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Article

Employee Readiness for Organizational Change in the SME Internalization Process: The Case of a Medium-Sized Construction Company

by
Bojan Moric Milovanovic
1,*,
Zoran Bubas
1 and
Matea Cvjetkovic
2
1
Institute of Public Finance, Smičiklasova 21, 10000 Zagreb, Croatia
2
Department of Media and Communication, University North, Trg dr. Žarka Dolinara 1, 48000 Koprivnica, Croatia
*
Author to whom correspondence should be addressed.
Soc. Sci. 2022, 11(3), 131; https://doi.org/10.3390/socsci11030131
Submission received: 29 December 2021 / Revised: 3 March 2022 / Accepted: 10 March 2022 / Published: 17 March 2022
(This article belongs to the Special Issue Innovation and New Entrepreneurial Models—the Transformative Forces in the Era of Global Changes)
Review Reports Versions Notes

Abstract

:
A growing body of research, especially in the domain of psychology and business, is aimed at identifying the link between work-related factors and employee readiness to accept change. Moreover, change management is a topic that rapidly attracts the attention of the academic and business communities as well. Therefore, this study is conducted in order to identify the antecedents of the effective implementation of change(s) within a context of a medium-sized construction company that went through numerous changes during its lifetime. A total of 12 different hypotheses and sub-hypotheses was tested to better understand what factors affect employee readiness for change. A multiple regression analysis was used on a sample of 54 employees indicating that organizational commitment, career commitment, and job satisfaction positively affect employee readiness for organizational change. The research contributes to the fields of human resources, organizational psychology, management of small and medium-sized enterprises, and change management.

1. Introduction

Contemporary companies are faced with growing changes in the business environment, which require adaptability and flexibility as the crucial characteristics of modern management (Tomljenović 2016). It can be stated that almost every company operates in a state of continuous change because they are on a daily basis faced with both numerous threats and opportunities which require a quick response (by 2005). In the last decade alone, we have witnessed numerous challenges that companies were exposed to: a financial crisis, labor shortages, unstable business environments, concentrated competition, differentiated demand, and increased job responsibility, all of which are accompanied by rapid technological advancements (McKinlay and Starkey 1988).
As a continuous and inevitable process, accepting change is more than necessary for business success. Many studies have shown that a successful change implementation depends mostly on employees because employees need to be receptive, open, and prepared for change (Meyer and Allen 1984; Armenakis et al. 1993; Madsen et al. 2005). A positive employee attitude towards change is reflected in openness and acceptance of the change. At the same time, a negative approach would mainly result in dissatisfaction, postponement of work, and very often with giving up and leaving the company (Belak and Ušljebrka 2014).
The situation is even more complex for companies operating in an international environment because, besides all the uncertainties they cope with on the domestic market, they need to consider various other risks and obstacles which they encounter on the foreign market. Although entering the foreign market in the past represented a gradual process spanning over an extended period of time, today, many companies enter new markets from their very inception (‘born global’ companies), which can present a significant challenge for the employees facing many complex changes at once. Since people are naturally “programmed” to resist change(s) (Smith et al. 2014), it is up to the management to help employees overcome psychological barriers in order for the change implementation process to run as smoothly as possible.
The aim of the paper is to investigate how employees accept changes and to determine which factors contribute to a positive perception towards change. A case study was conducted on the medium-sized Croatian construction company called Tromont Ltd. (Split, Croatia) The company has undergone numerous changes over the years, one of the most complex being the diversification of business when the company transitioned from mainly operating in the construction industry to the manufacturing sector. The business diversification was also accompanied by the internationalization process when it started exporting its products to foreign markets. The research contributes to the fields of human resources, management, organizational psychology, small and medium-sized enterprise management, and change management. The empirical results show that organizational commitment and career commitment as the first-order variables and job satisfaction as a second-order variable positively affect employee readiness for organizational change. The paper is divided into five sections, where, after the Introduction, the second section provides a literature review and hypotheses development, while the research method and results are elaborated on in the third and fourth sections, respectively. Finally, the fifth section concludes with theoretical and managerial implications followed by research limitations and future research recommendations.

