Magoosh GRE

Change management: the implications of self-interest on organizational change

| February 6, 2017

Introduction

Organizations in the modern business environment face rapid change driven by globalization and continuous technological innovation. To adapt to this rapid change and to be successful in enhancing organizational performance in this environment, an effective approach is required to facilitate the transitioning of individuals, teams and organizations to a desired future state. A structured approach enabling organizational change would ensure smooth change and successful implementation in the pursuit of lasting benefits (Bennis, 2000).
Despite this need, efforts towards organizational change often run into some form of human resistance due primarily to the diverse ways in which individuals and groups act in response to change. However rational or positive, change often causes some form of emotional turmoil and involves perceptions of loss and uncertainty (Beitler, 2005). Kotter and Schlesinger (1979; 451) identify four common reasons people resist change including: …“a desire not to lose something of value (parochial self-interest), a misunderstanding of the change and its implications, a belief that the change does not make sense for the organization, and a low tolerance for change.”
Self-interest is a major reason for resistance within organizations with people focusing on their own best interest and not those of the entire organization. This paper explores the effect of self-interest in change management evaluating the view that this factor necessitates the adoption of pluralism in organizations with regard to management styles and approaches, organizational design, culture, and decision-making. Also evaluated is the view that although self-interest undermines the concept of “shared organizational vision,” it is essential to the comprehension of the nature of resistance to change and how that resistance might be managed. This is achieved through an in-depth analysis evaluating organizational context, culture as well as employee behaviour and attitudes which are linked to potential resistance. It contributes to the understanding and application of change management processes and how transformational change can be sustained towards enhanced organizational performance.

Parochial self-interest

Despite potential positive outcomes, it is nearly always the case that change is resisted. A degree of resistance is normal and acceptable given that change and its attendant process is often disruptive and stressful (Lawson and Price, 2003). A degree of scepticism can also be healthy especially when there are actual or perceived weaknesses in the change proposed, which need to be addressed for the change to have desired positive outcomes (Frese and Fay, 2001). However, resistance in any form and from whatever cause impedes the achievement of business objectives which form the essence of the pursuit and effective management of organizational change (Bennis, 2000).
It is a widely held opinion that humans are born with self-interest as an innate tendency and their primary motive, which underlies their outwardly evident behaviour, is to safeguard and to improve these interests (Miller, 1999). This tendency is often automatic, habitual and is in most cases exercised without conscious thought (Mansbridge, 1990; Miller, 1999). Self-interest is, therefore, part of normal human nature inherent in our being with every individual having the propensity to narrowly focus on their own best interest and self-preservation before that of others including the organization. Self-interest concerns individual regard for the implications of change for themselves linked to a desire not to lose something of value.
In the context of organizational change, this concern and regard for self often causes individuals to resist changes or alterations, particularly if there are suspicions or negative perceptions regarding the changes or circumstances (van Dam et al, 2008). Strong resistance to change is however often rooted in feelings that are historically reinforced and deeply conditioned, established ways, procedures, or methods which could be subject to disruption through the change (Battilana and Casciaro, 2013). Resistance could also result from the individual’s perception of a particular situation, as well as their levels of tolerance for change which could be linked to other causes of resistance such as inadequate information and/or understanding of the necessity and implications of the change; adequate skills development and training; trust and a sense of security; and overall employee relations in organization settings (Zander, 1950; Beitler, 2005).
However, in some cases, self-interest has negative connotations of greed and selfishness in the context in which such self-concern goes against the interests of others or widely accepted moral values (Miller, 1999; Rocha and Ghoshal, 2006). In this case, an individual acts to safeguard individual benefits and/or to enhance gain without regard to the impact and effect of their decisions and actions on others including the interests and objectives of the organization.
In the exploration of the nature of self-interest and its implications in the context of organizational change, this paper reviews two theoretical viewpoints applicable to this focus. These include the rational-economic view which is discussed alongside complementary theories, such as the bureaucratic-hierarchy organizational theory and the neo-institutional economic theory; and the humanistic view, in which the communitarian and collaboration theories are addressed. These orientations reflect a shift in regard for human nature and behaviour from the traditional narrow definition of the rational, egocentric individual to a greater recognition of capacity for other-orientation and willingness of individuals for collaborative action.

