Reflections On Organizational Change And Impact On Employee Behavior
Drawing on the foundation of Social Cognitive Theory developed by Bandura, we explore the interdependence of the person, their environment and their behavior through a series of significant changes which took place as Zurich redefined its’ business strategy, lost essential personnel and watched employee performance decline.
As Charles Darwin said, “it is not the strongest of the species that survive, nor the most intelligent, but the one most adaptable to change. ” Organizations wishing to survive must adapt to changes in the market, and sometimes reinvent themselves or take a new strategic direction, just as Zurich did this past year. Employees wishing to survive in their organizations must adapt to their constantly changing work environment. Some are successful, and some are not, as we see in the Zurich Information Technology Group (IT). Performance, work quality, morale and employee retention all suffered during this period of change. Recalling the interdependence of the person, their environment and their behavior, “it is critically important to recognize that the relative influences exerted by one, two, or three interacting factors on motivated behavior will vary depending on different activities, different individuals and different circumstances” (Stajkovic and Luthans 2003, p. 128).
Triadic Influence in Social Cognitive
Theory adapted from Stajkovic and Luthans 2003 In this paper, we examine some significant changes in the work environment and the resulting changes in three specific behavior patterns that lead to lower productivity. We point out how TAPB (Type A behavior personality) employees could not immediately adapt to the many changes in their work environment, and we link it to the decline in self-efficacy and collective efficacy. Next, we look at the positive reinforcement measures Zurich used to improve performance, work quality, morale, and retention. Finally, we suggest some other corrective actions that could be taken to encourage positive behavioral changes.
In early 2017, Zurich switched its operating strategy from growth to profitability. In parallel, Zurich made major internal realignments, policy changes, and program adjustments. Every organization is besieged by multiple and conflicting demands (Pfeffer, Sutton, 2006). Zurich chose to make many of these changes in quick succession. With so many things being changed back to back, people couldn’t possibly do everything well, and performance was negatively impacted. Employees are confronted with a unique set of workplace stressors resulting from changing work environments. Because organizational change by its very nature is not linear, the most frequent psychological state resulting from organizational change is uncertainty.
Due to the changes and resulting uncertainty, Zurich IT lost some influential and charismatic leaders. The lack of leadership only compounded the issues. Employees experienced uncertainty in many different facets of the changing work environment. Members of the Zurich IT Group were uncertain about their redefined roles and responsibilities, lines of communication, tolerance for risk, methods of conflict resolution and more. Senior management changed some expectations dramatically and while leaving other expectations ambiguous or completely undefined. Lack of clarity and well-defined goals led to decreased productivity. How TAPB employees responded With turnover in management, some employees were left feeling like they were hanging in the balance with none of the securities they once enjoyed, The Type A personalities utilized this window in time to go into overdrive and to try to take charge, like a survival-of-the-fittest. When new managers step into their roles, these Type As will do what it takes to prove their worth and get in good graces with their managers. Conversely, employees with less self-efficacy may have their performance decrease on top of the added stresses they are undergoing.
People naturally sort others into in-groups and out-groups – just by their looks and actions. Managers are not exempt. Research has shown that managers classify their employees into winners and losers as early as three weeks after starting to work with them (Nicholson, 1998). There is no question that in an environment in turmoil or on unsteady ground, the human behavior patterns will kick into high gear for better or for worse. However, it is important for upper management to understand these factors and be aware of how it is impacting their business and work environment. In a changing environment at Zurich IT, there was widespread speculation that new systems were designed to monitor and control people. Those being controlled began to resent their lack of autonomy and the general lack of trust, which reflected in their reduced levels of effort. With so many back-to-back changes, Type A employees did not easily adapt to the transitions. The stress of a crisis can cause people, teams, and organizations to freeze up and to be so riddled with fear and anxiety that they cling tightly to the past. In the new environment, many people either withdrew from having critical discussions or did not share their position very clearly leading to the postponement of crucial conversations and the delay of multiple initiatives.
The correlation between self-efficacy and low performance Self-efficacy plays a significant role in how an employee functions on a day to day basis in a work setting. The definition of self-efficacy is “an individual’s belief (or confidence) about his or her abilities to mobilize motivation, cognitive resources, and courses of action needed to successfully execute a specific task within a given context” according to Alex Stajkovic and Fred Luthans (Stajkovic & Luthans 2003 p. 130). Before the reorganization, the employees at Zurich IT had high overall self-efficacy (believed they could accomplish the tasks given). They felt empowered to do their jobs, supported in their sometimes-risky decisions, and were able to have difficult conversations with stakeholders to overcome hurdles. They consistently produced high-quality, on-time deliverables. Unfortunately, the reorganization, coupled with changes in policies, left many individuals uncertain about their decisions, creative license, and ability to deliver results which were reflected in their productivity levels.
