Strategic Management Analysis Managing change - Essay Example

?Change Management Introduction “Change is the only constant” is a very famous saying. Hence, managing change with the right strategies is very important at all levels - be it individual, corporate or political. The organizations and governments have to address fast pace of changes caused by many factors which are characteristic of the present millennium (Paton, Paton and McCalman 2008). One of the factors is the fact that the world has today become a global market. The creation of European Union has bridged the gap between the various European nations. Eastern economies have opened up and are on a growth trajectory. This has resulted in increased competition for market capture. Organizations also have competitive pressure for resources as people have realized the finiteness of natural resources and importance of finding alternate solutions for sustainability. With the evolution web based communications, the world has become even smaller and the physical boundary lines have disappeared. People’s lifestyles and hence their requirements are changing fast. Knowledge has become a key resource which makes skilled manpower a crucial component for growth. These factors impact the working of both public as well as private organizations. In the case studies under consideration, we will look at two types of organizations - one local public sector organization (Haram case study) and the other a private one (Marks & Spencer case study). Both these organizations have been facing issues on account of the changing environment based on the factors discussed earlier. Let us have a macro level picture of the issues faced by each. In our later sections we will also discuss the various theories related to change management and analyze the two organizations and their strategies in the light of these theories. The public sector organization under discussion is the Haram Commune. A commune is the basic level of the local government in Norway. Haram is an area of one of the counties of Norway, which is faced with a changing demographic profile of its population. As the area does not have sufficient career opportunities, it is faced with the exodus of young population seeking better career prospects outside Haram resulting in shortage of young, highly educated and skilled manpower. The future local job market is expected to be more knowledge based and hence requires highly educated workforce. The commune, which was so far a public service organization, needed to change its way of functioning to make Haram an attractive business destination. We will analyze the various strategies and their outcomes in our later discussion. Our second organization, Marks and Spencer, had been very successful till 1998. However since then it started facing losses on account of increased competition, lack of ability to change with time and risk avoidance strategies. The case later analyses the various strategies employed by two CEOs, Holmes and Rose, with the aim of turning the company around. We will analyze the various strategies in our later sections and also try to see what could be a sustainable change management approach. Literature review Looking at the importance of change for today’s organizations, change management has been an important subject of study and a lot of research has been done in this regard. Some researchers suggest a transition change model whereby “four interlocking management processes lead to” implementation of sustainable change in an organization (Paton, Paton and McCalman 2008). These processes are described as – trigger layer, vision layer, conversion layer and maintenance and renewal layer (Paton, Paton and McCalman 2008). Sustainable change management requires organizations to identify and open for change to encash upon opportunities rather than to overcome crises. They need to have leadership with a vision which establishes and tracks the future course of an organization. (Pettigrew and Whipp 1991). This vision should be converted to actual actions by gathering support within the organization. And finally, the change which has been brought about needs to be sustained by developing behavioral and cultural shifts and avoiding going back to old ways of working. Within an organization, various methods can be used to bring about the required change. For example, it can be top-down or bottom up, transformational or incremental and rapid or gradual (Adrian 2000). Top-down approach is characterized by higher management triggered change. Some researchers feel that this approach is required to bring about radical changes within an organization. However, many feel that this approach will bring about a resistance to change as it will be seen as being forced upon by the individuals or groups towards whom it is directed. A bottom-up approach with participation of the people affected by change will be better at bringing about a transformational change. It is also important to choose the right people for the implementation of change. As per Mabey and Salaman three main sources of change are line manager, external consultants and HR specialists (Adrian 2000). Each change agent has its own advantage but the external agents have some advantages over other. They bring fresh perspective to the problems and share experiences of handling similar issues faced by other organizations. However, they may not be able to understand the organization as well as the line managers or the