Theoretical context

In neoclassical economics under the capitalist system, the business environment is portrayed in a mechanistic nature with businesses portrayed as ‘machines’ serving primarily for profit maximization subject to iron laws of competition (Mahoney, 2005). This linguistic scheme tends to ignore reality and focuses strictly on mathematical grammar which ideally, albeit not factually, replaces human judgment with algorithms (Rubinstein, 2006). It does not anticipate challenges regarding the human component of organizations, assuming it to be among essential factors of production. However, the human component in business is significant and cannot be ignored or eliminated in the conduct of economic activities; being an essential space through which individual participants exercise responsibility (Sen, 2002; Harder et al, 2004). Businesses in the modern world have to grapple with the human resource component, given the rapidly changing nature of business and greater flexibility and freedoms of employees participating in production.
A central concern in the study of organizational behaviour is how to get employees to contribute high levels of effort and performance to their organization’s collective interests (Mahoney and McGahan. 2007). It entails the pursuit of mechanisms through which to achieve greater alignment between the self and the collective interest (Lawson and Price, 2003; van Dam et al, 2008) essential for the achievement of enhanced organizational performance and crucial in the modern dynamic business environment particularly in moments of change.
On one hand, in the context of neoclassical economics, the practice and study of organizations has been based on the foremost assumption of individuals and organizations as rational actors pursuing their self-interests in an inherently competitive space in which several parties involved strive for scarce resources (Diefenbach, 2007). This is the basis for the rational-economic view which assumes that self and collective interests are essentially in conflict (Zander, 1950). In contrast, the humanistic point of view holds that both interests are not independent of each other, embracing the view that they are compatible (Dierksmeier, 2009). These viewpoints are explored in greater detail.

Rational-economic view

This view essentially assumes that individuals are independent agents rationally pursuing actions that seek to maximize their own self-interests as a primary motivation for their engagement in economic considerations (Mahoney and McGahan. 2007). This has its basis in descriptions in a set of Theory X assumptions regarding human nature described by McGregor (1960) which are premised on the view that employees are naturally lazy and harbour a dislike for work. Individuals are thus reluctant to contribute to the objectives of the organizations, pursuing only money and security. The objective of organizations, then, is to control individual behaviour through rational and efficient organizational structures and processes which ensure consistency with organizational goals and objectives such as stability, efficiency and productivity (Sen, 2002; Dierksmeier, 2009).
In this view, organizational design, administrative structure and management approaches adhere to bureaucratic-hierarchical form. The design of tasks follows principles of division of labour and efficiency maximization pegged on classical economics (Diefenbach, 2007). Control is achieved through systems of authority in the structure, written rules and regulations, punishment and coercion for deviants, as well as incentives such as career advancement and compensation for compliance (Mahoney, 2005).
Recent emergence of neo-institutional or organizational economics applying rational-economic assumptions to the analysis of organizations has gained in popularity. This approach relaxes the narrow assumptions of rational economics and departs from the simplistic and negative view of the nature of humans (Sen, 2002; Mahoney and McGahan, 2007). The underlying assumption that humans are rational in intent, self-interest and readily opportunistic is retained though emphasis is made on the assumption of bounded rationality (Rubinstein, 2006; Thomas and Hardy 2011). Neo-institutional approaches, in their various constituent theories, are premised on the perspective of ready belief that individuals are likely to seek avoidance, to withhold effort, or to act deviousness in pursuit of their own interests (Diefenbach, 2007; Folger and Salvador, 2008). Hence, self-interest is seen to be in conflict with collective interests with the former taking precedence in determining individual decisions and actions.
With a basis on these assumptions, agency theorists who argue for control of agents (i.e. employees) by the principal (i.e. manager) affirm the need to adopt mechanisms for incentive, monitoring and control to align the conflicting interests and to prevent agents from pursuing their individual self-interest without regard to organizational goals (Kotter and Schlesinger, 1979). Proponents attempting to solve problems associated with collective action advocate the use of mechanisms to distinguish individual contribution (or lack thereof) which enable incentive or sanction mechanisms (Diefenbach, 2007).
This perspective does not consider collective action and collaborative effort in the organizational context as feasible instead promoting greater control and authoritative hierarchical approaches. In its core assumptions, humans are regarded as rational and readily opportunistic making the joint pursuit of a shared organizational vision in organizational settings untenable. In disregard of collective (or organizational) interest, individuals are likely to shirk, withhold effort, and act in devious ways with their self-interest taking precedence and determining their decisions and actions. In this case, pluralism, which entails a bargaining process among diverse and sometimes competing interests in the attempt to maximize the goals of all involved cannot be realized. It is ineffective in organizational settings involving diverse and varied individual interests at play.
Despite its significant influence, this perspective has been subject of various criticisms. Its control mechanisms are deemed to hinder flexibility and responsiveness reducing employee morale, creativity and satisfaction (Frese and Fay 2001; Folger and Salvador, 2008). Its primary emphasis on external control mechanisms and monetary incentives is seen to reinforce and foster negative egocentric behaviour locking out collaborative behaviour essential for the advancement of the organization’s interests (Sen, 2002; Folger and Salvador, 2008; Frese and Fay 2001).

