Radical organizational change is sometimes necessary for companies on the decline and trying to stay afloat. Most of the current literature in this area focuses on the up-front strategic planning, rather than the stages of the change process—particularly implementation. This qualitative study however, explores how emotional factors and legitimacy judgments interplay over phases of time during the radical organizational change process.
Who Conducted the Study?
Quy Nguyen Huy, Kevin G. Corley, and Matthew S. Kraatz, Quy
Nguyen Huy is an associate professor of strategic management at INSEAD, Kevin G. Corley is a professor of management at the W.P. Carey school of Business at Arizona State University, and Matthew S. Kraatz is an associate professor in the Department of Business Administration at the University of Illinois.
Planned Radical Organizational Change (PROC) (Bartunek, 1984; Pettigrew 1985): Sudden and intense change actions that fundamentally disturb various groups’ roles, identities, and interests that have co-existed for a long time.
Legitimacy (Tost, 2011): The judgment that an entity is appropriate for its context. Particularly, these judgments relate to decisions to accept existing power structures and obey managerial directives.
Instrumental Legitimacy (Tost 2011): Is present when the change agent is “perceived to facilitate the individual’s or group’s attempts to reach self-defined or internalized goals or outcomes” such as “perceptions related to the effectiveness, efficiency, or utility of the entity.”
Relational Legitimacy (Tyler & Lind, 1992): Judgments involving how a social entity communicates with others in a way that accord them respect, dignity, and status within their social milieu.
Moral Legitimacy (Scott, 2001): Judgments involving the extent to which a social entity conforms to moral values and ethical principles.
Emotions (Elfenbein, 2007): A feeling with an identified cause or target that can be expressed verbally or non-verbally.
Emotional Reactions according to Cognitive Appraisal Theory (Lazarus, 1991, 1993): people evaluate the significance of an event in relation to their own goals and concerns. In simple terms, they have an emotional appraisal of the event that is good, bad, or neutral.
Resistance to Change: Dysfunctional agent based outcome due to personal cognitive and social limitations such as cognitive rigidity, conflicting schemas, low openness to change, risk aversion, and protection of self-interests.
What did they find?
Through this study they were able to derive themes from legitimacy and resistance to change literature, and map them to the dynamics they found in the top management and middle management descriptions of the change effort. Their emergent model suggests an account of change agent actions and change recipient legitimacy judgments and emotional reactions coalescing to create a dynamic process playing out over the course of the entire change effort. Ultimately, their insight is that the legitimacy of change agents is central to their ability to lead and that legitimacy can be construed as a sequence of interim accomplishments involving continuous social interactions.
How did they find these results?
During this inductive qualitative study, the first author was given access to observe meetings and interact with employees. The researchers conducted both formal and informal interviews with employees at all levels. These formal interviews consisted of interviewing the incumbent CEO 3 times, the two previous CEOs once each, 12 executives 26 times, and 114 MMs 192 times, in addition to many lower-level employees and union officials.
These interviews were conducted real time through each phase, and among diversified groups of middle managers. Half of which were in the change championing group and the other half to the change recipient group. Though this categorization is rough because a middle manager of a championing group could be a change agent for a project while simultaneously a recipient of another project.
In addition to the formal interviews over this time, the first author also conducted about 200 informal discussions where he followed up on suggestions for additional interviews. The employees he found that had new or potentially divergent viewpoints were requested for formal interviews. These interviews, along with employee surveys and other internal documents, were used to triangulate and strengthen interpretations.
From the descriptions collected from the individual interviews, they coded for legitimacy judgments and resistance to change. From these first order codes, they coded across the various informant groups to detect conceptual patterns of legitimacy, resistance to change, and emotional reactions to change. Here they attributed and specified themes from the related literature. Then they aggregated the dimensions to serve as the foundation for their theory. For the emotions they used the “circumplex” model of emotions, which consists of two basic dimensions: one dimension reflects the hedonic valence (pleasant-unpleasant) while the second refers to the intensity of arousal (high versus low intensity). With this model, they then coded for emotional reactions with Lazarus’ cognitive appraisal theory. These emotional reactions were aggregated into higher order constructs of simply positive and negative emotional reactions, then used to explain key elements of their inductive model.
The setting is described below:
The company with more than 50,000 full time employees and a market value of $12 billion that had shrinking market share and profits, responded with the board of directors appointing a new CEO. Thus began the initiative for a radical organizational change. The first year was the formulation phase, with a group of about 40 senior middle managers that were enlisted to generate the plan of how to restore profits. This group of championing middle managers then enlisted more than 500 other middle managers across a wide array of work units that were selected for their experience. This was in effort to draft proposals of cost saving change initiatives for the Corporate Transformation (CT); wherein, about 250 suggestions were proposed and about 150 were accepted.
Going into the second year, the strategy implementation phase began. The CT plan was announced, and 13,000 employees would be laid off while the championing middle management would implement the accepted 150 projects. Year three was the result of the implementation phase, where underperformances and qualms about meeting financial targets arose.
Year four was the change evaluation phase, where challenges from the implementation phase continued to surface. An additional 3,000 people were let off, the CEO resigned, and a new CEO was appointed.
Why are these findings important?
These findings were able to track the acceptance and support for the top management team over time while also tracking the resistance to change. This is important because the legitimacy literature and resistance to change literature are understood separately, without much exploration of how the two relate.
Additionally, most of the PROC literature focuses on the early strategic stages of the radical change process, with insufficient attention to the challenges that change agents face during the later stages—especially implementation. Due to a lack of theoretical and empirical understanding of how PROC is implemented and the role played by change agent legitimacy, this paper contributes insight to this needed area of implementation.
Overall, this study provides some context for researchers to further develop theory about the interrelationship between change agent legitimacy and change recipient resistance during the underexplored implementation phase.
Where can these results be applied?
These findings could be applied in scenarios where companies need to execute on radical changes, and pivot when the initial plan falls through. For example, when Daimler-Benz and Chrysler merged, the top management of the two large companies thought they had the perfect plan of combining their strengths as a “merger of two equals”. However, following the merger was a complete disaster. Each company had their own unique culture, and combining the two “as equals” was a challenge that failed. The management had different thinking styles and the workers developed sentiment of superiority to one another.
If going in they had this insight of a longitudinal understanding behind PROC, they would have been better positioned to monitor top management, middle management, and employee sentiment over time. Also, they would have a more informed strategy to pivot as initial plans fall through.
For those that seek an understanding beyond the literature that emphasizes an individualistic approach, these findings offer insight towards a relational approach. Also, those among the PROC literature that seek a deeper understanding beyond the early stages of radical organizational change, could use these findings to expand a longitudinal understanding of PROC.
Huy, Q. N., Corley, K. G., & Kraatz, M. S. (2014). From support to mutiny: Shifting legitimacy judgments and emotional reactions impacting the implementation of radical change. Academy of Management Journal, 57(6), 1650-1680.