Furniture Manufacturer in the US - Case Study Example

The Challenges of Change Management and Its Rich Benefits: A Case Study Introduction Change is inevitable in a progressive country, Disraeli said famously in 1867 when business was simpler and more predictable such that the possibility did not cross his mind that the same can be said of companies. Had Disraeli known the complex configuration that business would assume in later years, he would have seen the inevitability of change in a "progressive company" as well. This is because the present-day company needs to cope with a fast-changing environment that brings with it a multitude of challenges to its viability - globalisation, new technologies, stricter regulations, increased competition, pickier customers, unpredictable market behaviour, social and political disturbances, higher costs of labour and raw materials, etc. The company that refuses to face up to the challenge of change will be swept away by the flood tide of this very change, the literature on change management implies. It follows that the company that manages change well could reap enormous benefits. Organizational change is a challenge, which may be imposed or initiated. It could be the outcome of a merger, the setting of a new organizational direction, or a newly installed information technology system (Concept Systems Online). In this paper's discussion of change, it relates to a plan of a progressive furniture manufacturer in the US to expand its operations into cyberspace, a process that follows the just mentioned concept except for the part about the merger. For one, it sets a new direction for the organization and it calls for the installation of an unfamiliar IT system. It can also be said that the change is initiated by top management and imposed by circumstance. Management initiated the move following assessment by the firm's finance and accounting department that profits do not reflect the rising manufacturing costs and that raw material inventories waste expensive rental space in public warehouses. The website option is then set to be imposed by suggestions that transferring part of the firm's business online can take care of this sort of production problems and ensure its continued profitability. This is where change management is called into play because e-commerce is strange territory to a small-town company run on paternalism by an outdoors type of man who involves himself in the design and technical work and shares lunch with employees, most of whom have been with the company from the start and thus strong on loyalty. Although without formal training in business and management, the hands-on company president reads and attends business seminars, which gave him an open mind about change. However, the reaction of employees to the online plan was frosty, indicating their lack of enthusiasm on this idea of change. This represents a big challenge to change management, which this essay precisely seeks to address, in a way that would illumine how to meet the challenges and how to carry out the appropriate change management methods and models set forth on the subject. Chad's Creative Concepts Chad Thomas, founder and president of the company called Chad's Creative Concepts, started entertaining the idea of going online when a conflict arose over the firm's production of standardized line of furniture on top of the custom-design products. The company was catapulted to prominence by custom-made wooden furniture that brought "a bit of the outdoors" into homes. As the market for this innovative and unique product boomed, Chad's decided to add standard-design furniture to its product line. Lately, the standard-design furniture accounts for 40 percent of the firm's sales turnover but only 25 percent of the dollar value of sales. The customized furniture makes up 60 percent of sales and 75 percent of the sales' dollar value, which means this product line remains the company's bread and butter. For this reason, management is taking a second hard look at its standard-line production, which is exerting some pressures on operations considering that both customized and standardized pieces of furniture are manufactured in a single facility, using the same equipment, personnel and warehouse space. The dilemma is that while sale of custom-built furniture remains strong, turnover of the standard-design line is also on the upswing. Thomas is aware of the competitive advantage offered by business-to-consumer and business-to-business e-commerce, which is becoming popular with other furniture manufacturers in the US, including wholesalers and retailers. However, he is taking the plunge with some trepidation mostly because of his unfamiliarity with the technology. All the IT activity he knows is related to accounting and inventory management and record keeping, and cyber commerce is to him a brave new world. The same presentiment is even stronger and more pronounced among the employees, and this exact organizational belief and attitude described in the change management (CM) literature makes up the "problem state" that represents the single biggest obstacle to a CM program (Bocklund, 2002). Relevant CM Concepts Change management is basically "problem finding for problem solving" for which purpose it seeks to magnify and systematically handle all known and unknown elements that could influence business efficiency and productivity (Nichols, 2004). These elements or potential problems may be external or internal in character. An organization, according to the literature, will have little or no control over external concerns such as legislations, globalisation, new technology and competitor's action, and all it can do is manage the internal elements or those that lie within the company that can be controlled (Ibid). The last theory about the difficulty of controlling change brought about by external factors is debatable. For example, globalisation and new technologies are outside elements in business but it seems more realistic to look at these factors as blessings instead of potential problems, as the literature suggests. By telling business that globaIisation and new technology are potential problems, there is a tendency that companies would develop a mindset of avoiding them. Were it not for the advances of technology, we would not have experienced the immense benefits of mass production and the ease and cost-efficiency of online commerce. As for globalisation, it came to Chad's when it went into the production of standard-design furniture although the company may not be aware