The humanistic view

This view challenges the core premises of the rational-economic perspective regarding human nature focusing on motivations that underlie human behaviour in a broader orientation (Nguyen, 2000; Lawson and Price, 2003). It is premised on a contrasting set of Theory Y assumptions also described by McGregor (1960) contrasting those of Theory X. These capture the essence of the humanistic perspective including the notion that individuals will to be self-directed, to work hard, and to assume responsibility (Nguyen, 2000; Dierksmeier, 2009). Unlike the earlier approach focused on lower order survival and security needs, such assumptions serve to create more humanistic organizations which endeavour to provide employees with greater opportunity to pursue their higher order needs for self-esteem and self-actualization (Rocha and Ghoshal, 2006; Harder et al, 2004).
This view is compatible with the communitarian view which sees humans as multifarious and consequently cannot be limited to concepts such as egocentric, rational and pursuing only their self-interests, not even when regarding their economic transactions (Frese and Fay 2001). Communitarians posit instead that individuals are at the same time rational and social agents, pursuing both concerns of self and moral values of community. In their view, people want and endeavour to be part of and to identify with something larger than themselves, a group or community, and to contribute to some collective good. An ability of human beings to have and to express sympathy for others and to demonstrate commitment to other-oriented values and principles is consistent with this perspective (Nguyen, 2000). Incidentally, in instances when self-interests are in conflict with moral values and commitments in a social setting, the latter in communitarian theory, often supersedes the former as the basis for individual decision making (Mansbridge, 1990; Folger and Salvador, 2008).
The communitarian perspective generally advocates for involvement and participation, as well as engagement in civic, collective, and social processes and activities to encourage social and moral behaviour among individuals (Lively, 1978; Battilana and Casciaro, 2013). This backs up the premise that the use of economic incentives and factors that are intrinsically motivational can foster greater alignment between self- and collective interests resulting in an internalized moral commitment to collective good rather than one which is induced or incentivized (Lawson and Price, 2003). This perspective can also be subsumed under the collaboration theory which is of the general belief that individuals have social-moral potential for the pursuit of collective interests and thus are collaborative in nature (Harder et al, 2004; Rubinstein, 2006).
Proponents of this perspective have suggested that organization based on the rational-economic perspective is insufficient and incapacitated in the modern dynamic, information-based society linked in networked systems (Mahoney and McGahan. 2007). Others also posit that there are a number of positive benefits that could accrue from organizational structures, management approaches and incentive mechanisms consistent with collaborative assumptions. These include: increasing positive behaviour due to organizational citizenship and belonging (Battilana and Casciaro, 2013); enhancing willingness and motivation to perform; facilitating high levels of morale and creativity (Frese and Fay 2001); improving the quality of team-based action and work; support of win-win approaches to resolution of problems; besides enabling greater systemic coordination (van Dam et al, 2008).Communitarianism and the collaboration theory support and front the humanistic idea that there can be significant benefits for organizations from design features and management practices oriented towards shared power with employees through increased opportunities for co-leadership, autonomy, empowerment, self-management and participation.
Collaboration theory is also premised on the view that due to the interdependence of an organization’s constituent parts, there is no inherent conflict between individual self-interest and the organization’s collective interest (Lively, 1978). Research on organizational culture, for instance, has shown that organizational effectiveness can be enhanced when employees are bound together by shared values, beliefs and practices, in their natural inclination to protect and advance collective interest (Lively, 1978; Battilana and Casciaro, 2013). The collaboration-oriented approach advocates for the replacement of traditional principal-agent relations and hierarchical authority serving to control and to direct employees by a pluralist stewardship approach to management. This aims to meet the needs of various stakeholders while serving the interests of the entire organization (Lively, 1978).
This view and orientation favours pluralism given that individuals in the organizational context, with diverse and sometimes competing interests, are considered to have the capacity to co-exist and to achieve democratic equilibrium essential for the obtaining of a win-win compromise. This compromise and cooperation is essential for the change process and the attainment of enhanced performance. Accordingly, self-interest is not a hindrance in the pursuit of a share organizational vision given the potential for individuals to have shared values, beliefs, and practices, and a natural inclination to protect and to advance collective interest. Such a shared vision can be attained through the pursuit of a stewardship approach to management.
These recommendations are however criticized for their optimism with regard to moral values, trust and willingness to contribute and to collaborate. This optimism is deemed by sceptics as underestimating the potential pervasiveness of self-interest, the strengths of existing power relations, and the risks of democracy in the establishment of business relations; factors which necessitate the pursuit of greater managerial/principal control and direction (Folger and Salvador, 2008).