2. Literature Review and Hypotheses

Entering foreign markets introduces significant changes and challenges, especially for small and medium-sized enterprises. Large companies have more resources than SMEs, such as a larger number of skilled employees, adequate budgets for research and development, various sources of financing, a broad client and customer base, and a mass production based on the latest technology (Çetinkaya et al. 2019). Moreover, SMEs differ from the large ones in the management style and more direct ownership and organizational structure. They also display different responses to environmental factors and manifest different approaches to handling competition (Ruzzier and Konečnik 2006). When placed into the context of internationalization and change implementation, SMEs need to cope with and overcome many obstacles and barriers when entering foreign markets compared to large companies (Ruzzier and Konečnik 2006). The attitude towards change in SMEs is characterized by the individual involvement of key decision makers and their personalized approach to management. Following the decision to enter foreign markets, various changes occur inside the company, such as changes in the market strategy, changes in the mode of entry strategy, and changes in business relationships (Agndal and Chetty 2007). Internationalization affects the firm size, organizational structure, organizational culture, values, profits, etc. For that reason, internationalization is observed as a strategy and as a strategic process that significantly alters the organizational structure and the overall business operations (Ogbechie et al. 2018).
Studies on individual readiness for change and change management have emerged more extensively in the past twenty years when companies began to face numerous challenges, such as more frequent economic crises, labor shortages, and highly rapid technological advances (By 2005). In such an unstable environment, companies often did not react fast enough to change and were not able to adjust to the new business conditions. Since every company is under the influence of various economic, sociocultural, political, legal, and other factors, they need to constantly monitor and adapt to these elements in order to successfully run their business operations (Belak and Ušljebrka 2014). Sometimes, companies need only minor modifications to their existing business model; however, sometimes, they are forced to implement more significant and radical changes, resulting in a new structure, processes, or a completely new identity. For that reason, successful businesses require an understanding of organizational change and change management in order to “catch up” to market trends and cope with innovations that come from their environment (Burke 2017).
A successful change implementation has to start with the employees, which is why organizations need to find ways to motivate and prepare them for the change (Madsen et al. 2005). Many studies have shown that most change implementation processes fail in organizations, with a percentage as high as 70% (Dobrovič and Loumova 2017). Change resistance manifests primarily because of the fear of the unknown (Repovš et al. 2019) and it represents one of the main reasons why change implementation fails, mostly because people are “creatures of habit” and prefer routine; therefore, change can cause them stress and insecurity (Belak and Ušljebrka 2014). For that reason, change cannot be observed as an isolated event that employees need to cope with. On the contrary, change acceptance needs to be incorporated into the organizational culture to make it more ‘natural’ to the employees so it can lead to its successful implementation within the entire company.
Employee readiness for organizational change is reflected in the beliefs, attitudes, intentions, and understanding of the employees that change is necessary for business success (Armenakis et al. 1993). Therefore, readiness for change is a cognitive precursor to behavior that is then reflected either as resistance or openness to change. Accepting change implies changing individual perceptions among most of the employees (Armenakis et al. 1993). Employee readiness for change is both an individual and social phenomenon, because colleagues and associates can also shape individual acceptance (Repovš et al. 2019). Madsen et al. (2005) believe that readiness for change represents a higher construct than just understanding and believing that change is necessary to implement. It involves the collection of thoughts and intentions towards a precise effort to implement change. Change can also occur in conditions when readiness for change is low. However, studies have shown that the probability of success is much lower when employees have a low level of readiness, low level of motivation, or experience resistance to change (Backer 1995; as cited in Madsen et al. 2005). Readiness for change represents an important variable that ensures the success of change implementation (Rafferty et al. 2012). In order to better understand the concept, the next part of the text presents various factors that affect readiness for change and empirically investigates their impact on employee readiness for organizational change.

2.1. Organizational Commitment and Employee Readiness for Change

Organizational commitment is defined as the level of personal identification with the organization (Shore et al. 1995) or as a sum of attitudes and feelings that employees develop towards the company they work for (Madsen et al. 2005). Meyer and Allen (1984) believe that commitment to the organization arises when employees “invest” too much into the company and, therefore, it is not worth leaving the organization. They named the phenomenon “continuance commitment”. The second type of commitment, “affective commitment”, refers to employees’ emotional attachment towards the company. Both types of commitment present a psychological state that influences the employees to stay in the company. The employees who develop continuance commitment stay in the company because they have to, and the ones who develop affective commitment stay because they want to. It is believed that organizational commitment is influenced by employees’ characteristics, experience, job position characteristics, and structural characteristics of the company (Shore et al. 1995).
Organizational commitment is associated with emotional attachment, a feeling of pride, and a personal sense of obligation (Shah 2009). Emotional attachment implies an emotional relationship that an individual develops towards other employees and the organization and leads to the successful transition of acceptance to change, because positive attitudes and feelings help overcome the difficulties and challenges (Thakur and Srivastava 2018). A feeling of pride indicates a psychological state in which an employee is happy to work in a company (Suri and Maqhfirah 2018) and is created in a positive, encouraging work environment that requires high identification with the company (Mas-Machuca et al. 2016). The personal sense of obligation is also an important element in readiness for change. Responsible employees are entrusted with important assignments which affect their motivation (Syptak et al. 1999). The personal sense of obligation is connected with more freedom and independence, which reflects the ultimate sense of contribution to the final result. As individuals acquire new skills to perform all the necessary tasks, they are offered more opportunities that carry more challenges. Considering the above, the influence of employee organizational commitment on readiness for change was tested with the following hypotheses:
Hypothesis 1 (H1).
Organizational commitment positively affects employee readiness for organizational change.
Hypothesis 1a (H1a).
Emotional attachment positively affects employee readiness for organizational change.
Hypothesis 1b (H1b).
Feeling of pride positively affects employee readiness for organizational change.
Hypothesis 1c (H1c).
Personal sense of obligation positively affects employee readiness for organizational change.

