What Is Organisational Change? (Benefits, Types And Reasons)

By Indeed Editorial Team

Published 20 April 2022

The Indeed Editorial Team comprises a diverse and talented team of writers, researchers and subject matter experts equipped with Indeed's data and insights to deliver useful tips to help guide your career journey.

Organisational change is important for the growth or transformation of a business. Change can be an exciting time for companies to reevaluate their processes, improve corporate culture and maintain long-term viability. Understanding why companies implement change strategies can help you navigate fluctuating circumstances in an organisation. In this article, we answer, 'What is organisational change?', share some benefits of change for both organisations and individuals, outline some common types of changes you can expect in an organisation and explore some common reasons changes occur in a company.

What is organisational change?

The answer to 'What is organisational change?' can help you understand the concept better. Organisational change is the process through which a company undergoes any transformation internally or externally. The change may occur after extensive internal planning, or rather suddenly, because of unanticipated external factors. It can cause major shifts in the structure, culture, goals, operational processes, service offerings and technology policies of a business.

The implications of organisational change may depend on the type of change implemented, the extent of the transformation and whether the change was slow or sudden. Depending on the nature of the change, employees may display active or passive resistance to it. Some changes may not affect the employees at all. How the management executes the change may greatly impact how the employees receive it. Whether the changes are sudden or take place over a longer period of time, they can require the management to adopt new policies and adjust to new differences within the organisation.

Related: What Is Organisational Culture?

What are the benefits of organisational change?

Implementing periodic changes within an organisation is an effective way to ensure that the organisation can adapt to the changing world and keep up with its competitors. As an employee, adapting to changes in the workplace may feel uncomfortable at the moment. But once you can overcome that challenge with a positive attitude, you are likely to experience personal development and become a valuable asset to the company. Here are some benefits of organisational change for employees:

  • more opportunity for skill growth

  • diversification of demographics and tasks

  • improved communication

  • increased opportunity for employee input and participation

  • more scope for innovation

  • opportunities for new roles and promotions

Here are some benefits of organisational change for a company:

  • new business opportunities

  • improved employee efficiency

  • better management styles

  • enhanced market relevance

  • better staff morale

  • more cohesive vision and values

  • higher functioning teams

  • improved processes

Related: Adaptability: An Essential Skill For Changing Workplaces

5 types of organisational change

While there are many types of organisational changes, they mainly come under these five categories:

1. Transformational

Changes that completely reshape business strategies and processes and redefine a business are called transformational changes. These are dramatic, large-scale changes that fundamentally alter the organisation. They happen rarely and are usually implemented when businesses pursue entirely different products or markets, experience radical changes in technology, try to revamp their business model because of extreme conditions or keep up with rising supply demand.

Some common reasons for transformational change are leadership change, unmatched competition, adverse market conditions, business growth and decline in revenue. This type of change can affect all sections of a company, from staff to management. Some kinds of organisational changes brought about by transformational change are:

  • Cultural change: It involves promoting new attitudes that better express the company's core values or redefining its vision and mission altogether. This transforms the work environment of the organisation.

  • Structural change: This refers to changes in hierarchies and job roles. Incorporating structural change may involve reorganising departments, creating high-performing teams, adding employee positions, revising job roles and assignments or promoting valuable employees.

  • Personnel change: This happens when a company experiences massive growth or downsizing. This involves mass hiring and layoffs that significantly impact employee engagement and retention.

Related: How To Be Flexible At Work: A Complete Guide

2. Transitional

In a transitional change, companies replace an existing procedure with a new one for increased efficiency and performance. This may involve switching from manual to automated production methods, creating new products or services, implementing new technology and updating long-held, outdated policies. Companies make these changes periodically to remain competitive in their marketplace.

Transitional changes may happen during mergers and acquisitions, policy changes and corporate restructuring. This type of change is substantially disruptive, as it may impact relationships, job functions and culture and may involve substantial retraining. Transitional changes usually result in the following kinds of organisational changes:

  • Technology change: This comprises adopting new technology to phase out old methods and keep up with technological advancements. This may include automating jobs, introducing new software platforms and designing new strategies for technological processes.

  • Operational change: This might involve updating to a new process or streamlining the existing process. Companies can implement operational changes by introducing new technologies or products, focusing on team building and improving employee communication.

Related: How To Keep A Positive Attitude: A Complete Guide

3. Developmental

This type of change involves the enhancement and correction of existing systems without aiming for any radical changes. These are slow, small-scale changes that focus on incremental improvement, detecting deficiencies and building upon prior success. Some examples of developmental changes can include updating payroll procedures, improvement of existing billing and reporting methods and refocusing marketing and advertising strategies. These minor changes compound over time and produce positive returns for the company, significantly increasing its market value.

Developmental changes are a sign that the company is committed to improving itself to meet market demands and grow revenues. These changes are easy to adapt to and happen most frequently. Developmental change can be of the following types:

  • Anticipatory change: An organisation may take up this type of change to better prepare for future shortcomings or opportunities. This is a strategy-oriented change, often involving prior data analysis, surveys and customer outreach.

  • Remedial change: A company implements this type of change when it identifies an unanticipated problem and executes a quick solution. This can relate to a loss of talent, addressing customer communication issues, introducing an employee training program or creating a position to fix a recurring problem in the company.

Related: What Is Strategic Planning And How To Do It In 6 Steps

4. Proactive

Proactive changes are pre-planned changes that the company undergoes to avoid a potential future threat or to capitalise on a potential future opportunity. These are active attempts to alter the workplace and its practices. This kind of change coordinates the various parts of the system as a whole and addresses the underlying forces creating symptoms.

Examples may include increasing production volume due to the expected rise in customer demand or introducing employee benefit schemes to improve employee retention. Any kind of transformation, transition or development requires pre-meditation and extensive planning. These are organised changes that are economically feasible and allow the company ample time to prepare.

5. Reactive

Reactive changes are unplanned transformations undertaken in response to unexpected external factors when some threat or opportunity has already occurred. Factors like a market crash or boom, political shifts, war, disease outbreaks such as an epidemic or pandemic, product or technological obsolescence, natural disasters and accidents trigger reactive changes. These types of changes cover a limited part of the system and only respond to immediate symptoms.

This can involve scenarios such as controversy concerning the lack of diversity in employee demographics or new business laws implemented by the government. The only example of reactive change is remedial change undertaken spontaneously to solve an unforeseen problem. It is often chaotic and expensive and prompts the company to act within a limited time.

Some reasons for changes in organisations

Organisations transform and evolve because of either internal or external factors or a combination of both. Here are some internal and external reasons a company may undergo change:

Internal reasons

Companies may undergo organisational change because of issues within the company, relating to staff, management, processes or performance. Some of those reasons are:

  • change in leadership

  • change in vision and values

  • introduction of new technology

  • deficiency in the existing structure

  • poor employee performance

  • decline in revenue

  • need for variety or diversity in workplace demographics

  • high turn-over rate

  • company growth

  • meeting a sudden crisis

  • organisational life cycle involving an expected sequence of advancements

External reasons

Companies may undergo organisational change due to external reasons. Some of those reasons are:

  • new opportunities

  • natural disasters, accidents and extreme weather

  • government regulations and laws

  • digital and technological advancements

  • fierce competition

  • political factors

  • social changes

  • economic collapse

  • market changes

  • customer requirements

  • globalisation

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