Restructuring Organizations for Improved Productivity: Promoting Creative Innovation and Continous Change Readiness
Abstract
The study assessed continuous change readiness and the prevalence of innovation within organizational performance after restructuring organizations for improved productivity. The main study findings include the facilitation of continuous change readiness through digital age technologies including ICT to enable innovation. The study also identified that employees most resistant to change can change their orientation by utilizing change readiness. Freedom is important within the organization to spur innovation and productivity. Executive leadership through the management chain is the most appropriate method to enable the technology and human resources initiatives to drive innovation. Organizational restructuring should remain fixated on improving organizational productivity. Organizations should identify that innovation drives productivity through the promotion of continuous change readiness as part of the restructuring process.
Introduction
Academic literature has given much attention to the concept of planned organizational change and restructuring efforts, and it was observed that a majority of such efforts ended in failure (Isern & Pung, 2007). In this digital age of globalization and the internationalization of business, it has been suggested that the concept of planned organizational change could be replaced with one that is more appropriate for the modern paradigm: continuous change readiness ( Diefenbach and Klarner, 2008). The use of the term ‘readiness’ in research literature refers to a state of mind among organizational members. Change readiness involves beliefs and understanding about the need for a particular change, as well as the ability and will to cooperate with it (Cawsey and Deszca, 2007; Neves, 2009). Change readiness is an important concept, because empirical research shows that employee resistance to change is the most significant reason for failure of planned organizational change efforts (Erwin & Garman, 2010). In this article, it is argued that organizational leaders should approach restructuring with attention to two concepts – creative innovation and continuous change readiness – which seem different from one another but actually may be closely related.
It is possible to promote appreciation for continuous change readiness as a shared value among organizational members, and continuous change readiness in turn promotes one of the most important types of productivity in modern industry: creative innovation. In the new paradigm, business leaders must go beyond cultivating readiness for a specific planned change; now it is necessary to achieve an ongoing kind of change readiness, such that employees believe in the necessity of continuous change in response to rapidly changing circumstances – economic changes, new practices in the industry, new opportunities and threats, new technologies – and organizations can be more flexible than ever. Dhillon and Gupta (2015) suggest that restructuring is associated with increased collaborative creativity and innovation.
Promoting Creative Innovation and Continuous Change Readiness
As a starting point for a discussion of the way restructuring affects productivity, it should be noted that most efforts at organizational restructuring and change are unsuccessful (Isern & Pung, 2007). The success or failure of organizational restructuring initiatives can be discussed in terms of whether or not the restructuring resulted in improved productivity. Restructuring can increase or decrease productivity depending on how effectively restructuring is carried out, so organizational leaders need to know the best principles of practice. According to Kurt Lewin’s (1947) change theory, the first step in planning for a change is to increase the driving forces that promote the desired change while decreasing the restraining forces, which inhibit it. The process of change is subject to interpretive schemas that identify old and new methods of synthesizing the organizational restructuring process (Bartunek, 1984). The organizational restructuring should reflect the core function of the organization in a way that links the organization more directly to the underlying market.
The impact organizational culture and restructuring can have on organizational performance (Ting, 2011) can have on the future of the organization can be immeasurable. Often times, organizational restructuring post-merger or simply after a cost reductions by reducing staff size can create identifiable changes in organizational performance. For example, “Mitchell and Yate (2002) pointed out that the culture of an organization is the combination of value, faith, and understanding shared by members of the organization” (Ting, 2011, p 97). The organizational culture is often a mishmash of personal characteristics that share common organizational beliefs, often perpetuated by slogans. The statement that organizational culture is a reflection of value, faith and understanding provides a vague, general, and unspecific sense of cultural identity. The fusion of the individualistic characteristics of the organization can take many years to come together. For example, “The culture of an organization requires a long time to come into shape and evolve” (Ting, 2011, p 97).
