Four types of change in organisations

Change in organisations is not always initiated consciously and designed with intent. It often arises by chance as part of evolutionary organisational development. Behind the word change also lie very different occasions and requirements, and each occasion brings its own management tasks. The term change management should therefore not be used indiscriminately. Different challenges call for differentiated answers and approaches that fit the specific requirement for change.

transformis (Peterhänsel/Sedlák) set out the distinction between the four types of change based on Wimmer (2007a). It classifies change by two characteristics: its order, meaning how deeply it intervenes in the organisation's patterns, and its duration.

Probably the most common type of change consists of manageable optimisations. They develop processes, structures and routines further without intervening deeply in what happens in the organisation or interrupting everyday work to any great extent. Such first-order changes do not usually come about through planned and steered interventions. Organisations are constantly in motion. They observe and evaluate their environments, take up impulses and adapt them on their own. This is what the term dynamic stability stands for.

Despite all this dynamism, these adaptations lead in the long term to rigidity as people experience it. At a certain point they are no longer enough to meet the challenges. The view arises: if we do not intervene now, the organisation will suffer damage. Management now intervenes deliberately, and second- or third-order changes become necessary. Only at this level does transformis speak of change management, because these processes are tackled and managed in a targeted way.

Second-order change is always based on a concrete occasion. The effort aims to deal with this occasion and then to follow newly created routines again. The organisation proceeds in the way it is used to. What has proved itself is applied again. Fundamental structures, values and strategies, as well as the corporate culture, remain untouched. The pattern is more of the same.

Third-order change goes beyond the concrete occasion. It aims at changing the way the organisation deals with change. The occasion is used to reflect critically, from a meta-position, on previous solution patterns and to establish new ones where necessary. In short, it is about changing the way change happens.

Combining order with duration produces the four types of change. Crisis management and restructuring are limited in time and second-order. Continuous optimisation is permanent and second-order. Profound transformation is limited in time and third-order. Foresighted self-renewal is permanent and third-order.

If the organisation faces a problem that threatens its existence and has to be solved in the short term or within a limited period, crisis management or radical restructuring becomes necessary. Crisis management serves to deal with a problem that acutely threatens the organisation's existence. Radical restructuring is better understood as a preventive measure: the danger was recognised just in time, and restructuring offers a chance to avert the crisis. In both cases, fast and consistent action is required.

The measures aim at a short-term effect. The overriding goal is to secure liquidity. They do not necessarily contribute to the organisation's long-term survival. Examples include selling parts of the company, closing individual sites, mass redundancies or short-time working. This type of change is characterised by driving on sight. The measures are constantly reviewed for their effectiveness, which greatly intensifies communication within the management team. Intensive communication with employees is just as important, so that they receive all relevant information and the whole organisation pulls together.

Continuous optimisation is not limited in time. It serves the permanent, targeted development of established processes and exploits existing potential for success. Special structures ensure that changes are not swamped by day-to-day business and forgotten again after a few weeks. They also ensure that ideas and potential from the workforce and the relevant environments reach the decisive places in the first place.

Managers face the task of recognising the right ideas at the right time among the mass of observations and impulses and putting them into practice. Simply pushing things along is usually not enough. Change takes more energy than carrying on as before. The key is to stay on the ball consistently.

A profound transformation intervenes in the architecture of the organisation. This is why it is also called genotypic transformation. Not only are internal structures and processes rebuilt. The allocation of resources and the tasks and functions of many employees are also critically examined and restructured where necessary. Such a transformation is due when the company has recognised that continuing on its current path and holding on to its existing strategic direction, with its structures and processes, will sooner or later lead it into a situation that threatens its existence.

Restructuring of this kind demands a great deal of strength from the organisation, especially when it happens while the engine is running. It needs pressure that threatens the organisation's existence and is clear at every level, a shared view of the situation and an attractive vision of the future that is worth fighting for. It also needs a carefully designed dramaturgy that moves the status quo to the target state within a reasonable period without reducing existing performance.

Besides positioning the organisation for the future, the aim is for the organisation to learn from the process for the long term. Because the leadership system itself comes under pressure to change, a change in leadership is a prerequisite. The decision-makers responsible must see themselves as a critical part of the undertaking.

Foresighted self-renewal enables an organisation to pick up even weak signals and random impulses from its relevant environments and use them specifically to develop its performance potential. It aims to systematically increase the organisation's own capacity to learn. Those who recognise the need for change early enough to leave sufficient time for implementation gain a time budget. It makes a radical transformation less likely and helps to avoid emergency operations and self-inflicted crises.

Besides suitable structures and communication and decision-making routines, this requires a leadership system capable of making decisions. It picks up impulses from the environments and the workforce, examines them and drives the necessary renewal forward. This capability goes hand in hand with cultural change: employees contribute their own ideas and observations, and contradictions to the familiar are seen as welcome prompts for learning. The strengthened capacity for change secures the resilience known as organisational resilience. It ensures that organisations remain successful even under very unfavourable environmental conditions.

The four types of change call for different approaches. Before setting up a change initiative, it is therefore worth asking which type is at stake. If a problem acutely threatens the organisation's existence and has to be solved quickly, the task is crisis management or restructuring. If established processes are to be developed continuously, continuous optimisation is called for.

If the current path will foreseeably lead to a threat to the organisation's existence and structures, processes and leadership have to be redesigned, a profound transformation is due. If the organisation is to recognise the need for change early and avoid such drastic cuts as far as possible, the task is foresighted self-renewal.

If an occasion that calls for third-order change is handled with the proven means of second-order change, there is a risk. The fact that patterns and routines have proved successful in the past is no guarantee of future success. They may be part of the problem rather than its solution.