The need for greater focus on self-interest

In organizational settings, various individuals and different personalities are engaged and interact each with their own priorities and motivations. Behind the various economic facts pursued by organization in their operations are free human beings (McGregor, 1960). Unlike unalterable laws of nature, structures of economic behaviour are influenced by notions and ideals of these interacting individuals that are engaged in it (Frese and Fay 2001). Time and again throughout history, it has been shown that economic behaviour changes with alterations in human attitudes eroding various economic laws (McGregor, 1960; Harder et al, 2004). The individual freedom and ideas about its responsible use plays an eminent role in the economy and if directed and employed appropriately can have significant impact in furtherance of shared organizational vision and objectives. These freedoms and ideas and their individual application in various contexts cannot be conceptualized by abstract methods, predicted or computed (Nguyen, 2000).
Unlike physical systems, human beings form theories about their contexts and act, not simply driven by material causes as often assumed by economic theory, but upon their personal interpretations of the world (Lively, 1978; Dierksmeier, 2009). In the context of organizations and in everyday life, resistance is not a single set of behaviours employees exhibit in situations such as when change is instituted. It comprises various reactions, sometimes unconscious, to forces acting on individuals or groups in a particular environment and context (Thomas and Hardy 2011). Reality in business in the organizational context therefore requires “messy” procedures and qualitative assessments which result from unpredictable democratic as opposed to technocratic decision-making procedures (van Dam et al, 2008; Thompson and Martin, 2010). There can therefore hardly be a singular effective method or approach to the management of resistance as it requires that all the diverse concerns and needs be addressed.
It is also noteworthy that the common reason leading to resistance such as the desire not to lose something of value, a misunderstanding of the change and its implications, and low tolerance for the change can in some way be tied up to self-interest (Harder et al, 2004). It is therefore imperative to focus on the particular self-interest of the various individuals so as to predict potential causes of the resistance, to create an understanding on the nature of their individual and particular resistance to change, to predict their individual responses to it, and to seek appropriate response to mitigate the concerns or to tackle upcoming issues. The various reactions to the change help to elucidate the effect and actual or potential impact of the change, which might not be evident in a closed hierarchical and controlled command system. Such an approach enables the realization of greater success in the change process as it enables joint diagnosis of problems, fostering of consensus, development of a shared vision, enhancement of cohesion and revitalization in the path to the new vision, as well as the development of all-inclusive formal policies and enhanced monitoring and adjustment. It thus is not a coercive and an impelled process but one that is inclusive and shared.
The more people’s needs are better understood, the better the management of the change process and the better the involvement and participation of affected individuals in the process. It is only through such wide engagement and consensus that any transformational change desired can be effected and sustained.