of it. When Chad's produced only customized furniture, the domestic market was its logical base, but when it went into the manufacture of standardized product, it began to reach the global market since standardisation is synonymous with globalisation. In effect, Chad's globalised its production process without even knowing it and without going through any elaborate activities on change management. As Chad's prepares to move part of its business online, this is when it could use a change management strategy to control what the literature describes as "internal changes within the organization that can be triggered by outside events or environment." The entry into e-commerce represents internal changes within Chad's because practically all its employees, starting from its founder-president, have no IT training or skill required by such enterprise. The content or subject matter of change includes various models, methods, techniques, tools, skills and other forms of knowledge that go into any professional practice. They draw concepts from a variety of fields that range from psychology, sociology, business administration, economics, industrial engineering, systems engineering, to studies of human and organizational behaviour. This body of knowledge is linked together by a set of principles known as General Systems Theory (GST), whose main purpose is "to bring order to a messy situation," another definition of change management offered by Newell & Simon (1972). GST deals with people, organizations, industries, economies, etc., such that the change management task calls not only for a system skill but also for political, analytical, people and business skills. Chad's needs all these skills for the enhancement of business in both its traditional stores and in its upcoming Internet outlet. Chad's requires political skill in its change management because, being a social system, it is a political organization. As for analytical skill, management needs this in big doses since it will be acting as change agent, a task that cannot countenance guesswork. The ability to handle people well is as essential because the process is all about changing people's beliefs and attitudes. A good business acumen should go with this because without adequate knowledge of how business works, the change management team will appear phoney to employees. Finally, there is the system skill requirement that is of utmost importance to any online migration. For its establishment of a commercial website, Chad's needs people who know their way around computers. (Nichols, 2004) In its change management program, Chad's can choose from the four basic CM strategies identified in the literature, namely, empirical/rational, normative/re-educative, power/coercive and environmental/adaptive. Empirical/rational - if Chad's picks this strategy, it shall base its activities on communicating the relevant information to employees and proffering incentives for compliance. The idea is that people are by nature rational and would readily accept change if rewarded for it. Normative/re-educative - with this strategy, Chad's shall redefine and reinterpret the norms and values existing within the company for the purpose of developing employee commitment to new ones. Power/coercive - change is based on the exercise of authority and the imposition of sanctions, which means ordering the employees to adapt to a new set-up or else. Environmental/adaptive - change is implemented by building a new organizational structure to supplant the old one in gradual steps. (Nichols, 2004; Newell & Simon, 1972) The best thing that Chad's can do is adopt a mix of these strategies or take up one that is based on the degree of employees' resistance, size of the target population, the time frame, expertise, dependency and the antes or stakes. If the stakes are high, Chad's would need all the above four strategies to give the change program greater chances of success. Challenges for Chad's The biggest obstacle to a CM program, according to the literature, is the fear and resistance of employees, including managers not supportive of change. People fear and resist change because of individual values, socio-cultural and organization factors. Socio-cultural factors include ideology, ethnocentrism, and group conformity. Avoidance of conflict and rejection and perception of intrusion into one's power and influence make up the organizational factors that contribute to people's fear of change (Sturges & Minor, 2000). The report on Chad's Internet plans indicates that the reason its employees exhibit fear about the possible change it will create in the organisation is not because of any of these complicated psychological theories but because of their simple personal attachment to Chad Thomas, who runs the firm like a family. Thus, the company can easily overcome the challenge of change posed by e-commerce. All Thomas needs to do is demonstrate to employees that he is all for that change and the rest will follow. Most working environments can't do without change management, which operates on five key principles (Team Technology, 2005): Different people react to change in different ways. Change often involves a loss of something held dear. Fears have to be properly dealt with. Every employee has basic needs that need to be met. Expectations need to be managed realistically. (Ibid) According to Prosci Research, the primary obstacles to change are unsupportive management behaviours and fear and resistance from employees (Bocklund, 2002). Based on a study of 254 management teams, it was found that the visible and active participation of executives is the key to success. Successful change starts at the top, and then it spills over to the rank-and-file as the process is communicated down the line. As we earlier noted, no such great obstacles stand in the way of Chad's Internet venture because management, having initiated the move, is supportive of that change. With such visible and active executive participation, the fear and resistance of employees are expected to melt down once change started at the top, as the literature suggests. Addressing the Challenges of Change Change is carried out by transformation, reduction and application. By transformation, the organization involved changes the situation from a "problem state" to a "solved state." By reduction, the magnitude of the problem is lessened to blunt its effects on the organization. Through application, specialists are called in to transform, reduce or eliminate the problem (Newell & Simon, 1972). Hiring professionals