Global Economic Down Turn - Essay Example

? ORGANISATIONAL CHANGE MANAGEMENT Contents Introduction 3 D2 Company 4 Definition 5 Discovery 7 Strategic management and planning 8 Dream 9 Design 11 Destiny 12 Conclusion 13 Reference 13 Nok 20-F 2009, ‘Exchange Rates’ wikinvest. Viewed 3 May 2013 15 Strategic management insight 2013, ‘Strategic Management Topics:Strategic Management & Strategic Planning .Viewed 3 May 2013 15 Wember, T(n.y). ‘ Kotter’s 8-Step Change Model for Leading Change’ leadership thoughts viewed 3 May 2013 16 Introduction In current economic times, internal and external factors that affect an organization are changing at a very fast and sometimes the future is unpredictable especially for multinational companies that operate in different external environmental factors such as political, economic, social and technological factors. The organization needs to redevelop a strategy to survive, adjust and continue operating in the hard times (Ates and Bititci 2011, P. 5601). The ability to overcome the challenges that comes with the changes helps the business to grow and offer innovative products to its customers. Global economic down turn is causing turbulence in business environment and many companies have not been able to achieve their goals and profitability and therefore the need to change their business strategy as well as restructuring their operations. Changes in an organization if not properly planned and implemented may fail to attain the expected objectives affecting the organization negatively. In some cases the managers fail to involve their employees in the planning stage and there the employees who are the implementors resist the changes especially if the changes have a negative impact on them (Blomme 2012, P. 9). In a dynamic business environment, the situations that necessitated the change may seize to exist and the execution of the planned changes may create more challenges. To avoid the negative impacts of changes in an organization the company need to conduct an analysis of their current position and understand its future expectations’, analysis their business environment and involve all the stakeholders, design the strategy, predict the outcomes and prepare to handle the negative outcome. This paper will critically evaluate the current position of the France based Car Parts manufacturing company and recommend the best approach the managers can take to avert the expected outcomes through several theories and outcomes. D2 Company D2 is a multinational car spare parts manufacturing company that operates in three countries namely France, Spain and United Kingdom. The company’s headquarter based in France where it also operates two manufacturing plants and one plant the other countries. The main objective of the company is to increase their profitability by product improvements, improving and developing their employees and use of advanced technology. Previously the company has managed to offer valuable returns to its shareholders by sustaining their competitive advantages despite the ever increasing competition from other organization especially companies based in low cost regions. The current economic hard economic times that have changed the supply and demand chain due to high cost of living and low purchasing power on non basic products the company is not able to meet its objectives. The company’s to management has in turn formulated a new strategy to reduce the management and production cost by stopping manufacturing of some products and operating less facilities. However they have not involved their staff and they are yet to inform them of their decision and in fact the top managers have created the impression that they will be expanding some of their facilities soon. This strategy may have negative impact on the employees and consequently the whole company. Evaluation of D2 new strategy The report will evaluate and offer a recommendation on new strategy of D2 Company using the appreciative inquiry five D frame work that include definition of what is happening, discover, dream, design and destiny (Bushe 2011, P. 10). Definition The D2 Company is planning to reduce cost of operation and management by termination production of some products and closing down of the United Kingdom based manufacturing facility since it is the oldest one with less modern technology. Despite this it is mostly used for product development due to its strategic location. The major problem the company is facing currently is loss of the competitive advantages it had over the other car parts manufacturing companies especially the one based in low cost countries due to their higher prices. This is mostly due to poor performing European economy as compared to other developing countries like china and Japan which have low cost labor (Moncada-Paterno-Castello at el 2011, P. 585). The European countries have experienced hard economic times due to high rate of unemployment, retrenchments and inflation and consumers in this region are opting to purchase cheap products of postponement of purchase. Other environmental factors affecting business in the region include political activities in different countries and the exchange rates. International companies trading in countries using different countries are affected by variations in currency exchange rates (Nok20-F 2009, P. 64). The top executives choose to develop their new strategy without involving their middle level managers as well as their employees. In fact they made an impression that they are planning to improve the United Kingdom facility by investing in new and modern technology. This will adversely affect the employees due to loss of jobs or transfer to other plants as well as loss of trust for the rest of employees as they cannot predict the future of the company. Dissatisfaction, lack of trust andproduction are closely related and therefore this will lead to low production (van der Berg and Martins 2013, P. 1). Once the employee are aware of what is happening in the company and the restructuring strategy will may lose morale to work as they focus in searching for new jobs. Production effectiveness in an organization is affected by job fulfillment, work place identification, employee’s involvement, fulfillment of the organizations promises to employees, management actions and employee trust. The more the company delivers on its promise the more the employees invest in their work activities (van der Berg and Martins 2013, P. 1). The closure of the UK plant and the planned transfer may affect the concerned employees negatively due to relocation, separation from the families and new workplace environment. Employees from other plants may feel insecure and demotivated as they cannot predict the future actions by the management