Gary Shawhan, Contributing Editor, The CHEMARK Consulting Group01.24.25
There can be a variety of reasons for considering an organizational change. In general, the majority of these can be segregated into two categories: those that are driven by issues that are external to the organization and those that originate from within the company.
• Unanticipated global events
Global events can introduce issues that require short-term course corrections involving changes to the organization. The COVID-19 pandemic is one example. Its impact on the global supply chain required companies to establish alternate sources of supply. In some cases, key customers were lost due to the company’s inability to meet contract obligations.
These disruptions forced companies to alter their long-term supply-chain management plans and consider in-house manufacturing of critical materials.
• Sustainability
Sustainability initiatives, driven by global environmental issues, have created a need for organizational change. Sustainability encompasses climate change, waste recycling/reuse, and the need for greater circularity in product manufacturing methods. Its resulting impact has been far-reaching, especially for large, multinational corporations.
The importance of pro-actively addressing sustainability has resulted in significant organization change with long-term business implications.
Market transitions that take place in strategic market segments can require changes in the organization to adapt. The introduction of a next-generation or disruptive technology is an example.
This can threaten share in key market segments and challenges a major source of revenue for the company. Such events can signal product line obsolescence and a decline in future revenue projections. In this circumstance, the organization needs to react and change in order to survive and continue to grow.
• Migration of key markets
Markets sometimes migrate or expand to a new geographic region for a variety of reasons. This can require a repositioning of the organizations resources to protect their business position going-forward. Alternatively, adding new resources to address the needs in this new market space can be required.
Most often, it is necessary for companies to establish new, effective channel-to-market strategies. This can include setting up local or regional sales, distribution, and support strategies within the new geography. In addition, the need to manufacture key products in this region has to be assessed.
Acquisition strategies are driven by the need to improve or alter the company’s current business situation. Reasons for pursuing this avenue include strengthening market position in key market segments or geographies. They can also provide a growth path by facilitating entry into adjacent markets. Adding complementary technology to strengthen the company’s competitive position is another.
One consequence is the impact it can have on the structure of the organization. Personnel changes are among the biggest challenges as job duplications are created in many areas that need to be addressed.
• Competitor M&A Actions
Alternatively, mergers or acquisitions by key competitors can introduce unexpected challenges to organizations serving the same market space. When it introduces a strategic threat to the company’s current business, it forces a reaction to protect its market position. This event can drive the need for organizational change.
• Low-growth or Commoditization of Certain Product Lines
Organizational change becomes a necessity when expectations for revenue growth do not meet the company’s business goal and objectives. It is management job to identify and develop a plan for the organization to transition the company into more profitable, growth businesses.
• Shift in Branding Strategy
Protection and building brand strength is a necessary component for companies whose business has a visible interface with the consumers. As market conditions change and consumer purchasing trends shift, organizations need to adapt and change. In this case, these changes can go beyond brand identity and include the services and support behind the brand that is expected by customers.
Technology oriented companies often sell their products through a license agreement. As a result, they have not established a brand identity within the markets they serve. This limits the company’s ability to pursue growth opportunities on their own as they have no brand identity established in the marketplace.
The organizational challenge for such companies, who decide they now want to develop a brand identify in key markets they currently serve through licensing is significant.
Such events require management to react quickly with changes that include consideration of changes within the organization.
One of the most difficult and uncomfortable aspects of organizational change is its potential impact on employees. In order for any plan to succeed, it requires the sustained support and involvement of its employees at all levels of the organization. In this regard, it is critical that management includes in its plan how it will communicate its purpose to everyone affected.
Once changes are initiated, management needs to be prepared to implement a program that monitors plan progress against its goals and objectives. Regular interval monitoring is essential for plan success.
The regular involvement of employees at multiple levels of management helps minimize defections while encouraging input and ideas that help keep the plan on course. When necessary, it also provides a forum for change or course corrections going forward.
Externally Driven for Organizational Change
Industry Disruptions, Global Events• Unanticipated global events
Global events can introduce issues that require short-term course corrections involving changes to the organization. The COVID-19 pandemic is one example. Its impact on the global supply chain required companies to establish alternate sources of supply. In some cases, key customers were lost due to the company’s inability to meet contract obligations.
These disruptions forced companies to alter their long-term supply-chain management plans and consider in-house manufacturing of critical materials.