The idea of self-efficacy is derived from social cognitive theory. Social Cognitive Theory is based on the principle that an employee’s knowledge and behaviors are a combination of factors from their own experiences and concepts they acquire from their work environment – see figure 1. 1 (Stajkovic & Luthans, 2003). These factors contribute to an employee’s self-efficacy but can vary from situation to situation (meaning that the factors’ symmetry changes with each situation). Self-efficacy can suffer if an employee faces adverse circumstances and if their social and cognitive position is challenged. Individual skill levels had not changed, yet the increasing doubt in their abilities contributed to the decline in self-efficacy and in-turn had a significant impact on productivity. In the old organization, people on the Operations Team were not afraid to make decisions, even if there was a chance for failure. In the new organization, the same employees were hesitant to make similar decisions because they were unsure about the new leaders’ tolerance for risk and ramifications of failure.
This hesitation slowed down the decision-making process, which caused a longer service restoration process and poor customer service. The Business Intelligence Team had apprehensions about asking for additional help and reinforcements (i. e. , additional resources/training/cost approvals, etc. ) as they were not sure whether the same criteria were applicable in the new organization. Instead, they started questioning their abilities to deliver in areas where they were not comfortable or had expertise. In the past, team leaders had the authority to clear out obstacles and have tough conversations with specific stakeholders. Under the new organization, in an unfamiliar situation, they doubted their ability to have tough conversations with those same stakeholders, business partners, and senior leadership. Ultimately, team leaders dragged their feet, which often delayed each initiative by a few weeks.
Collective Efficacy and the Interdependence with Self-efficacy
The impact of significant changes in the workplace can be felt throughout the organization, usually causing stress and anxiety in individual employees. What once was a secure environment becomes uncertain in the face of a corporate reorganization. At Zurich IT, a highly admired group leader was let-go, and as a result, morale and productivity suffered. It is essential to keep in mind that an individual does not function alone in the workplace. Employees typically engaged in team-based activities to generate performance results, create a product or complete a task. So, it follows that as individual performance suffers, team performance will suffer as well.
While self-efficacy is a belief in one own’s ability to perform a specific task, collective efficacy is defined as a group’s shared belief in its’ collective ability to perform a specific task. Just as self-efficacy has been linked with an increase in individual performance (Stajkovic, Luthans and Eisenberg 1998), collective efficacy has been positively correlated with group performance (Stajkovic, Lee and Nyberg 2009). Before the reorganization and loss of a key leader, the Zurich IT group was a high-performing team with high collective efficacy, who had been empowered to make on-the-fly decisions, given creative license and collaborated well together. A group needs to believe they can work well together to choose to engage in the task at hand (Stajkovic and Luthans 2003). So as collective efficacy falters, the group will expend less energy to complete a task, and work performance will suffer, which happened at Zurich IT.
The Operations Team needs to make quick and sometimes difficult decisions, but with the new leadership, they have lower group-efficacy and were risk-adverse. The Business Intelligence Team is responsible for developing efficient reporting methods and needs to have some creative license, but again with new leadership and change in organization structure, they were risk-adverse, which reflected in poor quality deliverables. The Project Management Team, who is responsible for project execution, relies on leadership for the clear communication and to remove political obstacles, also faltered under lack of leadership, which decreased group efficacy and resulted in missing deadlines, poor quality deliverables, and higher project costs. It is important to note, that there exists an interdependence of self-efficacy and collective efficacy in the workplace (Stajkovic & Luthans 2003). A robust self-efficacy will bolster the collective efficacy, and a strong collective efficacy will reinforce self-efficacy. However, because of this interdependence, the reverse is also true, and erosion in one can lead to erosion in the other. Doubt undermines efficacy, causing individuals as well as teams to question their capabilities. “We can do it!” becomes “Can we do it? ” While skill levels have not changed from one month to the next, a significant disruption in the workplace brought on by a reorganization and a change in leadership at the top has negatively impacted group performance.
As stress, doubt, and anxiety rise, collective efficacy declines. The group no longer believes it can accomplish the task set before it. In this case, much of the decline could be attributed to the lack of leadership, but some could also be tied to the reorganization of teams themselves. As members leave and join, trust must be established between new members. Collective efficacy is not an instant event. It takes time to develop (Lee, Stajkovic and Sergent 2016). Efficacy of the group is a shared belief created from shared experience. There is no collective mind. Therefore, collective efficacy is an emergent phenomenon developed through collaboration, cooperation, and communication. Employee Reaction and Zurich’s Response When a company goes through a significant reorganization and decides to make a mid-course correction change in strategy, it often leaves a massive wake causing more interruption and unintended consequences than planned for.
