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					CHAPTER 7 - MANAGING CHANGE, STRESS, AND INNOVATION

LEARNING OUTCOMES (PPT 7-2, 7-3)

After reading this chapter students should be able to:

1. Describe what change variables are within a manager‘s control.

2. Identify external and internal forces for change.

3. Explain how managers can serve as change agents.

4. Contrast the calm waters and white-water rapids metaphors for change.

5. Explain why people are likely to resist change.

6. Describe techniques for reducing resistance to change.

7. Identify what is meant by the term ―organization development‖ (OD) and specify four popular OD
   techniques.

8. Explain the causes and symptoms of stress.

9. Differentiate between creativity and innovation.

10. Explain how organizations can stimulate innovation.

Opening Vignette
SUMMARY

         The video game industry is serious business, and in this industry where customers are looking for
the ―next best game,‖ and where competition abounds, one company, Electronic Arts (EA) has prospered.
EA is now the number one video game publisher in the US, offering its products under three primary
brand names---EA Sports, EA Games, and EA Sports Big. Offering such game titles as Freedom
Fighters, Madden NFL 2004, SimCity 4, and the Lord of the Rings: The Two Towers, the company has
created over 50 best-sellers—each of these with more than 1 million copies sold. The company psoted
revenues in 2003 that exceeded $2.5 billion—up nearly 50 percent over 2002 revenues.
         EA continues to risk time and money to develop new, creative, market leading games. It takes
EA 12 to 36 months to produce a top-selling game, with costs upwards of $10 to develop. John
Riccitello, president and chief operating officer at EA says that ―The forgotten aspect of creativity is
discipline.‖ Creativity is an absolute must, as employees relentlessly pursue games people want to play.
         Game designers try to identify the creative center of a game---what they call the ‗creative x‘ so
they can understand what the game is all about. Then, they use the discipline of understanding by
conducting customer focus groups, and place the information on the company‘s intranet library for
everyone to have access to ---the discipline of sharing. They also employ a discipline of studying the
competition, whereby employees are encouraged to know the features of competitors‘ products. Finally,
they have the discipline of project management. As Riccitello states, ―If you‘re working on a game and
you miss your deadlines, you won‘t be working here long.‖
   While so much discipline and focus may seem stressful, employees of EA are so passionate about what
they do that strain doesn‘t seem to be an issue. They love the creative challenge video games presents,
                                                            Chapter 7 Managing Change, Stress, and Innovation

and they are inspired to accept the next creative challenge. It‘s this kind of passion, devotion, discipline,
and innovation that serves EA so well.

Teaching notes
1. Ask students to determine what characteristics are unique to Electronic Arts (EA). What is it about
   the organization that has allowed it to thrive and grow, regardless of the changes in the marketplace?

2. What are some of EA‘s core survival skills and how have they played a critical part in the success
   enjoyed by this company?

3. What role has discipline played in innovation at EA? Do you believe this has been a key factor in the
   organization‘s success? Why or why not?


I. WHAT IS CHANGE?

    A. Introduction

        1. Change is an alteration of an organization‘s environment, structure, technology, or people.
           (PPT 7-2)

        2. If it weren‘t for change, the manager‘s job would be easy.

            a) Planning would be simplified.

            b) The issue of organization design would be solved.

            c) Decision making would be dramatically simplified.

        3. Change is an organizational reality.

            a) Handling change is an integral part of every manager‘s job.

        4. A manager can change three things.

            a) Structure.

            b) Technology.

            c) People.

            d) See Exhibit 7-1. (PPT 7-5)

II. FORCES FOR CHANGE (PPT 7-6)

    A. Introduction

        1. There are both external and internal forces that constrain managers.

        2. These same forces also bring about the need for change.


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    B. What External Forces Create a Need for Change?

        1. They come from various sources.

             a) New competition.

             b) Government laws and regulations.

             c) Technology.

             d) Economics.

    C. What Internal Forces Create a Need for Change?

        1. Internal forces tend to originate primarily from the internal operations of the organization or
           from the impact of external changes.

        2. When management redefines or modifies its strategy, it often introduces a host of changes.

             a) Employees may have their jobs redesigned, need to undergo training to operate the new
                equipment, or be required to establish new interaction patterns within their formal group.

             b) An organization‘s work force is rarely static; its composition changes.

             c) The compensation and benefits systems might also need to be reworked to reflect the
                needs of a diverse work force and market forces in which certain skills are in short
                supply.

Teaching Notes _______________________________________________________________________
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    D. How Can a Manager Serve as a Change Agent?

        1. Changes within an organization need a catalyst.
        2. People who act as catalysts and assume the responsibility for managing the change process
           are called change agents.

             a) Any manager can be a change agent.

             b) A nonmanager can also be a change agent.

        3. For major systemwide changes, internal management will often hire outside consultants to
           provide advice and assistance.

             a) Outside consultants can offer an objective perspective.



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         b) But they may have an inadequate understanding of the organization‘s history, culture,
            operating procedures, and personnel.

         c) They are also prone to initiate more drastic changes than insiders.

     4. Internal managers who act as change agents may be more thoughtful and possibly more
        cautious.

III. TWO VIEWS OF THE CHANGE PROCESS (PPT 7-7)

  A. Introduction

     1. The ―calm waters‖ metaphor envisions the organization as a large ship crossing a calm sea.

         a) Change surfaces as the occasional storm, a brief distraction in an otherwise calm and
            predictable trip.

     2. The ―white-water rapids‖ metaphor, the organization is seen as a small raft navigating a
        raging river with uninterrupted white-water rapids.

         a) Change is a natural state and managing change is a continual process.

  B. What Is the “Calm Waters” Metaphor? (PPT 7-8)

     1. The calm waters metaphor dominated the thinking of practicing managers and academics.

         a) The prevailing model for handling change in calm waters is illustrated in Lewin‘s three-
            step model. (See Exhibit 7-2.) (PPT 7-9)

     2. According to Lewin, successful change requires unfreezing the status quo, changing to a new
        state, and refreezing the new change to make it permanent.

         a) The status quo can be considered an equilibrium state.

