Using System Dynamics to Investigate How Belief Systems Influence the Process of Organizational Change

Abstract

The relationship between organizational change and performance is an important topic in strategic management. However, the way in which the process of organizational change affects organizational performance has been underestimated (Combe & Carrington, 2015). This study explores how Chief Executive Officers' beliefs lead to organizational changes and then subsequently generate superior organizational performance, using General Electric Corporation as a case. We developed a detailed simulation model of GE, including human resources, financial and cost accounting, research and development, and operations. Historical information and archival data were used to specify and formulate the model. The results show that a Chief Executive Officer's belief system can impact a firm's strategic decisions and financial performance both in the short and long term. In the short term, leaders' beliefs influence the strategies of the company and can be beneficial to financial outcomes. In the long term, leaders' beliefs may protect the company from future failures.