to do the job is indeed one attractive option for Chad's since none of its staff knows his way around computers. Nichols (2004) reports that hundreds of independent consultants who call themselves change agents now hire out their services to manage change and restructure management practices for clients. Some of these CM practitioners say they help clients manage the changes they face, others say they make changes for clients. By getting the services of these professionals, Chad's will improve its chances of overcoming the challenge of change. In managing the people side of change at Chad's, the earliest CM model developed by Kurt Lewin (1951), which consists of a three-stage process, makes a perfect fit. According to this model, the first stage witnesses an "unfreezing," then the often disturbing occurrence of change, and finally the "re-freezing" phase. Based on the literature, unfreezing relates to efforts to overcome inertia and dismantle the existing mindset about change, which could be negative. This is followed by the occurrence of change, which is usually a period of confusion as the people involved don't have a clear idea of what will replace the old ways. The re-freezing stage, which is when the new mindset about the operational change crystallizes and the people's sense of comfort returns to its previous level, may come about or not depending on the effectiveness of change management implemented by the organization. Open and honest communication throughout the organization can help address the challenges of change management (Nichols, 2004). Be open and honest with the facts, without resorting to speculation or over-optimism. For a large group, the communication strategy must provide choices to people and ample time to express their views. The trick is to assuage the employees' fear by offering something to replace the loss (Team Technology Online, 2005). In scotching this fear of employees and overcoming such obstacle, the best that Chad's management can proffer as replacement for the loss is the prospect of increased profitability and a commensurate adjustment in salaries. This relates to the empirical/rational model of Nichols (2004), which postulates that human beings, being rational, would be motivated to accept change if offered incentives or rewards for doing so. The other change management models, which could be appropriate for Chad's, are as follow: Gleicher formula - this theory developed by David Gleicher and Richard Beckhard posits that for meaningful changes to take place, management should nurture in employees a sense of dissatisfaction with the current organizational set-up. It then develops a vision for the future and a desire for change that are stronger than the perceived resistance within the organization. (Beckhard, 1969) Kubler-Ross model - this CM model assigns five stages of human reaction or response to change. The first is the denial stage, in which the employees at least mutter to themselves or to one another: "This can be real" or "this can't be happening." Anger is demonstrated in the second stage when the question is asked: "How can they do this" or "why is this happening" The third stage is described as bargaining, during which the employees begin to soften their position and negotiate ("Let me keep my old position and privileges and I will buy in."). Depression characterizes the fourth stage when the CM program hits the snags common to new undertakings, thus employees may be heard moaning: "I can't bear this." Acceptance is the fifth stage when employees finally give up and say: "This is going to happen anyway, so I'm in." (Ghent, 2000) ADKAR model - the acronym ADKAR stands for Awareness, Desire, Knowledge, Ability and Reinforcement, which are the perceived building blocks of change management. To adopt this particular model, the literature suggests that the organization starts by promoting awareness of why the change is needed. Then effort is exerted to foster a desire among employees to support and participate in the process. Once that desire is there, management can proceed to provide employees with the appropriate knowledge on how to implement the organizational change, which means the combined ability, skills and behaviour to handle the new processes. All these steps are reinforced towards the end to sustain the pace of the change management program. (Hiatt, 2006) O'Donovan model - the overall goal of this model is to change the existing corporate culture, which is the only way to translate a vision into reality. To do this, management must first organize a combined team of managers and employees to plan and design a CM strategy, then put embedding mechanisms in place. To implement this strategy, it is advised that the program and its objectives be communicated across the entire organization. The key is to manage the human landscape effectively to maintain the momentum of change. Once the process is underway, continuous evaluation and readjustments are necessary to measure results and plan for future remedial actions. All the key strategies in these CM models come together in the concept set by Kotter (1996), which advocates 8 steps to successful change: Get the vision right. Build the guiding team. Increase the urgency of the CM program. Communicate for possible buy-ins. Empower the action of the CM team. Create short-term wins. Don't let up. Make the change stick. Benefits from Change The issues and concerns about the upcoming operational change at Chad's will be brought to the fore and addressed at all employee levels if change is managed according to the strategies suggested in the literature. This is expected to result in buy-ins and road maps to guide planning interventions that are essential to monitoring and supporting the process of change (Concept Systems Online). Such benefits were derived from a change management program undertaken by a US petroleum company that developed a map of issues involving all stakeholders, whose views on what is important are inputted into its implementation. The change involves a new computerized system that requires a sophisticated PC interface and affects all employees and every aspect of the firm's operations. Increased business efficiency and productivity is more assured with change management. This was the experience of British Airways, which implemented a successful change management program that increased each employee's awareness of what the rest of the company's workforce are doing in the other sections. The idea is to familiarize everyone to the contribution of each employee and department