Transport Company That Has Reached a Crucial Juncture in Its Life Cycle - Case Study Example

Contents Introduction 2 Organizational structure 2 Organizational culture 3 Leadership 3 Discussion 6 Organizational context 6 Managing talent 7 Decision making 8 Current Situation 8 Conclusion 9 Leadership 9 Effective Decision making 9 Communication 10 Effective communication strategy 11 Bibliography 12 Analysis of Case Study on KD Transport Introduction The case describes a situation of a family managed transport company that has reached a crucial juncture in its life cycle. The organization structure, management-employee relations and leadership style are described along with the financial crisis that is looming. The report seeks to review the present organizational situation and what the head of the company, John, can do to manage it. A learning organization is a vibrant structure that is able to harness energies to cater to changes in economic and market forces. The success of an organization is dependent on its capability to quickly identify and learn new skills, hone talents and excel in relevant areas. The main factors at work at KD transport are the organizational culture, the leadership in evidence and the structure. The attitudes and reactions to events flow from this mix are considered to create a picture of the forces at play. Organizational structure The company acquired three competitor companies but has failed to integrate them early on with the company as a whole. One of the challenges in the culture of KD Transport is the creation of separate depots with independent working styles. The absence of cohesion among the silos hinders the transfer of information and learning. The absence of active learning negatively affects job satisfaction and reduces the employees desire to stay with the company. Lopez, Peon and Ordas (2004) observe the need to for an organizational environment that fosters trust and security to encourage innovation and risk-taking. The authors highlight the need to recognize the processes involved in enhancing organizational learning and the management of it. A structure that separates employees from one another does not benefit from the powers of cohesive working towards a common goal. Organizational culture Another aspect that is important to consider the culture that has flown from the management of four depots with distinct policies since three were acquisitions from competition. Employees display depot oriented loyalties and have little sense of belonging to a larger group. Chang and Lee (2007) cite Schein (1990) who observes that there are visible and invisible cultural forces at work. The visible forces at KD Transport: Delinked depots with individual loyalties Separate policies for each silo Leadership style designing reduced managerial accountability Inconsistent leadership policies The invisible forces at work are the beliefs and assumptions about the organization. When these forces are positive they form the base for the organization to respond appropriately to the changing environment. Shivers-Blackwell cites research sources to highlight the relation between ‘context and leadership behaviors’. The interplay of culture and structure determine the managers’ and leaders’ approach to leadership. Leadership When John took over as the head of the company, he had an inkling of the overall coordination problems in the organization but did not find a solution for it. The structure and practices were retained and John started getting into the day to day working of the organization. All decisions regardless of import flowed from him. Chang and Lee (2007) underscore the primacy of leadership in shaping the organizational capability for learning. Leadership is directly associated with learning and job satisfaction experienced by the employees. In the case of KD Transport, John has rendered the managers mere implementers and prefers to rely on his personal judgment. The managers prefer to stay away from taking accountability for decisions and leave it to John to decide on difficult issues. Inconsistency in decision making and backtracking on promises have led to poor business and also reduced trust of the employee force. Power lies in the hands of a leader who prefers to utilize an autocratic style of operation has removed the sense of empowerment among his managers. The leader tends to depend on familial inputs for business decisions. The company is now facing a financial crisis that personally bodes ill for the owner of the company. The owner views himself as being in a situation of choosing between business and personal assets. The report aims to aid the head of company in understanding the limitations related to current decision making style, developing an effective decision making process and open his mind to ways of managing difficult situations without losing sensitivity to human processes. Key processes related to human relations management will be explored and methods for arriving at appropriate decisions are considered. The importance of delegation and creation of a vibrant culture that is able to adapt to conflicting circumstances are important practices for the leader to be open to. The report seeks to lay down a literature based perspective for managing the current situation in the company. The prevalent style of leadership, cultural framework and organization structure are viewed while giving cognizance to the