     3. Unfreezing is necessary to move from this equilibrium.

         a) The driving forces can be increased (direct behavior away from the status quo).

         b) The restraining forces can be decreased (hinder movement from the existing equilibrium).
         c) The two approaches can be combined.

     4. Once unfreezing has been accomplished, the change itself can be implemented.

     5. The new situation needs to be refrozen so that it can be sustained over time.

         a) Unless this is done, there is a strong chance that the change will be short-lived.

         b) The objective of refreezing is to stabilize the new situation by balancing the driving and
            restraining forces.

     6. Lewin‘s three-step process treats change as a break in the organization‘s equilibrium state.

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    C. How Does the “White -Water Rapids” Metaphor of Change Function? (PPT 7-10)

        1. The white-water metaphor takes into consideration that environments are both uncertain and
           dynamic.

             a) Example, variable college curriculum.

        2. Currently, the stability and predictability of the calm waters do not exist.

             a) Many of today‘s managers face constant change, bordering on chaos.

        3. Is the white-water rapids metaphor merely an overstatement?

             a) No! Example, General Motors.

    D. Does Every Manager Face a World of Constant and Chaotic Change?

        1. Not every manager faces a world of constant and chaotic change.

        2. But the number of managers who don‘t is dwindling rapidly.

        3. Few organizations today can treat change as the occasional disturbance in an otherwise
           peaceful world.

             a) Most competitive advantages last less than eighteen months.

             b) People‘s Express was described as the model new-look firm; it went bankrupt.

             c) Southwest Airlines uses this no-frills model and is successful.

    E. How Do Entrepreneurs Handle Change?

        1. Entrepreneurs need to be alert to problems and opportunities that may create the need to
           change.

        2. Often it is the entrepreneur who first recognizes the need for change and acts as the catalyst,
           coach and cheerleader, and chief change consultant.
        3. Even if a person is comfortable with taking risks, as entrepreneurs usually are, change can be
           hard.

        4. The entrepreneur must assume the role of explaining the change and encouraging change
           efforts by supporting, explaining, getting employees excited about the change, building
           employees up, and motivating employees to put forth their best efforts.

        5. The entrepreneur may have to guide the actual change process as changes in strategy,
           technology, products, structure, or people are being implemented.

             a) Answers questions, makes suggestions, gets needed resources, facilitates conflict,
                does whatever else is necessary to get the change(s) implemented.


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Teaching Notes _______________________________________________________________________
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IV. ORGANIZATIONAL CHANGE AND MEMBER RESISTANCE

    A. Introduction

        1. Managers should be motivated to initiate change because they are concerned with improving
           their organization‘s effectiveness.

        2. Change can be a threat to managers and to nonmanagerial personnel as well.

A Management Classic
Coch and French: Resistance to Change
SUMMARY

   One of the most famous studies on organizational change, the Harwood Manufacturing Company. The
plant had a long history of disruptions every time changes were made. Although the changes were
typically minor, the employees resisted.
   The usual way that Harwood‘s management made these changes was autocratically. The changes
would be implemented immediately. The employees would rebel. So Harwood‘s executives brought in a
consultant as a change agent to help with their problem. As an experiment, the consultant arranged for the
next change to be conducted in three groups, using three different methods.
    The change agent gathered data over a forty-day period. What he found strongly supported the value
of participation. In the control group, resistance occurred as before. In the representative and full-
participation groups, there were no resignations, only one grievance, and no absenteeism, and
participation was positively related to productivity.
   The conclusion of the Coch and French study: for permanent change to occur without extensive
resistance, employees must be involved.

Teaching notes
1. Discuss the following scenario with your students.
 Your college/university is going to revise its general education requirements to better reflect
   employers‘ requirements in terms of problem solving, oral communication and presentation skills,
   basic use of technology for information management, and a broad knowledge of national and
   international current affairs. This change will result in more highly structured majors, fewer elective
   choices for students, a more rigorous program of study, and the creation of a professional portfolio of
   work from various classes.

2. Ask students to consider the following questions:
 Should the college/university involve students, faculty, etc., in discussions and the design of this
   change? What would be the advantages, the drawbacks of such inclusion?

   If they are going to include others, who should be included in these discussions?

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   What kind of resistance is likely to arise and from what stakeholder groups?

   What strategy(ies) might the college/university take in order to minimize resistance from
    stakeholders?

3. Discuss as a class or break into small teams, have the teams discuss in class and then prepare, outside
   of class, a 10-minute oral presentation of their answers.


    B. Why Do People Resist Change?

        1. An individual is likely to resist change for three reasons: uncertainty, concern over personal
           loss, and the belief that the change is not in the organization‘s best interest. (See Exhibit 7-
           3.) (PPT 7-11)

        2. Changes substitute ambiguity and uncertainty for the known.

             a) Employees in organizations often hold a dislike for uncertainty.

        3. The second cause of resistance is the fear of losing what one already possesses.

             a) Change threatens the investment in the status quo.
             b) The more people have invested in the current system, the more they resist change.

             c) They fear the loss of their position, money, authority, friendships, personal convenience,
                or other benefits that they value.

        4. A final cause of resistance is a person‘s belief that the change is incompatible with the goals
           and best interests of the organization.

             a) If expressed positively, this form of resistance can be beneficial to the organization.

    C. What Are Some Techniques for Reducing Resistance to Organizational Change?

        1. Dysfunctional resistance to change can be addressed with several strategies.
           (See Exhibit 7-4.) (PPT 7-12)

        2. Education and communication help employees see the logic of the change effort.

             a) Assumes that much of the resistance lies in misinformation or poor communication.

        3. Participation involves bringing those individuals directly affected by the proposed change
           into the decision-making process.

             a) Allows expression of feelings, increases the quality of the process, and increases
                employee commitment to the final decision.

        4. Facilitation and support involve helping employees deal with the fear and anxiety associated
           with the change effort.


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          a) May include employee counseling, therapy, new skills training, or a short paid leave of
             absence.

