According to a research, 25-30% of business entities, companies and organizations are wiped out every two to three years.

What is the one single reason for this?

These organizations fail to adopt change.

The organizations which adopt change these are one which thrive and flourish. Therefore, change is inevitable even it is not desirable.

Organizational change is a change, reorganization or replacement in process, method, system, operations, technology and structure of organization. Organizational change can be developmental, transitional and transformational.

How does this change occur?

What does cause this change at organizational level?

There might be one single factor affecting organizational change or there might be varied factors behind this change. These can be financial or economic, technological, political, social, legal, staff performance, vision of leadership etc.

All of these and many others can be categorized into two groups- internal and external factors of change

Let’s discuss each of category in detail.

Internal Factors Affecting Organization

Internal factors are those which are originated from an organization itself. These are predictable factors because these lies within organization.

Leadership and management has clear understanding and quickly analyze that what are internal factors and how can organization respond to these and embark on journey of making change. 

Following are some of the key internal factors which affect organizational change.


Some organizations are vision focused. Such organizations continuously make changes to achieve its vision. These organizations also have tendency to revisit and redefine vision. And this is key force behind accepting and executing changes.


Organizations core values are also driver of change. For instance, values like gender balance, cultural and ethic diversity etc are some powerful principles that often lead to big changes in organizational strategies and processes.

Organizational Culture

Organizational culture has a powerful impact on the future of the organization. If work place culture is vibrant, dynamic and leadership encourages creativity, then it is likely that organization accepts and implements change.

Core Expertise

Core expertise of an organization also dictate change. If organization is strong in one technical area, it will create innovate solutions and disrupt the existing methods and culture of the entire industry.


Sometimes change in leadership is the reason behind organizational change. Every new leadership brings new vision, new strategies and new working culture to his/her organization. So new leadership is a strong internal factor which affects change.


This is perhaps the most important factor which drives change. Good Leaders makes strategic shift in their approach to business when performance of an organization is not satisfactory. Then, drastic changes are made in role and responsibilities of different players within organization to perform better in industry.


Confidence of an organization to make change depends on attitude and skills of its employees. If employees approve and accept change and their skills are also in line with intended change then there is more chances that organization will be successful in managing change.   

External Factors Affecting Organization

Organizations function in a large environment. This environment around organizations includes customers, government, policy and laws, social norms, economy, technology, competitors etc.

All of these exist mainly outside of an organization which has no control over these. Besides control, Leadership and managers even has less understanding and knowledge about external changes. So these external factors also drive organizational change.

The external factors of organizational change are difficult to manage because these are unpredictable than the internal factors.

Following are some of the key external factors affect organizational change.

New Opportunities

Economic growth brings new business opportunities. And organizations expand when they seize new opportunities in the market. For this to happen organization make changes in their strategies, acquire new expertise and take new staff on board.


Latest trends dictate changes. For instance, people are becoming more sensitive about health and hygiene. So organizations are offering healthy products and communicating to their customers that how much they take care of health and hygiene of the customers.


Competition is getting tougher every day. Organizations innovate new marketing tool and strategies and disrupt the entire trend of market. It is such a compelling factor that every player of the industry has to respond and develop it own strategy to survive and thrive in market.

New Technology

Technology is also a powerful factor which shapes changes. In this digital world, organizations need to upgrade technologies in order to remain competitive in the market. For instance, it is absolutely necessary nowadays for every organization to have its presence on online marketing platforms which was not the case ten years ago.

Government Regulation

Government laws and regulation such as trade policies, taxation, industry specific regulation, labour laws greatly affect the way of doing business. Organizations need to stay vigilant in connection to government policies and adapt to changes.

Politics and Economy

Internal and external politics and economy also affect business. One single event can damage country’s economy. Organizations need to closely follow and analyze political events and economy and make changes as situations demand.

Social Change

The social changes refer to change in norms, change in level of education, urbanization, migration etc. These social changes are also powerful external factors which affect the environment which push organizational change to make change.

Take Home Points:

  • There are always reasons and causes which lead to change.
  • It is important to understand and analyze what are these reasons, what are strong factors which are triggering change.
  • Knowing these factors help developing clarity to define change, design its strategy and implement the required change.
  • There are two broad categories of drivers of change-  internal and external factors.
  • There are many further dimensions of both internal and external factors.