and failures.
If just one of the ingredients is missing then things go wrong. A structure and process without employees does not deliver products or services. And a structure with employees without standard processes will not be very efficient. Indeed, standard processes for a group of employees that work together without any structure will be very chaotic.
The conclusion is that we need three equally important parts in the black box to create products and services for the market or society.
Many change consultants stop here but in my opinion, we are only halfway there. There is something more important than the abilities of the organisation.
Level 3: The culture
The definition of an organisation included the element of working towards a goal. Working together is not a simple thing. Individual employees have different beliefs about the same topic which may lead to interpersonal problems.
She does not like him, he does not want to work with the other guy, and they all try to influence their colleagues to come into their bubble. Coalitions exist, and this is when we see the appearance of suboptimization. When I refer to Lencioni’s model from the book “The Five Dysfunctions of a Team” (Lencioni, Patrick M. The Five Dysfunctions of a Team. Wiley-Blackwell,2010), managers and employees all recognise these cultural difficulties. On this level, we have to invest in culture, by, for instance, teambuilding - forming a team, creating trust and discussion about topics (storming) so we can decide what is the best solution (norming) to become a better (performing) team in the direction of the common goal.
The better we work together and accept the qualities and weaknesses of individuals, the better an organisation is able to improve its abilities, creating better products or services for their market or for society.
So now the question is, is there something more important than the culture of the organisation?
Level 4: The Brand and its values
The brand is more than the logo of the company. The brand is also the emotional impact on the environment. We can learn from Steve Jobs how marketing is about values, and we can create representations of these values to maximize emotional impact in the environment. Hence, there is a direct link from the ID (organisational identity) and core values to the standards of the environment.
At the same time, the internal communication surrounding company values and the role management plays in judging if employee behaviour is in-line with those values is a matter that is often forgotten. This is an area that can create significant image risks. When, for example, we market ourselves as customer oriented and our employees are rude to our customers, word will spread fast that we might not be what we say we are. This will damage our image, and as a result, we will lose customers.
Many managers I meet, are only able to manage results and not behaviour. And results are only a representation of yesterday’s behaviour. It is asking employees to act differently but without telling them how they have to change.
I believe, the better management is on behaviour, the better employees will support the marketing message, the better our customers will trust that message, the better the results.
Therefore, my quest is to improve the observation power and behavioural flexibility of managers, so they can have a major impact on creating an organisation that is in alignment.
But there is more.
Level 5: The Purpose and Impact
The highest level in change management within organisations is the level of Purpose and Impact.
In particular, organisations that are making plans for the future need to have the answers to the following questions:
- Why do we exist?
- What is our added value in the world (market / society)?
- What is our strategic goal that is tempting enough to make us move forward?
The answer to these questions creates a momentum in organisations to move forward, to change and to decide on every level to do things differently.
So from top to bottom:
The moment you want to achieve something else in the future (level 5) you must consider your values (level 4) that you will market to the environment, and also have to communicate internally by being a role model and empower managers to manage on behaviour (level 3). Sometimes you will conclude that you have to adjust the structure (level 2) and/or the processes (level 2) or that you have to invest in the abilities of managers (level 2) and other employees to manage behaviour to increase results. As a result, the managing of behaviour will improve the products, services (Level 1) and the alignment of the organisation in its environment. Your customerswill spread the word and you will experience an increase in results (level 0). And that was just what you wanted to create!