      5. Negotiation involves a bargain: exchanging something of value for an agreement to lessen
         the resistance to the change effort.

          a) This technique may be quite useful when the resistance comes from a powerful source.

      6. Manipulation and cooptation refers to covert attempts to influence others about the change.

          a) May involve twisting or distorting facts to make the change appear more attractive.

      7. Coercion involves the use of direct threats or force against the resisters.

       8. Self Assessment #49, How Resistant am I to Change?
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V. MAKING CHANGES IN THE ORGANIZATION (PPT 7-13)

   A. Introduction

      1. What can a manager change?

      2. Changing structure includes any alteration in any authority relationships, coordination
         mechanisms, degree of centralization, job design, or similar organization structure variables.

          a) These structural components give employees the authority and means to implement
             process improvements.

      3. Changing technology encompasses modification in the way work is processed or the methods
         and equipment used.

          a) The primary focus on technological change in continuous improvement initiatives is
             directed at developing flexible processes to support better quality operations.

          b) Employees are constantly looking for things to fix.

          c) Work processes must be adaptable to continual change and fine tuning.

          d) This adaptability requires an extensive commitment to educating and training workers.

      4. Changes in people refers to changes in employee attitudes, expectations, perceptions, or
         behaviors.

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             a) Requires a work force committed to the organization‘s objectives of quality and
                continuous improvement.

             b) Again, necessitates proper education and training.

             c) It also demands a performance evaluation and reward system that supports continuous
                improvements.

    B. How Do Organizations Implement Planned Changes?

        1. Most change in an organization does not happen by chance.

        2. The effort to assist organizational members with a planned change is referred to as
           organization development.

    C. What Is Organization Development? (PPT 7-14)

        1. Organization development (OD) facilitates long-term organization-wide changes.

        2. Its focus is to constructively change the attitudes and values of organization members so that
           they can more readily adapt to and be more effective in achieving the new directions of the
           organization.

        3. Organization leaders are, in essence, attempting to change the organization‘s culture.

        4. Fundamental to organization development is its reliance on employee participation.

    D. Are There Typical OD Techniques? (PPT 7-15, 7-16)

        1. Any organizational activity that assists with implementing planned change can be viewed as
           an OD technique. (See Ethical Dilemma in Management.)

        2. The more popular OD efforts rely heavily on group interactions and cooperation.

        3. Survey feedback efforts are designed to assess employee attitudes about and perceptions of
           the change they are encountering.

             a) Employees are generally asked to respond to a set of specific questions regarding how
                they view such organizational aspects as decision making, leadership, communication
                effectiveness; and satisfaction with their jobs, coworkers, and management.

             b) The data the change agent obtains are used to clarify problems.

        4. In process consultation, outside consultants help managers to perceive, understand, and act
           upon process events with which they must deal.

             a) These might include workflow, informal relationships among unit members, and formal
                communications channels.



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            b) Consultants are not there to solve these problems. Rather, they act as coaches to help
               managers diagnose which interpersonal processes need improvement.

        5. Team building is generally an activity that helps work groups set goals, develop positive
           interpersonal relationships, and clarify the roles and responsibilities of each team member.
           (PPT 7-16)

            a) The primary focus of team-building is to increase each group‘s trust and openness toward
               one another.

        6. Intergroup development attempts to achieve the same results among different work groups.

            a) Attempts to change attitudes, stereotypes, and perceptions that one group may have
               toward another group to achieve better coordination among the various groups.

Teaching Notes _______________________________________________________________________
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Dilemma in Management
The OD Intervention
SUMMARY

   Organization development interventions often produce change results that are viewed as positive.
However, any change agent involved in an OD effort imposes his/her value system on those involved in
the intervention, especially when the cause for the intervention is coworker mistrust. Sometimes they
walk a very thin line because for personal problems to be resolved in the workplace, participants must
disclose private, and often sensitive information. Refusal to divulge such information may carry negative
ramifications. On the other hand, active participation can lead to employees speaking their minds. But
that, too, carries some risks. Saying what one believes can result in having that information used against
one at a later time. Even though the intent was to help overcome coworker mistrust, the end result may be
more back stabbing, more hurt feelings, and more mistrust among participants (see Exhibit 7-5).

Questions
1. Do you think that coworkers can be too open and honest under this type of OD intervention?

2. What do you think a change agent can do to ensure that employees‘ rights will be protected?

Teaching notes
1. Discuss with the class.

2. Have students discuss in the context of a focus group on teaching within the business department.
 Under what circumstances would students feel comfortable about speaking their minds?

   What negative and positive consequences might there be to keeping silent or speaking up?


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   How realistic are their positive expectations, their fears?

3. Have 2-3 students help record the class‘s ideas on the board.

4. At the end of the discussion, ask the class what their comments tell them about the atmosphere for
   change and feedback in your department/college?


VI. STRESS: THE AFTERMATH OF ORGANIZATIONAL CHANGE

    A. What Is Stress? (PPT 7-17)

        1. Stress is a dynamic condition in which an individual is confronted with an opportunity,
           constraint, or demand related to what he or she desires, and for which the outcome is
           perceived to be both uncertain and important.
        2. It is a complex issue.

        3. Stress can manifest itself in both a positive and a negative way.

             a) It is positive when the situation offers an opportunity for one to gain something.

             b) It is when constraints or demands are placed on us that stress can become negative. (PPT
                7-18)

        4. Constraints are barriers that keep us from doing what we desire.

             a) They inhibit you in ways that take control of a situation out of your hands.

        5. Demands may cause you to give up something you desire.

             a) Demands preoccupy your time and force you to shift pr iorities.

        6. When coupled with uncertainty about the outcome and importance of the outcome,
           constraints and demands can lead to potential stress.

        7. When constraints or demands have an effect on an important event and the outcome is
           unknown, pressure is added—pressure resulting in stress.

        8. It is important to recognize that both good and bad personal factors may cause stress.

             a) Stress-related problems cost U.S. corporations nearly $300 billion in terms of lost
                productivity, increased worker compensation claims, turnover, and healthcare costs.