• Sustainability
Sustainability initiatives, driven by global environmental issues, have created a need for organizational change. Sustainability encompasses climate change, waste recycling/reuse, and the need for greater circularity in product manufacturing methods. Its resulting impact has been far-reaching, especially for large, multinational corporations.
The importance of pro-actively addressing sustainability has resulted in significant organization change with long-term business implications.
Shifts in Market Dynamics
• Transitions in primary marketsMarket transitions that take place in strategic market segments can require changes in the organization to adapt. The introduction of a next-generation or disruptive technology is an example.
This can threaten share in key market segments and challenges a major source of revenue for the company. Such events can signal product line obsolescence and a decline in future revenue projections. In this circumstance, the organization needs to react and change in order to survive and continue to grow.
• Migration of key markets
Markets sometimes migrate or expand to a new geographic region for a variety of reasons. This can require a repositioning of the organizations resources to protect their business position going-forward. Alternatively, adding new resources to address the needs in this new market space can be required.
Most often, it is necessary for companies to establish new, effective channel-to-market strategies. This can include setting up local or regional sales, distribution, and support strategies within the new geography. In addition, the need to manufacture key products in this region has to be assessed.
Changes in the Competitive Landscape
• Internally Driven Mergers and AcquisitionsAcquisition strategies are driven by the need to improve or alter the company’s current business situation. Reasons for pursuing this avenue include strengthening market position in key market segments or geographies. They can also provide a growth path by facilitating entry into adjacent markets. Adding complementary technology to strengthen the company’s competitive position is another.
One consequence is the impact it can have on the structure of the organization. Personnel changes are among the biggest challenges as job duplications are created in many areas that need to be addressed.
• Competitor M&A Actions
Alternatively, mergers or acquisitions by key competitors can introduce unexpected challenges to organizations serving the same market space. When it introduces a strategic threat to the company’s current business, it forces a reaction to protect its market position. This event can drive the need for organizational change.
Internally Driven Organizational Change
Revised Business Growth Strategies• Low-growth or Commoditization of Certain Product Lines
Organizational change becomes a necessity when expectations for revenue growth do not meet the company’s business goal and objectives. It is management job to identify and develop a plan for the organization to transition the company into more profitable, growth businesses.
• Shift in Branding Strategy
Protection and building brand strength is a necessary component for companies whose business has a visible interface with the consumers. As market conditions change and consumer purchasing trends shift, organizations need to adapt and change. In this case, these changes can go beyond brand identity and include the services and support behind the brand that is expected by customers.
Technology oriented companies often sell their products through a license agreement. As a result, they have not established a brand identity within the markets they serve. This limits the company’s ability to pursue growth opportunities on their own as they have no brand identity established in the marketplace.
The organizational challenge for such companies, who decide they now want to develop a brand identify in key markets they currently serve through licensing is significant.
Alter the Go-to-Market Strategies
Markets evolve over time for many reasons. Such transitions can necessitate some changes in the organization. Reasons for changes include the need for improved products to satisfy the performance requirement of next-generation finished goods. Another is the issue of new environmental regulations that impact the future use of current product lines.Such events require management to react quickly with changes that include consideration of changes within the organization.
Change in Management Philosophy
Management’s philosophy on how they choose to do business can change. A common reason for considering a change in the way a company does business is linked to a personnel change in company leadership. The new leader wants to put his stamp on how the company is run from the beginning. Alternatively, the success of a key competitor can provide a benchmark for organizational change.Considerations in Planning for Organizational Change
The decision to pursue an organizational change is the responsibility of the senior management team. The more complex the organizational transitions being considered, the greater the emphasis on preparation and plan implementation. Of particular importance is the plan for communication within the organization.One of the most difficult and uncomfortable aspects of organizational change is its potential impact on employees. In order for any plan to succeed, it requires the sustained support and involvement of its employees at all levels of the organization. In this regard, it is critical that management includes in its plan how it will communicate its purpose to everyone affected.
Once changes are initiated, management needs to be prepared to implement a program that monitors plan progress against its goals and objectives. Regular interval monitoring is essential for plan success.
The regular involvement of employees at multiple levels of management helps minimize defections while encouraging input and ideas that help keep the plan on course. When necessary, it also provides a forum for change or course corrections going forward.
