MBA management

Organizational Effectiveness

Organizational Effectiveness can be defined as organization, as a social system, given certain resources and means, fulfills its objectives without incapacitating its means and resources and without placing undue strains upon its members. This stems from the fact that organizations are social systems.

It can also be defined as its capacity to survive, adapt, maintain itself, and grow regardless of the particular function that it fulfills. This definition develops from the fact that every organization has multiple goals or functions and also exists within organization an environment that provides predictable inputs.

The first definition of OE subsumes the following:
• Organizational productivity
• Organizational flexibility
• Absence of organizational conflicts

Thus, OE is reflected in how the organization is equipped to:
• Move toward is goals, and
• Survive in the face of external and internal variability through creative adaptation strategies.

The concept of effectiveness in OD programming

1. It is difficult to measure the number, nature and magnitude of confounding variables: While an OD program is implemented, there are various other influences operating internally and externally to the firm which influence its effectiveness. Assuming that there is a change in the organization, it is difficult to detect which of the influences was the primary cost.

2. Pre-intervention measures of behavior are not taken: In order to judge whether an OD program is effective, it is first necessary to have knowledge of the situation prior to the interventions. It is impossible to state that a training program ‘helped’ a particular manager unless we first have some specific measures of the person’s behavior prior to the training. Similarly, to state that an MBO program increased an organization’s overall effectiveness, specific measures before and after the change must be available.

3. Those doing the evaluations of OD programs have a vested interest in proving success: Many OD programs have become commercial ventures with companies paying large sums of money for consultants to ‘develop’ the organization. These same consultants then report specific successes regarding the programs which, of course, serve to generate more clients. This is certainly not to say that paid consultants are dishonest or misrepresent their findings, but it does point to a define conflict of interest situation, and unfortunately, may contaminate the findings.

Various approaches to OE

There are four approaches to OE which have been dealt with in sufficient details in OD approaches under Unit- V. However, with regard to certain these problems and limitations, we shall discuss here for the benefit of the students. There are also certain factors in OE which the students must know of and we shall be explaining these in the following chapters.

a. Goals attainment approach:

This approach suffers from certain limitations and this makes its exclusive use highly debatable.

• While operationalizing goal- attainment approach, one is confronted with a problem like whose goals?

• Organization’s official goals do not always reflect the organization’s actual goals. This is because official goals, at times, are influenced by some factors like social desirability.

• An organization’s short-term goals compete with each other and sometimes are even incompatible. The achievement of “high product quality” and “low unit cost”, for example, may be directly at odds with each other.

These limitations, while certainly damaging, should not be construed as a blanket indictment of goals. Organizations are deliberate goal-seeking entities. The real problem lies in how to identify and measure the attainment of goals. If managers are willing to confront the complexities inherent in goal- attainment approach, they can obtain reasonably valid information for assessing on organization’s effectiveness.

b. Systems approach:

We already saw the various facets of this approach. This approach basically assumes that:

• Organizations are made up of interrelated sub-parts. Performance of one part affects the performance of other parts as well.

• Effectiveness requires both awareness and successful interactions with environmental constituents.

• Survival requires a steady replenishment of resources consumed by the organization. Failure to replenish will result in the organization’s decline and, ultimately, death.

Like goal- attainment approach, systems approach relate to measurement and the issue of whether means really matter.

c. Strategic- Constituencies Approach:

This approach is related to systems approach closely. But there are some noteworthy problems as given hereunder.

• The task of separating the strategic constituencies from the larger environment of a business is easy to say but difficult to do so in practice. This is because, given the fast changing business environment what was strategic to the organization till the other day, may not be so today. The converse of this example may also hold true.

• That what expectations various constituencies hold for a business organization is also difficult to identify in the absence of required information in this regard. There has so far been no reliable technique how to tap information accurately on what constituencies actually expected in an organization.

Given above problems, the strategic – constituencies approach cannot be rejected in too. If organization has to survive, then it is incumbent upon managers to understand just who it is, in terms of constituencies that survival is contingent upon. Knowing whose support is needed to make organization survive, management can accordingly modify its order of goals as necessary to satisfy expectations of various strategic constituencies.

d. Competing- values approach:

Having studied the nuances of the approach already, we shall look at the three basic sets of values which we are describing briefly below.

Let us further look at how competing values operate. Robbins has listed three basic sets of values, namely. Flexibility versus control, people versus organization, and means versus ends. A brief description of each of these follows:

• Flexibility versus control: Flexibility and control are two incompatible dimensions of organizational structure. While the former values innovation, adaptation and change, control favors stability, order and predictability.

• People versus Organization: Whether people in organization should be valued more or organization itself. This is because people – organization dichotomy is another set of essentially incompatible dimensions. The managers are concerned for values realization, for the feelings and needs of the people within the organization. In contrast, concern for productivity and task accomplishment appraises concern for organization.

• Means versus Ends: the third set of values relate to organizational means versus ends. Means stress internal focus and the long term, whereas ends value final outcomes and the short term. This dichotomy is very similar to goal attainment and systems approaches respectively as discussed earlier. Goal attainment focuses on ends, and system emphasizes means.

The competing–values approach is conceived upon the following assumptions:

1. The concept of OE is subjective. The evaluator values goals as per his or her interests and preferences.

2. It assumes that the evaluator’s diverse preferences can be combined in such a way as to create a set of competing- values. Each set defined a different model of OE.