        9. And stress on the job knows no boundaries.

             a) In Japan, there is a concept called karoshi, which means death from overworking—
                employees who die after working more than 3000 hours the previous year—18 plus hours
                each day with nearly every minute scheduled out in specific detail.

                 1) Upwards of 10,000 individuals die each year from heart attack or stroke.


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           2) One in six Japanese employees works more than 3,100 hours annually.

   10. Employees in Australia, Germany, and Britain, too, have suffered the ill effects of stress.

B. Are There Common Causes of Stress?

   1. Factors that create stress can be grouped into two major categories—organizational and
      personal. (See Exhibit 7-6.) (PPT 7-19, PPT 7-20)

   2. The discussion that follows organizes stress factors into five categories: task, role, and
      interpersonal demands; organization structure; and organizational leadership.

   3. Task demands are factors related to an employee‘s job.

       a) Design of the person‘s job, working conditions, and the physical work layout.

       b) Work quotas can put pressure on employees.

       c) The more interdependence between an employee‘s tasks and the tasks of others, the more
          potential stress there is.

       d) Autonomy tends to lessen stress.

   4. Role demands relate to pressures placed on an employee as a function of the particular role he
      or she plays in the organization. (PPT 7-21)

       a) Role conflicts create expectations that may be hard to reconcile or satisfy.

       b) Role overload is when the employee is expected to do more than time permits.

       c) Role ambiguity is created when role expectations are not clearly understood.

   5. Interpersonal demands are pressures created by other employees.

       a) Lack of social support from colleagues and poor interpersonal relationships can cause
          considerable stress.

   6. Organization structure can increase stress.

       a) Excessive rules and an employee‘s lack of opportunity to participate in decisions.

   7. Organizational leadership represents the supervisory style of the organization‘s company
      officials.

       a) Some managers create a culture characterized by tension, fear, and anxiety.

           1)   Unrealistic pressures to perform in the short run, excessively tight controls, and
                firing employees who don‘t measure up.

   8. Personal factors that can create stress include family issues, personal economic problems, and
      inherent personality characteristics. (PPT 7-20)

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             a) Some employees bring their personal problems to work with them.

             b) Employee personality can have an effect on how susceptible he/she is to stress. (PPT 7-
                22)

             c) Type A personality is characterized by feelings of a chronic sense of time urgency, an
                excessive competitive drive, and difficulty accepting and enjoying leisure time.

                 1)   Only the hostility and anger associated with Type A behavior is actually associated
                      with the negative effects of stress.

             d) Type Bs never suffer from time urgency or impatience.

                 1) Type Bs are just as susceptible to the same anxiety-producing elements.


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    C. What Are the Symptoms of Stress? (PPT 7-23)

        1. There are three general ways that stress reveals itself: physiological, psychological, and
           behavioral symptoms.

        2. Most of the early discussions of stress focused heavily on physiological concerns (health-
           related).

             a) High stress levels result in changes in metabolism, increased heart and breathing rates,
                increased blood pressure, headaches, and increased risk of heart attacks.

             b) Detecting these requires the skills of trained medical personnel; therefore their relevance
                to HRM is negligible.

        3. Of greater importance to managers are psychological and behavioral symptoms of stress.

        4. The psychological symptoms can be seen as increased tension and anxiety, boredom, and
           procrastination—which can all lead to productivity decreases.

        5. So too, can the behavior-related symptoms—changes in eating habits, increased smoking or
           substance consumption, rapid speech, or sleep disorders.

    D. How Can Stress Be Reduced? (PPT 7-24)

        1. Some stress in organizations is absolutely necessary. Without it, people have no energy.



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       2. Make sure that employees are properly matched to their jobs and that they understand the
          extent of their ―authority.‖

       3. Letting employees know precisely what is expected of them, role conflict, and ambiguity can
          be reduced.

       4. Redesigning jobs can also help ease work overload-related stressors.

       5. Regardless of what is done, some employees will still be ―stressed out.‖

           a) To help deal with this issue, many companies have started employee assistance and
              wellness programs.

       6. Employee assistance programs (EAPs) as they exist today are extensions of programs that
          had their birth in U.S. companies in the 1940s.

          a) It is estimated that U.S. companies spend almost $1 billion each year on EAP programs
             and they save $5 to $16 for every EAP dollar spent.
       7. A wellness program is any type of program that is designed to keep employees healthy.

           a) These programs may include such things as smoking cessation, weight control, stress
              management, physical fitness, nutrition education, high blood-pressure control, violence
              protection, work team problem intervention, etc.

           b) Wellness programs are designed to help cut employer health costs, and to lower
              absenteeism and turnover by preventing health-related problems.

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VII.   STIMULATING INNOVATION

   A. Introduction

       1. Innovate or die! Increasingly becoming the rallying cry of today‘s managers.

       2. The standard of innovation to which many organizations strive is that achieved by such
          companies as 3M, DuPont, Sharp, Motorola, and Whirlpool.

       3. Management at Black and Decker learned a valuable lesson about innovation.

           a) Brought their ―Snake Light‖ to market in mid-1990s.

           b) Underprojected first year sales by 400,000 units.

           c) Backlogged orders for nearly 28 months.


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             d) Failure to inject useful, useable, and desirable changes into the product led to loss of
                market share to competing product.

        4. What‘s the secret to success for innovative companies? We‘ll discuss the factors behind
           innovation.

    B. How Are Creativity and Innovation Related? (PPT 7-25)

        1. Creativity means the ability to combine ideas in a unique way or to make unusual
           associations between ideas.

             a) Example, Mattel.

        2. Innovation is the process of taking a creative idea and turning it into a useful product, service,
           or method of operation.

             a) 3M Company has taken novel ideas and turned them into cellophane tape, Scotch Guard
                protective coatings, Post-it notepads, and diapers with elastic waistbands.
             b) Intel—leads all chip manufacturers in miniaturization; 75 percent share of
                microprocessor market for IBM-compatible PCs.

    C. What Is Involved in Innovation?

        1. Some people believe that creativity is inborn; others believe that with training anyone can be
           creative.

        2. Creativity can be viewed as a fourfold process consisting of perception, incubation,
           inspiration, and innovation.

