Managing Change at Tesco - Case Study Example

Managing change at Tesco Name University Contents 1.0 Introduction 3 2.0 Background of the organisation 3 3.0 Impact of Change 3 4.0 Analysis and Evaluation of the Change Process 4 4.1 Communication 4 4.2 Leadership 5 4.3 Resistance to change 6 5.0 Conclusion 8 5.1 Recommendations 8 5.2 Conclusion 9 6.0 Reflection 10 References 12 7.0 Appendix 14 Managing Change at Tesco 1.0 Introduction Professionals in the organisational, management and leadership studies have showcased that change is unavoidable and indispensable in guaranteeing the performance of organisations. Principally, organisations have to change with respect to environmental demands. Armstrong asserts that the change is sustained throughout an organisation (Armstrong, 2009). In the same vein, organisations are subject to change (Muslin, 2010). Change is therefore inevitable in adapting to new business environment, approaches and challenges. Through a case study of TESCO, this retrospect paper seeks to present the approach used in managing change in relations to the theoretical frameworks. 2.0 Background of the organisation TESCO is an internationally recognised British company dealing in grocery and general retail chain products, with its headquarters based in Chestnut, Hertfordshire. Presently, it is the largest supermarket and employer in United Kingdom. It dominates UK’s grocery market with an unprecedented 30 percent share. With its stores in almost 13 countries worldwide, it takes precedence on customer satisfaction (IBTimes, 2010). TESCO was subject to organisational change resulting from Sir Terry Leahy’s resignation. His departure marked a watershed in the company’s leadership model, organisational culture, entrepreneurial yields, productivity levels, and change in management. How power and transition is handled by the incoming CEO, Philip Clarke’s leadership, will reflect on his leadership skills. In essence, it will ultimately define the extent of the organisation’s future structure. 3.0 Impact of Change Tesco’s change process necessitated a need to incentivised and motivate the employees. The management and leadership structure guaranteed employees’ security under the new leadership. It covered the safety of their employment given the sharp decrease in the stock market, after Leahy resignation. Primarily, the focus on the workforce was realised through two fundamental aspects; organisation change and change within the management. Changes at the organisational levels related to the changes in its organisational system and culture. This first order of managing change necessitated the need to adopt new strategies while maintaining Sir Leahy’s strategic practise. A new client system was adopted in a quest to improve the customer experience. Evidently, the new systems were efficient, therefore Clarke was able to garner support of investor confidence. The anticipated change was smooth given the internal variables of the company. Philip Clarke’s takeover, will be evolutionary as opposed to being radical and reactionary. As an International and IT director, Clarke has worked with the company for over thirty years and has partnered to increase the productivity of the company as a market leader. 4.0 Analysis and Evaluation of the Change Process Tesco used credible change agents that oversaw the change process in the organisation. Dave Ulrich articulates that change agents are crucial in enabling an organisation’s smooth functionality since they are able to turn the strategies created into reality. An in-depth analysis on various impacts was discussed in this regard. Considerable change in investor confidence towards Leahy’s resignation affected the company. During Leahy’s leadership, the company was steered towards success given the increased returns and market presence. Philip Clarke’s transformational leadership focused on the customers. It was imperative to maintain customer confidence with respect to organisational performance. Internal and external resistance during the implementation of the change process was experienced, as such, the new leadership had to counter this problem. Change in management methods and processes necessitated the need for improved functioning of the organisation. Tesco’s change process are outlined under three significant aspects 4.1 Communication In the modern organisational culture, strategic leadership necessitates for effective communication strategy in fostering a positive working relationship (Browning, 2007). Since customers play an imperative role in the re-engineering process, customers had to be included in the change process. Proficient communication arrangement is instrumental in accommodating latent resistance among the staff. This confirms the OC and OD theory of communication. Organisation communication theory (OC) suggests that communication in instrumental in any organisation. Nonetheless, organisational change has little attention on OC theory. The reason for a change should be clearly articulated to the people involved (Browning, 2007). Evidently, through the change process, it was important that the new management attained maximum communication levels among all the ranks and files. Everard points out that the readiness for change can be realised through effective communication of the message (Everard, 2004). Chawla agrees while advocating that openness to change is indirectly and directly predisposed by communication (Chawla and Kelloway, 2004). Lack of information is a barrier to change. Thus, OC