2.2. Salary and Employee Readiness for Organizational Change

For some employees, salary and rewards motivate further work, affect their job satisfaction, and, ultimately, their long-term stay in the company (Iqbal et al. 2017). Salary and special bonuses are important to employees because they represent the tangible value they receive for the effort and work they invest. When the employees believe they are adequately paid and rewarded for their efforts, they feel valued and appreciated and devote extra effort into every new task and assignment. It is essential to respect equality, i.e., equal treatment of all employees when determining job systematizations. Job satisfaction decreases sharply if employees believe there is an unfair distribution of wages among colleagues (Mahmood et al. 2019). The salary level affects approximately 31% of all employment decisions regarding leaving the company (Iqbal et al. 2017). The salary is also one of the most important reasons employees accept specific job positions, and it directly affects long-term job satisfaction. Moreover, high-paid employees do not leave their jobs so quickly. From the above mentioned, the second hypothesis was formulated:
Hypothesis 2 (H2).
Salary positively affects the employee readiness for organizational change.

2.3. Promotion and Employee Readiness for Organizational Change

A promotion can be defined as the transition to a higher position within the organizational structure or as ‘climbing the corporate ladder’ that mostly leads to the increase in responsibility and compensation (Malik et al. 2012). A promotion creates new roles for employees and marks the trust and recognition of a person’s abilities and skills (Razak et al. 2018), at the same time significantly affecting employee motivation (Haryono et al. 2020). Motivation is connected to different past feelings, thoughts, and experiences that affect employee productivity. If employees are properly motivated, they react positively to new decisions and events that come with the change implementation. Taking this into consideration, the third tested hypothesis was as follows:
Hypothesis 3 (H3).
A promotion positively affects employee readiness for organizational change.

2.4. Career Commitment and Employee Readiness for Organizational Change

Career commitment is defined as the strength of the employee’s motivation to work in the chosen business field (Blau 1988). Career commitment is related to the long-term perspective because it focuses on employees’ subjective traits and presents an important element in readiness for change, as employees who are committed to their careers stay longer within the company while acquiring specialized skills (Colarelli and Bishop 1990). Career commitment also encourages employees to create and maintain professional relationships and contacts (Colarelli and Bishop 1990). Career commitment is a complex concept that depends on many elements, such as job satisfaction, job involvement, supervisor and peer relations, and training and skills development (Shah 2009). Employees who are not sufficiently committed to their careers give up easier when encountering more considerable obstacles and changes (Colarelli and Bishop 1990).
Herzberg was one of the first psychologists to prove the relationship between job satisfaction and business success (Parlalis 2011). Job satisfaction is associated with employees’ achievements, acknowledgment, and status (Parlalis 2011). It can be defined as an inner state of the employee associated with affective and cognitive insight into the situation at work with a certain degree of approval or disapproval (Lipińska-Grobelny and Papieska 2012). Job satisfaction stems from assessing the situation as favorable or unfavorable, concerning things, people, or events in which feelings serve as a central point of observation (Matthews et al. 2018).
Job involvement refers to the importance of work in an employee’s life and marks the ease with which a person socializes within a company (Lodahl and Kejnar 1965). Job involvement can also be defined as the degree to which people perceive the situation at work as an important element of their private life and provides a sense of security (Saleh and Hosek 1976). It can be concluded that people are involved in their job if (1) the work presents their main life interest, (2) they actively participate at work, (3) when success at work affects their confidence, and (4) when they identify themselves with the work (Saleh and Hosek 1976).
Supervisor and peer relations are often accentuated as one of the most important factors contributing to the acceptance of change. Managers, or supervisors, are the ones who communicate the change, assign responsibilities, communicate vision, measure success, and help employees to individually adapt to change (Mangundjaya 2013). A well-established leadership system such as mentoring and a transformational approach motivates employees’ personal growth and is vital during the change implementation (Avolio et al. 1999). In other words, through a personalized approach, intellectual encouragement, and inspiring motivation, transformational leaders promote a culture of involving every employee in the change implementation process, which can result in better job performance (Guerrero and Kim 2013).
Training and skills development are key elements for preparing the employees for new assignments and obligations that arrive with every more extensive change implementation. Training and education help employees reach various goals faster, contribute to their self-esteem, provide a sense of security, increase employee engagement, and enhance their abilities and skills needed to perform a particular assignment (Rodriguez and Walters 2017). Given that modern companies face dynamic and complex business situations, training and education often occur in suboptimal conditions during the change implementation, which can provoke feelings of confusion among employees and result in change resistance (Narayan et al. 2007). Therefore, training and education should be considered as a step that precedes the change implementation process to better prepare employees for the new situation. Following the above, the fourth hypothesis was formulated:
Hypothesis 4 (H4).
Career commitment positively affects employee readiness for organizational change.
Hypothesis 4a (H4a).
Job satisfaction positively affects employee readiness for organizational change.
Hypothesis 4b (H4b).
Job involvement positively affects employee readiness for organizational change.
Hypothesis 4c (H4c).
Supervisor and peer relations positively affect employee readiness for organizational change.
Hypothesis 4d (H4d).
Training and skills development positively affect employee readiness for organizational change.