financial crisis and recommending possible remedies and methods for the leader to adopt. Discussion Organizational context KD Transport is a long-recognized competitor in the transport business. The company was managed by two brothers. In this scenario, the owners would have been involved in the operational and managerial issues of the business. The organization was aggressive and competitive and followed a strategy of growth by competitor acquisition. The acquired companies continued to operate as depots of the organization with the original staff and practices. The next business head ran the company closely and was generous with the staff. In this setup, the owner believed in the tenets of hard work and expected these to be respected through the company. The culture of the organization has transitioned from being a uni- to multi-depot with the head of the business keeping a close control. In the present context, it is visible to John that there are coordination issues between the depots when he takes up the new role. Hill (2007) highlights the difficulty of transition into a managerial assignment and the necessity to adopt a learning approach to the experience; the difficulty is brought out in John’s inability to grasp and manage the organizational issues while the approach adopted is one of assuming low commitment to be the issue. There has been no attempt to integrate the acquired staff with the original company by creating situations for people to mingle or standard policy creation has led to a divided organization. The employees owe allegiance to the depots they operate with. Gulati (2007) refers to a situation when GE faced stagnant growth. It was found that the department was ‘seeking to solve customer’s problems through the lens of its own products, rather than from the customer’s perspective.’ Silo creation results in paucity of inter-departmental co-ordination due to the absence of a wider focus. Managing talent An organization relies on the workforce for making success a possibility. The individual’s desire to contribute to objectives is spurred by the psychological contract between the individual and the corporate. The organization must provide scope for individuals to learn more as the business grows, market changes and processes alter. This is possible when each individual is empowered and feels responsible for business success. Stone (2007, p. 40) describes a process to enable empowerment that involves ‘training’ people to manage situations and ‘believing’ in their ability to do so. When an employee does something right, use the event as an example to build the employees sense of capability in themselves. Encouragement and communication are an important part of this process. On the aspect of human relations, workers see themselves as part of independent depots that they are loyal to. Managers are subordinate to John’s decisions and are lacking empowerment due to his style of management. John views the issue of being one of low commitment towards the organization and goes ahead to take decisions that widen the gap between the management and employees. John has not been able to show visible proof of intent and credibility. Incentive schemes have failed because of John’s decision to openly go back on an offer. This has led to the belief that agreements are broken by the management. Motivation has been further affected by the effect of dwindling fortunes on compensation. Decision making John believes in his superior instinct for making the right decisions. Bazerman and Chugh (2006) have pointed to research about the process of decision making. Senior executives have been found to display a lack of awareness of issues beyond narrow perspectives. The authors refer to this as ‘bounded awareness’, a situation when ‘cognitive blinders prevent a person from seeing, seeking, using, or sharing highly relevant, easily accessible, and readily perceivable information during the decision-making process.’ This is compounded by the fact that John is taking decisions without involving his managers and forcing them to share data- and instinct-based perspectives. Instead, he relies on discussions with his wife who guides his decisions. Campbell, Whitehead and Finkelstein (2009) highlight the brain’s tendency to view information and connect it to past patterns. This can lead to erroneous perception when new circumstances arise and cause bad decisions. Past patterns are related to our experience of the world. John’s and his wife’s experiences provide a narrow perspective for the organization. Current Situation Business is at a crucial financial juncture and major decisions are to be taken. The creditor bank has placed KD Transport in the debt recovery section. John is contemplating closure of a few units and increasing the load on the other depots. Freeman (2009) recommends an effective approach deciding on business closure. The financial effect of the decision is far outweighed by the effect on the motivation on the remaining employees and image in the market. If closure is inevitable, closure must be supported by an effective communication and action strategy. Conclusion Leadership, structure and culture are acting on the organization that has now reached the crossroads and led to the need for organizational change. Leadership John has displayed the capacity to take risks as a leader. Though there are serious limitations in his style, he is open to suggestion