Strategy Development of ECG - Essay Example

«Strategy Development of ECG» Introduction Despite of the universality of research on organisational change the ‘why’, ‘how’, and ‘when’ components are not at all conclusive. Thomas and colleagues (1994) and Van de Ven (1988) claimed that we have very little knowledge of the sequence or order of activities or occurrences that portray how aspects change in due course, how companies cope with institutional or large-scale changes, and whether these activities or occurrences will result in second-order change, or a change of the system, or to more subtle first-order change, which takes place within the system (Pasmore & Woodman 2005). Change is the “movement away from a present state toward a future state” (Pasmore & Woodman 2005, p. 38). The extensiveness of studies on organisational changes in the securities industry classified second-order, or revolutionary might encourage the average reader to think that these are the standard. A number of scholars have explained such changes as responses to disorders in the financial market. Yet other scholars have explained such changes with respect cusp-catastrophe approaches or by monitoring such developments in the securities industry’s strategic model, organisational identity, structure, or even in the senior managers’ cognitive maps (Hill & Jones 2009). More extensive studies show, still, that second-order change, a move from one strategic model to another, is uncommon even in periods of disorders in the financial market (Ben, Dunphy &Griffiths 2003). For example, scholars have emphasised that securities organisations usually converge around a dominant pattern: strategic approach and apathy have a tendency to relate organisational change to that which is in harmony with the pattern, embodying first-order change (Ben et al. 2003). Meyer and his associates (1990) discovered that second-order change in investment holding companies took place 30 percent of the time, despite of large-scale turbulence in their organisations of study. This essay is an attempt to analyse a specific organisational change scenario in Emperor Capital Group Limited (ECG), an investment holding company in Hong Kong. As a branch executive of ECG it is my responsibility to make sure that the organisation is able to adapt to institutional or environmental changes such as the current financial crisis that forces the company to lay off several workers. However, as the world economy started to recover, many of the employees started quitting their jobs. One of the strategies considered by the management team is adding commission to the basic salary of employees. These concerns will be discussed more thoroughly in the proceeding sections. Strategy Development of ECG Nowadays, the level of instability and the heightening competition and rate of expansion keeps most securities firm in anything, but a stable condition. The ECG, developing plans with at least three year time prospects, is basically making use of the fundamental principle of economic theory and this is only not practical. The dilemma with ECG’s strategic plans is that they are derived from mission statements and research, not in the everyday tasks that are being performed, nor around the employees carrying out the tasks. Thus strategy becomes an imposing system rather than a productive tactic for moving the firm forward. I, being a CEO of the company, have a broad understanding of what the organisation has to create, but the challenge advances as it is worked out. Hence the organisation is being confronted with the choice of whether to apply the planned or emergent model of strategy development, or both. Before the main analysis, it is important to discuss first the definition and the strengths and weaknesses of each of the model. Emergent strategy implies that strategy orientation is a result of the everyday interaction and work that takes place within an organisation, its markets, its industry, and the international setting (Hill & Jones 2009). The strategy, within the context of emergent strategy, is not recognised in advance, but through the bumps and turns of daily work, a strategy arises and it is the task of the top-level management to merge these things into a scheme that pushes the organisation forward (Hill & Jones 2009). An entirely emergent strategy is distinguished by order, yet with a lack of purpose for it. It is although complicated to envision action in the complete absence of purpose (Hill & Jones 2009). On the other hand, planned strategy indicates articulated and decisive objectives, supported by proper controls to guarantee their intentions, in a setting that is agreeable (Freeman 2010). Some of the advantages of the planned approach to strategy development are: compels an objective evaluation, provides a decision-making framework, allows measurement of growth, and endows an organisational viewpoint (Freeman 2010). In contrast, some of the disadvantages of a planned or also called ‘deliberate’ strategy are: the future does not happen as projected, it can be costly, and it hampers flexibility (Freeman 2010). However, in the actual scenario of ECG, it would be more beneficial to integrate the two approaches to strategy development. Combining the planned and emergent strategies somehow will aid the company on controlling its direction while promoting the process of learning. According to Mintzberg (1994), “organisations... [may] pursue... umbrella