HR specialists. Hence, a good approach would be to use these external consultants in the beginning of change process and let the internal agents follow through the rest of the process. Resistance is an important part of change as the process threatens the power positions of individuals within an organization. To overcome resistance it is important to determine the right speed of change. If resistance is high, change should be slow. However, the leader needs to analyze the situation well in advance and adapt change strategy accordingly (Kotter and Schlesinger 2008). If transformation is vital to avoid crisis situation, then change should be implemented at the fastest pace irrespective of the resistance. It is also important to predict the types of resistance before implementing any change and plan the countermeasures beforehand. Various strategies to counter change could be education, participation, facilitation, negotiation and coercion (Kotter and Schlesinger 2008). Kotter (1995) proposes 8 areas where an organization could go wrong and result in a failure to implement change. These are – not establishing sufficient sense of urgency, not creating enough leadership support for the change program, not having a clear vision, not communicating the vision in a rigorous manner, not removing hurdles which come in the way of the new vision, not planning for and creating short-term wins, celebrating too early for the small success and not making enough effort to institutionalize change in the corporate culture. (Baulcomb 2003). Researchers have evolved many models of change. Greiner’s model uses growth as “a factor for change” (Kondalkar). At an initial stage, growth is achieved due to the creativity of a founder. This poses leadership issues. To overcome this issue, management hires leaders who have achieved success in their spheres of work. This leads to a problem of excessive leadership as such leaders tend to keep power concentrated in their hands. This leads to bureaucracy. To overcome this issue, delegation of authority is implemented. (Pettigrew and Whipp 1991). This leads to lack of control. So the management has to issue rules within which autonomy has to be exercised. Thus, the employees have to work in collaboration. Another theory of change is Theory E and Theory O. Theory E propagates “change based on economic value” (Beer and Nohria 2000). Theory O proposes “change based on organizational capability” (Beer and Nohria 2000). In Theory E approach, shareholder value creation is the main measure of success. It involves a hard economic approach of reducing costs and improving profits. This approach to change requires hard measures like employee layoffs and restructuring. The theory O approach focuses on soft strategies. The focus of this change is not just economic value enhancement but bringing about a cultural change through trainings, feedbacks and employee commitment, etc. (Todnem 2005).The change management happens through bottom up approach which entails participation as against top down approach of theory E. Also, the use of consultants in this approach is to support the management in driving and shaping change rather than analyzing problems and providing solutions as in theory E. Bear and Nohria (2000) propose a hybrid strategy of both the theories for successful change management. For example, layoffs might be imperative for reducing redundancies within the system, but at the same time people participation and communication should be equally adopted. Incentives should be used to reinforce change and not drive it. Changes can be of four types - strategic, structural, process oriented and cultural (Kondalkar). Strategic change requires change of mission and needs a lot of planning before implementation. Structural change requires a change in the way an organization works. This is very important to reduce bureaucracy and implement fast decision making. Process change is required to keep up with the changing technology, markets and customers. Cultural change is required to achieve organizational mission. The top management plays a key role in effecting this change (Wiersema and Bantel 1992). Wiersema and Bantel (1992) found that firms which have the top management team showing following characteristics is more likely to undergo change than other – lower age, high education levels, having science based academic background, short organizational tenure but high team tenure and academic specialization heterogeneity. The role of top management in bringing about sustainable change is much more than just planning and delegating responsibility of change. (Schein 2004). They need to be actively and directly involved either themselves or through change ambassador to help the middle management in bringing about the change (Balogun 2006). They need to watch their own behaviour in the new environment and bring about the desired change in themselves. To ensure sustainable change in the organization, a Balanced Scorecard (BSC) is required to be developed. The scorecard helps in measuring performance of various units and aligns it to the ultimate strategic goals. It is also used to measure relationships with suppliers, customers and outsourcing vendors (Kaplan and Norton 2001(b)). It looks at business from four perspectives – customer perspective, internal perspective, innovation and learning and financial perspective (Kaplan and Norton 1992). Researchers have suggested modifications in BSC for public sector organizations