        3. Perception involves the way you see things. Being creative means seeing things from a
           unique perspective.

        4. Ideas go though a process of incubation.

             a) During this incubation period, employees should collect massive amounts of data that are
                stored, retrieved, studied, reshaped, and finally molded into something new.

             b) During this period, it is common for years to pass.

        5. Inspiration in the creative process is the moment when all your efforts successfully come
           together.

        6. Creative work requires an innovative effort.

             a) Innovation involves taking that inspiration and turning it into a useful product, service, or
                way of doing things.

             b) Thomas Edison is often credited with saying, ―Creativity is 1 percent inspiration and 99
                percent perspiration.‖



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           c) That 99 percent, or the innovation, involves testing, evaluating, and retesting what the
              inspiration found.

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   D. How Can a Manager Foster Innovation?

      1. There are three sets of variables that have been found to stimulate innovation.

           a) They pertain to the organization‘s structure, culture, and human resource practices.

      2.   How do structural variables affect innovation? (PPT 7-26)

           a) First, organic structures positively influence innovation.
              1) They have less work specialization and fewer rules and are more decentralized than
                  mechanistic structures; they facilitate the flexibility, adaptation, and cross-
                  fertilization that make the adoption of innovations easier.

           b) Second, easy availability of plentiful resources is a key building block for
              innovation.

                1) An abundance of resources allows management to purchase innovations, bear the
                   cost of instituting innovations, and absorb failures.

           c)   Frequent inter-unit communication helps to break down possible barriers to innovation
                by facilitating interaction across departmental lines.

      3. How does an organization‘s culture affect innovation?

           a) Innovative organizations tend to have similar cultures.

           b)   They encourage experimentation.

           c)   They reward both successes and failures.

                1) They celebrate mistakes.

           d)   An innovative culture is likely to have the following seven characteristics: (PPT 7-27)

                1) Acceptance of ambiguity.

                2) Tolerance of the impractical.

                3) Low external controls.

                4) Tolerance of risk.

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                      (a) Mistakes are treated as learning opportunities.

                  5) Tolerance of conflict.

                  6) Focus on ends rather than on means.

                  7) Open systems focus.

        4.    What human resource variables affect innovation? (PPT 7-28)

             a) Innovative organizations actively promote the training and development of their members
                so that their knowledge remains current, offer their employees high job security to reduce
                the fear of getting fired for making mistakes, and encourage individuals to become
                champions of change.

             b) Once a new idea is developed, champions of change actively and enthusiastically
                promote the idea, build support, overcome resistance, and ensure that the innovation is
                implemented.
             c) Research finds that champions have common personality characteristics: extremely high
                self-confidence, persistence, energy, and a tendency to take risks.

             d)   Champions also display characteristics associated with dynamic leadership.

                  1) They inspire and energize others.

                  2) They are also good at gaining the commitment of others to support their mission.

                  3) Champions have jobs that provide considerable decision-making discretion.

Teaching Notes _______________________________________________________________________
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_____________________________________________________________________________________
_____________________________________________________________________________________
_____________________________________________________________________________________
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    E. Why Do Entrepreneurs Value Innovation?

        1. Innovation is a key characteristic of entrepreneurial ventures.

        2. An innovation-supportive culture is crucial.

             a) Employees perceive that supervisory support and organizational reward systems are
                consistent with a commitment to innovation.

             b) Employees do not perceive that their work load pressures are excessive or unreasonable.

             c) Firms tend to be smaller, have fewer formalized human resource practices, and less
                abundant resources.


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         3. At Monarch Marking Systems, Inc., in Miamisburg, Ohio, employees know how to turn ideas
            into action.

             a) An employee team reduced the amount of time to change over the production line from
                60 minutes to four minutes—and the innovative solutions made the employees‘ jobs
                easier.

Review, Compre hension, Application

Chapter Summary
1. Managers can change the organization‘s structure; they can change the organization‘s technology; or
   they can change people by altering attitudes, expectations, perceptions, or behavior.

2.   External forces for change include the marketplace, government laws and regulations, technology,
     labor markets, and economic changes. Internal forces of change include organizational strategy,
     equipment, the work force, and employee attitudes.

3.   Managers can serve as change agents by becoming the catalyst for change in their units and by
     managing the change process.
4.   The ―calm waters‖ metaphor views change as a break in the organization‘s equilibrium state. The
     ―white-water rapids‖ metaphor views change as continual and unpredictable.

5.   People resist change because of uncertainty, personal loss, and the belief that it might not be in the
     organization‘s best interest.

6.   Six strategies have been proposed for reducing the resistance to change: education and
     communication, participation, facilitation and support, negotiation, manipulation and cooptation, and
     coercion.

7.   Organization development is an organizational activity designed to facilitate long-term organization-
     wide changes. The more popular OD efforts in organizations rely heavily on group interactions and
     cooperation and include survey feedback, process consultation, team building, and intergroup
     development.

8.   Stress is the tension individuals feel when they face opportunities, constraints, or demands that they
     perceive to be uncertain and important. It can be caused by organizational factors or personal factors.

9.   Creativity is the ability to combine ideas in a unique way or to make unusual associations between
     ideas. Innovation is the process of taking creative ideas and turning them into a useful product,
     service, or method of operation.

10. Organizations can stimulate innovation with flexible structures, easy access to resources, and fluid
    communication.

Companion Website
We invite you to visit the Robbins/DeCenzo Companion Website at www.prenhall.co m/robbins for the
chapter quiz and student PowerPoints.




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OneKey Online Courses
We invite you to visit www.prenhall.com/onekey for the part-ending ethics scenarios, diversity exercises,
and learning modules.

 Enhancing your Skill in Ethical Decision Making
New to this edition is an online interactive feature designed to give students experience in making
management decisions about hypothetical yet realistic ethical issues. Introductory paragraphs at the ends
of Parts 1, 2, 3, 4, and 5 provide background about the company (Boeing) and set up the situation for each
set of exercises. After they have studied the chapters in each part, have students log onto
www.prenhall.com/onekey and work through the two multiple choice questions and two short-essay
questions. You may want to hold classroom debates, assign students to conduct role-plays, or have
students work in teams to explore the decision alternatives involved in some of these ethical challenges.