Comparison of Four OE Approaches

We have presented four different approaches as useful one in their own way. Now, we are answering under which conditions each approach is preferred. The table below will help you identify the effectiveness of the various approaches.

Approach   Definition   When Useful
    An organization is effective to the extent that….   The approach is preferred when….
Goal attainment   It accomplishes is started goals.   Goals are clear, time bound, and measurable.
Systems   It acquires needed resources.   A clear connection exists between inputs and outputs.
Strategic constituencies   All strategic constituencies are at least minimally satisfied.   Constitutions have powerful influence on the organization, and the organization must respond to demands.
Competing values   The emphasis of the organization in the four major areas matches constituent preferences.   The organization is unclear about its own emphases, or changes in criteria over time are of interest.

Factors in Organization Effectiveness

Knowing only criteria or approaches for OE may not serve a practicing manager’s purpose. It is also equally important for a manager to identify the underlying factors in organizational effectiveness individually, ach factor matters in affecting organizational effectiveness. But, what actually matters more is each factor matters in affecting organizational effectiveness. But, what actually matters more is each factor’s relationship to the entire organization. Viewed from this angle, Likert has classified all factors into three groups. These are:
1. Casual Factors
2. Intervening Factors
3. End- Result Factors

We will discuss them now.

Casual Factors:
These are the factors that cause or influence development within an organization. Likert states that casual variables are independent variables that determine the course of development within an organization and the results achieved by the organization. The casual variables can be changed by the organization and its management. Examples of casual variables are organizational structure, managerial policies, leadership styles, and skills.

Intervening factors:
Intervening factors are those which get their reflection in the internal state of organization. Casual variables cause intervening variables or factors. Intervening factors are reflected as the loyalties, attitudes, motivations, performance goals, and communication and so on. Intervening factors can be divided into two broad types: one attitudinal and the second, behavioral. These help in building and developing the organization.

End-result factors:
These are the dependent factors caused by casual and intervening factors. These are often in terms of the factors which managers use to measure effectiveness of organization. Production, sales earning etc., are examples of end-result factors.

Impact of Organizational Effectiveness on Organization Development and Organization Design

It enabled support services, BPO/ KPO, telecom, hospitality and sectors are in the process of harnessing the growth potential of the Indian economy largely driven by a demographically formidable labor force in India. The world has embarked on a massive realignment of economic activity thanks to technological advance, capital market development, economic liberalization and demographical shift. This realignment will continue in spite of shocks and setbacks. Today Asia contributes 13% world GDP.

The last decade has been marked by unprecedented pace of changes in technology, economy and society. The decade has been marked by unprecedented pace of changes in technology, economy and society. The center of economic activities has shifted from developing world to Asia and Latin America. The once sluggish economics of India and China have been rejuvenated to buoyancy because of huge presence of multinational and off shoring of business and Knowledge and processes. Public and private sectors in India have responded to the challenges and changes in competition by their increasing presence in the global economic scene. The service sectors contribute to approximately more that 50% of GDP through their formidable presence.

Changing trends that affect the organizational design

Changes have affected the organizational development and design in the last decade. Some of the major trends in these change processes are likely to affect industry, Lifestyles and social structures. These will affect in turn the organizations-their strategies, structures, their leadership, their employment practices and they all need to work with the change. 11 such trends are indicated below.

Individuality: A decline in traditional family forms.

Choice: An increase in the mobility of individuals regarding residence, working, and personal relationships.

Identity: Increased ‘fluidity’ in personal identities because of increased mobility and more transient working arrangements, personal relations and leisure.

Independence: Increased freedom from traditional obligations leads to more self-centeredness, self- indulgence and hedonistic psychologies.

Anxiety and risk: A more rootless society giving rise to feelings of insecurity, society perceived as perhaps high risk and threatening or exciting and challenging.

Creativity: Increased focus on self- interest and individuality will encourage personal creativity generating a more innovative society.

Globalization: Increase in the international division of labor with greater global segregation between the developed and underdeveloped economies: Islamic and Christian societies, Russia, central Europe and Euroland; the challenge to Britain is to become a leading- edge information economy.

Information and Communication technologies (ICTS): Increasing capabilities of ICTS leading to the decline in traditional forms of organization including large public sector as well as commercial and voluntary organizations.

Bio-technologies: genetic engineering: increased ability to control patterns of reproduction, not just sex of babies: technologies to improve health, both physical and psychological.

Socioeconomic inequalities: Increased polarization in cultural, educational and materials living standards.

The changes mentioned above will have far reaching impact on the very nature and design of the organizations in various parts of the globe in varying degrees. These trends thus provide the possible direction in which organizations need to move in order to align themselves with the changing environment and utilize the enormous possibilities inherent in the emerging information technology revolution sweeping across the globe.

The macro level changes on a global scale have affected the productive sectors of the society represented by business organizations. The organizations and the organizational context today are not the same as in the last decade.