is regarded as an organisational process. Therefore, the media richness theory points out that the communication of complex organisational issues can be realised through verbal communication, as seen under Clarke’s management (Northouse, 2004). Contrariwise, organisation development theory is instrumental in effecting process of change. Hence, planned change can be structured under OD programs (Perk, 2008). Simply put organisation development theory (OD) emphasises on the process of change, however it does not focus in the role of communication (Northouse, 2004). Therefore, a combination of the OD and OC offered a preferred change avenue in Tesco. Through the Leahy’s leadership style, effective communication with the consumers was indispensable in realising dependable solution in improving Tesco’s services. In most cases, customer and workforce negotiations, enabled for a sound decisions making process that favoured both parties. The company had established a proficient communication strategy within the organisation and the top management. 4.2 Leadership Leadership colouration following the resignation of its CEO presented a state of transition. There was a need to consolidate Leahy’s participative and democratic leadership practised. Alliance of this practise will oversee the successful creation of Clarke’s leadership. Lewis’ theory of leadership asserts that democratic leaders are accustomed to involve all employees in the change process (Perk , 2008). Inevitably, Clarke sought opinions from his employees, in facilitating smooth transformational process. Principally, under Leahy’s tenure, the company operated under democratic leadership model. Leahy’s involvement of the entire workforce in decision making improved the company’s performance and service. Buckingham advocates that transformation is the core formulation of transformational leadership (Buckingham, 2005). It necessitates for a change in the variation in performance, management and productivity. It furthers motivation among the employees. Kotter refers to these as ‘energy surge’ (Browning, 2007). This increases a leader’s and followers in rising higher levels of morality and motivation. In this reverence, Clarke’s employs Leahy’s strategy while managing these changes. Vertical integration of management created dissatisfaction between the employees and managers (Buckingham, 2005). A leaders’ capacity in driving the change and maintaining the company’s vision within the limits of the organisational strategic leadership necessitates for transformational leadership (Yukl, 2006). In essence, transformational leadership suggest that the process through which the leaders creates high commitment points and motivation through a creation of a clear vision and appealing ideas (Politis, 2004). As Peterson points out, transformational leaders can communicate positive visions, propel confidence and emphasize on his followers’ strength (Peterson et al., 2009: 349). This approach was referred to as “local leadership.” A contingency in leadership existed where Leahy’s practices oversaw Tesco’s success as a market leader in the hypermarkets. Everard advocates that the contingency theory of leadership correlates to the leaders-match theory which attempts to compare the leaders with the given situation (Everard, 2004). In this respect, Leahy was skilful in engaging diagnosis practices. Contingency theory advocates that a skilled leader who leads the organisation on the right path is fit to handle all situational problems (Yukl, 2006). This strategy affirms that a given situation determines the leader’s actions (Everard, 2004: 155). Tentatively, a significant correlation exists between the situational and contingency theory, such that both theories suggests that the present situation determines the strategy used. However, contingency theory is a behavioural theory that deals with the best strategy in organising an organisation (Politis, 2004). Instead, the optimal strategy would be contingent on the external and internal factors affecting the organization. Simply put, diagnosis is a leader’s skill in forecasting on the company’s future. Unmistakably, diagnosis is realised through customer satisfaction (Northouse, 2004). Barclay advocates that the transformational leadership showcases four characteristics that include: idealized influence, intellectual stimulation, inspirational motivation and individual consideration (Barclay, 2005). 4.3 Resistance to change Resistance to change is exhibited by the workforce effecting the change. Resistance to change occurs when the employees are not in support of change, adverse effects of the change and adaptation to change (Mullins, 2010). Under Leahy’s rule, the employees were contented given the fair treatment at the workplace. Leahy’s leadership style focused on the employee’s well-being throughout their practise at Tesco. After Leahy’s resignation, the employees were compelled to expect new changes in leadership practise. Thus, most of the employees are compelled to resist the change. Although change is significant in any organisation, it does not create resistance to change particularly, with respect to anxiety, working conditions and fear of the unknown. Nonetheless, whatever consequences arises from this change, all the organisations facets are affected (Peterson, 2006). Resistance to change has a disruptive consequence on organisational performance and employee motivation (Beardwell, 2004). TESCO’s employees were not motivated to actively carry out their functions at various