Nadler and Tushman’s change model is an open systems model based on the proposition that the effectiveness of an organisation is determined by the congruence between the various elements of the organisation. According to the open systems theory, the organisation is dependent on its environ-ment. The outputs from the transformation of the system-received inputs are again exchanged for new inputs (Hendrickson 1992). There are four basic components in the transformation process of an organisation – task or the specific work activities; individuals or the knowledge, skills, needs and expectations; formal organisational arrangements which includes the structures, processes and methods; and informal organisation that involves implicit, unstated values, beliefs and behaviours (Palmer, Dunford
and Akin 2006). The inputs towards the transformation process include the external environment, internal resources and the organisation’s history.
Based on these inputs, the organisation’s leaders formulate the strategy for initiating changes. The outputs are the performance of the various sectors of the organisation after the changes are implemented.
The economic policy reforms initiated by the Indian government were a gradual process involving a period of about 6 years from 1991 to 1997.
These changes can be categorised as a first-order, incremental change that involves maintaining and developing the continuity of the organisation as opposed to second-order, discontinuous change involving radical transfor-mation in the nature of the organisation. Nadler and Tushman (1995) added another dimension to this distinction between the incremental and discontinuous change by incorporating the concepts of anticipatory or reac-tive of changes to the external environment (Palmer, Dunford and Akin 2006). In the case of changes in the Indian policies, the changes were pri-marily reactive in nature. The impending economic crisis faced by India was due to the Gulf War between Iraq and the United States in the early 1990s that led to a short-term rise in the prices of oil. The collapse of the Soviet Union, India’s largest trading partner in 1991 was another cause of India’s economic crisis (Nagaraj 1997). Similarly, there were demands from inter-national lenders such as the interinter-national monetary fund (IMF) to deregu-late and liberalise India’s economy in order to avoid a debt crisis and maintain economic stability (Basu 1993). In addition, weak economic poli-cies by earlier governments whereby expenditures exceeded revenue leading to high fiscal deficits and heavy borrowing by the government were also responsible for the economic crisis (Nayar 1998). The economic reforms brought about by the government were, thus, a reaction of these pressures to bring about change in the national policies. Moreover, these incremental changes in the policies were adaptive to the pressures of India’s deteriorating economic situation as well as the dictates of international lenders.
The congruence model outlines eight steps while analyzing organisa-tional problems. Table 1 lists the eight steps and then analyses them in the context of the changes.
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Step 1 Identification of symptoms of problem existence
Step 2 Specification of the key elements of the organisation – environment, resources and strategy
Step 3 Identification of outputs – the desired and the actual
Step 4 Classification of the problems, that is, the gap between the desired and the actual outputs
Step 5 Describe the organisational components by collecting data on the four components
Step 6 Evaluation of the congruence between the various components Step 7 Identify the key factors requiring attention by linking the congruence
analysis to the problem identified
Step 8 Identification of action steps that might remove or reduce the problem
Table 1. Eight steps of Nadler–Tushman’s congruence model.
5.1. Application of the congruence model to the Indian economic change process
In the context of the changes brought about by the economic reforms in India, the eight steps would be as follows. The symptoms that suggested that there existed a problem in the Indian economy are a balance of pay-ments problem, high fiscal deficits and high inflation. The inputs for the transition are the policies that were formulated to bail the country out of severe economic crisis. These policies were in response to external pressures as well as internal efforts at stabilising the economy. The intended outputs of the change efforts were to improve India’s economic stand in the inter-national arena as well as to make India a more deregulated and globalised economy. The problems or the gaps between the intended and actual outputs are deficiencies in the policies implemented by the previous govern-ments. Being a democracy, the new policies related to changes in the eco-nomic system need to be dictated by consensus. In addition, the government initiating the changes was a minority government which was subject to coalition politics as well as the demands of the opposition parties.
The next sections would discuss in detail steps 5 through 8, that is, the organisational components, the congruence between them, and identify actionable steps.
5.2. The organisational components in the change process
Following is a brief description of the four important organisational com-ponents involved in the change process.
Task – the task or the specific work activities in the change process involved formulating economic policies that would initiate and sustain the changes.
Informal organisation – this includes the implicit, unstated values, beliefs and behaviours of the organisation. India being a socialist democratic republic, its policies, ideals and values were dictated by social concerns, namely, those which benefited the whole society. However, with globalisa-tion and reforms in countries such as China as well as radical changes in erstwhile communist nations and the break-up of the Soviet Union, India had to change its socialist values for a market-oriented, capitalist approach.
Formal organisational arrangements – the policies that were imple-mented were recommended by a high-powered committee comprising of the Tax Reform Committee, the Committee on the Financial System and the Insurance Reform Committee. Other key groups such as political parties, organised labour groups, and the public – the middle class in particular – were also included in order to build consensus on the changes (Nayar 1998).
Individual – this level consists of the knowledge, skills, needs and expec-tations of the organisations undergoing the change. The change efforts initiated by the Indian government became more definite with the appointment of Dr. Manmohan Singh, a renowned scholar in economics and a proponent of open markets as India’s Finance Minister. Dr. Singh
had the necessary knowledge, skills and experience in liberal economic policies, and was instrumental in framing the changes that led to replac-ing of the previous economic policies with policies characterised by medium levels of protection and regulation.
In the next section, the fit between these four organisational compo-nents is studied.
5.3. Assessing congruence or consistency between the organisational components
There needs to be consistency between the four components involved in the change process, namely, task, informal organisation, formal organisational arrangements, and the individual in order for the change to be effective. As discussed earlier, the specific task to bring about change involved framing new market oriented and investor friendly policies that were very different from the policies implemented by previous governments. In fact, the social-ist values that guided the country’s policies since independence from British rule were somewhat given up in order to avoid a huge public debt and an impending economic crisis. Moreover, the new policies were framed after much discussions and deliberations with key stakeholder groups such as political organisations, organised labour groups, committees set up for dif-ferent areas, interest groups, industrialists, as well as the general public.
The change would not have been effective if it had not been for the appoint-ment of a skilled Finance Minister whose knowledge in the field of deregu-lation, delimitation and open market systems assisted in the framing of policies that propelled India into the forefront among the developing nations. Thus, the four components are consistent with each other and this explains why the changes initiated by the Indian government were effective in boosting the country’s economic health.
In the event of inconsistencies between the components, Nadler and Tushman (1988) suggested an identification of the key factors needing attention and identifying actionable steps that would reduce or remove the problem as mentioned in steps seven and eight of the congruence model. In this analysis, the four components were consistent with the change and the need for identifying key factors and solutions do not arise. The changes in the Indian economic system is also consistent with the stage-based theory developed by Rogers (1983) to explain how new ideas or initiatives are dis-seminated and adopted by the society. The five stages identified by Rogers in the diffusion process of a new initiative are knowledge, persuasion, decision, implementation and confirmation. Roger’s argument was that dissemination of ideas is high when the perceived superiority of the initiative is high com-pared with the existing practice as well as when the initiative’s perceived compatibility with the existing social system is high. In the Indian context, the new economic policies were successfully implemented because the per-ceived success rate of the new policies in stabilising the economy was very high. Also, economic changes in the communist countries and China also changed the mindset of the Indian people regarding market oriented policies.
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