Emerging Realities of Business

The process of globalization has unleashed forces affecting the conduct of business and they very nature of organization engaged in productive pursuits. Such developments have led to reexamination and redefinition of the principles of organization design. Some of the major contextual factors are discussed as follows:

1. Distributed Intelligence:
As the organizational space gets dispersed, knowledge workers replace manpower with traditional skills, and domain of operations increases; and the information base is enlarged. The information needed by an organization to make informed decision gets highly distributed amongst members of enlarged domain. The phenomenon often termed as distributed intelligence would need to be converted into collective intelligences by pooling together the views, ideas, options and perceptions of all the relevant players. It is through this process of convergence that organizations seek to create knowledge and utilize the same for rethinking strategies, systems and processes as also for bringing about continuous improvement in their performance parameters.

2. Creative destruction:
Most organizations are at crossroads as they face the global competitive pressures, emerging economies, saturated market s and demanding customers. The industrial era paradigm fails to provide answer to the emergent problems. The structure, system, processes and mindsets that were functional in a relatively predictable environment have outlived their utility. In the changed scenario, organizations have little option other than systematically destroying what they built over the years in the past. Destruction is a painful process as w fall in love with what we have created with sweat and labor and which has enabled us to succeed .However, “new” cannot be created unless we destroy the “old”. Creative destruction thus implies that organizations need to successfully and systematically destroy the old edifice and order to be destroyed in favor of organic –nonhierarchical structure. Internally focused systems and processes need to be replaced by external customer focus.

3. Knowledge Workers:
A qualitative change in the nature of workforce and consequent pressure to raise the productivity of knowledge workers will necessitate a fundamental shift in the way work is structured. The primary asset of manual worker has been production equipment. Organizations have used such tools as task management and industrial engineering to make the manual worker more productive. Manual workers are always assigned a task; whereas each knowledge worker possesses individual strengths and needs to have total accountability for the task. They need to be able to manage themselves. Manual workers are viewed as costs to be controlled and reduced, but knowledge workers should be viewed as capital asset. This would require organizations to develop new performance measures and new strategies.

The shift to knowledge- intensive industries highlights the need for attracting and retaining well- trained talent. This will inevitably lead to integration of global labor markets. About million university- educated young professionals in developing countries is more than double the number in developed countries. For many companies, global labor and talent strategies will become as important as global sourcing and manufacturing strategies.

4. Social Responsibility Of Business:
The global reach of business resulting in emergence of mega-corporation will have wide – ranging implications for their legitimacy in societies in which they operate. The mega- corporations will come under sharp scrutiny by societal and regulatory mechanisms. The current business concerns of shareholders’ value, free trade, intellectual property rights and profit repatriation may not easily be accepted by a sizeable number of people. Scandals, environmental mishaps, value- conflict and clash of ethical standards will draw increasing attention thereby threatening the existence of the global operators. The business leaders will need to argue and demonstrate more forcefully the intellectual, social and economic case for business in society and the contributions they make to social welfare.

5. Clash of Cultures:
With ever-increasing trend towards mergers and acquisitions of corporations, large or small, at global scale, integration of diverse organizational cultures has emerged as a major concern area. Even outsourcing of business processes in different parts of the world brings together cultures with different norms, orientations and practices. Inter-cultural issues need to be resolved and relationships managed in ways that will enable the organizations achieve synergy. Likewise in strategic alliances and private- public joint ventures also, the need to integrate the district organizational culture acquires significances to achieve unity of action towards the common purpose.

Diverse cultural norms and practices have to be managed to realize the larger purpose for which organizations enter into partnership arrangement. Culture not only provides the direction to responses of organization members, it also influences the management processes like performance appraisal, monitoring and control, information sharing norms, work standards and the like. It will be necessary to consider cultural differences as a significant factor in developing appropriate designs of organizations.

It is imperative for organizations to incorporate the abovementioned concerns in the design of structure, process and culture. There cannot obviously be one best way to respond to the emerging realities. Appropriate options need to generated by organizations to develop such designs as will enable them gain and maintain competitive advantage.

6. Organization Deconstruction:
Traditional concept of organization seems to have lost its relevance in the post-industrial world. The post-industrial social order is in the process of transition from a mechanistic, stable and orderly philosophy to one found on complexity, knowledge and flux.

There is a fundamental change in the way we think about organization and organizing. The organization is no longer confined within a well-defined boundary separated from its constituents in the environment. The suppliers, vendors, outsourced business processes and customers are increasingly being considered as partners engaged in pursuing common objectives. Attempt at maximization of one’s own gain at the cost of other partners in the entire value chain of an organization has lost its legitimacy. It has to be a win-win situation for all the partners working together to achieve a common purpose. The concept of organization space likewise has undergone change. Geographical space is no longer a limiting factor for expansion and growth of organizations; the geographical space is no longer a limiting factor for expansion and growth of organizations; the geographical dispersion is facilitated through instant coordination and control of information and processes electronically. The real time distributed action and decision making have become order of the day. In such a scenario, the view of organization as a stable and unitary entity is replaced by unstable and multiple players founded on the principles of uncertainty and specificity. The deconstructed organization, thus, is less amenable to command and control mechanisms; the top level approaches have to be relegated to the levels where the action is.

7. Technological Connectivity:
Organizations and individual’s world over are learning how to make the best use of IT in designing processes and in generating and accessing knowledge. New developments in the field, such as biotechnology, laser technology and nanotechnology are moving well beyond the realm of products and service.

The IT revolution has transformed the way we live and work. The work is being carried out globally and instantaneously. New forms of communities and relationships are emerging. Marriages emanating out of online meeting are on the increase. More than two billion people now use cell phones, nine trillion emails are sent a year. We do a billion Google searches a day. Geography is no longer a constraint on limits of social and economic organizations.

