Strategic Change Management - Essay Example

?Strategic Change Management Nearly all the big organizations in the world are undergoingsome type of change. The factors that drive organizations towards change vary in accordance with the environment in which the organizations operate however the change has become highly important for the organizations to survive in any environment. Organizations cannot stay isolated from their external environments. All the organizations interact with their external environments one way or the other and in this manner they are all affected by the environment. It is not possible to stay isolated in a closed system therefore the organization has to respond to the changes in its external environment. In this essay, the significant and application of strategic change in organizations would be considered. One of the examples of the strategic change in the current economic scenario is that of Marks & Spencer. The example of this organization would also be discussed. WHAT ORGANIZATION STRATEGIC CHANGE MEANS AND HOW IT IS SITUATED AS LITERATURE Strategic change is highly important for all the organization in today’s global situation. This section describes what strategic change is and a basic model for change. Strategic Change in Organizations Strategic change in organizations means bringing a change in the internal environment in accordance with a defined strategy that is implemented through synchronization of the organization’s vision, mission, goals and objectives. A strategy is a framework on which the decisions and operations of an organization depend. A strategic change is changing the way an organization operates by changing its strategy. Strategic change is a very wide term it may also include radical transitions undergone by organizations that include changing the strategy, structure, culture and processes of the organization. Strategic change cannot be brought instantly it requires a large span of time depending upon the nature of change. If it is a transition of the style of the organization, it may require some years; on the other hand if it is a change confined to a particular department or process of an organization, it may be carried out relatively sooner. In order to know whether the strategic change is producing the projected results, certain indicators are used by the management. Such indicators are named Key Performance Indicators (KPIs) which indicate the difference in the performance of the organization before the implementation of the change and after the implementation of the change. If the difference is in line with the projected results, it can be concluded that the strategic change is being implemented successfully; however if the difference in performance is not as planned, it can be concluded that a modification in the strategy is required. There are a number of factors that can cause pressure for a strategic change in an organization. Such factors can be so significant they can sometimes harm the very survival of an organization. Therefore, in order to survive in the market, an organization needs to bring change in its system as a result of the pressure from such factors. Factors that can create pressure for change may be; change in external environment of an organization that is, change in technology, change in economic scenario, change in social trends or a change in political scenario. There are a number of ways in which a change may happen in an organization. The strategic core of an organization, which normally comprises of the board of directors, may inform the other levels of organizations that the organization is under a crisis and they may suggest a strategy for change. On the other hand, the change may be a gradual process with a number of short term goals. In this manner, the change would happen without raising an alarm throughout the organization. Another manner of bringing a change in the organization may be through a change agent. A change agent may be the leader of an organization or any other person who is inspiring and who is followed by the majority of the personnel in the organization. The perspectives on how change happens are; planned perspective, incremental perspective, and punctuated equilibrium model of change. Planned perspective is when the strategic core of an organization decides to bring a significant change and the change is implemented by long term planning. Incremental perspective is when the change is brought gradually as a result of small insignificant changes in the organization. Punctuated equilibrium model is when the organization’s environment is pegged to the external environment therefore the change is brought in as soon as the external environment changes. Kurt Lewin’s Model of Change Kurt Lewin presented a change model that comprised of three stages. The change model also took into consideration the driving forces and restraining forces of change. According to Lewin, driving forces direct the employees of an organization towards the planned change, while on the other hand, restraining forces cause the employees resist the change thus it hampers the implementation of the change in an organization. Therefore, such forces need to be analyzed and Lewin’s three step model can help an organization shift the balance in the direction as planned by the strategic core (Lewin, 1958). The three steps in Lewin’s model were; unfreeze, move, refreeze. According to Lewin, the first step for bringing a change in an organization is to unfreeze the current situation in the organization or the status quo. Status quo is an equilibrium state and shifting the equilibrium may be faced with extensive restraining forces. Therefore, in order to weaken the restraining forces, unfreezing is highly important. Unfreezing can be done by increasing the driving forces can encourage the implementation of the change in the organization. It can also be done by decreasing the restraining forces. Second step of the Lewin’s model is changing the behavior in the organization while the status quo is shifted. Behavior can be changed by persuading the personnel in the organization that the previous state is not helpful anymore and by convincing them to look at the scenario from a new perspective. This is the most important step because this step determines the level of change to be brought in the organization. In order to ensure that the change is brought successfully, the organization must ensure that the personnel in the organization are convinced about the planned change. The third and last step of Lewin’s model is refreezing. This step is about setting up a new equilibrium in the organization. In order to ensure that change is brought in the organization as planned, refreezing must be done when the change is implemented completely. Refreezing can be done by formalizing the changed system through new policies and procedures. Lewin’s model was applied in University Hospital Erlangen where the system of documentation for costly surgical equipment was changed in order to ensure efficiency and effectiveness in the system of the hospital. In order to implement the change, the force field analysis was conducted. The driving forces and restraining forces were determined and the three step change model was applied. Initially the existing system was