Leadership and organizational change are important concepts that seem to go hand-in-hand. When an organization has declining sales, market share, or reputation over a long duration of time, we anticipate the induction of new leadership. On the other hand, when there is a replacement of leadership at the helm, we expect the organization to go through large-scale changes. Our anticipation and expectations are based on the concepts we learn in school, the books we read on management, and the information we receive about the events in the world. We believe that a new leader can bring about considerable change. However, let us take a step back and ask, should a new leader bring about change? If yes, to what extent?
A change at the top
Theory and practice indicate that change in leadership is likely to result in organizational change. A new leader brings in a new vision for the organization. This can result in redefining organizational objectives and goals in the short and long term. Consequently, there can be a spillover effect on the organizational strategy and processes, and sometimes even the fundamental structure. Moreover, a new leader comes in with a unique perspective about governance and may choose to focus on different values that can influence corporate culture.
However, a change in leadership does not necessarily imply that the organization requires enterprise-wide change. When the transition of leadership occurs naturally (e.g., term-end or retirement of the current leader in an organization performing well), there may not be any need for change. The new leader may be required to focus on strengthening organizational capabilities, internal and external relationships within the existing design, alongside existing operations, and culture. When a shift in leadership occurs suddenly or unexpectedly (e.g., termination or forced resignation of the current leader in an organization performing poorly), there may be a need for change in specific problem areas rather than the whole organization. The new leader may be required to diagnose these problem areas and systematically create and implement solutions to address them.
Making the wrong change
Unfortunately, it is often seen that a new leader introduces organizational level changes that are entirely unnecessary. This may occur in organizations that are already performing well and creating value for their stakeholders; this usually happens in organizations where core issues are not identified correctly. An unnecessary change breeds inefficiency since it consumes precious time and effort without resulting in any incremental benefit. Besides, it can hinder the pace of critical activities, thus impacting employee satisfaction.
An unnecessary change can also become an adverse change if it disrupts the existing organizational processes, structure, values, and culture that have been vital for the organization and have contributed to its performance. It can also create inconsistency and conflict between the goals of the organization and the policies and practices employed. As the change is not borne out of any clear need, it may also confusion, uncertainty, anxiety, and insecurity amongst employees. It also impacts employees’ responsibilities and authority, and consequently, their growth and development. This can also affect their perception of organizational support and psychological safety. Such a change, which is unnecessary and misdirected, hampers employee commitment to the organization and engagement towards their jobs and can lead to reduced productivity and higher attrition.
How to go about making a change
The primary purpose of any organizational change is to resolve the problem areas that are impeding progress, growth, and performance. If there are no significant stumbling blocks, change may upset the apple cart, and disrupt the functioning of the organization. If problems do exist but are not identified correctly, change may be futile. In both cases, change may do more damage than good for the organization in the long term.
Therefore, a change initiative must be undertaken only after thorough due diligence to ensure that one, it is needed; and two, it is focussed in the appropriate direction. However, our attention to this perspective on change is very limited as is reflected in our management education on leadership. The training and knowledge we learn tends to convey the importance of leaders to champion change efficiently and effectively. The implicit assumption is that a new leader needs to create a leadership identity or justify their designated position by changing what exists. This assumption is unfounded.
The primary task of any new leader is to take the organization forward by influencing the employees appropriately and organizational change may, or may not, be part of the task. Leaders, especially those who are freshly inducted, have to be cognizant of their role in the organization. They need to spend enough time in carefully assessing the aspects which have driven or impeded organizational growth. If the existing system has performed well, the new leader can be effective by continuing the previous legacy and improving upon it. If it has not performed well, the leader needs to identify the required changes with inputs from the management team and feedback from employees, and implement them incrementally and transparently. This is the only way a new leader to gain employee trust and commitment from all the stakeholders, while also enhancing the organizational performance.