which may affect them. There is also the possibility that post employees may not be willing to relocate to the France plant. The company is planning to adopt the new strategy without analysis of its current position of the organization in regards to both internal and external environmental factors affecting its performance as the new strategies are quick fix to minimize cost. Strategic analysis helps to determine the present situation of the company, predict the future and come up with the actions towards the desired future (Strategic management insight 2013). This can be done through SWOT or PEST analysis that helps the managers to identify, evaluate and comprehend the company’s strong sections, weak sections, current opportunities and negative macro environmental factors (Downey J. 2007, P. 5). The managers are able to concentrate on their strengths, current opportunities, improve their weak areas and strategies on how to overcome the negative external factors. The new strategy of D2 Company may not lead to the expected result. Previously, good performance and competitiveness of the company has been associated with product development and staff development. Product development and innovation was rigorous at the UK facility proposed for closure since the area is home to several other international auto parts manufacturing companies in addition to high number of highly qualified product engineers. Engineers based in this plant may also be reluctant to relocate and therefore the company could lose it product development capacity due to loss of their product engineers. The company is also planning to eliminate some of its product as they plan to benefits from economies of scale however this might not be effective as product and international diversity helps to spread the risk in hard economic times (Allen and Gorgeon 2007, P.1). Due to poor performance of the company and the unpredictable future investors may be reluctant to invest in the company. In current economic times the investor are not willing to invest and a company that is not performing well and therefore the company lacks funds for expansion. Discovery Communication is a key element in an organization success. Managers should communicate and engage their employees in any new decision as these create of ownership of organizational goals by the employees. Eskelsen (n.y. P. 18), urged that the expected result of any idea is achieved in an organization when the concerned parties understand its goal and objectives. However most managers usually fail to communicate their strategy or they send the wrong information and this lead to failure of the strategy or worse still failure of the business (Eskelsen n.y. P. 18). D2 senior managers failed to communicate their new strategy to their employees and instead communicated the wrong impression that they are to invest in the improvement of their major product development facilities that had most out-of-date manufacturing equipment and technology. Effective communication involves to and fro flow of information between the employees and the employer and clear explanation of any inconsistencies to enhance trust and avoid communication breakdown (Eskelsen n.y. P. 18). The company should introduce effective communication channel to avoid misunderstanding. RIPE theory supports involvement of the employees as one way to ensure a company maintains its competitive advantages (Mehta and Shah 2013, P. 41). RIPE is a short form of receptive, energized, proactive and involved. Involved employees are receptive in their workplace, focus in achieving the organizational goal, proactive as well as energized and motivated to work in their company. The company therefore has low staff turnover, high productivity and good profits. The managers in the D2 Company should have consulted its employees before coming up with their strategy in order to develop a compressive and effective strategy that involves all the stake holders and ensure that employees acquire a sense ownership to their new strategy. This reduces time wastage as the employees try to understand what is happening and predict the future development. Strategic management and planning This is an ongoing process that helps a company analysis, policy formulation, and implementation and continues monitoring in order to attain and maintain competitive advantage (Strategic management insight 2013). The most successful companies involve middle managers and employees in the formulation of strategic plan since they are the implementers of the strategic plan and for it to be successful they must support it. Middle level managers are also the link between the employer and the employees. Strategic plan helps the company to achieve competitiveness against its competitors as well as establishing proper communication between all the stakeholders in the organization. For a global company strategic management helps the company to improve their competitive advantage in all countries of operation since managers are able to develop tool that helps in understanding external environmental factors such as economy, political status and social activities. To develop good strategy mangers should conduct a rigorous analysis of their company. D2 should have involved the middle level manager in developing the new strategy as well as conduct a comprehensive analysis of the internal factors such as competences, skill of their employees, technology as well the external factors such as economy, competition, politics, exchange rates fluctuations, rules and regulation(Strategic management insight 2013). Dream As external environmental factors change a company must change its strategy to help reduce operation cost, improve their customer service, deliver competitive services and products and seek new opportunities for growth (Eskelsen n.y. P. 8). A company can adopt Kotter eight steps to implement and deal with changes by preparing for change, involving all the stake holders, implementing the changes and maintaining the changed state. An effective change happens when there is dedication by all members, there is urgent need to be fulfilled, effective leadership, openness, strategic plan, efficient communication and clear goals (Wember n.y.). Management strategies fail since employees oppose the changes or are resisting the process. After the formulation of a new strategy the manager should create urgency for the change and create a team to effect the changes that helps to deal with the existing problem. The manager develops an effective team that is commuted to working on the assigned task. Predict the expected result and inform the team of the expected results. Facilitate the team to perform the task by eliminating the barriers. Reevaluate the project and inform the team