changed towards an improved system and the employees were convinced that the new system is better. When the change was implemented, the new system for documentation was formalized and it was adopted as the new status quo. THE CONTEXT OF CHANGE WITH EXTERNAL AND INTERNAL ELEMENTS There are certain factors that drive an organization into a state where change becomes necessary. Such factors can be either internal or external. Internal factors are confined to the operations of an organization however the external factors are present in the environment in which an organization operates. Assessment of such factors is necessary to determine the extent of change required. Need for an Organizational Change In order to avoid itself from a crisis, an organization must acclimatize itself with the change whenever it is required. If a change is not dealt with in a reasonable time, the existence of the organization may be harmed. Therefore an organization must be proactive in analyzing the need for a change. Some organizations may choose to be reactive in case a need for change arises, however some changes require a wide span of time, they may cause harm to the organization if not implemented on timely basis. In order to be proactive, an organization must assess certain internal factors on continuous basis. According to Barney (2002), those factors are resources and organizational capabilities. Through these factors, organizations must assess the factors that distinguish them from other organizations in the industry. If the distinguishing factor is held and controlled by a specific organization and it becomes the reason behind the stable position of the organization in the market, it can be termed as the ‘competitive advantage’ of the organization. By analyzing the internal factors, an organization may indentify its distinguishing factor. This identification would lead the organization to bringing a strategic change and turning that distinguishing factor into its competitive advantage. According to Barney (2002), in order to capitalize on the resource or capability making the organization distinguishable from others, the management needs to; add value to the firm, be rare, be hard to imitate and interact with the appropriate organizational structure. The last part is the core idea behind a strategic change. A competitive advantage can only be created when a complimentary change is brought in the organizational structure. Factors That Drive Organizational Change There are number of factors that drive organizational change. Internal factors are confined to the organization however there are a number of external factors that must be assessed to determine whether there is a need for a change. One of the models used to analyze the external factors is PEST which stands for Political, Economical, Social and Technological. According to this model, these four external factors drive an organizational change. If any of these factors changes, it will affect the organization and create a need for the organization to change. Change in technology is one of the prime reasons behind strategic change in organizations. Technology has been developing at a very fast pace. The pace of development in technology can be analyzed from the fact that a new technology is introduced even before the previous technology is completely adopted. In order to acquire faster processing ability, organizations try to have latest technology equipment therefore the organizations bring change in their systems. One of the examples of strategic change driven by technology is that of the application of Management Information System (MIS) or a Warehouse Management System (WMS). Change in political scenario may be the change in rules and regulations to be followed by the organizations. Such regulations may be adoption of certain accounting standards, environmental regulations or corporate governance rules. In order to meet certain corporate governance regulations, organizations may be bound to change their structure or the processes followed by them. Political changes may also include new taxes or restriction on carrying out a certain business which is an integral part of the organization’s business. In such scenario, organization will have to adjust with the political requirements and it will have to change the very nature of its business. Economical changes may include change in interest rates, exchange rates, inflation or economic growth rate. This is a very important factor because each organization is somehow affected by the economy of the region it operates in. If there is less economic activity in the region, the organization may not be able to recover its costs and it might have to face loss. Therefore, the organization might have to change the way it conducts its business and it may need to acclimatize with the economic scenario. Social factors include the culture, population demographics, and attitude of the people of the region in which the organization operates. Any change in such factors may cause the organization to change because it is the consumers who are ultimately responsible for the profitability of an organization. The scale and scope of the change varies in different scenarios. According to Balogum and Hailey (2008), there are four types of change in accordance with the extent and scope of change. The four types are; evolution, revolution, adaptation and reconstruction. Evolution and adaptation are classified under incremental change which is slow however revolution and reconstruction are classified under big band which is a rapid change. Evolution is a continuous change which takes place gradually over a large span of time. Adaptation is merely a small adjustment of the organization with its external environment therefore it does not have any significant effect and it does not attract any restraining forces. On the other hand, revolution is large scale change that takes place at a rapid pace. Revolution is a transformational change, and due to the fact that it is carried out at a rapid pace, it might attract so many restraining forces. Therefore, in order to implement transformational change at such rapid pace, the organization may need to use force and legitimate means to bring the change. Reconstruction is the change carried out to realign the way in which the organization operates. It is often carried out by using force because it attracts strong restraining forces due to the change in the competitive context of the organization. These four types of changes can also be seen in the practical examples. Incremental change was observed when the Anti-Trust Law was applied in the 1960s. The law paid attention towards the complex issues such as long term liabilities and inefficient systems. The law was not adopted by the organizations at once it was applied as an incremental change in a step by step manner. The ultimate effect of the incremental change was an evolution when the law was completely applied and all the organization started following it. On the other hand, example of a revolutionary change can be observed from the 1970s’ oil crisis. The sudden change in the oil supply and its price created a crisis and the organizations had no other way than to adopt the change. It became a matter of the survival of the organization therefore the