strategies: the broad outlines are deliberate while the details are allowed to emerge within them” (pp. 23-25). ECG’s planners should concentrate on determining the major concerns that are most probable to influence the company in the future. The leaders should be aware that strategic development and implementation is tantamount to change management, and they should be prepared to modify the plan as new events or details arise during its implementation. The plan should be flexible in order to guide the process of change. On the contrary, the process does not end with the formulation of a strategic document. It should be assigned to functional individuals, workgroups, and programmes in ECG so that their tasks are realigned to coordinate with the general direction of the company. Innate in the operational process is a knowledge that everyday tasks should change if the performance of ECG is going to change, and the firm is prepared for the future. In order to cope with the heightening financial crisis and instability of the industry, ECG should depend on several strategies: it should employ the new financial tools created in the futures and options exchanges to circumvent portions of the risk, and it should exploit new types of business that offer a more diversified stream of profit (Meyer, Brooks & Goes 1990). In this contemporary period, innovation is one of the most essential kinds of competition among the biggest investment holding companies in Hong Kong, such as ECG. The regional companies widely pursued the examples of these bigger investment holding companies in implementing innovative services. These innovative services created in the 1980s resulted in the development of multibillion-dollar markets in high-yield bonds, asset-financed securities, derivative securities, and mortgage (Pasmore & Woodman 2005). To those companies that were early competitors in Hong Kong securities industry, these new financial instruments have proved significantly lucrative. Stakeholder Management in ECG The ECG scenario that I have laid out beforehand, with regard to the compensation scheme, involves the question: why does the compensation system of ECG fail? Perhaps because it is compensating individuals, including the CEO, inaccurately; it is impractical to run businesses nowadays with traditional compensation schemes. But there is a variety of traditional schemes nowadays anchored in the technological or industrial era that not simply fall short in meeting the demands of the securities industry, but that ditch employees, managers, and CEOs against each other (Rini 2003).ECG’s compensation scheme should promote a feeling of ownership among its employees. In several financial organisations, profit sharing, pension, commissions, and traditional bonuses have become privileges (Rini 2003). Effective implementation of a scheme to offer fair compensation system for ECG stakeholders requires a thorough assessment of stakeholder roles. Employees should be trained to recognise the consequences of their vested interest (Benn et al. 2003). A commission-based scheme can only become appropriate to ECG when its organisational culture moves to building a feeling of ownership among its employees. Afterward, they can shift from a purposeful focus on performing the right things to endorsing the firm’s objectives and fulfilling their own purposes (Benn et al. 2003). Another strategy is to build a system to offer a reasonable commission-based scheme for stakeholders. It should be fairly different from conventional schemes. The projected goals of the compensation scheme should comprise the long-term vision I have been stressing in this essay, which, from the point of view of employees, implies stable job, rather than quick-fix annual revenue. ECG will achieve this only by harmonising revenue and growth with yield and value priorities. A commission-based scheme will be important when the organisational culture of ECG builds a feeling of ownership among employees. Everyone should know and value the corporate concerns and goals. Everyone should know how their job contributes to their team performance, which impacts on the unit or department, which eventually sustain ECG’s performance. Focus on individual role should be swapped with a concentration on doing appropriate things appropriately (Freeman 2010). Creation of a productive commission-based compensation scheme for ECG’s stakeholders rests on reaching performance levels beyond an average level which should be consented by the board and management. The emphasis should be transformed to one that will make best use of the skills of everyone concerned. This implies that managers should genuinely trust their employees’ wide-ranging skills. It afterwards necessitates ECG’s leadership being eager to dedicate their time and effort in enhancing how the company reaches its objectives. Let us be more precise. Quite often, purely commission-based programs recognise quantity rather than performance. In an appropriate performance compensation system for stakeholders, quantity is measured and controlled, but only performance is recognised (Freeman 2010). Compensating individuals for quantity, rather than quality, implies that commission is never reconciled with the concrete profit performance level the company pulls off. Measuring for value and performance encourages individuals to consider individual goals and the task that each individual merits to