8. Disruptive Innovation:
An increasing number of organizations will gain competitive advantages through disruptive innovation. A disruptive innovation is a business model that aims at significantly transforming the demands and needs of a mainstream market thereby disrupting its former key players. It involves introduction of products or services to meet the unfulfilled needs of an emerging or niche market. The product has performance attributes that are not appreciated by the mainstream market. After successfully testing the product performance in the niche market, the organization crates new niche markets and expands the customer base. The awareness of the product increases as it influences the perception of its value in the mainstream markets. The change in the mainstream market’s perception of what it values is the catalyst that enables the innovation to disrupt and replace existing mainstream products, services, or business models. For example desktop computers disrupted the mainframe market, DVD’s are disrupting the VHS market and digital communications and transmissions are disrupting analogue communications and transmissions.

9. Leveraging Knowledge:
Ubiquitous access to information is changing the economics of knowledge. Knowledge is increasingly available and at the same time, increasingly specialized. The most obvious manifestation of this trend is the rise of search engines (such as Google), which make an almost infinite amount universal, yet the transformation is much more profound than simply broad access.

“In an economy where the only certainty is uncertainty, the one sure source of lasting competitive advantage is knowledge. When markets shift, technologies proliferate, competitors multiply and products become obsolete almost overnight, successful companies are those that consistently create new knowledge, disseminate it widely throughout the organization and quickly embody it in new technologies and products. These activities define the knowledge creating company, “whose sole business is continuous innovation.”

New models of knowledge production, access, distribution, and ownership are emerging. We are seeing the rise of open-source approaches in knowledge development as communities, not individuals, become responsible for innovations. Knowledge production itself is growing worldwide; patent applications, for example, rose from 1990 to 2004 at a rate of 20 per cent annually. Companies will need to learn how to leverage this new knowledge universe or risk drowning in a flood of too much information.

10. Social Architecture:
Approaches to social architecture for organizations would need to be developed to connect and synthesize a wide variety of unforeseen organizational and contextual forces impacting on performance of organization. In a relatively stable environment, the social architecture of organization was conceived as ordered arrangement of parts with fixed positions and roles. As organizations today find themselves functioning within a chaotic environment with complex set of factors, the social architecture has to be flexible and adaptive to emerging concerns.

Organizations as complex systems are governed by a set of principles qualitatively different from those of the simple system with inherent order. Organizations need to continually align themselves with changing configurations of environmental forces through repositioning and self-organizing. Complex systems adapt to changes through emergent structures, process and behavior.

Dealing with the impact of change

Organizations in the both the public and private sectors are undergoing some type of transformation or change to improve the performance. These organizations face a daunting challenge. Although no studies document comprehensively the outcomes of such large scale change effort experts seem to agree that most organizations are left with disappointing results yet some organizations do succeed and their experiences provides a number of useful lessons for managing large scale organizational change. Based on this there are seven steps for dealing with the change.

Step 1: Appoint leaders whose backgrounds and experiences are suitable for the change---- As is often the case with organizational change efforts, the transformation generally begins with the change---- As is often the case with organizational change efforts, the transformation generally begins with new leaderships. The change demonstrates the importance of having leaders whose experience fit the needs of the change. For some organizations undergoing change, new leadership may be necessary, but the focus should be on ensuring that leaders have the right background and experience for the change.

Step 2: Follow a focused and coherent transformation plan- most changes encompass many different activities and initiatives. The leadership is expected to focus on four inter related activities:
• Creation of a vision for the organization---- It has become well established principle that successful changes required clear and comprehensive vision for the organization’s future.
• Adoption of a new organizational structure--- there is a need for changing the organizational structure into sub structures to suit the various needs and demands of the organization. This would help in decentralization of decision making and allow the top management to engage in more productive activities.
• Establishment of an accountability system—performance contrast served as the center piece of the new accountability systems. A set of performance goals would be stipulated to each department head and he will be held accountable for the same.
• Modification of the organization rules and regulations—along with the change there has to be a reform in the rules and regulation also. This would convey a necessary message to all the employees that the needed to change their attitude and behavior to serve the goals of the change.

These four initiatives formed the basic transformation framework for the organization. Other activities undertaken during the change process were linked to one or more of the four initiatives. The management’s ability to develop and implement each one of the initiatives was central to overall success of the change.

Step 3: Persevere in the presence of imperfection--- al changes generate controversy and criticisms. These criticisms distract the leaders of the leaders of the changes from focusing on the larger goals of the change. No change will be perfect and those who oppose it will often seek to derail the effort by exploiting its flows and limitation. The change managers need to be responsive to legitimate criticism and should avoid being consumed up in technical details.

Step 4: Match changes in the external environment with the changes in the internal environment leaders of change are often consumed with managing the internal changes of an organization. Leaders of change will typically have far more control over their organization’s internal environment than its external environment. Nevertheless change initiatives that capitalized on interdependencies between external environments. Nevertheless change initiatives that capitalized on interdependencies between external and internal environment may contribute substantially to a successful change.

Step 5: Develop and manage communication channel from the highest levels to the lowest levels. What strategies can managers use to communicate effectively with their employees during a change? Some management consultants advocate that organizations plan for communication to be handled face to face between frontline employees and supervisors to whom they report directly. What would seem most important is that those leading the change be attentive to challenges of communicating to frontline employees. Clearly, effective communication with frontline employees requires a well-planned and highly focused effort.