change had to be brought at a rapid pace. This can be classified as a revolution and the way it was applied can be classified as reconstruction. In Marks & Spencer, the change being applied can be classified as incremental change which is leading the organization towards an evolutionary change. The organization is transforming its operations to ensure environmental friendly processes. The strategic change has been named Plan A and it was initiated in the year 2007. So far the organization has received positive feedback and it can be inferred that the change is being applied successfully. INVOLVEMENT OF STAKEHOLDERS IN STRATEGIC CHANGE PROCESS Stakeholders are the individuals or group of individuals who risk their investments with the organization. They are important for the organization because stakeholders with significant share in the organization can influence the internal decisions of the organizations. Stakeholders can be inside the organization as well therefore the involvement of stakeholders in the strategic change process is highly important. In order to ensure satisfaction of stakeholders from the change, the organization should use such a model for change that includes higher involvement of shareholders. Diana Winstanley (1995) provided a framework to assess the power of the shareholders. This framework is important because organizations can decide the involvement of stakeholders in accordance with the power they retain. There are four types of power a stakeholder can hold; arm’s length power, comprehensive power, disempowered, and operational power. Stakeholder with arm’s length power cannot influence the internal operations of the organization however he can influence the organization from outside. Stakeholder with comprehensive power can influence the implementation of the strategic change in the organization. Disempowered stakeholder is deprived of any involvement in the internal management of the organization. Stakeholder with operational power is the most powerful stakeholder of all as he can influence the implementation of strategy and operational decisions at the same time. Therefore, organizations should involve stakeholders at the time of determination of the strategy for the change in order to ensure unhindered implementation of the strategy. This model can be effective because the satisfaction of stakeholders is important for the goodwill of the organization in the market. If the stakeholders are satisfied from the organization, the organization would be able to have a more stable position in the market. There might be certain obstacles in the process of change such as resistance to change by the stakeholders or the employees of the organization. Such obstacles can be tackled by convincing the stakeholders and employees about the benefits of the change and by strengthening of the factors that encourage the implementation of the change in the organization. In case of Marks & Spencer, stakeholders are given complete information regarding the strategic change and its implementation. Stakeholders with significant shareholdings are empowered to influence the decisions in the organization. The change being applied in the organization in order to become the most sustainable major retailer in the world is a slow but effective process. Stakeholders are aware of all the insights of the strategic plan and they are satisfied with the organization’s strategy for change. ADAPTATION OF MODELS AND STRATEGIES TO THE CHANGE OF AN ORGANIZATION Implementation of a strategic change in an organization is not a simple process therefore a number of problems can occur in the process of implementation. For example; if an organization is implementing a new Management Information System, a number of problems might arise such as; transfer of data from old system to the new one, processing of the transactions at hand and ensuring the adaptability of the organization with the new system. Therefore, while determining the strategy for a change, strategic core of the organization must also consider the problems that might arise and the solutions for all the possible problems should be decided proactively. Another factor that must be considered by the organizations is the appropriateness of the change model to be adopted. In order to ensure efficiency and effectiveness of the change, the strategic core of the organization must ensure that the organization is compatible with the model of the change to be applied. If an organization has employees who are innovative and who encourage new processes, the organization must not force the change upon them. In such case, the change may be presented along with its benefits and the employees would accept it easily. However, if the change is resisted in an organization, it cannot be implemented by merely presenting it. The organization must apply the change by using force and other legitimate means. Evaluation of the change can be done from time to time basis or a time evolution manner. In this method, the organization compares certain internal factors in accordance with their positions before the change and after the change. Use of Key Performance Indicators (KPIs) can also be done for this purpose. In this manner, the organization can ensure whether the change is being implemented in the manner it was planned. There are certain models to determine strategies in an organization. Some of those models are known as 3Ps and 7S. 3Ps model includes; practitioners, practices and praxis. According to this model, a strategy depends upon the people who design it, the approaches used to implement it and the process by which the strategy is implemented. 7S model includes; strategy, structure, systems, style, staff, skills and shared values. Strategy is the long term plan with proposed outcomes and a successful strategy depends upon the combination of other factors like structure of the organization, system or processes followed in the organization, the style of work, the efficiency of staff and the skills possessed by the organizational personnel. From the arguments and theoretical models presented above, it can inferred that internal factors, external factors and the involvement of stakeholders in the process of change can influence the effectiveness of change to a significant degree. If an organization does not respond to its internal factors but changes in accordance with external factors only, would not be able to bring an effective change in its system. Therefore it is necessary that an organization considers all these factors before designing the strategy for the change so that the implementation of change may be done effectively and efficiently. REFERENCES Balogun, J. and Hailey, V. (2008) Exploring strategic change, New York: FT Prentice Hall Financial Times. ISBN: 0273683276 Lewin, K. (1958) “Group decision and social change,” in Readings in Social Psychology, eds. E. E. Maccoby, T. M. Newcomb, and E. L. Hartley, Holt, Rinehart and Winston, New York, pp. 197–211. Jarzabkowski, P., Balogun, J. and Seidl, D. (2007) ‘Strategizing: The challenges of a practice perspective’, Human Relation, vol. 60 no. 1 5-27. Whipp, R. (2003) ‘Managing strategic change’ in Faulkner and Campwell (eds) The Oxford Handbook of Strategy, Oxford, Oxford University Press. ISBN: 9780198782551 Read More