build for themselves- to focus on their desired contribution, rather than their desired task (Hill & Jones 2009). Sceptics at times challenge the intricacy of a system to offer performance-based and commission-based compensation scheme for stakeholders can be effectively disseminated to employees (Hill & Jones 2009). In my experience with ECG as a branch executive I have discovered that employees, granted the opportunity, willingly understand the basics. It is important to remember that employees want to feel satisfied with their work. In order to accomplish this, they should realise how they contribute to outcomes. Culture-Excellence or Best-Practice Approach in ECG By culture-excellence approach, we refer to an environment where individuals are aware of, on a quite practical and immediate manner, what productivity, quality, and genuine value really imply (Hill & Jones 2009). There are numerous facts about culture. Every existing culture has implications. A poorly established culture will provide uncertainty in managers and staff with vagueness of goal and values (Hill & Jones 2009). A culture-excellence approach results in accuracy and clarity in understanding what to do and how to do it. Under the culture-excellence perspective, only a handful of organisations genuinely value culture’s behavioural aspects and in that rests the failure to manage change (Hill & Jones 2009). However, planning to allow outside guides establish a culture is a foremost dilemma. The client, collaborating with a group of specialists, ensures effective culture change management (Cameron & Green 2004). It is fairly simple to change a culture. In most situations managers think that several cultures can exist interdependently, perplexing individuals as to which activities/actions are most suitable (Cameron & Green 2004). One of the major weaknesses of the culture-excellence approach is that it accepts a ‘mixture of cultures’ recognising assortments of perspectives. It only obscures problems and bewilders individuals, particularly people new to the management or organisation (Cameron & Green 2004). On the other hand, there should be methods and tools for assessing progress in change management. With a powerful trend towards branded or custom-made frameworks, a category of Best Practice markers has been created to aid organisations and the individuals within them to assess and improve their own organisational culture and processes (Benn et al. 2003). Best-practice approach is basically an attempt to develop the process so as to assist communication and to enhance its success. However, focusing mainly on Best Practice indicators may compromise the importance of culture in the successful management of organisational change (Benn et al. 2003). Primarily, best practice approach is focused on maximising performance hence maximising profit, whereas culture-excellence framework is focused on maximising individual contribution hence maximising organisational value. Nonetheless, integrating culture-excellence and best practice approach in ECG’s organisational processes is about adopting a tailored and strengthened approach to financial instruments that puts service users at the core of everything its performs. Yet, the mission is not merely to manage the two approaches on a separate way but rather to accept the fact they are interconnected and will influence each other. Both models have a distinct role in facilitating ECG in delivering excellent customer service and integrating these models can bring the company to the fore. The risk culture of ECG emanates from its leadership. The board should be capable of understanding the risks being managed. In actual fact, this denotes that board members of ECG should not simply be informed but also appreciate the required change. Furthermore, they should appreciate and recognise the implications of important implementation moves. For instance, ECG’s board members did not talk about the implications of the massive boost in absolute leverage or the unplanned outcomes of brokers’ almost unrestrained earning capability. Aggressively shaping and consenting to a change-oriented profile is the major step in promoting culture-excellence and best practice approach (Hill & Jones 2009) in which ECG’s change management is viewed as a facilitator of the front office instead of a hindrance to be prevented. Another step to reinforce culture-excellence and best practice approaches in ECG is to elevate the profile of investment groups or risk teams, specifically in the front office departments, and to heighten the level to which ECG’s risk specialists are represented on boards of directors and executive committees. Ascertaining the trustworthiness of ECG’s risk function through a thorough understanding of the organisational processes and its continuously changing product criteria would endure toward establishing a culture wherein risk specialists are viewed to be credible and more than only support specialists. Organisational Learning in ECG Organisational learning is an asset which is reflected by particular orientations embedded within the organisational culture and processes. In order for organisational learning to be evident in practice, the management should recognise its importance and a needed dedication towards it (Cameron & Green 2004). Managers should emphasise the importance of learning and enable learning by promoting and allowing employees to act as a team in