levels. Predominantly, the employees felt unsafe under the new management practise. Planned change is in most cases revolutionary as opposed to reactionary (Peterson, 2009). As such, Tekavcic asserts organisational supremacy focuses on anticipation in the impending divergences emanating from prevalent patterns hence taking directive measures in that direction (Punger &Tekavcic, 2008:304). It is evident therefore Tesco’s state, involves how to manage change with respect of the state of affairs. Under the new leadership, Clarke was compelled to initiate effective measures that reduced employee resistance and adaptation to the new changes. In response, there was a need to guarantee employee safety and fair working environments. Peterson points out that, managing planned change, pertains three significant elements content, context and process (Peterson, 2009). Content refers to the actions needed in addressing the organisational change while context means the business environment and process entails the actions undertaken in implementing the change. TESCO’s management board created a two-day forum that highlighted the need for these changes. Effective communications strategies were implemented in this regard (Mullins, 2010 & Salaman, 2001). The firm adhered to the Barclay affirmation on the importance of empowering the workforce in the organisation. He affirms that numerous procedures exists in the focus of the organisation as a whole (Barclay, 2009) 5.0 Conclusion 5.1 Recommendations Scholars such as Lewin , Thurley, Kotter and Schlesinger, upholds that a combination of diverse strategies are critical in managing organisational change. In the view of various literatures presented, Kotter’s approach would be effective in complementing the change process at Tesco (Browning, 2007). Kotter’s approach assures least resistance to change. His approach is in consonance with the baton of leadership in the transitional change from Leahy to Clark. Kotter’s eight-step model of managing change is outlined below; Creation of a sense of urgency was imperative in guaranteeing that an organisation’s objectives are realistic and relevant. In this stage potential crisis and major opportunities are identified. The management should therefore help employees understand the need for a change and its importance. Formulation of a powerful coalition succeeded through the acquisition of influential change agents. Assembling agents helps in garnering support and empowering skills – crucial for change. Creation of a sustained vision is necessary in directing TESCO’s change process. In essence, vision helps in directing the team towards the expected change effort. Strategies are, therefore, developed in achieving the vision. Communication of the vision entails information sharing among the stakeholders such that they are not alienated in the process of change. Communicating the essentials of change, appeals and responds to the employee’s need. Empowering of involved parties requires a removal of probable barriers to change. Systems and structures that undermine change need to restructured and evaluated. Accordingly, recognition and reward progress are important in making such achievements. Creation of a short term winning and planning process whose objectives is readily achievable for visible performance improvements (Useem, 2001). There should be a consolidation of the high performance and improvements in various platforms. Fostering and encouraging persistence and determination increases employee productivity. Institutionalisation of strategies/changes that complement the value of Tesco’s performance and culture is celebrated since an articulation between new behaviours and organisations success should be realised. Failure to adopt the above strategies may result to the less organisational performance that hinders Tesco’s productivity. Resistance to change according to Kotter is as a result of the following aspects: Parochial Self-interest. This arises when employees feel unsafe in the wake of the organisational change. As a result, most employees will seek self-interest in order to maximise their stake while working in the organisation (Muslin, 2010). Misunderstanding. When employees do not effectively cognize the position of the emerging leadership through lack of appropriate communication strategies, their interest will be threatened. (Muslin, 2010). Low tolerance to change. The customers and employees might be anxious on the change process, as such, it could ultimately affect the level of patients in the two parties (Muslin, 2010). Different situational assessment. Different people assess situations differently, specifically if the future results are unknown. If these happens, then the organisation is geared for the change process (Muslin, 2010). 5.2 Conclusion Conclusively, effective change process is traditionally focused on the leadership, managing resistance, and triangulation of communication. Eventually, a smooth change process can be easily realised. From the foregoing, it is apparent that Leahy’s resignation will result to organisational change and transition of power. Clarke’s take over, has been typified by organisational, strategic, operational and leadership restructuring, engendered to effect change. Resistance to change ultimately affects the change process given the dynamics involved throughout the employee reaction. Kotter’s eight-step model of managing change, evidently exercises proficient methodology in alleviating resistance to change. Appropriate mechanisms have been put into place to manage TESCO’s change. Hence, various theories such as transformational change, leaders-match theory, contingency theory, organisation communication theory, organisation and development theory influence the strategic decisions made regarding change. It is to this end that the consequences of its transformation, will guarantee Tesco’s wellbeing and momentum that pioneers Leahy’s success. 