Organisational Change and Firm Performance

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Authors: M. Murphy

Publication Year: 2002


Categories: Organizational Change, Gestalt Switch


Organisational change encompasses production processes (quality management, lean production, business re-engineering), management approaches (teamwork, training, flexible work and compensation) and external relations (outsourcing, customer relations, networking). Performance improvements from organisational investments are greatest when production, management and consumer approaches are combined, and when these bundled practices are implemented in conjunction with information and communications technologies (ICT). One explanation for the “productivity” may be that organisational change is key to realising benefits from ICT, while ICT is essential to implementing organisational change, necessitating combined investments to raise productivity growth. The proportion of OECD firms that introduced organisational changes rose significantly in the 1990s and the incidence of organisational change has been highest in service sectors. Larger firms, particularly those exposed to international competition, are more likely to invest in ICT and organisational change than smaller firms. Organisational change programmes may fail in the absence of greater employee participation and decentralised management. Governments should ensure proper frameworks for labour/management relations and for the introduction of flexible work practices, including part-time work and incentive-based pay. Approaches are needed to enlist unions as partners in implementing new work practices. Governments can also take steps to inform firms and train managers on the implementation of organisational change.