2.5. Social Relationships and Employee Readiness for Organizational Change

Social relationships imply employees’ feelings, thoughts, perceptions, and impressions towards the people they work with directly or indirectly, including supervisors, subordinates, and peers (Madsen et al. 2005). Social relationships present a vital element that contributes to job satisfaction. During the change implementation, employees go through similar problems and uncertainties (Chênevert et al. 2019). Therefore, interpersonal relationships with colleagues are extremely important because they can rely on each other and provide support in such situations. Studies conducted in the 1980s showed that that support could increase readiness for change and motivation in dealing with stressful situations (Lawrence and Callan 2010). When employees work together on change implementation, providing support while maintaining good relationships, such cooperation can result in anxiety reduction and a higher probability of change acceptance (Shah and Shah 2010). Taking this into consideration, the fifth hypothesis was formulated as:
Hypothesis 5 (H5).
Social relationships positively affect employee readiness for organizational change.

3. Research Methods

This research aimed to answer the question about factors affecting employee readiness for organizational change, where the unit of analysis was one company. A survey questionnaire was used for the research, which was sent to the employees of Tromont Ltd. in February 2021. The questionnaire consisted of 38 questions, out of which 4 questions were related to demographic variables, while the remaining questions tested the relationship of the observed variables defined by the research model.

3.1. General Information about Tromont Ltd.

Tromont Ltd. is a privately owned company specialized in designing and performing construction works. The main activities of the company are in the field of specialized construction operations: installations (of electrical, hydro, and thermal systems and maintenance of equipment), engineering (constructions and adaptations of buildings), and production (design, development, and production of metal components upon request, mainly for rail and maritime transport industries). Tromont Ltd. was founded in 1995 in Split, Croatia, when they started with five employees and operated mostly through subcontractors. Over time, the company grew into one of the leading players in the construction sector and, today, employs approximately 240 people. Tromont Ltd. carries the ISO 9001, EN ISO 3834-3, EN ISO 1090-2, and EN ISO 15085-2 certificates, which further confirms their commitment to the quality of their products and services. In 2020, the company generated over 31 million EUR in revenue, out of which over 3.3 million EUR was gained in exports.

3.2. Sampling Frame and Data Collection

The survey covered 90 out of 240 employees (everyone with access to e-mail). The other employees with no access to e-mail were employees working on constructing facilities; therefore, they did not represent a relevant sample as they were not largely affected by the changes. A total of 54 employees responded to the questionnaire, representing a return rate of 60%. Of these respondents, 17 were women (31.5%) and 37 were men (68.5%). Regarding job position, the participants could be divided into three categories: operational/administrative, which included 46.3% of employees (n = 25), management, which included 48.1% (n = 26) of employees, and directors, which included 5.6% (n = 3) of respondents. Most of the employees had graduated from college, amounting to 53.7% (n = 29). A total of 18.5% (n = 10) had a master’s degree, while 27.8% (n = 15) of respondents had graduated from high school. When observing the years of employment within the company, a total of 29.6% (n = 16) of respondents worked longer than ten years, 22.2% (n = 12) worked between 5 and 10 years, 37% (n = 20) worked between 1 and 5 years, and only 11.1% (n = 6) worked less than a year.