since their objectives are not purely financial (appendix fig1) (Kaplan and Norton 2001(a)). Business Process Reengineering (BPR) has also found a special place in change management literature as a tool to bring about organizational change. BPR projects specifically bring about a change in the organization’s processes dealing with” management (styles, values, measures), people (jobs, skills, culture), technology and organizational structures” (Kettinger, Teng and Guha 1997). The overall objective of BPR projects is to provide improved services and products with respect to cost, customer satisfaction, quality and shareholder value. Case Studies The Haram Commune in the case is working towards developing economic activity within the region which in turn would help retain young workforce in Haram. The CEO had already developed a vision for his organization. This is a very positive aspect of a change program because without a direction no purpose can be achieved. However, one inherent drawback of this change program was the lack of initial planning. As seen in our literature review, change needs to be brought about with proper planning to achieve sustainable results. For example, the CEO should have first created awareness through communication within the organization. The blueprint of the vision and change strategy was not communicated to the individuals down the line. Though the commune came up with a strategic plan in 1999 there was no rigor around communication and participation. The change management approach was top-down. One step that falls within the framework of successful change management program is the fact that the CEO recognized the need for restructuring / reengineering the organizational setup. This was very essential as so far the corporation was organized as statutory services delivery firm. Such firms are characteristic of slow decision making, low communication levels and less focus on value creation. With restructuring, the hierarchy became flatter and employees were empowered to take decisions. The CEO also tried to bring about a cultural change in the organization through education. As seen in the literature review, education is an important source of bringing about a shift in thought process. It also motivates employees as they see their personal goals being achieved while fulfilling the organization’s goals. The use of external agent, PWC, as the source of change was a good strategy used by the CEO. As described earlier, using external agents brings fresh ideas into the systems and motivates employees. The PWC input and its duration (2 years) was seen as a way of enhancing personal skills by the employees and showed them the commitment of the organization towards their personal development. This was followed by a university program which was useful in converting vision to action. With the participation of politicians and Commune employees together in the various training programs a common ground was achieved between the two groups, which were so far considered as two separate work groups with no common purpose leading to conflicts. Thus, synergies could be achieved. A very important aspect of change management is cascading of learning to the employees at the lowest level. This was beautifully achieved as the new system encouraged managers to spread their learning. And finally the use of change management techniques like balanced scorecard and Change Kaleidoscope was a feather in the CEOs cap. In M&S case, the management tried to turn the company around by hiring leaders who had similar experience. Another important aspect of this change management case is the fact that the CEO was young and as per our literature review this is one of the factors that leads to change in an organization. The new CEO, Holmes, achieved initial success by using various strategies like hiring talented leaders from competitors, using new product innovation from other sources like Per Una and customer segmentation. He also focused on reducing redundancies by decreasing contractors and outsourcing directly. However, Holmes was not able to achieve results as per expectations. One of the reasons for this can be attributed to his lack of rigor around change. He did not formulate a clear vision for the organization. On top of this, he was working within the same organization structure. Some of the key elements of change are organization structure and processes. He did not create new processes or structures to support his strategies. M&S had a very complicated structure and decision making was slow. Holmes also failed to propagate himself as an expert and the external stakeholders considered him to be inexperienced. A leader is the critical element of change. If he is not able to build confidence in the stakeholders, the change is bound to be ineffective. He was working in bits and pieces and had no comprehensive strategic plan. He targeted one segment but overlooked the other. He was trying to focus on too many things at a time and starting too many new schemes without thinking of the implications. Though he said he was focusing on the customer, he was not able to incorporate the feedbacks into products and services. No benchmarking mechanisms were used and none of the BPR or BSC techniques were used to ensure a clear direction of change. The new CEO, Rose, started by identifying the inherent weaknesses in the system. He started to bring about a change by focusing on quick decision making, product innovation