Step 6: Do not overlook training and education--- generally the managers will have difficulty in adapting to a new structure under the organizational changes. They may also lack educational and training to a new structure under the organizational changes. They may also lack educational and training resources during the process of the change strong emphasis will have to be placed on education and training. In situations where swift changes are deemed necessary, the managers should not overlook the importance of education and training to support employees in developing the needed skills in a timed manner.

Step 7: Balance system wide unity with operating unit flexibility. Managers of all multi-unit organizations must struggle with the issue of how much decision making authority should be given to operating units and how much should be reserved for the top management. This issue is often central to changes, which are often undertaken by organization in part to improve the fit between their decision making structure and business requirements.

Benefits and Limitations of Organizational Development

Benefits of Organizational Development

Organization Development is a dynamic values- based approach to systems change in organizations and communities; it strives to build the capacity to achieve and sustain a new desired state that benefits the organization or community and the world around them.

Based in Core Values: OD work is grounded in a distinctive set of core values and principles that guide the behavior and actions of an organization. The key values required for a positive organizational development are: Respect and inclusion, authenticity, self-awareness, collaboration and empowerment. These values help insure the integrity and effectiveness of the organization.

Informed by Data: Organizations need to ensure they have the data before leaping to conclusions about what type of intervention will best serve their clients. The focus on getting the data first will help companies to insure the success of various interventions they undertake.

Focused on Effectiveness and Health: OD consultants should work to create and sustain a healthy effective human system as an interdependent part of its larger environment. Since the work is client centered, effectiveness is defined in collaboration with the client.

Systems Approach: Organizational Development based consulting services approach communities and organizations as open systems; that is , they act with the knowledge that change in one area of a system always results in changes in other areas; and change in one area cannot be sustained without supporting changes in other areas of the system.

Client Centered: OD focuses on the needs of the client in order to continually promote client ownership of all phases of the work and support the client’s ability to sustain change after the consult engagement ends.

Collaborative Approach: The Organizations need to partner with their clients in helping them solve problems and sustainable change. While they might have process expertise, they need to know clients are the experts in any organizations. By combing the knowledge of systems and processes, with client’s knowledge of their organization, service providers should create partnerships that produce results.

Limitations of OD

There are a number of limitations of OD and listed below are a few of them
• OD practitioners, do not, as a rule, sit at the table of power. It is unusual for them to work with executives to help plan and implement strategy for the organization, to be involved in developing a new business model and implementing it through the hierarchy.
• OD practitioners do not necessarily have to be experts in business strategy, but they often do not sufficiently understand the language and how profit is made costs contained according to various business models.
• Even where there is an internal OD function, it is frequently buried deep within HR.
• OD practitioners for the most part are carrying out piecemeal activities using OD techniques and tools but are not involved in a system wide change effort.
• The people responsible for Organizational development are carrying out the below mentioned activities mostly which is not OD as defined but rather helpful for the survival of employees on a day to day basis,
• Serving as facilitators at off- site meetings
• Conducting teambuilding and visioning exercises
• Serving coaches for supervisors and managers
• Helping to resolve conflict between bosses and subordinates, peers etc.

Organization Development in Perspective

Organization Development is a dynamic value- based approach to systems change in organizations and communities; it strives to build the capacity to achieve and sustain a new desired state that benefits the organization or community and the world around them.

In the past

Organization development practitioners have, for ever half a century, engaged with organizations to help them grow and thrive. The artful application of Organization development (OD) has helped business leaders articulate vision, rethink business processes, create more fluid organization structures and better utilize people’s talents. While business leaders and OD practitioners intuitively believe that OD provides valuable results, rigorous measurement of the value delivered has long eluded many OD practitioners.’ Bottom- Line Organization Development’ provides powerful tools to capture and measure the financial return on investment (ROI) of OD projects to the business. Given the increasing competition for budget and resources within organizations and the requirements of demonstrating tangible results, the need for such OD measurement tools is very high. But in addition to proving the value of OD projects, integrating evaluation into the change management process itself can actually increase the value of the change initiative because it opens up new ways of capturing and increasing the value of change initiatives. In other words, there is an ROI to ROI> Merrill Anderson calls this new way of approaching OD “strategic change valuation.” It explains the five steps in the OD value process- diagnosis, design, development, evaluation and reflection. In addition, case studies take readers through the process of applying bottom line OD to three type of popular strategic change initiatives: executive coaching, organization capability, and knowledge management. Thus, Organizations will gain a holistic perspective of how to make the seemingly intangible benefits of these initiatives tangible.

In the present

OD has come under fire in recent years. Critics claim that it has lost its way and become too technique driven, splintered, piece meal, antiquated and marginal in its impact. Many OD professionals are involved in a host of training, coaching, facilitating and consulting services. Far fewer employ their skills in the kind of large, systematic, planned change efforts that characterized the field in its heyday. There are many explanations to all this. Some sources of OD’s problems come from broader social and organizational trends that have led to misconceptions about OD and its processes, a narrow focus on the short term and bottom line, and widespread indifference to the human side enterprise.