3.3. Operationalization of the Measured Variables

All the observed variables, independent and dependent, were measured by a 5-point Likert scale. The employees had to assess the degree of agreement or disagreement with the given statements, ranging from 1 (strongly disagree/or unlikely) to 5 (strongly agree/or very likely). Cronbach alpha reliability estimates of all measured variables were above 0.7, which indicated a high internal consistency of the scales.
Employee readiness for organizational change, as a dependent variable, was operationalized with an instrument developed by Madsen et al. (2005), with a Cronbach alpha coefficient of 0.71.
Organizational commitment as an independent variable, and, at the same time, being the first-order construct, was measured using three second-order variables: emotional attachment, the feeling of pride, and personal sense of obligation. Each of these variables were measured using three questions from the instrument developed by Cook and Wall (1980). Cronbach alfa coefficients of the observed variables were: organizational commitment = 0.93; emotional attachment = 0.92; feeling of pride = 0.83; personal sense of obligation = 0.72.
As an independent variable, the salary was measured by three questions from the instrument that was developed by Price and Mueller (1986) but modified by Yoon and Thye (2002), with a Cronbach’s alpha coefficient of 0.94.
As an independent variable, promotion was measured using three questions from the instrument developed by Chang (1999), with a Cronbach’s alpha coefficient of 0.87.
As an independent variable and as a first-order construct, career commitment was measured using four second-order variables: job satisfaction, job involvement, supervisor and peer relations, and training and skills development, with a Cronbach’s alpha coefficient of 0.93. Each of these second-order variables were measured with three questions. Job satisfaction was measured with the instrument developed by Brayfield and Rothe (1951), with a Cronbach’s alpha coefficient of 0.81. Job involvement was measured with the instrument developed by Blau (1985), with a Cronbach’s alpha coefficient of 0.84. Supervisor and peer relations were measured with the instrument developed by Gaertner and Nollen (1989), with a Cronbach’s alpha coefficient of 0.95, while training and skills development were measured with the instrument developed by Chang (1999), with a Cronbach’s alpha coefficient of 0.70.
As an independent variable, social relationships were measured using the four-question instrument developed by Madsen et al. (2004), with a Cronbach’s alpha coefficient of 0.70.

3.4. Analysis

In addition to the subjective evaluation and the use of professional and scientific literature (face validity), the questionnaire was reviewed by a competent expert with long-term experience in the research process (content validity). Additionally, before the questionnaire was distributed to the employees, a member of the company’s board examined it to evaluate if the questions corresponded to the situations employees went through. Criterion validity was monitored through correlation analysis presented in the paper’s results section, while the construct validly was tested through exploratory factor analysis using the Kaiser–Mayer–Olkin index (Hair et al. 2013). The Kaiser–Mayer–Olkin (KMO) index was 0.838, meaning that the sample was suitable for factor analysis since the index should be higher than 0.5 (Miljko 2017). In order to confirm the questionnaire’s reliability, the Cronbach alpha coefficient was calculated for each of the variables. The values of the Cronbach alpha coefficient were above the acceptable range, from which it could be concluded that the research was reliable.
The basic assumptions of multiple regression were also tested. More precisely, it could be concluded that multicollinearity, heteroskedasticity, and autocorrelation were not present, since the VIF values, Durbin–Watson statistic, and maximum Cook’s distance were far below critical limits. Additionally, there was no presence of common method bias nor a nonresponse bias. Multiple linear regression was used as the primary method of analysis and it was performed using the SPSS computer program to test the relationship between each of the independent variables in relation to the observed dependent variable. A correlation matrix (Pearson correlation coefficient) was used to test the strength and the direction of relationships between independent and dependent variables.

