Managing Organizational Change: Key to Efficiency and Productivity - Essay Example

Managing Organizational Change: Key to Efficiency and Productivity ___________________ Post-Graduate - Division of Project Management University of Northumbria, Newcastle upon Tyne Abstract The purpose of this paper is to assess the value of change management in the profitable operations of organizations. Thus, it scanned the available literature for definitions of organizational change management, its content and process dimensions, the elements and principles of change management, the possible outcomes of a good change management, as well as the likely obstacles to change. These data were related to the experience of Northumbria University, which is pursuing a change management strategy in its entire operations to cope with a government policy that affected its principal source of income. The paper provided evidence that Northumbria was off to a good start, although it is setting higher targets. Keywords: change management, organizational change, project management. _________________________ BE1022 Assignment 1.0. Introduction 1.0.1. Change For organizations, change is a challenge that may be imposed or initiated, the result of a merger, the installation of a new IT system, or the setting of a new company direction (6). The changes that often confront present-day businesses include globalization, new technologies, stricter regulations, increased competition, pickier customers, different market behavior, social and political upheavals, higher costs of labor and materials. These are the external forms of change, over which an organization exercises little or no control, and the common response to such changes is either reactive or proactive. The internal types of change may range from lack of employee initiative and motivation to faulty operational processes and low productivity, which may have been triggered by the environment or outside events (14). These changes lie within the organization and can be managed and controlled. 1.0.2. Change & Project In the study of organizations, change is any external or internal factor that could bring operations up or down. A project for an organization, on the other hand, may be a workload or routine task, a goal that requires the generation of new ideas, or a problem that needs to be solved. As the goal of an organization, it calls for the commitment and involvement of all participants for the success of the project (8). Thus, a project organization is often used as a means of meeting the demands of a project and the environment, or the change that an organization needs to deal with. This in effect is how the purposes of change and project overlap. Studies of selected Dutch organizations by Hovmark & Nordqvist (1996) showed that the introduction of a project organization in meeting the demands of change in the business environment enhances the commitment, dynamism, support, solidarity and communication among the people in an organization. The studies also indicated that a well-chosen project may succeed with or without project organization and management, but a judicious project management can be useful in improving the chances for the success of that project. The most important thing is the project managers must be focused on the project and must support the organization's need to adapt to changes and cope with the uncertainties in the business environment. (8) 1.0.3. Change Management The task of change management is to bring order to a messy situation (14). Essentially, it seeks to magnify and systematically handle all known and unknown elements in the business environment that could affect the efficient and profitable operation of an organization (13). In most cases, change management involves a problem, which is addressed by transformation, reduction or application. By transformation, the management task is to change the situation from a "problem state" to a "solved state," while the goal in reduction is to lessen the magnitude of the problem to blunt its effects on the organization. In application, the organization calls in specialists to transform, reduce or eliminate the problem (21). There is always the option of doing nothing and leaving things as they are but management scholars have consistently and strongly questioned this course of action (12). 1.0.4. Change Management Concepts Change management operates under four basic concepts. One is called empirical/rational because it assumes that all people listen to reason and that if management communicates the proposed change effectively throughout the organization and incentives are offered, the change will be accepted without resistance. The second concept is described as normative/re-educative since change is based on redefining and reinterpreting existing norms and values to give way to new ones. The third is tagged power/coercive because it is based on the exercise of authority and the imposition of sanctions. The fourth concept is environmental/adaptive because it seeks to build a new organization, gradually transforming the old structure into a new one (14). One of the more popular concepts describes change management as a process that follows the ADKAR route, which means awareness, desire, knowledge, ability and reinforcement. In this theory, change management starts in an organization by promoting an awareness of why change is needed. The next logical step is to foster a desire among the organization's staff and employees to support and participate in the change process. This is followed by efforts to provide these employees with appropriate knowledge on how to implement change, which basically means the ability to handle the new process. The final stage calls for the reinforcements to sustain the momentum of change (7). 2.0. Perceived Problem 2.0.1. Higher Education For many years, the UK policy of democratizing access to college education was carried out by funding polytechnic schools because these institutions tend to attract students from lower income families more than other educational facilities do. This works like a subsidy scheme, in which the state shoulders part of the costs of educating people from poorer backgrounds so that no one is denied a college education for reason of poverty. Lately, however, it was realized that polytechnics are inherently limited to practical and technical courses. The emphasis being placed on polytechnic schools in effect discouraged poorer students from obtaining higher education in liberal arts, such as the arts and humanities, natural and social sciences, including specialized courses like law and medicine. These course offerings are available only in universities. Thus, the main idea behind the enactment of the Further and Higher Education Act 1992 was to ameliorate this situation by encouraging polytechnics to transform themselves into universities so more learning institutions can accommodate lower-income people in aspiring for higher levels of education in liberal arts. Under the Further and Higher Education Act, the Higher Education Funding Council for England (HEFCE) was created to implement the new directions set by the Act, which are to support: 1) the full-time education of all people in the 16 to 18-year-old age bracket, 2) the part-time and full-time education of those over 18 years of age, and 3) the education of persons with learning difficulties. The third population segment is a new target of the higher education program, which refers to persons suffering from dyslexia who are usually educated in special schools that are few and far between. The objective of the Further and Higher Education Act is to widen the educational opportunities for this group to include a university education. In pursuit of the above-cited three goals, the Act provided for the reconfiguration of the polytechnic institutes into universities. A wide-ranging assessment of the involved schools were conducted to see if they help provide higher education to the three targeted population sectors