As an example, the concept of an organization’s culture may be useful because it consists of the widespread norms and values (O’Reilly & Chatman, 1996), two aspects that might affect change efforts in opposite ways. Change readiness is better among employees who enjoy value congruence with the organization (Lamm, Gordon, and Purser, 2010). Value congruence is similarity between an organizational member’s values and those s/he associates with the organization (Kristof-Brown, Zimmerman, and Johnson, 2005). This observation about shared values is relevant to the concept of organizational culture, which is understood as a set of norms that become widespread among organizational members (O’Reilly & Chatman). Paradoxically, research shows that strong organizational culture (with more shared norms and values) is associated with more resistance to change.
Even though this finding seems to contradict the notion that value congruence is conducive to change, it is easy to understand because the two elements of organizational culture affect change efforts in opposite ways: shared values help to promote change, while widespread norms function as barriers to change. Therefore, it seems appropriate to introduce continuous change readiness as a value to be shared among employees. It is also possible to argue that creative innovation and continuous change readiness are two ways to express the same idea.
Some organizations have served as excellent case examples to demonstrate the importance of organizational restructuring. Sony and Microsoft have undergone organizational restructuring that brought about measurable improvements in creativity and innovation (Dhillon & Gupta, 2015).Resistance to change affects not only organizational members but also its leadership, and not only at the individual level but also collectively at the level of organizational culture. Leadership must be willing to completely restructure organizations instead of just going halfway, and they should promote organizational culture that is facilitative of continuous change readiness.
An excellent case example of organizational restructuring is the newspaper Financial Times, and it is particularly interesting because organizational restructuring became necessary because digital publishing was quickly taking the place of print media. Firms need to be intuitive enough to anticipate what will be necessary in order to create future value under changing circumstances (Kaplan and Norton, 1996), and this is exactly what the Financial Times leadership accomplished through restructuring. To compensate for the reduced value of news content (because such a variety became available online), they focused on creating a community of subscribers. They totally changed the business model such that revenue would come from paid subscriptions rather than from advertising.
The New York Times handled the situation very differently. They underwent significant restructuring and tried to target younger markets as well as trying many other methods to stay competitive and relevant, but they continued to use the same basic principle of profiting from advertising revenue, even though online advertising was outside the scope of their core competencies and its value and usefulness were changing. The company has downsized considerably (Somaiya, 2014), and it is possible that downsizing could have been unnecessary if the company had instead undergone the restructuring necessary for thriving in the digital age. Compared with the more extensive restructuring that was done by the Financial Times, the New York Times seems like an example to show that if organizational restructuring is to improve productivity it must be done with full commitment and no hesitation.
Another example can be given on how failing to move with the current advancement in Technology brought Kodak down. Just a few years back, Kodak was the market leader in the Camera Technology, accounting for 90% of the film market and 85% of camera sales market in America. Kodak was slow in adopting digital technology while other companies were doing so i.e. Fujifilm. In the year 2015, Fujifilm recorded a profit of $12.6 billion to Kodak’s $220m.
Leadership of Strategic Change and Innovation
Implementation of innovation through the use of creativity remains to be a significant attribute for the success of a company. It also forms a major competitive advantage for the firm that needs to succeed in its operations. Currently, most of the companies usually face the dynamic environment that is characterized by the rapid technological change, a shortened life cycle of the product, and globalization. These aspects profoundly affect the way the product is produced both locally and internationally. Firms, specifically those that are in the technological industry are the ones that are affected since they need to be more innovative and creative than before. They need to survive in the competitive world as their main controlling factor is technology (Argyris & Schön, 1974, p. 89).
From what is gathered, the creativity is considered as a production of useful ideas that will assist the company to grow. Innovation, on the other hand is the successful implementation of the creative ideas that are within the firm. That means that creativity is considered at the individual level as innovation is considered at the organizational level. The current trend shows a growing interest in the influence of the transformational leadership on both innovation and creativity. Leaders who implement transformational leadership have been seen to raise their performance expectations for the firms that they lead. Besides, they have a record of seeking transformation to the personal values of their followers at the same time moving these values to a higher level of needs and aspirations (Bennis, Sample, & Asghar, 2015, p. 78). According to different researchers, the effects of using transformational leadership in different organizations have proved to be successful. However, there are conflicting findings at the same time experimental nature of the findings that establishes the connection between transformational leadership and the success of the company.