Conclusion

Regardless of the many types of change, a critical aspect is an organization’s ability to buy-in its employees to the change. This is the predominant reason why evaluation of the implication of self-interest, particularly the unbridled parochial self-concern, is essential to change management enabling the understanding of the nature of resistance to change and therefore how such resistance might be managed. Such a capability can facilitate the sustenance of transformational change, which enables enhanced organizational performance and consequently, success in the challenging modern business environment. The modern environment, given its attendant dynamism, networked systems and information-based societies, presents a challenge to traditional hierarchical and control approaches to management. This makes pluralist and democratic methods essential for the conduct of business in present day organizations.

References

Battilana, J., and T., Casciaro, 2013. Overcoming resistance to organizational change: strong ties and affective co-optation (Report). Management Science, (4), 819.

Bennis, W., 2000. Managing the dream: Reflections on leadership and change. Cambridge, MA: Perseus.

Beitler, M., 2005. Overcoming Resistance to Change. Viewed from: www.strategicorganizationalchange.com

Dierksmeier, C., 2009. “A Requisite Journey: From Business Ethics to Economic Philosophy.” In: The Humanistic Management Network (ed.), Humanism in Business, 68–83. Cambridge: Cambridge University Press.

Folger, R. and R. Salvador, 2008. Is management theory too self-fish? Journal of Management, 1127-1151.

Frese, M., and D., Fay, 2001. Personal initiative: An active performance concept for work in the 21st century. In: B. M. Staw and R. I. Sutton (Eds.), Research in organizational behaviour (Vol. 23, pp. 133–187). Amsterdam: Elsevier.

Harder, J., P., Robertson, and H., Woodward, 2004. The spirit of the new workplace: Breathing life into organizations. Organizational Development Journal, 22(2), 79–103.

Kotter, J., and L., Schlesinger, 1979. Choosing strategies for change. Harvard Business Review. March-April, 1979

Kotter, J., 1995. Leading change: Why transformation efforts fail. Harvard Business Review, 73(2), 59-67.

Lawson, E., & Price, C., 2003. The psychology of change management. McKinsey Quarterly, (4), 30-41

Lively, C. 1978. Pluralism and consensus. In: P. Birnbaum, G. Parry, J. Lively, (eds.), Democracy, Consensus and Social Contract. London: Sage Publications, 188–202

Mahoney, J., 2005. Economic Foundations of Strategy. Thousand Oaks, CA.: Sage,

Mahoney, J., and A., McGahan. 2007. The field of strategic management within the evolving science of strategic organization. Strategic Organ. 5(1) 79–99.

Mansbridge, J., 1990. Beyond self-interest. Chicago: University of Chicago Press

McGregor, D., 1960. The human side of enterprise. New York: McGraw-Hill.

Miller, D., 1999. The norm of self-interest. American Psychologist, 54, 1053–1060

Nguyen, H., 2000. Do humanistic values matter? Academy of Management Best Paper Proceedings, ODC: A1-A6.

Rocha, H., and S., Ghoshal, 2006. Beyond self-interest revisited. Journal of Management Studies, 43: 585–619.

Rubinstein, A., 2006. A sceptic’s comment on the study of economics. The Economic Journal, March: C1–C9.

Sen, A., 2002. Rationality and Freedom. Cambridge: Harvard University Press.

Thompson, J., and Martin, F., 2010. Strategic Management: Awareness and Change. Cengage Learning EMEA.
Diefenbach, T., 2007. The managerialistic ideology of organisational change management. Journal of Organizational Change Management, Vol. 20 Issue: 1, pp.126 – 144

Thomas R., and C., Hardy, 2011. Reframing resistance to organizational change. Scandinavian Journal of Management, 27(3), 322-331.

van Dam, K., Oreg, and B., Schyns, 2008. Daily Work Contexts and Resistance to Organisational Change: The Role of Leader–Member Exchange, Development Climate, and Change Process Characteristics. Applied Psychology: An International Review, 57(2), 313-334.

Zander, A., 1950. Resistance to change: Its analysis and prevention. Advanced Management, 4(5), 9-11.

Tags: , ,

Category: Business, Business & Management, Essay & Dissertation Samples