to the common goal of achieving service excellence. It introduced a program called "A Day in the Life of" which enabled employees to take a closer look at what the others are doing, thus fostering the virtue of teamwork and enhancing employee motivation (Aspery, 1990). According to Ghent (2000), a successful change management program paves the way for a smoother adoption of a new business model, enables the firm to take a vertical growth, gives it greater ability to predict customer buying patterns and to cope with adverse market forces. It also helps maximize the use of a firm's capacity. Most of all, the firm acquires a competitive edge that it can hardly acquire without managing change that affects its operations. Sometimes change can create a salutary effect on an organization with management not even lifting a finger, but the risks are high such that it would be ill-advised to leave change to chance. When managed strategically, change can lift the firm to new heights of success by maximizing its investment in new technologies and in organizational or process design (Ibid). Conclusion Change management is a matter of both necessity and urgency for Chad's Creative Concepts because it is laying a new organizational direction and installing a new IT system for its Internet-based operations. The reason is that Internet-based commerce is unfamiliar to Chad and his entire workforce, such that this calls for a whole new set of corporate culture and values. Also, there are the inefficiencies noted by the finance and accounting department regarding the production conflict on the customized and standard product lines. To meet these challenges, the planned online operation holds great promise but first Chad's needs to address the perceived fear and resistance of employees to the forthcoming change. Thus, management needs to tap all its reserves of political, analytical, people, systems and business skills. It is also imperative that the company hires IT-educated people to handle its online business if it can't afford to train the existing workforce for the new operation. The literature says that it is often more cost-effective to use an expensive workforce than to make do with a less expensive one that does not perform. On the possible CM strategies that Chad's can pick up, the power/coercive method has a certain appeal but this may not sit well with Chad Thomas and his paternalistic and hands-on management style. The company would instead do well with the empirical/rational and normative/re-educative strategies, which suit its type of personnel who are strong on loyalty and group conformity. Through the first method, Chad's can provide a system of rewards and incentives in exchange for the employees' acceptance and support of the new undertaking. By the second strategy, it can develop employee commitment to a new set of norms and values relative to online operations. The key that could unlock the door to a successful change management at Chad's is the commitment shown by Chad Thomas himself to the desired organizational change. By initiating the move himself, he indicated his determination to overcome the challenges and uncertainties posed by change. This augurs well for the firm's ability to adapt to the new undertaking. The literature says that the visible and active involvement of management goes a long way in managing change, and that a successful change management starts from the top and then filters down to the rank-and-file. If Chad still fails to make an influence on his employees, he can use one of the three known methods of implementing change as a last resort, which is application. The literature identifies these three methods as transformation, reduction and application. Under the third one, a company hires specialists from the outside to transform the problem into a "solved state" or reduce its magnitude. Chad's can also adopt a strategy mix that picks out the best principles from the various models of change management in the literature. Based on the Gleicher model, for example, the company can nurture among employees a sense of dissatisfaction with the current organisational set-up and thus promote the idea that change is crucial to the firm's survival in today's highly competitive business environment. This strategy also tallies with the ADKAR model, which calls for efforts to promote keener awareness of why change is necessary. To do so, the change must be communicated effectively throughout the organisation, which is emphasized in the O-Donovan model. In this connection, the shift to computerisation of the newspaper industry in late 1980s comes to mind. When computerization was announced in newspaper companies, the strongest resistance came from reporters, many of who knew nothing about computers and too set in their ways about doing their stories on typewriters. The management of one newspaper that we knew called the reporters to a meeting and discussed the necessity of the organisational shift. The message was: computerise or perish. To deal with the problem on the reporters' lack of computer skill, management hired professionals to conduct a crash course on the basics of computer use. This took care of the problem and the change proceeded without hitches. Bibliography & Reference List Aspery, J. (1990). "British Companies Meet the Challenge of Change." Communication World, International Association of Business Communicators, December 1990. Beckhard, R. (1969). "Organizational Development: Strategies and Models." Addison Wesley, Readings MA. Bocklund, L. (2002). "Rising to the Challenge of Change." ICCM Weekly, Oct. 10, 2002. Concept Systems. "Case Study: Change Management." Available online at: http://www.conceptsystems.com.Consult/CaseStudies/ChangeManagement.cfm Ghent, N. (2000). "The Growing Business Handbook." R. Willsher & A. Jolly (eds). Hiatt, J. (2006). "ADKAR: A Model for Change in Business, Government and our Community." Prosci Research. Kotter, J. (1996). "Leading Change." Harvard Business School Press ISBN 1930885504. Lewin, K. (1951). "Field Theory in Social Science." Harper & Row, New York. Newell, A. & Simon, H. (1972). "Human Problem Solving." Prentice Hall, Englewood Cliffs. Nichols, F. (2004). "Change Management 101: A Primer." Distance Consulting. O'Donovan, G. (2006). "The Corporate Culture Handbook." The Liffey Press ISBN 087587471. Sturges, D. & Minor, M. (2000). "Total Quality Communication." PowerBook 63-266. Team Technology. (2005). "Change Management." Available online at: http://www.teamtechnology.co.uk/changemanagement.html Read More