As a fact, the leading factor is the intrinsic motivation approach that dominates the creativity and innovation world. According to the intrinsic motivation approach, individuals tend to be more creative through intrinsic innovation. Besides, the perception of an individual on the working environment is a vital element of his or her creativity. According to the model that proposes the use of intrinsic motivation approach, the perceived working environment affects the creative roles performed by workers within the organizations. That means, the psychological meaning of the workers that is attached to certain events in their companies will always affect their motivation to develop new ideas.
Other researchers have identified the different perceptions of the psychological work environment that influence creativity work in companies. For instance, these studies reveal the way perception of supporting innovation together with psychological empowerment could be a significant source of creativity. Most studies have revealed that the use of transformational leadership has helped to empower their followers. The same has helped in establishing an innovative climate. Nevertheless, the available research fails to examine other empowerment roles and the innovative climate that relate with the transformational leadership and the creativity of their followers (Isern & Pung, 2007).
As seen above, the aspect of competitive advantage is quite significant not only to an individual but also to the organization as a whole. The choice of the best way to follow solely remains in the abilities of the organizations to maintain their production schedule. That means that the leadership of the strategic change within the organization will remain to be significant.
Resistance to Change and Disruption of Core Competencies
Restructuring can also detract from productivity to the extent that it requires learning new procedures for applying the core competencies of the organization. Core competencies represent the “collective learning in the organization, especially how to co-ordinate diverse production skills and integrate multiple streams of technologies” (Prahalad and Hamel, 1990, p. 82).
It is irrational to resist the need for change, because a defining characteristic of the digital age is the rapid change made necessary by new opportunities. Some would argue that contemporary business issues are best approached using digital age technology and associated problem-solving strategies. The types of digital age new opportunities being created are within the framework of the ‘New Economy’ (Hempell, 2002). The emerging technologies have been within the area of information and communication technologies (ICT), which continue to have a large impact in determining the growth potential for firms and entire economies (Hempell, 2002). Hempell (2002) argued the need for change regarding new economy productivity was as he had stated, an emerging delusion, which is taking foothold in identifying what is the modern economy. In sum, Hempell (2002) had identified the usage of ICT as being an enabling technology “that require additional complementary innovation efforts to fully unfold their productivity potentials” (Hempell, 2002).
The digital economy stands to provide new innovative methods to modern economies including Japan. “Over the course of two painful “lost decades,” Japan has lost much of its competitive edge. Its economy continues to operate below its potential” (McKinsey, 2015). Below its potential has to do with its need to grow its productivity, which is seen as investing in automated infrastructure for the digital age. “If Japan can successfully double its rate of productivity growth, with a sharp focus on increasing value added as well as reducing costs, it could boost annual GDP growth to approximately 3%” (McKinsey, 2015, p 8). The Japanese firms will ultimately decide to follow the productivity growth strategy to increase value added and to reduce costs as a means to identify with a new digital age strategy.
Innovation could be thought of as derived from the ability to be expressive and creative within a paradigm of freedom. Research from Keller (2004) identified the tourism industry as being reflective of the nature between innovation and productivity. This is because tourism companies are under “tremendous competitive pressures” (p 1) to compete against new market entrants and against losing market share to their main market competition. In the OECD countries, there is currently a lack of growth and production in countries with a long tradition of tourism (Keller, 2004). The need to restructure the tourism industry to promote growth and production is imperative to ensuring the region continues to grow at a rate above decline. “If you want to be “state-of-the-art” it is easier to start all over again than to try modernising the old installations” (Keller, 2004, p 2). Smaller companies are finding it hard to raise revenues and cut costs, which has identified these issues as major problems that could cause these companies to close. The transition to digital age technologies can help small businesses to thrive against larger competition in the tourism industry.
