Substantial organizational changes take place typically when organizations perceive a need to change the overall strategy and direction for success, adds or discontinues a major segment or practice, and/or wants to change the very nature by which it operates.
It also occurs when an organization evolves through its life cycles, and has to restructure itself to grow. Organizational change is often a response to changes in the environment. Some of the reasons prompting changes are:
The changing market conditions cause unexpected changes which organizations find hard to adjust to. To stay in business and continue to serve the customers, organizations have to align themselves to these variations.
Globalization has created enormous opportunities as well as global challenges to organizations. The market has thus expanded across geographies, and organizations in order to succeed have to serve customers across these regions. While doing this, organizations are finding it more affordable and logical to produce goods and deliver services in certain countries compared to others. The availability of local resources, the environment of the countries they serve in, localization of goods and services, etc. are some reasons for this. To cater to global market, organizations have to understand the global environment and market behavior, and align the organizations to these new situations.
As organizations grow and develop in size, the policies, procedures and the structure that forms the core, also needs to evolve. Organizational changes may involve changes to its mission and objectives, strategy and direction, organizational structure and hierarchy, etc. Adjusting an organization’s internal direction and environment requires considerable dedication and a careful management.
Reaction to External Environments
Organizations are greatly impacted by the environments that surround it. External pressures come from many areas, including customers, competition, changing government regulations, shareholders, financial markets, and other factors in the organization’s external environment.
Organizations that have been having issues with their results are often the ones that consider changes. Performance gaps can be identified in several areas like production, sales and marketing, service, etc. Such companies need to conduct a serious study and identify factors causing gaps and change accordingly to succeed.
Mergers & Acquisitions
Mergers and acquisitions create reorganization in a number of areas. When two organizations merge, significant changes are expected.