4. Results

In the following section, results of descriptive and inferential statistical analysis are presented. The descriptive statistics shown in Table 1 demonstrate that most of the employees had a positive attitude towards each observed variable. Emotional attachment was the highest-rated factor (μ = 4.43), followed by social relationships (μ = 4.38), feeling of pride (μ = 4.15), personal sense of obligation (μ = 4.30), and organizational commitment (μ = 4.29). Therefore, it could be concluded that employees had long-term plans to stay within the company, they were proud of their work, and would recommend it to acquaintances. They considered having good relationships with their colleagues, while their supervisors communicated clearly all the assignments and responsibilities. The lowest-rated elements of employee readiness for change were salary (μ = 3.35), promotion (μ = 3.65), and training and skills development (μ = 3.51). Employees believed they could be paid more for the job they performed, they would like to participate more often in training and educational workshops, and that the company should promote current employees more often when opening new job positions.
A correlation matrix was used to find out the correlation of the variables. Table 2 and Table 3 show the arithmetic mean, standard deviation, and correlation coefficients among the observed variables, whose values ranged from 0.06 to 0.97. Most variables showed a moderately strong association with employee change readiness: organizational commitment (r = 0.62, p < 0.01), emotional attachment (r = 0.61, p < 0.01), feeling of pride (r = 0.56, p < 0.01), personal sense of obligation (r = 0.56, p < 0.01), promotion (r = 0.57, p < 0.01), career commitment (r = 0.61, p < 0.01), job satisfaction (r = 0.62, p < 0.01), job involvement (r = 0.56, p < 0.01), and training and skills development (r = 0.52, p < 0.01). In other words, an increase in the level of any of these variables resulted in an increase in the level of employee change readiness and vice versa. On the other hand, salary (r = 0.49, p < 0.01) and supervisor and peer relations (r = 0.42, p < 0.01) showed a weak correlation with the change readiness, while the social relationships (r = 0.01, p < 0.01) had a positive and weak correlation that was not statistically significant.
Table 4 shows the results of the multiple regression analysis. In all three models, employee readiness for change represented the dependent variable. From Model 1, it is visible that organizational commitment, as the first-order variable, had a statistically significant influence on employee readiness for organizational change (β = 0.30, p < 0.10); thus, confirming the first hypothesis (H1). Furthermore, career commitment, as a first-order variable, significantly affected employee readiness for organizational change (β = 0.51, p < 0.05); thus, confirming the fourth hypothesis (H4). On the other hand, social relationships at work showed a statistically significant negative influence (β = −0.40, p < 0.05) on employee readiness for organizational change; thus, rejecting the fifth hypothesis (H5). The other two variables did not significantly influence the observed dependent variable, meaning that the second (H2) and the third (H3) hypotheses could not be accepted.
Model 2 shows that none of the second-order variables that comprise organizational commitment had a statistically significant impact on the observed dependent variable and, therefore, sub-hypotheses H1a, H1b, and H1c could not be accepted. Second-order variables related to career commitment (as a first-order variable) are presented in Model 3, where it can be seen that job satisfaction alone had a statistically significant effect (β = 0.39, p < 0.05) on the observed dependent variable. Therefore, there was sufficient evidence to accept the H4a sub-hypothesis, while the other sub-hypotheses, H4b, H4c, and H4d, could not be accepted.

5. Discussion

Madsen et al. (2005) argue that employees react with the most resistance when changes are the most necessary to the company. Therefore, knowing which elements affect change acceptance with employees is extremely important to plan its implementation adequately. Results of the research showed that employees had a positive attitude towards change. Their readiness was primarily influenced by organizational commitment, career commitment, and job satisfaction, among the observed variables.
Organizational commitment (H1) positively affected employee readiness for change. This conclusion coincided with the research conducted by Madsen et al. (2005); Mangundjaya (2013). Other sub-hypotheses (emotional attachment (H1a), feeling of pride (H1b), and personal sense of obligation (H1c)) did not affect employee readiness for change, which was in contrast to the results of the research conducted by Shah (2009). Salary (H2) and promotion (H3) did not affect employee readiness for change, which was also in contrast to the results of research conducted by Shah (2009).
Career commitment (H4) positively affected employee readiness for change, which was also confirmed by other studies (Shah 2009; Santhidran et al. 2013). Job satisfaction (H4a) positively affected employee readiness for change, which also coincided with research conducted thus far (Shah 2009; Santhidran et al. 2013; Mangundjaya 2013). Job involvement (H4b) did not affect employee readiness for change, an outcome also concluded by Mangundjaya (2013). Supervisor and peer relations (H4c) did not affect employee readiness for change, which was confirmed by Mangundjaya (2013) and Shah (2009). Another study conducted on U.S. bank employees (Whelan-Berry et al. 2003) showed that leadership and training and education did not have a continuously statistically significant relationship with the perceived employee readiness for change at the individual level. The low correlation of training and skills development (H4d) with employee readiness for change was also demonstrated in the research conducted by Shah (2009), and this fact was confirmed with this study.
However, research conducted in China (Long and Mao 2008), Pakistan (Shah and Shah 2010), and Iraq (Ahmad and Cheng 2018) showed that leadership is significantly associated with organizational changes. Those results could be related to the cultural characteristics, since China and Iraq show a high power distance, while Pakistan demonstrates different power distance values, depending on the region (Shah and Amjad 2011). For comparison, Split-Dalmatia County, where the research was conducted, has a low level of power distance (Rajh et al. 2015). Social relationships (H5) did not affect employee readiness for change, which coincided with the research of Cunningham et al. (2002), but was contrary to the research of Madsen et al. (2005) and Shah (2009).

