Change Management and its Impact on Organizational Performance: Empirical Evidence from an Oil & Gas Firm

Abstract

Abstract In the face of evolving regulatory requirements and financial pressures from rising capital costs and operational expenditures, cost control continues to be a strategic priority for most businesses. Consequently, firms seek out opportunities to be more efficient and leaner through headcount reductions, mergers and acquisitions, introduction of new business processes and streamlining operations. Underpinning these threats and opportunities are waves of change after change in the seven dimensions of a business - strategy, systems, structure, skills, staff, shared values and style. Change management is thus an integral component of significance and importance. If change is not managed well, it may cause significant disruption to the business and consequently impact organizational performance. Despite the profuse output of academic literature and practitioner guidance on change management, the reported low success rates of many change programs prove that successfully delivering on what is originally intended in terms of time, cost and performance remains a challenge to organizations. Part of the problem that makes managing change difficult is the fact that there is little consensus on what factors most influence change efforts as organizations are dynamic and complex entities. This study seeks to investigate the influence and impact of individual factors, organizational factors and change processes on organizational performance which is measured in terms of two attitudinal job outcomes commonly studied in change research, i.e. employee job satisfaction and affective commitment. Affective commitment refers to employees' emotional attachment to or identification with their organization. The relationship between individual factors, organizational factors, change processes and organizational performance has been a key theme in change management literature. The association between change management and organizational performance in the context of the energy industry is also an area that has not been extensively explored. Individual factors refer to employee and leadership attributes; while organizational factors refer to organizational systems and reinforcing mechanisms. The change management process is categorised into four phases namely organizational diagnosis/change readiness, change preparation and alignment, change implementation, and communication. The findings from this study have important implications and recommendations for the selected organization and change practitioners in general. Of key importance is the need to integrate both soft and hard approaches in managing change with simultaneous focus on both; and prompt engagement of the workforce prior to the introduction of the change. To leverage on the reportedly high affective commitment of the workforce, it is also recommended that "insourcing" be considered, of establishing a pool of individuals trained to manage change effectively within the organization as a means of employee engagement whilst building the internal capabilities of the organization. Other recommendations include developing a formal change management framework to work to for all future major organizational changes with change readiness reviews being a key element in the framework; and demonstrating and communicating progress throughout the change effort. Additionally, leadership attributes, organizational diagnosis/change readiness and change preparation and alignment reported the highest correlation with organizational performance which implies that the success of a change program weighs heavily upon the change leader and the program's pre-implementation assessment and preparation. Change efforts can exert a heavy toll on both human and economic perspectives of the firm. Organizations can reduce and limit these costs by learning from past experiences and continuously improving future change efforts. Aside from providing insights to the interactive effects of these factors, it is hoped that this study will be a springboard for future research aimed at demonstrating the important role of these factors towards achieving successful change management and consequently enhanced organizational performance in the context of the energy industry.