Organizational capacity for change (OCC) can be conceptualized as the overall capability of an organization to either effectively prepare for or respond to an increasingly unpredictable and volatile environmental context. This overall capability is multidimensional, and it comprises three ingredients: (a) human skill sets and resources, (b) formal systems and procedures, and (c) organizational culture, values, and norms. As such, OCC is a dynamic, multidimensional capability that enables an organization to upgrade or revise existing organizational competencies, while cultivating new competencies that enable the organization to survive and prosper.
Peter Vaill argued that organizations increasingly operate in “white water” where executives have only partial control, yet effective navigation of a boat on the rapids requires everyone in the boat to react efficiently and effectively to the white water all around them. 1While I like this metaphor, I would add that the navigator must also prepare the boat and the rest of the team for the oncoming white water.
Robert Thames and Douglas Webster use a different metaphor to describe the context in which firms operate today, namely—a hurricane or an earthquake. They state,
To many organizations, change comes like a hurricane season. Everyone knows it’s coming. It is the same every year. The only thing we don’t know is “Who will it hit this time?”…To other organizations change comes like the earthquake. We may never see it coming but have this nagging feeling that it is. 2
Whether your industry or national economy seems like white water rapids, an oncoming hurricane, or a potential earthquake, organizations must prepare in advance, not just react when the “environmental jolt” is experienced. That advance preparation is what I am calling organizational capacity for change. Organizations with relatively high change capacity can successfully shoot the rapids, weather the hurricane, or continue operating during and after a devastating earthquake. Organizations with relatively low change capacity are at the mercy of their environment and much more subject to luck and chance.
I have been researching the nature of organizational capacity for change in hundreds of organizations in a wide variety of industries for over 10 years. In previous research I have found that the higher the aggregate organizational capacity for change is, the higher the subsequent environmental 3 and financial performance. 4 In other words, organizational capacity for change is positively correlated with, and is likely to lead to, superior financial and environmental performance.
In addition, I have also found that the importance of organizational capacity for change increases with the volatility of environmental uncertainty. In other words, common sense and systematic empirical research show that the more your environment is changing, or is about to change, the more important your organizational capacity for change is.
Finally, after reading literally hundreds of articles and dozens of books on organizational change, I have been able to distill the concept of organizational capacity to change down to eight separate and distinct dimensions. 5 These dimensions are briefly described in the sections that follow, but they will be more extensively discussed in later chapters.