of the progress and give them feedback. Maintain the achieved change and make is an organizational culture and norm. D2 Company should adopt this strategy instead of imposing the new strategy on the employee as an urgent plan to reduce cost. Emotional intelligence is individual characteristic to control their emotions as well as emotions of the other members in an organization for success development of team .A Company can adopt this strategy when implementing changes to reduce chances of job loss and low motivation. As the D2 Company prepare to close one plant and reduce its product management should invest on preparing the affected employees to adopt to the new are of transfer and in case of retrenchment equip them with survival techniques in the economic hard times. The company will also need to train and educate the employees in unaffected areas to reduce stress due to uncertainty. The company should restructure its operation instead of closing down its product development facilities. The company can do this by improving their products to fit different market segments. The product may range from low cost products to high product cost. To achieve this goal the company can redefine their teams. However this is a long term strategy as the new teams will undergo the four phases of tuckmans team development theory namely Forming, storming, norming and performing (Johnson 2010, P. 17). This new strategy will help build employees trust and increase productivity as members of the same team develop and grow their team. As the teams develops towards the performing stage the managers should change their management styles to Concertive control that helps to transfer the strategic planning from the senior managers to middle level manger and employees. This management style helps to create a sense ownership of the projects among the employees. Design Organizational development is a crucial management practice of any organization in a turbulent business environment. The company must realize the need to change, implement strategies that facilitates the required changes and finally the changes are adopted in the organizational culture as the guiding principles on how the company operates. Burke theory pay emphasis on the importance of external business environmental factors such as economy factors , political factors, regulations, competition and social factors that affect businesses either negatively or positively (Ganly 2010). The theory emphasis on how an organization can utilize the available opportunities to increase their profitability. Several factors affect organizational performance such as management strategy, individual employee and team performance, management strategy, company’s culture and macro environmental factors (Ganly 2010).For the D2 Company to be successful in their pursuit for change in their competitive advantage, reduction in the management cost, maintain motivated staff and quality product develop and implement a management strategy that involve all the stake holders in the company, effectively implement the desired change and support the middle level manager overcome the barriers in the project implementation. Complexity theory suggest that in a complex business environment organization experience several changes which are unpredictable and cannot be directly controlled by the company’s management but the management can plan to overcome the challenges and benefit from the opportunities. Only resilient organizations are able to survive in a changing environment (Ates and Bititci 2011, P. 5601). The company therefore should be dynamic to allow employees engage in the changes, proactively participate in adopting the changes and be receptive. The theory illustrates an organization as a complex system which must act on internal and external environmental factors while still maintaining its competitive advantage. The company should develop a culture of self managing employee and redesign the strategy plan frequently. D2 Company should analysis their internal and external environmental factors through SWOT analysis and develop a comprehensive strategic plan that will act as a guide in their management practices, come up with a sustainable cost reduction method while still offering its customer wide range of quality product and continually developing their employees. Lewins organizational development theory recommends that organizational changes occur in three stages. The first stage is the unfreezing phase where the organization management becomes conscious of the current position of their company and realizes necessity to adjust, develop a strategy for change and finally implement the changes that are adopted into organizational culture (Ganly 2010). It also recommends the use of problem recognition, hypothesis improvement and data investigation as a continuous process in an organizational development (Ganly 2010). D2 should develop a team that continuously evaluates its performance through emotional intelligent and self-regulating staff who can evaluate their performance and improve towards achieving the organizational goals. Destiny Organization operates in dynamic business macro environments that are unpredictable and are out of control by organizational management as well as internal environmental factors in an organization. Internal factors can be controlled by the management. In some cases the external environmental factors changes very fast and therefore changing factors that affect the business. Therefore an organization can only plan their strategy to avoid negative impact of the environmental factors and utilize the available opportunities. Change management therefore should be a dynamic continues process that is able to change with the changing environment. A management strategy may work well for a certain company but turn devastating for another company and there’s need for comprehensive research before developing a strategic plan. An organization should encourage continues learning by its managers in the areas of organizational growth, adaption to changes, resilience and changes. Conclusion D2 as international company operates its manufacturing plants under different external environmental factors and therefore different strategies are required for the different plants. The global economy is currently performing poorly and therefore need for the companies to change their strategy in order to remain competitive. The new strategy of D2 Company is not analytical and inclusive and it may deepen the poor performance of the company. The company needs to conduct a comprehensive analysis of business environmental factors and involve the plant managers who understand their business environmental factors better. 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