    Diversity Perspectives: Communication and Interpersonal Skills, by Carol Harvey and June
     Allard
1. Would you characterize the change coming with the new computer-based technology as calm waters or
white-water rapids?
     Arguments for the calm waters characterization are that nothing has been said to imply that the
company is in a constant state of change and given today‘s technology orientation, pressures to
computerize the technology have been mounting until such change is inevitable.
    Arguments for the white-water rapids characterization might be made on the grounds that this change
is large, affecting all sectors of the company and will inevitably spawn continuing change in the future as
technology changes.
    Students might make either argument. More astute students might see it beginning as calm waters and
turning into white-water rapids.

2. What techniques might the OD team use to change perceptions and reduce resistance to change?
    Support in the form of education is one technique. Training should be provided for everyone affected
and to the extent possible, the change could be phased in gradually. Participation is important and could
be combined with the training, i.e., a few members of each group could be trained and then used to help
train the others in the group. Informational meetings about the changes would not only serve to educate,
but also to allow the workers to openly communicate their concerns. Students might also mention other
techniques such as negotiation, manipulation, co-option and coercion

Reading for Comprehension
1. Why is handling change an integral part of every manager‘s job?
   Answer – Change is an organizational reality. Handling change is an integral part of every manager‘s
   job. Change is an alteration of an organization‘s environment, structure, technology, or people. If it
   weren‘t for change, the manager‘s job would be relatively easy.

2. Describe Lewin‘s three-step change process. How is it different from the change process needed in the
   white-water rapids metaphor of change?
   Answer – The prevailing model for handling change in calm waters is Lewin‘s three-step model. See
   Exhibit 7-2. According to Lewin, successful change requires unfreezing the status quo, changing to a
   new state, and refreezing the new change to make it permanent. The status quo can be considered an
   equilibrium state.

    Unfreezing is necessary to move from this equilibrium.
     The driving forces can be increased.
     The restraining forces can be decreased.
     The two approaches can be combined.

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     Once unfreezing has been accomplished, the change itself can be implemented.

     The new situation needs to be refrozen so that it can be sustained over time. Unless this is done, there
     is a strong chance that the change will be short-lived.
      The objective of refreezing is to stabilize the new situation by balancing the driving and
          restraining forces.

     Answer – The calm waters metaphor dominated the thinking of practicing managers and academics.
     The prevailing model for handling change in calm waters is Lewin‘s three-step model. Lewin‘s three-
     step process treats change as a break in the organization‘s equilibrium state.

     The white water metaphor takes into consideration that environments are both uncertain and dynamic.
     The stability and predictability of the calm waters do not exist. Many of today‘s managers face
     constant change, bordering on chaos. Few organizations today can treat change as the occasional
     disturbance. Most competitive advantages last less than eighteen months.

3. How do work overload, role conflict, and role ambiguity contribute to employee stress?
   Answer – Task demands are factors related to an employee‘s job: design of the person‘s job, working
   conditions, and the physical work layout. The more interdependence between an employee‘s tasks
   and the tasks of others, the more potential stress there is. Work overload is when the employee is
   expected to do more than time permits. Role demands relate to pressures placed on an employee as a
   function of the particular role he or she plays in the organization. Role conflicts create expectations
   that may be hard to reconcile or satisfy. Role ambiguity is created when role expectations are not
   clearly understood.

4.   How do creativity and innovation differ? Give an example of each.
     Answer – Creativity means the ability to combine ideas in a unique way or to make unusual
     associations between ideas. An organization that stimulates creativity is one that develops novel
     approaches to things or unique solutions to problems.

     Innovation is the process of taking a creative idea and turning it into a useful product, service, or
     method of operation. Custom Foot, a Connecticut-based shoe manufacturer, has combined mass
     production with customized customer desires. Another example, Novo Nordisk, a biotechnology
     company in Denmark.

5. How does an innovative culture make an organization more effective? Do you think such an
   innovative culture could make an organization less effective? Why or why not?
   Answer – The innovative organization is characterized by the ability to channel its creative juices
   into useful outcomes. The 3M Company is aptly described as innovative because it has taken novel
   ideas and turned them into profitable products. So, too, is the highly successful microchip
   manufacturer Intel.

Linking Concepts to Practice
1. Who are change agents? Do you think that a low-level employee could act as a change agent?
   Explain.
   Answer – Changes within an organization need a catalyst. People who act as catalysts and assume the
   responsibility for managing the change process are called change agents. Any manager can be a
   change agent. A nonmanager can also be a change agent. Does the individual exercise influence, are
   they credible, do they control resources, etc.? If they meet these conditions they can be a change
   agent.

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2. Why is organization development planned change? Explain how planned changed is important for
   organizations in today‘s dynamic environment.
   Answer – Most change in an organization does not happen by chance. The effort to assist
   organizational members with a planned change is referred to as organization development.
   Organization development (OD) is an activity designed to facilitate long-term organization-wide
   changes. Its focus is to constructively change the attitudes and values of organizational members so
   that they can more readily adapt to, and be more effective in achieving, the new directions of the
   organization. Organization leaders are, in essence, attempting to change the organization‘s culture.
   Fundamental to organization development is its reliance on employee participation.

3. Which organization—Daimler-Chrysler or Apple—do you believe would have more difficulty
   changing its culture? Explain your position.
   Answer – Student answers will vary. Try to get the students to focus specifically on what they think
   will affect changing culture. Students should address culture, structure, technology, people, need for
   participation in the change, etc. Students should also address what is similar and/or different between
   the two companies that might affect change.

4. ―Managers have a responsibility to their employees who are suffering serious ill effects of work-
   related stress.‖ Do you agree or disagree with this statement? Support your position.
   Answer – Stress is a dynamic condition in which an individual is confronted with an opportunity,
   constraint, or demand related to what he or she desires, and for which the outcome is perceived to be
   both uncertain and important. Stress can manifest itself in both a positive and a negative way. It is
   important to recognize that both good and bad personal factors may cause stress. Factors that create
   stress can be grouped into two major categories: organizational and personal. See Exhibit 7-6.