5.1. Theoretical and Managerial Implications

By observing the variables used in this research and comparing them to the studies conducted thus far, we could draw the following conclusion: organizational commitment, job satisfaction, and career commitment positively affect employee readiness for organizational change (and relate to the research conducted thus far), while training and skills development and job involvement do not affect employee readiness for change (which also coincides with the research conducted thus far). Training and education have been shown to have a more significant impact on the likelihood that companies initiate change implementation rather than on change acceptance at the individual level (Neirotti and Paolucci 2013).
The influence of leadership on organizational change cannot be fully confirmed nor denied. Interestingly, several studies have shown that leadership does not affect employee readiness for change, while most of the literature explicitly emphasizes its importance as the key element of change implementation. One possible explanation may be that the role of leadership is vital during planning the change and communicating it to the employees, but it is not directly related to the affective side and readiness for change (Whelan-Berry et al. 2003).
Social relationships at work should be further investigated given that, in some studies, they affect the willingness to change, while in some they do not. Other elements (salary, promotion, feeling of pride, emotional attachment, and personal sense of obligation) in this paper did not affect employee readiness for change. However, only one research was found (Shah 2009) that tested these factors on public organization (university) employees, so it is necessary to investigate their effects on small and medium-sized enterprise employees to reach a valid conclusion.
A review of previous research conducted on Croatian companies shows that research thus far has focused mainly on the impact of organizational culture on readiness for change, and it was performed primarily on large companies or those in the public sector (Kalinić 2015; Radanović 2017; Barišić 2017). One other study tested the role of organizational changes in building the company’s competitiveness (Aleksić 2009). Only a few studies have been performed in the field of change management of small and medium-sized enterprises, mainly in the domain of change management and its impact on the strategic development (Tomljenović 2016) and in defining the main determinants in successful change management with focus on the entrepreneurial management and dynamic management process (Tomljenović and Dujanić 2009). None of the mentioned studies observed in detail the factors that affect employee readiness for change. Moreover, the studies conducted thus far were conducted on employees of several companies. Nevertheless, it would be extremely useful for the managers of small and medium-sized enterprises to test these elements on their own companies. This research showed that every company is different and that generally accepted assumptions do not have to work for specific individual enterprises.

5.2. Research Limitations and Recommendations

Since the research was conducted on only one company, it should be extended to a more significant number of small and medium-sized enterprises to reach a general conclusion applicable to all SMEs. Additionally, it should also be taken into account that most employees filled in the questionnaire during working hours, which is why there exists a reasonable doubt that in a desire to complete the survey fast, they did not take enough time to think about the answer that best reflected their attitudes and opinions. Moreover, there were many other factors that the research could not cover and which could affect employee readiness for change, such as organizational culture, trust, communication, past experiences, motivation, etc. The sample consisted only of employees willing to complete the questionnaire, so a larger number of participants might generate different results.
As a method of data collection, the questionnaire also had its limitations and could not examine all the information in detail. The answers in the questionnaire were based on the employee’s perception and did not take into account deeper explanations and reasons for choosing the selected answers. Additionally, few papers have empirically investigated the elements presented in this paper, so not all factors could be compared with previous research to reach relevant conclusions. These limitations also represent recommendations and guidelines for future studies.

5.3. Conclusions

Contemporary companies face extreme pressure to adjust fast to their global environment. For this reason, organizational changes are gaining importance and are being studied more intensively. Being prepared for change and ready to accept change are factors likely to prove to be essential in a company’s survival in the turbulent times in which they operate today. This is vital for small and medium-sized enterprises, since they can adapt to change more easily and quickly, but, on the other hand, they have a higher risk of failure.
This paper investigated how employees accept change in a medium-sized Croatian construction company, which had undergone numerous changes over the years. One of the most significant changes was related to the internationalization process of exporting products to foreign markets. The case study method focused on one company, and after analyzing responses from 90 employees, empirical results showed that employees had a positive attitude towards change. More specifically, organizational commitment and career commitment as the first-order variables and job satisfaction as a second-order variable positively affected employee readiness for organizational change. On the other hand, the research determined that salary, promotion, emotional attachment, the feeling of pride, personal sense of obligation, job involvement, supervisor and peer relations, and training and skills development did not affect employee readiness for change.
Internationalization is one of the ways companies can expand their operations in order to grow and develop. Their success depends on accepting the changes from their internal and external environments. Change implementation fail if employees are not involved in the process because employees constantly look for new opportunities for their personal development, they are not largely tied to the company they work for, and they can change jobs faster than before. At times, when the change acceptance is urgent and necessary, employees react with resistance. There is no simple formula or just one method that leads to employee readiness for change. This study showed that it is a highly complex concept that requires intensive work and different approaches towards employees. Moreover, those companies that do not invest in their employees are likely to lose them in the long run.

