Ally.io
August 11, 2021

The 3 types of organizational change and how to navigate them

Lucy Hitz
Director of Content, Ally.io

From strategic shifts to structural changes to complete transformations, organizational change is common and expected. Today’s business environment requires organizations to regularly adapt, transition, or transform in order to remain competitive and reach their goals.

  • The typical leader has been through 13.5 major transitions.The typical leader has been promoted 4.1 times, moved between business functions (such as from Sales to Marketing) 1.8 times, joined a new company 3.5 times, moved between business units in the same company 1.9 times, and moved geographically 2.2 times (Genesis Advisers, Harvard Business Review, and the International Institute of Management Development)
  • The typical organization today has undertaken five major firmwide changes in the past three years. Nearly 75% expect to multiply the types of major change initiatives they will undertake in the next three years. Yet half of change initiatives fail, and only 34% are a clear success. (Gartner
  • 74.31% of people say their company has an established goal methodology, but not all of them use that methodology across the board. This disconnect makes alignment and successful organizational change almost impossible. (2021 State of Goal Management Report)

Let’s take a look at the most common organizational change types and examine a few cases of companies that have emerged from change stronger than ever.

1. Adaptive Change

Not all organizational change is massively disruptive. Adaptive change usually comes in response to an organization’s desire to improve or optimize processes or strategies that are already in place. This is adaptive change. 

An example of this could be upgrading a computer operating system that becomes out of date to a newer version, or bringing in a new goal management or project management system. While making this change might cause employee stress or temporarily impede workflow, it tends to resolve itself quickly and ultimately improve organizational efficiency. 

Another adaptive change you’ve likely experienced recently is a strategic shift. The need to respond to challenges and pressures happens over the normal course of business. Sometimes it’s as simple as shifting a deadline to accommodate for a reprioritization. Other times, it requires more significant readjustments of goals. 

Adaptive change becomes easier for companies with goal management methodologies in place, allowing for agility in a framework and language that everyone in the company understands. For examples of how to use OKR’s and join the ranks of Google, Facebook, and other tech brands who are masters of adaptive change, visit this post.

2. Internal Transitions

Internal transitions allow companies to move from a current to a future state that better aligns with their goals. These often come in the form of layoffs, mergers and acquisitions, structural changes, and rebrands. 

While these changes can be incredibly disruptive if not properly managed, good planning and preparation will allow organizations to move through them with grace. 

Want to learn how? Download our eBook to discover Four Strategies to Navigate Organizational Change

Shifts in organizational structure is one of these cases. Sometimes they’re a result of mergers or acquisitions, when job duplication is a common outcome. Other times, they’re done to streamline workflow or to align workload to changes in market. 

Whatever the reason, when poorly managed, a reorganization can feel chaotic and stressful for employees, and can cause significant impact to operational efficiency. However, because these changes can be anticipated and planned for, that doesn’t have to be the case. 

CASE IN POINT: MICROSOFT

In 2013, then-CEO Steve Ballmer initiated a Microsoft reorganization that would ultimately transform the company. At the time, Microsoft’s products and platforms we’re separated, causing internal tension, competition, and a lack of collaboration. Ballmer saw an opportunity to make a change in order to “[rally] behind a single strategy as one company — not a collection of divisional strategies.” 

When Satya Nadella took over as CEO in 2014, he took Ballmer’s vision a step further. He saw the reorganization as an chance to change Microsoft’s culture into one where teams were empowered to work cross-functionally in pursuit of higher goals. The idea was to make collaboration the norm, mimicking the company’s mission of being, as an article in Wired put it, a “company capable of working across any platform—even those controlled by competitors—to help people be more productive.” 

When Nadella became CEO, Microsoft’s stock closed out the day at $36.35 per share. As of August 4, 2021, their stock price has risen to $286.51. Thus, what began as a change in organizational structure became a transformational shift that yielded incredible business results. Which leads us to our next category of change.

3. Transformational Change

Transformational changes are ones that alter fundamental elements of an organization, including culture, values, and operations. As we’ve seen with the case of Microsoft, transformational change doesn’t always happen all at once. Rather, it can begin internally as something less drastic, and be taken a step further when initial changes prove successful.

Other transformational changes don’t have the luxury of such internal intention. For when it comes to external pressures from competitors or unanticipated changes in market conditions, companies are forced to change – whether they want to or not. Sound familiar? 

CASE IN POINT: COVID-19

We’ve all witnessed in real-time how businesses of all shapes and sizes have been forced to respond to the COVID-19 pandemic. One industry that’s had to be particularly agile is restaurants and dining. As many restaurants have been made to pivot from in-person dining to take-out, those fundamental elements we mentioned earlier (culture, values, and operations) have all undergone change. 

One iconic Seattle restaurant, Canlis, went from offering fine dining to running all sorts of “pop-up” style businesses, from a burger shop, to a yurt village, to a crab shack, then a canteen – all out of their parking lot. They even offered meal deliveries at times. That’s all a totally different ballgame from fine dining, requiring different forms of marketing and branding, people management, inventory management, IT systems, and more.  Talk about mastering the pivot!

But not all transformational change is as dramatic as what’s happened in response to COVID-19. In fact, more often than not, they arise from a need for businesses to stay competitive. 

CASE IN POINT: NETFLIX

A study shared in the Harvard Business Review (HBR) ranked Netflix as the company with the most successful transformation of the last decade. The streaming giant earned this number one spot when they began to invest more heavily in original content in order to compete in the market. 

At the time, a company memo from CEO Reed Hastings specifically called out the competition as a reason for the shift, saying, “We don’t and can’t compete on breadth with Comcast, Sky, Amazon, Apple, Microsoft, Sony, or Google.” Instead, they’d compete on “passion.” Even this rhetoric nods to the change going beyond operations and product offering – it required a fundamental change in culture and values. 

And it paid off. According to HBR, since this change in 2013, “Netflix revenue has roughly tripled, its profits have multiplied 32-fold, and its stock CAGR has increased 57% annually.” 

The Secret to Successful Change Management

Wondering how companies like Microsoft and Netflix became masters of change? They embraced new opportunities, laid out their goals, and engaged their employees on the journey. 

And you can, too. Download our eBook to discover Four Strategies to Navigate Organizational Change and prepare your organization for whatever comes its way.

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