One such consequence, was a high rate of turnover and the loss of several key leaders. An internal survey confirmed low morale, with only 38% of employees recommending Zurich as a place to work. The new policies designed to closely monitor and control people, contributed to a lack of trust and cohesion among team members. The disturbance to existing employees was noticed by upper management and led to some changes in its reinforcement behaviors to keep things in harmony. Zurich implemented a FlexWork program allowing approved employees to work from home. To date, 6% of employees have taken advantage of this policy. Zurich also paid out at 100% of performance bonuses in 2017, despite the financial challenges brought on by three major hurricanes and a change in strategic direction. With the hard times and many recent changes, the employees felt it was an excellent retention strategy to offer full bonuses. Zurich also created an employee recognition program to highlight a job well done.
This social recognition encouraged employees to be supportive of one another and build a stronger sense of community. Social reactions become predictors of future reinforcement, which in turn, strengthens behaviors that result in social approval and weakens behaviors that lead to social disapproval (Bandura 1986). During this transitional time at Zurich, we illustrate that many employees felt uncertainty and doubt, which triggered Type A behaviors of heightened anxiety and eroded both self and collective efficacy. The lack of a stable work environment impacted the behaviors of employees and their performance.
Further changes were made by management to address the issues caused by the initial changes. The Zurich IT group was reorganized and lost a charismatic leader. This, coupled with a lack of clearly defined roles and responsibilities, broken lines of communication, decreased tolerance for risk and reduced creative license, left many employees craving feedback. Employees who had been accustomed to delivering high-quality products on-time now struggled to meet deadlines and wondered how they measured up under the new organizational structure.
The lack of feedback amplified their doubt. Nonfinancial reinforcers cost organizations little, if anything, to administer. Most behavioral interventions in this category can generally be classified as objective or performance feedback (Kopelman, 1986; Luthans & Kreitner, 1985). In contrast to financial reinforcers, whose value is based on the tangible payoffs, their contents offer feedback interventions derive their reinforcing power from the information they provide about an employee’s performance (Annett, 1969; Bandura, 1986; Kluger & DeNisi, 1996; Komaki, Heinzmann, & Lawson, 1980).
Conclusion
We have identified three specific psychological effects, diminished self-efficacy, decreased collective efficacy and increased negative behaviors associated with Type A personality. All had a negative impact on employee productivity. We attempt to offer a corrective course of action, centering around communication, clearly set goals, and feedback.
One challenge facing organizations in transition is the effective implementation of organizational change that minimizes feelings of uncertainty and associated threat. As discussed by Milliken (1987), uncertainty in the work context points to the crucial need for the provision of information during periods of organizational change. Indeed, Sutton and Kahn (1986) argued that when profound organizational change is imminent, employees go through a process of sense-making in which they need information to help them establish a sense of prediction (e. g. , the timeframe for organizational change) and understanding (e. g. , the need for organizational change) of the situation. Thus, feelings of workplace uncertainty can be reduced by providing employees with timely and accurate information concerning the organizational changes; either through formal or informal communication channels (Ashford, 1988). It is important to note, however, that providing detailed information about the transition may be difficult or simply not possible, especially during the early phases of the implementation process. As noted by DiFonzo, Bordia, and Rosnow (1994), if a particular issue cannot be addressed, then it is best to explain why it cannot be answered.
Stabilizing the work environment through communication will provide employees with a greater sense of security, especially Type A employees. We recommend these efforts should continue and even be enhanced. Recognizing the interdependence between group efficacy and self-efficacy means that both need to be addressed, but that progress in one should be reflected in the other, thereby having a positive impact on both. However, it is important to note that group efficacy builds upon shared experiences and past performance results, therefore, requiring the passage of time. So, the priority should be to get back to the basics and set some specific and challenging group goals. A leader should provide clear direction and focus employee motivation through simple goal setting, paying particular attention to gaining commitment and giving feedback. These moderators of goal setting require a leader to build relationships with employees through collaboration and coordination.
Employees in unfamiliar territory, with a new leader or in a new situation, need feedback to reassure them of the pathway they have chosen to accomplish their goals. As the group works through these goals and relationships grow, so do the shared experiences. After some time working together, creating shared experiences, trust and group efficacy should begin to increase. As collective efficacy increases, self-efficacy should follow in tandem, and we see the group and individuals adapt to their new work environment.
Major transitions in business cause major disruptions in the work environment. If survival is predicated on adaptability, companies should address employee adaptability, alongside corporate adaptability. Understanding Social Cognitive Theory and the reciprocal influences of the person, their behavior and their environment could have alleviated some of the stressors and uncertainty caused by the realignment and reorganization of Zurich.
