Kamran Khan & Masood ur Rehman , pp. 54. MAM/Sektionen för Management, 2008.
While starting our thesis, we studied lot of literature on organizational change, and found that the concept of change and its types have been discussed by different authors in a manner that is very difficult to understand. Every author/researcher discusses his/her own concept regarding organizational change and have differentiated it as per their own study (e.g. Scheins typology, technical-social framework, etc). We have tried to categorize different types of organizational change and present somewhat complete and clear picture of ‘what is change’ for which the existing literature has been used as a basis. After discussing the broad topic of this study, methodologies have been explained. On the basis of categorization of change, we have tried to understand and present the practical change program carried out in our empirical case. This firm has been selected for this study because of its broad business activities and major workforce, operating in a developing economy.
Employees’ resistance, the basic topic of this study, is one of the major problems/threats to successful change program. In our empirical case, employees’ resistance failed an important and well intended change program. The first step after discovering employee’s resistance led us to the exploration of causes of resistance which have been thought by different authors as very important for overcoming it. As according to Mintzberg, the cure might actually prove to be just more of the cause (Mintzberg 1998 p. 324).
The study of different causes/antecedents discussed by several authors has given us the opportunity to add another important potential cause of resistance, that is, goal conflict between firm (owners) and individuals (employees). It should be noted that even in normal situation, goal conflict exists between firm (owners) and its employees, but the magnitude and intensity of this conflict is very low and so it is hidden, we call this ‘goal difference’, and both parties (firm & employees) accept each other’s goals. In a strategic and major change program, firms alter their goals (e.g. cost minimization, innovative products, etc), which result in shifting and increasing their focus towards new goals. The shift in focus and increased commitment of firm towards attaining its new goals, increase the magnitude and intensity of goal conflict and it become very difficult for both parties (firm & employees) to accept each other’s goals. The firm’s increased concentration and self-centered focus on its goals affects employees’ personal goals, and it become very difficult for employees to achieve their own goals and satisfy their needs. In our empirical case, change in the firm altered its goals toward profit maximization which was very important for its survival in that critical situation. The firm’s primary goal of survival was followed by new support goals which are quality control, productivity increase, cost minimization, and innovation & product development; to better achieve its primary goal. These firm’s goals constrained employees from satisfying their own needs and achieving their own goals which is important for their own survival. It becomes very difficult for both parties (firm and employees) to accept each other’s goal which resulted in intensive goal conflict between them, and caused severe employees’ resistance.
While studying this goal conflict, different supporting theories has been found which explain this concept and some also provides solutions to resolve goal conflict it to a favourable degree.
According to the principal agent theory, individuals (employees) as agents strive to maximize their utility while firm (owner) as principal strives for maximizing its profitability (Rees, 1985; Selden et al, 1999). The behavior of firm as profit maximizer, and individuals (employees) as utility maximizer can also be supported by neoclassical, neo-Keynesian, and managerial theories of firm. While studying our empirical case we analyzed the behavior of the firm and its employees after introducing the change program, and found that this firm (principal) was interested in maximizing its profit which was very important for its survival. The only possible ways to achieve these goals at that time by the firm was to utilize its employees efficiently and effectively, and to pay them according to their contributions in the firm’s profit, demanding more of their efforts and time. On the other hand, employees (major part of employees were poor labors) are interested in maximizing their own utility by getting more salaries, investing less efforts and time, good working environment, and better facilities. These efforts by employees were believed as very important for their own survival. The demands of firm’s new goals constrained employees from achieving their own personal goals, which increased the magnitude of goal conflict between firm and its individuals followed by severe resistance from employees. Both parties (the firm and its employees) started extreme level of efforts for achieving their own conflicting goals, and their struggle has cancelled the effect of each other and both parities faced failure in achieving their goals.
The surprising and interesting thing we found here is that this goal conflict can not be resolved or harmonized with the help of different ways/solutions proposed in the literature of change and resistance which were also applied by this firm and failed. Firms are required to take some other measures to deal with resistance due to intensive goal conflict. In this regard agency theory and stakeholders’ theory has been used to provide solutions/measures to decrease the intensity and harmonize this goal conflict, and make it possible for both parties (firm & employees) to accept each other goals.
Agency theory proposes different solutions to align agents’ (employees) goals with the principal’s (firm) goals, to allow them work on a common ground and achieve the firm (principal) goals. These solutions are; a) establishing appropriate incentives for the agents to motivate them towards the principal’s goals, b) Efficiently monitoring and observing agents’ behavior, c) Evaluating or monitoring the outcomes of the behavior, i.e. shifting some risk of the firm towards employees, and d) Making efficient contracting with the agent (Jensen & Meckling, 1976; Hill Charles and Jones Thomas 1992). Although these solutions are very important and effective in aligning employees’ goal with the firm’s goals, but we found that these solutions are more biased towards the firm’s interest, and may de-motivate and increase employees’ dissatisfaction, as employees are made to suffer by compromising on their personal goals and interests. According to Perrow, agency theory is unrealistically one sided because of its neglect and potential exploitation of workers i.e. agents (Perrow, 1986). The next problem in agency theory is that it assumes efficient markets and doesn’t consider the external forces and its irregularities.
Stakeholders’ theory provides somewhat more realistic and justified solution to resolve goal conflict between firm (owners) and individuals (employees). It considers an imperfect and real market situation, and suggest accordingly. The aim is that firm should not only exist to satisfy its own needs but also the needs of those working for it, and the needs of society. Stakeholders’ theory suggests maintaining a satisfactory balance with and between all its stakeholders’ divergent and conflicting goals/interests. Despite its important insights, the stakeholder theory has also some problems. The three most obvious and important are; a) its inability to provide standards for assigning relative weights to the interests of the various constituencies, b) it does not incorporate the idea of optimal contracting, and c) its failure to contain within itself some clear cut steps for the firms to follow, and we believe that it is because of its long term approach (Hill Charles and Jones Thomas 1992), (Shankman Neil 1999).
The solutions/measures suggested by agency theory and stakeholders’ theory, are very important for the firm to reduce the intensity of goal conflict, but as we can see both stakeholder and agency theory has their related flaws/problems and no individual theory can solve this problem. After analyzing the literature of change management, agency theory and stakeholders’ theory, with addition to the empirical case of this firm, we are able to provide better solutions (based on these theories) that will better harmonize goal conflict and will make it possible for both parties (the firm & its employees) to achieve their own goals and thus overcome employees’ resistance.