But other explanations are internal to the field and its practices. These include the following:

1. A narrow definition of PD’s boundaries and applications
2. Parochial possessiveness of its name and methods
3. Overemphasis on social processes and neglect of more substantive and strategic client needs
4. Limited collaboration with other management areas and disciplines
5. A shortage of new theory, concepts and methods to energize
6. Confusion between applying OD’s tools and preaching its values
7. Failure to take full advantage of leadership possibilities in the change agent’s role
8. Limited understandings of business and management realities
9. Lack of an integrated agenda for the field in the current century.

Problems in Organizational Development

The major problem in organizational development is the problem of dealing with the employees who are contributing towards the achievement of organizational goals. The main problem is how to maximize the contribution of human beings towards the targeted goals.

For this, the managers should understand the way the human being behave.
In the process of organizational change there are always opposing forces as detailed in the following:
1. Driving or facilitating force: They are factors that facilitated movement of the organization towards the goals and purposes.
2. Restraining forces or hindering forces: These are factors that prevent the organization to move towards its goals and purposes.

These two forces when these are equal in strength create balance leading to a state of quasi- stationary equilibrium. It is for the manager to balance between these forces to push the organization forward:

a) Identification and analysis of facilitating and hindering forces:
These forces may be internal or external to the organization. High degree of employee engagement with requisite competencies would be an internal facilitating force, whereas a growing market for products and services offered by the organization would be an external facilitating force. Likewise, inability to fully utilize IT- enabled services by the organization would be an internal hindering factor, whereas a shrinking market due to increased competition would be an external hindering force. These forces need to be carefully analyzed in terms of their impact on the capacity of the organization to move towards higher levels of effectiveness.

b) Formulation of strategies:
Strategies and action plans for strengthening the facilitation forces and minimizing the impact of hindering forces are formulated to enable the organization achieve its higher goals and purposes. For example, if the market for a product is shrinking due to competitive pressures from the environment, the organization may either introduce a modified product in line with customer’s taste or assume cost leadership to beat the competitiveness. According to Lewin, modifying the forces- facilitating or hindering, that maintain status quo would produce less tension and resistance than increasing taxes for change. It is thus a more effective change strategy.

It is for the managers to identify and formulate the above in consultation with the change consultants to solve this problem.

Another problems for the manager would be the selection of an OD intervention among a host of such intervention. Such selection is influenced by the following three factors.
• Applicability
• Feasibility
• acceptability


Applicability means the potential of a given intervention to yield desired results. This is possible when an intervention is capable enough to address the real problem and holds good promise of solving it. One way to ascertain applicability of an intervention is to examine the likely positive and negative consequences associated with it. What follows from above is the need for valuating one’s client system with great care and concern before actually introducing any intervention.


Feasibility means the suitability of an intervention to suit to the client system. In other words, one needs to evaluate whether an intervention can actually be effectively introduced in a given type of client system.


Whatever applicability and feasibility an intervention carries has no use unless it is acceptable to the client system. It means an intervention needs to be accepted by its client system to yield desired results. Experience shows that an intervention is likely to be less acceptable unless sufficient preparatory work has been done before introducing it.

The next problem after the selection of an intervention is to develop strategy to ensure its successful execution. Implementation strategy must have built – in flexibility to accommodate any variation in the change plan, be adaptable to changed conditions, extent of goal attainment and unanticipated consequences, if any. Implementation of intervention is a learning experience subject to continuous refinement. Interventions can take many forms depending on the problem that the client group is trying to solve. Effective implementation will depend on the following factors:

1) An intervention strategy must be formulated with clearly stated long-term and short-term goals and objectives of change.

2) Activities to promote learning and change should be structured effectively, this is achieved by keeping the following points in mind.
• All relevant people should be included. Client groups should identify problems and opportunities themselves and generate solutions to their own problems and utilize the potential inherent in their own opportunities. The goals and strategies for goal attainment must be clearly stated and shared with every client group.
• Activities should be structured in such a way that there is a high probability of success.

A major problem is also likely to crop up in the form of resistance to change. In case the organization wants to change an OD process, the consultant might help design interventions at individual. Departmental or organizational levels to promote desirable attitude, behavior and value changes. In this context, it is desirable that while designing interventions, the likely sources of the resistance must be identified or anticipated and strategies formulated for overcoming resistance throughout the life of a particular intervention. Thus, based on the result of data collection and interpretation, the consultant helps the client group in identifying effective problem solving strategies. The active participation of organization members is considered to be a prerequisite for increasing their commitment to the intervention effect and for solving the problem of resistance to such changes.

The Changes in the Corporate World

The past two decades of churning and change

The internal and external liberalization measures introduced over the last two decades and the dramatic changes that have taken place in the international business environment have had a far-reaching impact on Indian business. The face of Corporate India has changed more over these past two decade than in the proceedings four decades thanks to the U-turn in the Government’s economic policy in 1991.

a) Major policy changes:
The major policy changes introduced since July 1991 include:
• Abolition of industrial licensing;
• Lifting of restrictions on the size of firms;
• A drastic reduction in the areas reserved for the public sector;
• Disinvestments of government equity in public sector undertakings( PSUs) aimed at eventual privatization of most of them;
• Liberalization of foreign investment regulations;
• Substantial liberalization of import tariffs;
• Removal of all quantitative restrictions on imports;
• Abolition of the office of the Controller of Capital Issues ( CCI) and freedom to companies to set premier on their issues;
• Freedom to companies to raise capital abroad;
• Rationalization and lowering of excise and Customs duties; and
• A substantial reduction in corporate and personal income-tax rates.

b) Since 1991 to 2001:
In large measure, these reforms met the longstanding demands of the Indian industry to free it from the plethora of controls and regulations, exorbitantly high rates of direct and indirect taxes and sever restrictions on foreign exchange transactions. All the internal liberalization measures provided greater freedom and opportunities to the Indian companies and entrepreneurs to expand their existing businesses and enter new areas hitherto reserved exclusively for the public sector.