    Managers have responsibility to the degree that their management of employees creates conditions
    that lead to stress. Task demands are factors related to an employee‘s job—the more interdependence
    between an employee‘s tasks and the tasks of others, the more potential stress there is. Role demands
    relate to pressures placed on an employee as a function of the particular role he or she plays in the
    organization. Interpersonal demands are pressures created by other employees. Organization structure
    can increase stress. Excessive rules and an employee‘s lack of opportunity to participate in decision making
    can also increase stress. Organizational leadership represents the supervisory style of the organization‘s
    managers. Personal factors that can create stress include family issues, personal economic problems,
    and inherent personality characteristics.

5. Do you think changes can occur in an organization without a champion to foster new and innovative
   ways of doing things? Explain.
   Answer – It would be difficult because who would fulfill the functions of a champion? Once a new
   idea is developed, champions of change actively and enthusiastically promote the idea, build support,
   overcome resistance, and ensure that the innovation is implemented. Research finds that champions
   have common personality characteristics: extremely high self-confidence, persistence, energy, and a
   tendency to take risks. Champions also display characteristics associated with dynamic leadership.
   They inspire and energize others with their vision of the potential of an innovation and through their
   strong personal conviction in their mission. They are also good at gaining the commitment of others
   to support their mission. In addition, champions have jobs that provide considerable decision-making
   discretion. This autonomy helps them introduce and implement innovations.




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Management Workshop
Team Skill-Building Exercise
The Celestial Aerospace Company

Objective: To illustrate how forces for change and stability must be managed in organizations and to
illustrate the effects of alternative change techniques on the relative strength of forces for change and
forces for stability.

Time: 50-60 minutes.

Instructions:
1. This can be done entirely in class or outside of class with reporting in class.

2. If done outside of class.
    In the last 15 minutes of class, assign teams, have students read situation, ask for clarifying
       questions.

       Explain that students are to meet before the next class, identify the forces necessitating the change
        and the resistance to that change found in the company.

       They should brainstorm 3 tentative solutions.

3. Have students read the situation.

The Situation:
         The marketing division of the Celestial Aerospace Company (CAP) has gone through two major
reorganizations in the past seven years, changing from a functional to a matrix form, and then back, due
to confusion and complaints. This ―new‖ structure maintained market and project teams, but no functional
specialists were assigned to these groups. After the change, some problems began to surface. Project
managers complained that they could not obtain necessary assistance from functional staffs and this
affected their service to customers. Senior management is pondering yet another reorganization and has
requested an outside consultant (you) to help.

Instructions (continued):
4. Divide into groups of five to seven and take the role of consultants.

5. Next class, ask teams to record on the board.
    The forces necessitating the change.

       The forces of resistance to that change.

6. Discuss, compare, and contrast the lists.

7. Call on each group to present one strategy for dealing with the forces necessitating change.

8. Ask each group to present one strategy for dealing with the forces resisting change.

9. After each group has presented, probing questions should be posed by other ―consulting groups‖
   about the presenting group‘s recommendations.



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Understanding Yourself
Before you can develop other people you must understand your present strengths. To assist in this
learning process, we encourage you to complete the following self-assessments from the Prentice-Hall
Self-Assessment Library 3.0:

   Am I a Type A? (#3)

   How Creative Am I? (#5)

   How Well Do I Respond to Turbulent Change? (#49)

   How Stressful is My Life? (#50)

   Am I Burned Out? (#51) (Also available in this chapter, pp. 241)

After you complete these assessments, we suggest you print out the results and store them as part of your
―portfolio of learning.‖

Developing Your Change Management Skill
About the Skill
         Managers play an important role in organizational change. That is, they often serve as a catalyst
for the change—a change agent. However, managers may find that change is resisted by employees.
After all, change represents ambiguity and uncertainty, or it threatens the status quo. How can this
resistance to change be effectively managed? Here are some suggestions.

Steps in Practicing the Skill
1. Assess the climate for change. Here are some guiding questions:

    a)   Is the sponsor of the change high enough in the organization to have power to effectively deal
         with resistance?

    b)   Is senior management supportive of the change and committed to it?

    c)   Is there a strong sense of urgency from senior managers about the need for change and is this
         feeling shared by others in the organization?

    d)   Do managers have a clear vision of how the future will look after the change?

    e)   Are there objective measures in place to evaluate the change effort and have reward systems
         been explicitly designed to reinforce them?

    f)   Is the specific change effort consistent with other changes going on in the organization?

    g)   Are managers willing to sacrifice their personal self-interests for the good of the organization as
         a whole?

    h)   Do managers pride themselves on closely monitoring changes and actions by competitors?

    i)   Are managers and employees rewarded for taking risks, being innovative, and looking for new
         and better solutions?


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    j)   Is the organizational structure flexible?

    k)   Does communication flow both down and up in the organization?

    l)   Has the organization successfully implemented changes in the past?

    m) Are employees satisfied with, and trust in, management?

    n)   Is there a high degree of interaction and cooperation between organizational work units?

    o)   Are decisions made quickly and do decisions take into account a wide variety of suggestions?

2. Choose an appropriate approach for managing the resistance to change.

3. During the time the change is being implemented and after the change is completed, communicate
   with employees regarding what support you may be able to provide.

Practicing the Skill - Creativity
Read through the following scenario. Write down some notes about how you would handle the situation
described. Be sure to refer to the three suggestions for managing resistance to change.

The Situation

         As the nursing supervisor at a community hospital, you are interested in moving to cross-training
for the emergency room teams and the floor nurse teams. You believe this would vary their
responsibilities, improve patient care, and lower costs. Sue, the team leader of the emergency room
nurses, says they‘re needed in the emergency room where they fill the most vital role in the hospital:

   Work special hours when needed,

   Do whatever tasks are needed, and

   Often work in difficult and stressful circumstances.