6.0 Reflection Change is necessary for any organisation. Leaders should consider all the employees at various levels in the organisation as the organisation’s shareholders. A focus on skills, knowledge and ability, is paramount in the production of quality services to its customers. Essentially this constitutes the second order in the transformational change. It is obvious that proficient and theoretical-operational strategies need to be employed through Tesco’s managing change process. In the same way, leaders are key in achieving motivation, performance and increasing an organisation’s productivity in a competitive market. Leaders function to direct the organisation towards the organisational goals (Useem, 2001). It is inevitable that an organisation manages its change process. Tesco’s management handled the change professionally, per se, overseeing the smooth transition of employees, customers and stakeholders. Transformational leadership affects employee motivation and performance. Fair workplace practise improves the employee’s motivation resulting to organisational efficiency. Leaders, therefore, play a momentous role in managing change, motivating the workforce and realising proffered results. It is true, therefore, that emotions and motivation are associated to cognitive functions. Emotions are important in triggering motivation through helping an individual’s evaluation of information that affects an individual’s attitude and facilitating action in the account of such attitudes (Browning, 2007). In the wake of change in leadership, it is essential that leaders employ diverse leadership strategies in realising change in an organisation. In this esteem Rajan asserts that; diverse leadership is instrumental to companies faced with disparate organisational affairs (Rajan, 2002). For instance, an autocratic leadership style can be useful whenever an organisation faces turmoil and needs a fast overhaul (Browning, 2007). In principle, this leadership style can be counterproductive in the case when the organisation is well organised. This is in line with its leadership style characterised by being “fluid” in suiting these situations. Debatably, it is argued that Leahy’s leadership style may well function in a different situations. Intrinsically, resistance to change is ordinarily irrational. Lack of support of change is attributed to employee uncertainty of subjection to new operational and organisational practices. Some employees may not be ready to adapt to the organizational change. However, change is requisite in offering an opportunity to accommodate any further resistance from the internal factors. Implementation of new organisational practises may result to unwarranted work ethics and unsafe working condition. Eventually, the workplace environment will be natively affected. In turn, employee motivation is largely disrupted; whose results extend to reduced employee performance. It is well within the rights of the employees to resists to such changes (Peterson, 2009). Principally, the inclusion of a theoretical approach in managing change can alleviate resistance to change. On the other hand, customer’s views should not be disregarded since they create a platform for transformational change – in line with customer expectation. Throughout the change process, it is significant that an organisation maintains a safe customer practise and satisfaction given the effects of such organisational change. Essentially, customer satisfaction is crucial in maintaining customer loyalty. In the phase of reduced shares in the stock market, the company ought to maintain investor’s trust (Valentine, 2005). In response, therefore, the company should garner more support from potential customers and investor in alleviating doubts. A change in leadership, in most cases, question customer loyalty and satisfaction. In Tesco’s case, Clarke believed that misunderstanding the position of the change in leadership practise, by the employees result to a subsequent disregard of the organisational inputs and interests is threatened. Eventually, it will elicit unwanted reaction from the customers and employees against the foundational principle of the organisation (Everard, 2004). Adaptation, as a second contingency of leadership in Tesco, is efficiently addressed. Behavioural adaptation in an organisation dispels the interaction levels among the employees and managers. Communication between Tesco’s managers and Tesco’s workforce was central in reducing performance gap. Sir terry Leahy used his ability in developing proficient performance amongst his staff, in accordance to the company’s flat management. By definition, flat management, is a type of management consisting of few management levels between the managers and the staff (Peck, 2008). Smooth power transition was realised through the creation of a sense of ownership among the employees. In essence, this strategies creates a sense of ownership among the employees, as such employees feel part of the change. Finally, it imparts a sense if inclusiveness among the employees, and ultimately improve commitment levels. References