However, the corporate sector was not quite prepared for the other side of reforms, namely, the external liberalization and the movement towards globalization, which opened the Indian economy to competition from abroad. Although India was not strictly a closed economy even before the launch of the reforms process, Indian industry was generally insulted from external competition thanks to a variety of important restrictions and high tariff walls, the peak level import duty being some 300 per cent. Because of the strong pull of the highly protected domestic market and the virtual absence of external competition, the industry was never under pressure to cut costs, improve quality or develop an export culture. However, all this has changed, post liberalization.

Companies are now obliged to offer better quality products at increasingly competitive prices, their profit margins are constantly under pressure. Under the much earlier regime of protection, ‘cost-plus’ pricing was the norm in most cases. In the majority of cases, it was possible to pass on the burden of higher costs and inefficiencies to the customer by charging a higher price for the product. In the changed scenario, however, the market offering a wide choice to customers. In addition, there is also competition from imported products.

Rapid change and growing uncertainly have now become part of business life in India. No longer are profits assured because of contracts in Government. Manufacturers are now required to stand up to the risks of the market and changing consumer preferences. To customer who is becoming increasingly demanding ; the ability to design, develop and produce new and more customer- friendly products of better quality; skills to develop exclusive positions in the minds of the consumer; new processes, techniques and technologies to ensure that costs are being continuously reduced; ways to restructure organizations so that trained and talented people stay on to give their best efforts; and considerable funds to invest in marketing and building brand franchises.

c) Churning and restructuring:
It is not surprising, therefore, that the Indian corporate sector is undergoing a process of churning and restructuring. The fortunes of the once renowned family business houses such as the Dalmia-Jain group, Sriram group, Walchands, Thapars, Singhanias, Somanis, Wadias, Mafatlals, Khaitans and Modis have witnessed an unprecedented decline. With much erosion in their wealth, they lie scattered because of family splits and mismanagement. Today such industrial giants as Century Textiles, Dunlop, ITC Bhadrachalam, Steel Authority of India Ltd, Ashok Leyland, Telco, Essar Steel, EID Parry, ITI, Arvind Mills, Voltas and Siemens are in the red. Companies that have suffered a sharp drop in their profits include Tata Steel, Bombay Dyeing and Apollo Tyres, all flagship companies with proud histories. However, Mr. Dhirubhai Ambani’s Reliance Group has been an exception. It managed to prosper and grow despite all odds by seizing the opportunities provided by liberalization and globalization. Reliance Industries and Reliance Petroleum are now among the top five companies in the country in terms of market capitalization.

d) Post 2001:
The last decade also witnessed the phenomenal growth of the so-called New Economy companies such as Infosys, Wipro and Satyam Computers which started crating more wealth than the Tatas and Birlas. Mr. Azim Premji of Wipro and Mr. Narayan Murthy of Infosys are the new breed of entrepreneurs known for very high standards of corporate governance and global outlook. Some companies in the pharmaceutical sector such as Ranbaxy, Dr Reddy’s Laboratories, and Cipla, which have also grabbed the opportunities provided by the new business environment and have emerged leading players in their field, often doing better than the well-established MNCs operating in India.

It must be said to the credit of at least some of the family business houses and leading individual companies that they have not been silent spectators allowing the events to overtake them. For instance, Mr. Ratan Tata has initiated measures since 1998 to restructure the Tata Empire with the help of management consultants McKinsey & Co with a view to eventually reduce the number of companies in the group from the existing 80to 30 and cut down the portfolio from 25 to just a dozen core business. The C.K. Birla group and shore up the bottom lines of the group companies. The 100- year- old Godrej group has chalked out programs to spin – off non-core areas. Dabar India Ltd is increasing its focus on food products and fast moving consumer goods (FMCG).

However, it is too early to predict the results of all these exercises since the implementation is painfully slow compared to what happening in china and other south- East Asian countries. The restricting exercises also include financial restricting ---- restricting of debt and equity. Many companies have been retiring the earlier high cost debt with the new low interest bearing loans. The threat of hostile takeovers following the big slump in share value of old Economy companies has prompted managements to hike their equity stake. Gone are the days when business families could exercise control on the management of companies with a small equity stake, often less than 10 per cent. According to the data complied by the securities and Exchange Board of India (SEBI), 72 companies fell prey to takeovers in 2000.

e) Consolidation of market power:
While the first wave of mergers and joint ventures was driven primarily by competitive compulsions and as an outcome of business restructuring, of late, the larger and more aggressive companies have been buying out the smaller ones to assume market leadership. Till 1999, the biggest mergers and acquisitions deals were in the FMCG industries that are traditionally intensely competitive and have become more so with the entry of well-known international brands. A classic example of the extension and consolidation of market power is the Hindustan Lever’s acquisition and restructuring spree over the last few years. By 1998, it wrapped up five acquisitions (Tomco, Dollop’s, Quality, Milk food, and Kissan) and effected a host of mergers—Doom Doom with Brooke Bond, Brooke Bond with Lipton, Pond’s with Quest International, and finally Brooke Bond Lipton India Ltd (BBLIL) with Hindustan Lever Ltd (HLL). Last year it acquired a 74 percent stake in Modern Foods and turned it into a profitable venture.