Scott, the team leader of the floor nurse team, says the floor nurses have special training and extra
experience unique to their teams:

   Heaviest responsibilities,

   Do the most exacting work, and

   Have ongoing contact with patients and their families.

Neither team wants to train to learn and/or share the work of the other team.

Questions:
1. Identify the forces necessitating the change and the forces of resistance to the change.

2. Identify at least one strategy for dealing with the forces resisting the change. (See Steps in Practicing
   the Skill listed above and review the seven techniques for reducing resistance to organizational
   change, Exhibit 7-4).

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3. After reviewing all of the information available to you relating to this situation and change
   management, would you implement this change? Why or why not?

Teaching Tips:
1. Divide into groups of five to seven and take the role of the nursing supervisor.

2.   Develop responses to items 1 – 3 above.

3.   Ask teams to record key points of their responses on the board.

Developing Your Diagnostic and Analytical Skills
Changes in the Health Care Industry
   Hospitals in general, have one of the most archaic and costly operating systems of any group of large
organizations. Nearly 95 percent of all hospitals currently use procedures and record-keeping systems
that were implemented more than 50 years ago. Individuals in this industry have been highly reluctant to
accept and use new technologies. Doctors and hospital administrators at Beth Israel Deaconess Medical
Center in Boston, Massachusetts, refuse to be part of the ―old guard‖. They once has a patient who was
brought into the emergency room by his wife. He was overweight, short of breath, and dizzy and the
nurses hooked him up to the heart monitor immediately while the ER doctor looked up his records on the
portable laptop computer in the ER. Immediately, the doctor was able to see that the patient had had an
EKG in the past year, and he looked up his results. By comparing those results to the heart monitor, the
doctor was able to see changes that indicated the man was having a heart attack. An emergency
angioplasty was performed, and within a day, the patient was back on his feet and ready to go home.
   Beth Israel is unusual in the health care industry, and the hospital is investing money in technology.
Their system, called CareWeb, allows them to retrieve an individuals health history, which assists in the
current diagnosis. The system is saving Beth Israel more than $1 million a year. It has reduced errors in
patient care by more than 90 percent, and reduced prescription errors and potential drug interactions by
more than 50 percent. Patients are now discharged more than 30 minutes faster than they had been before
CareWeb was implemented.

Questions
1. Describe the types of changes that have occurred at Beth Israel in terms of structure, technology, and
    people. Cite examples.
   Answer – Structure: we don‘t know much about the structural changes. Technology: clearly many
   technological advancements---CareWeb, laptops in the ER. People: Nurses, doctors and
   administrators working together to make the patient experience much more efficient and seamless.

2. Why do you believe there is resistance by the medical profession to systems such as CareWeb?
   Explain.
   Answer – Medicine is a very people oriented field and they may feel like the technology will take
   the caring out of the profession---they may feel it will depersonalize the experience. Also, they may
   be so used to hands on interaction with people that they may not have much experience with
   technology. Also, access to information is power, and perhaps they don‘t want to share that power---
   technology creates better and easier access to information for all and therefore power will be
   distributed, which may be threatening.

3. Assume you were going to make a presentation to a group of hospital staff (doctors and
   administrators) on why they should invest in technology like CareWeb. How would you attempt to
   overcome their resistance to change and their attitude that ―they are doing what they‘ve always
   done‖? Discuss.

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    Answer – Students‘ responses will vary but should open a discussion of issues related to the ability of
    technology to enable them to do their job better. Their argument should focus on clearly identifying
    the specific sources of resistance to change (see #2) and addressing those sources, rather than just a
    standard sales pitch. The students should indicate which of the specific approaches to dealing with
    resistance they will take (e.g. education, participation, facilitation and support, etc)

Enhancing Your Communication Skills
1. Describe a significant change event you experienced (like going from high school to college,
   changing jobs, etc.). How did you prepare for the change? What fears did you encounter and how did
   you overcome those fears? Knowing what you know now about the change, what would you do
   differently today that you didn‘t do then? How can you apply these should-haves to changes you‘ll
   face in the future?

2. Go to the employee assistance programs provider Interlock‘s website at www.interlock.com.
   Research the following information: (1) What are the components of an EAP, and how does Interlock
   evaluate an EAP‘s program success? (2) Identify how Interlock recommends implementing an EAP in
   an organization.

3. Business programs have traditionally focused on developing rationality. They haven‘t emphasized
   creativity. That may be a mistake. Describe how you would promote student creativity in your
   business curriculum. Specify the kinds of courses or activities that you think should be included in
   business school classes that would foster creativity and innovation.

Team Exercises Based on Chapter Material

1. Break the class into pairs. Have each student tell his/her partner about the most recent time he/she felt
stressed. Have the partner then share the most recent time he/she felt stressed. Ask them to work
together to identify if they shared common constraints or demands. Also ask them to categorize the
sources of their stress into one of the five categories from the chapter (task, role, interpersonal demands,
organization structure, or organizational leadership) . How uncertain was their situation? How
important? What psychological symptoms did they experience? What physiological symptoms did they
experience? What behavior related symptoms did they experience?

2. Break the class into groups of 5. Ask them to each individually identify a change they experienced.
Have the group categorize (according to the categories in Exhibit 7-1) the different changes. What forces
for change were operating? Also have them identify whether each change was a ―calm waters‖ or a
white-water rapids‖ change. Did they resist the change? If so, why (see Exhibit 7-3). Finally, have the
group make recommendations as to how they would advise managing that change for each person in the
group (using techniques from Exhibit 7-4)

3. Allow the students to self-select into groups of 5. Assign each group a dimension of an innovative
culture (acceptance of ambiguity, tolerance of the impractical, low external controls, tolerance of risk,
tolerance of conflict, focus on ends rather than on means, open systems focus) and ask them to evaluate
your current class on their given dimension for innovation. Ask them to provide a concrete, clear
suggestion for you to improve the class in that specific area. (20 minutes). Then, have the groups present
their analysis and recommendations one by one. If there is time, have them analyze a very different type
of course (e.g. finance) in the same fashion. Discuss with them whether they believe all of the
dimensions are possible in all types of organizations.




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