Armstrong, M. (2009). A Handbook of Human Resource Management Practice. London: Kogan Page. Barclay, A. (2009). Employee change agents: the foundation for effective organisational Change. International business research, 2 (1), 3-7. Beardwell, I. et al. (2004) (4thed.) Human Resource Management: A Contemporary Approach. Harlow: Prentice-Hall. Browning, B. W. (2007). Leadership in desperate times: An analysis of endurance: Shackleton’s incredible voyage through the lens of leadership theory. Advances in human Resources, 9(2): 183-198. Buckingham, M. (2005). What great manager do. Harvard Business Review, 2-11, March. Everard, K. B. et al. (2004). Effective school management. London: Paul Chapman Publishing. Fiedler, F. E. and Chemers, M. M. (1974). Leadership and effective management. Illinois: Foresman and Co. IBTimes, (2010). Philip Clarke to replace CEO Terry Leahy in March 2011. www.uk.ibtimes.com/articles/27322/20100608/tesco-ceo.htm. Accessed 15/08/2010. Mullins, L. J. (2010). Management and organisational behaviour. London: Prentice Hall. Peck, E. and Dickinson, H. (2008). Managing and Leading in Inter-agency setting. Bristol, The policy press. Peterson, S. J. (2009). CEO positive psychological traits, transformational leadership, and firm performance in high-technology start -up and established firms. Journal of management, 35(2): 348-368. Penger, S. and Tekavcic, M. (2008). Slovenian case of strategic change management in the public sector: Towards the Lisbon strategy. 26, 301-324. Politis, J. D. (2004). Transformational and transactional leadership predictors of the ‘stimulant’ determinants to creativity in organisational work environment. The electronic journal of knowledge management, 2(2): 23-34. Paglis, L. L. and Green, S. G. (2002) Leadership self-efficacy and managers’ motivation for leading change. Journal of organisational behaviour, 23, 215-235. Northouse, P. G. (2004). Leadership: Theory and practice. (3ed.). London: Sage. Rajan, A. (2002). Meaning of leadership in 2002. Professional manager, March. Salaman, G. (2001). Understanding business organisations. London: Routledge. Valentine, E. K. (2005). A way with SWOT analysis: use defensive/offensive evaluation instead. The Journal of Applied Business Research, 21, 2, 91-105. Useem, M. (2001). How to groom leaders of the future. In Pickfors, J. (ed.) Financial Times mastering management. London: Prentice Hall. Yukl, G. (2006). Leadership in organisations. (6thed.) Upper Saddle River: Prentice Hall. 7.0 Appendix Tabulated Questionnaires Questions Response What is your name and position in the firm? My name is John Stewart and work as an Assistant Quality Control Manager How long have you worked in that position? I have worked for five years in Tesco What has been the major setbacks that the company has experienced over time? The company has recently initiated an investment in Clarendon park, Leicester city which was negatively received by the residents. Under Mags Lewis, the campaign leaders, massive campaigns was held against Tesco setting up shop in the region. Leicester City denied Tesco’s application for the vacant spaces in the city. Such initiatives hampers the growth of the company in new regions. Exploitations of the new markets have therefore been hampered in varying degree. Employee turnover has been a major issue, although in recent times the employees have been satisfied with the services offered by the management. What factors have sustained the company’s competitive advantage? Tesco’s organisation management has been instrumental in realising success both in the market and garnering the support from the customers. Under Leahy’s leadership the employees have been empowered in channelling their efforts towards organisational success. Employees have been subjected to training programs beneficial in improving their skillset as a whole individual. Through competitive advantage and core competence the company has maintained as a market leader in the grocery industry. The company has maintained a culture of satisfaction among the customers, hence, retaining the loyal customers who keep on shopping with TESCO. What led to the change in TESCO’s leadership? Change in leadership was necessitated after the Leahy opted to retire from the organisation. As such, there was a need to address the gap in leadership that existed in the company. Therefore, it was significant that Clarke took over leadership in maintaining Tesco’s leadership in UK. What leadership attribute did Leahy possess? His leadership style was typified as participative and democratic leadership. Democratic in the sense that the employees were part of the organisation. Through the decision making process, he was able to garner the support of the employees and as such augment their motivation in the workplace. Their contribution to the organisational process was indispensable as it offered a hands on experience on every matter in the organisations. Under such leadership practices the employees were able to work under a conducive environment. What was the immediate impact of Leahy’s resignation on employee, organisation, shareholders and market share? After his immediate resignation Tesco’s market share dropped by 13 percent at the stock market. Many investors were inclined to invest under: Leahy’s leadership. Therefore, his consequent resignation led to a massive withdrawal of the various investments with the company. However, the new leadership tried as much as it could in alleviating investor confidence. The employees