Author Contributions

Conceptualization, M.C.; methodology, B.M.M.; writing—review and editing, Z.B. All authors have read and agreed to the published version of the manuscript.

Funding

This research received no external funding.

Institutional Review Board Statement

Not applicable.

Informed Consent Statement

Informed consent was obtained from all subjects involved in the study.

Data Availability Statement

Not applicable since data was collected via online questionnaire.

Conflicts of Interest

The authors declare no conflict of interest.

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Table
Table 1. Descriptive statistical analysis of observed variables (n = 54).
Table 1. Descriptive statistical analysis of observed variables (n = 54).
VariableArith. MeanStand. DeviationVariance
Change readiness3.79630.874560.765
Organ. commitment4.29420.830120.689
 Emotional attachment4.42590.902860.815
 Feeling of pride4.15430.891880.795
 Pers. sense of obligation4.30250.864560.747
Salary3.35191.272871.620
Promotion3.65431.094991.199
Career commitment3.80090.868660.755
 Job satisfaction3.81481.012851.026
 Job involvement3.78400.962960.927
 Supervisor and peer relat.4.09881.098181.206
 Training and skill devel.3.50620.977180.955
Social relationships4.37960.557410.311
Table
Table 2. Correlation coefficients (n = 54), first-order variables.
Table 2. Correlation coefficients (n = 54), first-order variables.
VariableA.M.S.D.123456
1. Change readiness3.800.871.00
2. Org. commitment4.290.830.615 *1.00
3. Salary3.351.270.493 *0.660 *1.00
4. Promotion3.651.090.569 *0.654 *0.707 *1.00
5. Career commitment3.800.860.611 *0.703 *0.742 *0.729 *1.00
6. Social relationships4.380.550.0580.2090.2670.2400.489 *1.00
Note: * p < 0.01.
Table
Table 3. Correlation coefficients (n = 54), second-order variables.
Table 3. Correlation coefficients (n = 54), second-order variables.
VariableA.S.S.D.12345678
1. Change readiness3.800.871.00
2. Emotional attachment4.420.900.608 *1.00
3. Feeling of pride4.150.890.562 *0.891 *1.00
4. Pers. sense of obligation4.300.860.557 *0.828 *0.724 *1.00
5. Job satisfaction3.811.010.615 *0.711 *0.746 *0.721 *1.00
6. Job involvement3.780.960.557 *0.648 *0.691 *0.737 *0.711 *1.00
7. Supervisor and peer rel.4.091.090.416 *0.509 *0.532 *0.463 *0.746 *0.475 *1.00
8. Training and skills dev.3.500.970.518 *0.404 *0.486 *0.565 *0.721 *0.662 *0.576 *1.00
Note: * p < 0.01.
Table
Table 4. Multiple regression analysis results (n = 54).
Table 4. Multiple regression analysis results (n = 54).
Model 1Model 2Model 3
βS.E.βS.E.βS.E.
First-order variables
  Organizational commitment0.304 *0.163
  Salary−0.0770.115
  Promotion0.1220.131
  Career commitment0.508 **0.204
  Social relationship−0.400 **0.190
Second-order variables
  Emotional attachment 0.3540.292
  Feeling of pride 0.1090.240
  Personal sense of obligation 0.1760.201
  Job satisfaction 0.395 **0.188
  Job involvement 0.1850.150
  Supervisor and peer relations −0.0620.133
  Training and skills develop. 0.0880.150
R square (R2)0.502 *** 0.382 *** 0.413 ***
Adjusted R20.451 *** 0.345 *** 0.365 ***
Note: * p < 0.10; ** p < 0.05; *** p < 0.01.
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Moric Milovanovic, B.; Bubas, Z.; Cvjetkovic, M. Employee Readiness for Organizational Change in the SME Internalization Process: The Case of a Medium-Sized Construction Company. Soc. Sci. 2022, 11, 131. https://doi.org/10.3390/socsci11030131

AMA Style

Moric Milovanovic B, Bubas Z, Cvjetkovic M. Employee Readiness for Organizational Change in the SME Internalization Process: The Case of a Medium-Sized Construction Company. Social Sciences. 2022; 11(3):131. https://doi.org/10.3390/socsci11030131

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Moric Milovanovic, Bojan, Zoran Bubas, and Matea Cvjetkovic. 2022. "Employee Readiness for Organizational Change in the SME Internalization Process: The Case of a Medium-Sized Construction Company" Social Sciences 11, no. 3: 131. https://doi.org/10.3390/socsci11030131

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