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The Psychology of Business & Change

Patricia Inez Meiring & Sean Kelly

Understanding change in organisations must consider the psychological factors that influence behaviour. This is often where change can be most challenging. For instance leadership commitment may constrain the work from being done effectively, as well as constrain any change that can be made; so too can diverse perspectives, national cultural preferences, and the way in which employees are engaged. This is the nature of psychological meta-factors of performance that mean change is never linear but exists within the organisation as a continual approach of sense-making. An understanding of psychological factors affecting behaviour is as important as well-laid out project plans and management tools.

There is a cost for poorly managed and mismatched change efforts. No doubt you’ve heard this before. This is a concern given current economic, social and political lives because change will be continual. Knowing when and how to change is a capability that needs to be built in your organisation to be sustainable.

The main causes of failed change are a result of:

  1. Complacency – organisations don’t keep abreast with customer or employee needs so leaders don’t prioritise change and they don’t engage customers on what they need.
  2. The right mechanisms in place to help you make the right decisions by product or service, understanding where your revenue is being sourced; or how new organisational structures and governance affect employees.
  3. Senior management recognise change is needed, but delegate it to others in the organisation without playing an active part in the process
  4. There is mismanagement or poor communication during the change process (the ‘why’ is crucial and engagement with the right people to understand the right solution); 
  5. There is little engagement with all staff members, so less operationalising and innovation through change, and 
  6. There is little commitment to the change process.

Failed change (unpublished resources shared by Kelly Resources)

Failed change efforts such as the case of Woolworths UK and Commodore Computers are evident in the consideration of elements affecting the whole business. Woolworths UK for example, did not meet customer needs and were complacent about engaging with what the rest of the market had been producing. Commodore Computers failed in recognition of their competitors and the products and services that were made available. This is the recognition of market factors and how to develop the business to have the right skillset and people in place for it.

There are a few fundamental links to establishing when and why change will be successful including: understanding people, purpose, focus, capabilities, your leadership capacity and skills, your target market, marketing and sales approach, product support and if you have the right measures in place.

This analysis can be done through organisational diagnosis and design, and operating model revision. Both processes inform each other.

Fundamental Links of Change(unpublished resources shared by Kelly Resources)
Processes, Financial and Revenue Source Analysis (unpublished resources shared by Kelly Resources

And as the business grows are leaders cautious about how the organisation evolves? There will most certainly be the need to operationalise inside of the business, review and revise processes, and for everyone in the organisation to keep abreast of new strategic developments. This requires engagement.

Evolution of change within the business (unpublished resources shared by Kelly Resources

Other psychological factors affecting organisations operating globally can be analysed during diagnostics. These factors can hamper performance, and need to look more deeply at what an employee experiences (an approach called ‘end-user’ design). Consider:

  • What cultural preferences for ways of working do employees have, and how you do they influence others? As diversity grows a complex understanding of inclusive practices is needed.
  • What organisational design (structure and processes) facilitate the best ways of working? These can look like more cross-functional goals to reduce silo working; and a consideration of hierarchical levels that meet expectations around where decisions can be made and how
  • What interventions and training allow people to learn about change, and adopt new skills in the workplace? Not just about products and services but about ways of communicating with one another, creativity, managing change and navigating ambiguity.
  • What are your employees perceptions about the workplace, market, risk and decision making; and ultimately what motivates them to perform. For example, do you have a disciplinary environment in which all behaviours are rated on performance measurements including the values of the organisation – this ultimately drives compliance and may introduce more conflict in performance discussions; or do you have an innovative environment in which behaviours are directed through development and training (separated from the performance process or financial incentives) that produce not only positive action towards the values of the organisation but scope for uniquely independent skills to come to develop.
  • Does your leadership style and communication meet the needs of employees to promote engagement and psychological safety, or does it only engender compliance. This is essentially is restrictive in its capacity to allow for unique adaptations.

See a model for organisational diagnosis and development towards understanding the meta-psychological factors of behaviour

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