Why Organizational Change Matters in Business Management

Introduction: Does Change Matter in Business?

Effective management is what keeps companies and organizations moving forward. But when it comes to change, are companies and their workers truly ready to make the adjustments and potential sacrifices required to bring in new ideas and develop a new workplace culture? How important is it for companies to usher in organizational change? This paper examines those questions and references the literature on how management theories and models can make a positive difference for companies.

Cross-Cultural Management: Hofstede's Global Perspective

Geert Hofstede explains that throughout the world there are a number of management theories — each suited to the dynamics of the national culture in a particular country — and examining the effectiveness of those theories from his point of view proved instructive and practical for researchers in America and elsewhere.

Hofstede, a noted social psychologist and anthropologist, traveled to China, Africa, Russia, Japan, Germany, France, and Holland to examine the way in which management handles businesses in those places. His global perspective is that management theories in the United States "contain a number of idiosyncrasies not necessarily shared by management elsewhere" (Hofstede, 1993, p. 81). Though the article was already over a decade old at the time of this writing, the author nevertheless provides perspectives on management and change that remain timeless.

Hofstede refers back to an article he wrote thirteen years before he published this piece; in that 1980 work, he suggested that "generally accepted theories like those of Maslow, Herzberg, McClelland, Vroom, McGregor…" and others may not have been accepted or embraced outside U.S. borders — and in fact, American theories about management were not widely adopted or respected during that era (Hofstede, 1993, p. 83). What Hofstede learned by visiting other nations and studying their effective management models was, he explains, time well spent.

In Germany, for example, there exists a "very effective apprenticeship system" which works well both on the factory floor and in the executive offices. Because of the effectiveness of this system, the typical German worker does not "necessarily need a manager, American-style, to 'motivate' them" (Hofstede, 1993, p. 83). Hofstede implies that had Germany introduced a management system using an American model, it might have been "a liability rather than an asset" (p. 83). This is a clear example of why a system that works well in one culture may not be effective in another.

In Japan, Hofstede found that U.S.-style management does not exist; instead, a "permanent worker group" is the norm, and workers move into their lifelong positions after being trained. "American theories of leadership are ill-suited for the management group-controlled situation," Hofstede writes (1993, p. 84). In France, Holland, and China, systems of management are in place that do not base promotions on "earnings," "benefits," or "security of employment." In Holland, Americans could learn a great deal: the Dutch "attached more importance to freedom to adopt their own approach to the job" than Americans do, and the Dutch and Chinese care more about "training opportunities" than receiving a raise based on time spent on the job (Hofstede, 1993, p. 85).

Financial Distress and the Need for Corporate Change

Michael J. Mumford points to the fact that sometimes business structures absolutely must change in order to salvage success, and that the timing of this change is crucial. When a company faces financial distress, it presents a "very powerful constraint upon management" (Mumford, 2003, p. 52). The key is not to let things deteriorate to the point of company default before making necessary management changes. When a change in corporate leadership and management style is called for because the company is facing "financial difficulty," Mumford emphasizes that it is vitally important "to give creditors power to find out the truth of the matter" (p. 53).

The urgency of addressing corporate governance during financial difficulty is underscored by a striking statistic: "more than half the new firms set up between 1987 and 1989, both in the service sector and in production and manufacturing, failed within three years," Mumford recounts (2003, p. 53). What Mumford attempts to do in his article is offer "various alternative procedures contemplated under UK law to address financial distress," while the real practical theme is to implement management changes that can bring a company back to financial solvency before a disastrous failure occurs.

Works Cited

Byrne, John A., & Gerdes, Lindsey. (2005). The man who invented management: Why Peter Drucker's ideas still matter. Business Week, no. 3961, p. 96.

Hofstede, Geert. (1993). Cultural constraints in management theories. Academy of Management Executive, 7(1), 81–94.

Miller, Danny. (1990). The Icarus paradox: How exceptional companies bring about their own downfall. New York: HarperBusiness.

Mumford, Michael J. (2003). Corporate governance and financial distress: When structures have to change. Corporate Governance, 11(1), 52–63.