and focus on pricing. He had a clear vision and goals which he communicated to the investors. He was looking at changing the organization by affecting its culture, structure and processes. He also cut down the hierarchies and became more approachable for the operating units. He focused on suppliers and changed procurement processes. Another important aspect of cultural change which Rose adopted was employee participation and education. He also used technology which a critical element of change. Customer feedbacks were incorporated in the clothing designs and new designs were introduced fortnightly. He celebrated his wins and doled out bonuses to motivate staff for achieving desired results. Thus he used incentives as a means of reinforcing change. Eide (Haram case) and Rose (M&S) are similar in their change management techniques. Both had a clear vision and used the right change management techniques to achieve desired results. Both were able to motivate employees and avoid resistance through education and training. They were able to cut hierarchies and reduce bureaucracy. Haram Commune was more successful in using techniques like BSC to achieve results. They also used external agent to facilitate the change process in the initial phases which M&S could not utilize. However, Holmes lacked the basic vision for change. He was more inclined to knee jerk reactions to situations and had very short term focus rather than following a strategic plan. He could not incorporate stakeholder feedback into the system which resulted in complete failure of short term strategies. Conclusions and suggestions Successful change implementation is highly dependent on the leader. As seen in the literature review, change should be triggered as a proactive step rather than a reactive one. A leader should identify opportunities and bring about a change in the organization’s structure, processes and culture to cash upon those opportunities. In our case studies, both the organizations failed to do so. Both of them were facing performance issues which triggered the change process. If organizations could realize that change is a continuous process, they would be able to take advantage of the opportunities by changing fast. Incorporating a change culture in an organization is the best way to remain proactive. For translating vision into actions, it is important to follow a hybrid strategy of hard and soft techniques. For example, making structural changes to increase communication by removing layers of hierarchy as done by Rose in the M&S case study is a hard technique. However, taking care of employee’s personal growth through trainings and job rotation is a soft technique which can nullify the impact of hard decisions. Vision cannot be converted into action without employee commitment which will only come through participation and bottom up approach to change. There is no one right technique but a combination of different techniques can bring about sustainable change. Some of these are BPR and BSC. BSC has strategy in the centre and customer focus, innovation, internal processes and shareholder perspectives around it. Thus it helps to measure all these and help management see the direction of their strategies. This kind of structured approach to change can only help in bringing about sustained and continuous improvements within an organization. Complacency can be detrimental to growth and hence organizations should strive for continuous improvement. References Adrian, T., 2000. Managing change, Pearson Education India Balogun, J., 2006. Managing change: Steering a course between intended strategies and unanticipated outcomes, Long Range Planning, vol.39, pp 29-49 Baulcomb, JS., 2003. Management of change through Force Field analysis, Journal of Nursing Management, vol. 11, pp. 275–280 Beer, M and Nohria, N., 2000. Cracking the code of change, Harvard Business Review, May-June Kaplan, RS and Norton, DP., 1992. The Balanced Scorecard – Measures that drive performance, Harvard Business Review, January-March Kaplan, RS and Norton, DP., 2001a. Transforming the balanced scorecard from Performance Measurement to Strategic Management: Part I, Accounting Horizons, vol.15, no. 1, pp 87-104 Kaplan, RS and Norton, DP., 2001b. Transforming the balanced scorecard from Performance Measurement to Strategic Management: Part II, Accounting Horizons, vol.15, no. 2, pp 147-160 Kettinger, WJ, Teng, JTC and Guha, S., 1997. Business Process Change: A study of methodologies, techniques and tools, MIS quarterly, vol.21, no. 1, pp 55-80 Kondalkar, VG., Organization effectiveness and change management, PHI Learning Pvt Ltd. Kotter, JP., 1995. Leading Change: Why transformation efforts fail, Harvard Business Review, March-April Kotter, JP and Schlesinger, LA., 2008. Choosing strategies for change, Harvard Business Review, July-August Paton, RA, Paton, R and McCalman, J., 2008. Change Management: A guide to effective implementation, Sage Publications. Pettigrew, A. and Whipp, R., 1991. Managing Change for Competitive Success, Blackwell. Schein, EH., 2004. Organizational Culture and Leadership, Jossey-Bass. Todnem, R., 2005. Organisational Change Management: A Critical Review, Journal of Change Management, vol. 5, no. 4, pp. 369–380. Wiersema, MF and Bantel, KA., 1992. Top management team demography and corporate strategy change, Academy of Management Journal, vol.35. no.1, pp 91-121 Appendix Figure 1 – Balanced Scorecard for public sector organizations Read More