M&A is also took place in cement, aluminum, steel, chemicals and pharmaceuticals. Incidentally, the biggest merger in India Inc. took place this June in the telecom sector with BPL Communications and the Birla-Tata-AT&T combine, two of the nation’s biggest cellular players, announcing an agreement to merge operations.

Where mergers were not convenient, companies tried to form strategic alliances. Pharmaceutical companies such as Ranbaxy and Lupin Laboratories entered into strategic alliances with some MNCs. Another strategy was to form joint ventures with foreign majors, notably in automobile and consumer durable sectors. Unfortunately, most of these joint ventures did not last long. Some of the prominent joint ventures between Indian and foreign partners, particularly in the high- tech and high capital intensity auto mobile sectors, failed to mature and the foreign partners assumed full control. These include DCM- Daewoo, Tata- Mercedes, Mahindra- Ford, C.K. Birla group-general Motors, and PAL- Peugeot. The main reason for these failures was the inability of the Indian companies to bring in the additional funds needed for expansion and poor corporate governance.

Despite the churning and change that has taken place over the past decade, the Indian corporate sector has still to go a long way in improving its image and become globally competitive. True, there have been notable winners across industries such as HLL, reliance Industries, Hindalco, Tisco, Hero Honda, Asian Paints, Sundaram Fasteners, Ranbaxy, Dr Reddy’s Laboratories, and the public sector companies BHEL and Punjab tractors. The successes and failures have not been industry specific but company specific. But at the marco level, the overall efficiency of Indian industry has not shown much improvement. While there has been some increase in expenditure on R&D. One is the emergence of new companies, particularly in the pharma sector, as substantial spenders in R&D. With India recognizing the foreign product patents, companies have begun acquiring innovation capacity. Ranbaxy & Dr Reddy’s have recently licensed out their discoveries to MNCs earning fat royalties. Nicholas Piramal bought the R&D laboratory of Hoechst Marion Roussel. Second, and more important, is the change in the character of R&D. While earlier the R&D expenditure was mostly on import substitution and diversification, today a part of it is on reaching the internal technological frontier.

Unfortunately, the large public sector and the small-scale industries sector still remains untouched by reforms. Unless the Government is able to push ahead vigorously with reforming these sectors, along with a viable exit policy and labor reforms, they will continue to act as major impediments to competitiveness.

a. Future of Organization development: Enabling Sustainable Business Performance through People
Many studies and research have pointed to four areas in particular where there are significant opportunities for improvement: talent, culture, alignment, and engagement. Leaders urgently need support in areas related to talent, including developing current and future leadership capacity, as well as attracting and retaining top talent. There is also an urgent need for support in effectively addressing organizational culture during organizational realignments, industry consolidations and mergers and acquisitions.

Another high priority area requiring more effective support is alignment. Successful firms must align and executive business strategies in ways that meet their financial goals and are consistent with their core values. Moreover, strategies, people, systems and processes must be aligned organization- wide to enhance productivity and profitability.

Finally, business executives and leaders need support to engage their workforce. An organization can best achieve its business results when its workforce is engaged and committed to achieving its goals and objectives. An organizational leader must be able to clarify and communicate succinctly the purpose and mission of the organization to inspire and engage the workforce.

Future of OB
The research and practice in the field of OB has led to the emergence of new concepts and interventions. Therefore, OB is a continuously growing field. The factors that add to the strength of OB include
• Soundness of its processes
• The emphasis of OB interventions on democratic processes
• Bringing about a simultaneous change in people as well as technology.

Though OB seems to have a promising future, there are certain factors that have the potential to make the future of OB uncertain. These include
• Nature of organizational leadership
• The values of top management,
• Knowledge of management about OB
• The importance given by management to training employees in OB skills
• Interdisciplinary nature of OB
• Dissemination of OB techniques
• Integration of techniques in the field of OB with those in other fields

The recording and maintenance of the history of OB
The changes in global economy, technology and nature of workforce have significant implications for the future of OB. In the future, OB will become a part of organizational operations and OB based skills will be acquired by employees at every level in the organization. OB will focus on learning and innovation and its interdisciplinary nature will increase. As OB practitioners have to work with diverse client organizations and cross-cultural will increase. As OB practitioners have to work with diverse client organizations and cross-cultural teams, they will need to develop the required competence. Prior to solving the value dilemmas of modern organizations, OB practitioners will be required to resolve the dilemma within themselves regarding the focus of OB interventions.
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Review Questions
  • 1. Discuss the organizational effectiveness. What are the different approaches developed to study the same? Discuss factors underlying OE.
  • 2. Describe Kurt Lewin’s three steps change model. Explain what are transactional change and transformational change? What are the strategies for managing change?
  • 3. Explain in detail the benefits and limitations in OD?
  • 4. Discuss the organizational development in perspective outlook?
  • 5. Discuss the futures of OB and OD?
  • 6. What are the possible problems a manager may face during the course of OD processes?
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