on the other hand were shocked given the resignation faced under his management. Most of the employees were impressed with Leahy’s leadership as he steered the company to success, hence garnering the support of the employees. Most of the employees were displeased with the decision, since, Leahy’s leadership skills empowered their prowess. Many employees questioned the fate of their employee’s status given that new management took over from Leahy. How did the incoming management handle the change process? Under Clarke’s leadership, it was imperative to maintain investor confidence. In response, Clarke had to guarantee the competiveness of the company under the new leadership. The new leadership simply meant that the company could use a different approach in garnering the support of the customers and investors. Conversely, Clarke had to guarantee the safety of employment since many of the staff members were not sure of their employment security. This was Clarke’s first step in realising the change process. Secondly, there was a need to maintain the company’s culture and practices. An introduction to new practices meant that the new management would be faced with resistance to change in multifaceted dimensions. Through effective communication, Clarke communicated with the employees on the need for the change, and reasons for Leahy’s resignation. This was important since communication alleviates probability for resistance to change. Clarke guaranteed employee satisfaction and better management practices. This was important since he sought to maintain and develop a working relationship with the employees. What are some of the different leadership style used under Leahy’s reign with respect to Clarke’s takeover? Clarke incorporated change agents into Tesco’s change process. Change agents were important such that they oversaw the smooth transition of the company to the new management. Change agents were indispensable in evaluating the change process, and help the company gauge its performance throughout the process. On the other hand, Clarke had to maintain investor confidence in Tesco in support of the company. He affirmed that the company would maintain its dominance in the market and expand its outreach in new regions; in a quest to increase revenue. Was there resistance to change, as such, what was the cause of resistance? Yes, the management experienced resistance to change. Resistance to change was brought about by the uncertainty of the new management. Under Leahy’s leadership, the employees were contented with the fair treatment by the management. Therefore , they were not sure of what to expect under the new management practise What strategies were used to counter the resistance? Well, it was a little difficult to counter such resistance. However, the new management responded appropriately to the resistance to change. The new management created the need to guarantee employee safety and fair working environments. Clarke was positive about the ideas since he insisted that the employee was important for the organisation. On the first week after Leahy’s resignation, there was many forums that were conducted throughout the organisation in presenting the change process that occurred in the organisation. The employee’s response were noted and responded to accordingly. Additionally, it was important to use forums for the practices since they presented the employee’s needs. What are some of the effects of resistance to change? Resistance to change has a profound effect on the overall organisational process. Employees that were resisting change were a stumbling block to the smooth flow of the company logistics. Resistance to change result to reduced performance levels of the employees as a result of reduced motivation. Since Tesco operates as a service industry, reduced motivation is projected to the customers such that the customers will not be satisfied with the services offered. Nevertheless, 20 percent of the workforce resisted the change process, as such, the sales from the stores were affected in the first two weeks after Leahy’s resignation. Were the employees contended with the new leadership? As such, what strategies did Clarke use in this regard? Although the employees were unsure of the new management, they were convinced that Clarke’s leadership was proficient in maintaining the competitiveness of the company. Interestingly, Clarke made the employees feel as though they were shareholders of the company. In this sense, the employees treated Tesco as their own company as such, the workplace productivity was greatly improved. What was Clarke’s leadership style as such, was the leadership style was applicable in the change process? Yes it was. Clarke’s transformational leadership style was applicable in managing the change process. This was important since he had to transform the employees such that they were inclined to the change process and get acquainted with the new leadership. Did the company achieve sustained change under Clarke’s leadership? Yes, over time the company has sustained its competitive advantage and that it has performed well under different market conditions. It is evident that the company has shown a considerable dominance in the market although it has experienced reduced shares over time. For instance, from July 20th 2014 the company saw a considerable decrease in its overall share in the market. With the opening of two stores namely Aldi and Lidl the company has experienced improved shares up by 32.2 as opposed to FNY 2013. Read More