as shown by the serious consideration he gives his wife’s inputs. John needs to realize that his role as leader must go beyond operations. The organization is at a critical juncture and this is a time for change. He must adopt more effective approaches that involve dialogue and collaboration. Effective Decision making Tichy and Bennis (2007) bring out the fact that good decisions are not those that occur in a moment of brilliance; rather they are based on sound processes. Good decisions involve the ability to step back and review the context of the decision before moving ahead. John must reconsider his current style of depending on his instinct for decisions and move towards a more collaborative and data-oriented style. In this context, he needs to consider all options before deciding to close the units of the business since this will adversely affect employee morale in the remaining units. He should decide about the future of his business by involving his managers and communicating their need to take the load of operations off his shoulders. John has to display his desire to involve them through discussions and delegation. He must engage the managers in examining alternative solutions to the current crisis. Since a decision to close units will lead to increased workload and reduced staff numbers, the workforce will regard this as another sign of negative intent. This will in turn affect customer service. The organization will face a difficult situation within and without. Closure of units will lead to conjecture about the future of the business and reduce the organization’s credibility in the market. Major customers will be less willing to work with a company that appears shaky and competition will make the most of the situation. John will find it difficult to build credibility with the bank since this step will be seen as confirmation that the company is in difficulty. Communication John is believed to be a good communicator. He follows a one-way communication style and is not sensitive to the need for listening and gauging the response to his communication. His communication skills need to be honed. This is a time for taking people along and displaying the capacity for sensitivity. The two-day retreat, John should realize, will lead to churn among the managers and his presentation method will not be useful. John needs to bring the managers up to the situation of the company and highlight the options available to the company. In the absence of this, the communication strategy that he is following will fail. Effective communication strategy John must be aware of the loss of credibility among the workforce and discuss the way ahead with the managers. At the two-day retreat, John needs to communicate the following: Market standing and business performance Financial performance and immediate crisis Ideas from the managers about ways to reduce cost Calculate the cost saving on increased process efficiencies Highlight customer focus and value creation as being the primary purpose of the business Discuss possible frameworks that are required to aid this purpose Restructure business and merge depots to create a unified sense of customer focus Identify and retain the best business practices that aid value creation Identify excess staff and help them through effective exit policies The discussion should then go on to consider the effect of merging depots and how business can be more effectively run. Some managers will feel insecure while others resist the ideas, John should be prepared to take the managers into confidence. This is a time to appeal to the managers and involve them in the sole purpose of guiding the organization in an uncertain terrain. Freeman (2009) believes that leaders have to …use “soft hands” as well as “hard hands” to be successful... But they must also be heavily engaged in ensuring that employees, customers, suppliers, and communities are treated with consideration and compassion… the negative impact of a closure on the surviving business is underestimated. If employees who lose their jobs are treated impersonally, unfairly, or without respect, the productivity and loyalty of their remaining colleagues will suffer. The next line of communication involves the workforce with who he should share his fears for the future and the first line of action to save the company. Since the first line of action is towards internal correction, there is scope for appreciation and cooperation. If closure becomes inevitable, the visible effort will reduce the negative impact and make way for a vibrant culture. Bibliography Campbell, Andrew, Whitehead Jo and Finkelstein, Sydney. Why Good Leaders Make Bad Decisions. Harvard Business Review Feb 2009: 1-2. http://hbr.harvardbusiness.org/2009/02/why-good-leaders-make-bad-decisions/ar/1 Freeman, Kenneth W. The Right Way to Close an Operation. Harvard Business Review May 2009: 1-3. http://hbr.harvardbusiness.org/2009/05/the-right-way-to-close-an-operation/ar/1 Hill, Linda A. Becoming the Boss. Harvard Business Review Jan 2007: 1-3. http://hbr.harvardbusiness.org/2007/01/becoming-the-boss/ar/1 Tichy, Noel M. and Bennis Warren G. Making Judgment Calls. Harvard Business Review. Oct 2007: 1-2. http://hbr.harvardbusiness.org/2007/10/making-judgment-calls/ar/1 Gulati, Ranjay. Silo Busting: How to Execute on the Promise of Customer Focus. Harvard Business Review. 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