realising common objectives, to evaluate thoroughly actions/decisions taken in carrying out their tasks and serving the customers and to keep and disseminate the knowledge developed during their operations (Cameron & Green 2004). Given the instability of financial businesses, planning for the long-term is a luxury that investment holding company cannot afford (Rini 2003). Rather, ECG depends on a substantial number of qualified managers who have extensive abilities. Although business needs are urgent, creating skilled, well-formed employees is a long-term, steady process. ECG could buy the skill or knowledge that it requires, but rather, it usually trains its own. Because of the limited time for planning and the extensive time required to build resources, ECG has a choice: to build pools of skills and knowledge that can provide it with the flexibility to absorb the instability. ECG should make every task a challenge. The doctrine of the company is that individuals should work with an aim of making the best use of learning to realise personal and organisational goals. By challenging and maximising people, ECG can optimise its learning and integrity. If ECG runs out of profitable jobs, or if an employee thinks s/he already knows everything or there is nothing more to learn, then it is time for him/her to search for another job outside the company. ECG still is trying to understand how to motivate and train employees to exercise more power over their own learning. The problem with several ECG employees is that they depend on the firm for their career growth. This is dangerous for the company as it may end up with individuals who do not possess the talents and do not know why they do not possess them because they believe the company was shouldering that for them. That is absolutely very detrimental because the company can just be a partner; the company is excellently served by workers who have a firm belief of their own selves and work goals. An organisation cannot force the need to learn, but it can develop it. People can only be well harmonised to their tasks if both the company and the people understand the personal significance that is realised in work (Cameron & Green 2004). If they are well harmonised, high encouragement to learn will exist. If they are badly matched, all forms of low motivation and conflict will exist (Benn et al. 2003). One of the major duties of top-level managers in ECG is to perform as role models. By demonstrating a willingness to learn, by asking questions and by acknowledging errors, they establish a model of learning. Organisational culture is the key to the success of ECG. The company’s executives believe that ECG culture puts it at the vanguard of Hong Kong’s financial institutions. That culture is shown in the firm’s vigorous recruiting, with the expectation of cooperation between the organisation and employees, and with the hope that everyone will work in support of collective interest. Relating with the firm’s culture is ECG’s attempt to provide individuals a breadth of knowledge and experience. The firm attempts to shift managers across occupations and between various units of the company, which is another means of granting stretch tasks. Conclusion The future of Emperor Capital Group Limited rests on sustaining a vision of its status in the national and global financial institution, coupled with motivation to learn and flexibility. I believe that the major element as we progress is the capability and motivation to learn. We cannot capture the rate of progress in the world, in the marketplace, industrially and collectively. It is arriving at an escalating velocity. We have to be capable of adapting and learning and using. I think that it is fundamental that we attempt to build a culture within which individuals do not feel too pressurised by change, which is apparently complicated to do. Various individuals adapt or learn at different paces. It builds pressures within an organisation, and we have to be aware of those. We have to invest resources on ensuring it works. References Benn, S., Dunphy, D. and Griffiths, A. 2003, Organisational Change for Corporate Sustainability: A Guide for Leaders and Change Agents of the Future, London, Routledge. Cameron, E. & Green, M. 2004, Making Sense of Change Management: A Complete Guide to the Models, Tools & Techniques of Organisational Change, UK: Kogan Page. Freeman, R.E. 2010, Strategic Management: A Stakeholder, New York, Cambridge University Press. Hill, C. & Jones, G. 2009, Strategic Management Theory: An integrated Approach, Mason, OH, South-Western College. Meyer, A.D., Brooks, G.R., and Goes, J.B. 1990, “Environmental jolts and industry revolutions: Organisational responses to discontinuous change”, Strategic Management Journal, vol 11, pp. 93-110. Mintzberg, H. 1994, Rise and Fall of Strategic Planning, Free Press. Pasmore, W.A. & Woodman, R.W. (eds) 2005, Research in Organisational Change and Development, JAI Press. Rini, W.A. 2003, Fundamentals of the Securities Industry, New York: McGraw-Hill. Thomas, J.B., Shankster, L.J., and Mathieu, J.E. 1994, “Antecedents to organisational issue interpretation: The roles of single-level, cross-level, and content cues”, Academy of Management Journal, vol. 37, pp. 1252-1284. Van de Ven, A.H. 1988, “Review essay: Four requirements for processual analysis”, In A. Pettigrew (ed.). The Management of Strategic Change, Oxford, UK: Blackwell. Read More