Technological progress within the digital format could actually reduce costs overall compared to previous non-digital format technologies that were used. “Technological change drives long-term economic growth, productivity and improved standards of living” (OECD, n.d). Technological change could improve conditions well enough to establish long-term economic growth as a trend as well as leading to productivity gains and improved living standards. “New technologies destroy jobs in some industries, especially among the low-skilled, while creating jobs which are often in different industries and require different skills” (OECD, n.d). The use of digital age technologies had led to the development of new local collective capacities (Derville & Allaire, 2014). These new local collective capacities can function cohesively to draw different skill sets to the area and drive innovation to increase productivity. The rise in regional productivity then is reflective within the regional GDP growth and contributes to the national growth in productivity.
Part of the means by which businesses will set themselves apart within the digital age is in the ability to turn information into valuable output. “The ability of a firm to recognize the value of new, external information, assimilate it, and apply it to commercial ends” is critical to its innovative capabilities” (OECD, n.d, p 3). To recognize the importance and value of new information is part of entering into the digital age regarding data and information technologies. Smaller firms can innovate in these areas and keep costs low however likely at the expense of hiring labour. The new capital investments into digital age technology are likely to drive innovation and productivity at a faster rate compared to alternative baskets of growth and productivity strategies.
The development of new technologies including ICT can be equivocated to the invention of a brand new and innovative fertilizer to the farming industry (OECD, n.d). Digital age technology relative to the development of innovations like ICT can provide new avenues to increase business revenue and expand economies in the developing world. Therefore, it’s important to understand how digital age investments can provide returns in the long-run against short-run investment costs.
Conclusion
Continuous change readiness as a means to identify a culture based on innovation are identifiable similarities with how organizational culture will reflect the underlying organizational restructuring. Staff will be ready for restructuring due to the assumption that staff shares in the continuous change readiness as part of the collective values shared by the organization. The corporate culture should reflect the underlying need to innovate by allowing the organizational culture to reflect this dynamic. Part of the restructuring should take into account management and its identification to the underlying organizational culture. Whether management encourages contributions from the organization relative to the need to reflect continuous change readiness is important to organizational performance. Management often does not identify with the same values as the non-managerial organizational staff. This is because value creation and the identification of the underlying values often the job of executive leadership and line management to subjugate the individual identity to develop the core shared organizational values.
Management likely will survive the restructuring, which would indicate that either management is supportive of enabling organizational performance with continuous change readiness or is not supportive. The tendencies of management to strive for better results through managing organizational performance are not conducive to enabling individual free will to enable contributions. Management at best will seek to motivate employees to achieve an identifiable set of goals through management of objectives. The success of the organization is reliant on the ability of staff to perform at their best and subject to the underlying changes of the organization to include restructuring. Organizational performance is inherently dependent on the ability of the management and staff to turn data into information for decision-making purposes. Additionally, some organizations are more prone to customer service issues. These factors can create distance between competitors in highly competitive markets.
Organizational dynamics can muddle the fusion of shared organizational values that are intended to link the organization to its mission statement. Competition between organizations can create the environment that reflects the underlying continuous change readiness. At the same time, employees should not expect attrition if the organization restructures. The organization should seek to retrain employees to shift skills to other areas tied to organizational performance. The cost to rehire and potential train employees is critical to organizational performance relative to the cost of business operations. Employees should also expect to have a strong commitment to the organization by management. The idea that employees share a tenuous relationship with their employer cannot be conducive to the facilitation of organizational performance through continuous change readiness. The transition to a digital strategy can prepare the organization for a new business endeavour with the intention of growing market share.
Organizational productivity should remain the focal point of organizational restructuring. The restructuring process may at first limit the productivity of organizations but over time, restructuring should link the organization more closely to the competitive nature of the business. Hence, the organization should be more competitive in the marketplace post restructuring. If the organization is still muddled after restructuring, there could be issues with management and the ability of the organization to integrate staff to reach organizational goals. There is potential for the organization to be limited by management and managerial strategies. Limitations can include management’s use of command and control which likely will reduce staff contributions under reorganization. The organization needs to ensure the alignment of internal core structures related to business operations and employee engagement to organizational goals.
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