based on their course offerings and the socio-economic profile of their students. Those who fail in the assessment were subjected to funding cuts. 2.0.2. Differences between a Polytechnic and a University As polytechnic, a school is devoted to applied sciences and technical arts. A university, on the other hand, is concerned with higher branches of learning, offering various under graduate, graduate and professional courses leading to bachelor, master and doctorate degrees. In UK, a polytechnic is usually a state-funded institution highly dependent on government largesse for its survival. As a government-funded institution, Northumbria was under the control of local authorities, averse to taking risks, focused on full-time and part-time programs for HEFCE-funded students and its teaching and support staff had strong representation in the school's labor union. That was the configuration of Northumbria before 1992, such that its day-to-day management and operations were handled by a committee with a strong government representation and may thus be described as a bureaucratic structure. In such a setup, it is averse to risk and concentrated on the full and part-time programs for students funded by the HEFCE. The operating environment for the school has changed drastically in the 12 years that it ran as a university. The most significant of the changes is the reduction in government funding, which required a re-evaluation of the school's mission and structure. For this reason, organizational change is the only way for the University to achieve its growth objectives under the new configuration. 2.0.3. Northumbria: Past, Present and Future In 2001, Northumbria was adjudged the "Best University of the Year" by the Times of London. This was some 10 years before the University took the initiative to diversify its income upon realization that it had been too dependent on government policy and funds, particularly the HEFCE. As a university, Northumbria can accommodate more students from poorer backgrounds, which was the raison d' etre for the funding assistance provided through the HEFCE and the Further Education Funding Council (FEFC). For this purpose, the funding assistance received by Northumbria was increased from 36-million to 47-million pound sterling, of which 3.6-million pound sterling was allotted for teaching and 8.88-million pound sterling for research. On January 20, 2003, the employment and finance committee set new directions for the university, of which the primary aim is to develop a strategic growth framework that would allow the school to grow and diversify its income base in ways "that generate a sustainable investment capability to support its vision to be one of the world's leading teaching and learning universities." In line with the academic development plan that is subjected to a review from year to year, the key growth targets would be the HEFCE-funded UK students, internal recruitment, international franchises, distance-learning students, corporate partnerships, NHS contracts and commercial activities. The university wants to establish its reputation and strength on the size of student population, its global reach, resources and sustainability. 2.0.4. From Polytechnic to University As a university, Northumbria began to wean itself from its over-dependence on government policy and funding by diversifying its income base. The centerpiece of the change from a polytechnic to a university was the expansion of the study programs to 90, bannered by all the 30 most popular courses, of which the only two missing are medicine and music. In terms of quality and standards, these programs have been rated "excellent" by over 30 professional bodies. The key challenges that face Northumbria as a university include demographics, the impact of the tuition fee cap removal, the upward pressure on pay scales, the highly competitive international market, the strengthening of its research base and income, the strengthening of its position and brand, further estate development and development funding. Northumbria, like most UK universities, generates an investment amount of less than 3 percent from its annual income. This is not enough to sustain a long-term strategy of aggressive investment befitting a university. The obsession is to secure an annual investment surplus of at least 6 percent of income as soon as possible. 2.0.5. Options The reduction of government funding forced Northumbria to re-evaluate its structure and mission, and organizational change was unanimously recommended for the school to achieve its growth objectives under the new setup. Part of this structural change was the renaming of the school from the cumbersome University of Northumbria at Newcastle to simply Northumbria University. It took 18 months for the decision to be finalized, with the student body given a voice on the matter for the first time. The new name represents a desire of the school to project a clearer, more popular and distinctive image. Among the other areas affected by the change were the school's relationship with stakeholders, its work patterns, business processes, IT systems, roles and responsibilities, the supply chain, product quality, quality of globalization, legislations and markets (3). Northumbria has always the option of doing nothing and effecting no change, but management experts have consistently questioned this course of action (13). In keeping with its new image and processes, the overall goal of the corporate plan for 2007-2012 is the continuous refurbishing of facilities on the belief that good facilities would attract quality staff and students into the university. Despite the new experience of growth in money terms, financial management still needs polishing because of a 4 percent deficit and an audit has revealed a multitude of problems that still need to be addressed. For the past five years, a yearly decline in student applications was also noted. 2.0.6. Outcomes of Change Big strides have been made since Northumbria set a new mission and vision for itself as demanded by the situation. After 10 years of the change, the university achieved a stronger financial and academic position. This became possible because of the vigorous support and commitment to the change shown by the board of governors, the finance and audit units, the senior management team, the academic schools and service departments led by the deans and directors. For example, the financial picture looks rosy enough although it can stand more improvement. Because of newfound financial awareness and management, the university's income grew to 151-million pound sterling in 2006, up 39 percent over the 2005 income. As a result, it was able to repay 33-million pound sterling in loans, increased its working capital by 12-million pound sterling and realized an operating surplus increase from a negative 4 per cent to a positive 8 percent. The school also managed to raise funds for the 102-mllion pound sterling East and West City Campus, which earned the admiration of The Guardian as "one of the best city campus developments in the country." The literature on change management suggests that successful handling of change allows an organization to maximize use of new technologies and organizational process or design. 3.0. Theoretical Concepts 3.0.1. Perceptions on Change Management The problems in change management have both content and process dimension because organizations fall under different categories or groupings (14). There are organizations engaged in manufacturing, retail, financial services, healthcare and, in the case of Northumbria, education. Some organizations are non-profit while others are profit-oriented, some are regulated and some are not. In effect, no two organizations are exactly alike as to nature of operation and business. For this reason, organizations need to deal with different dimensions of change, and they have to do it to keep pace with the rapid evolution of business and development. Thus, organizational change is undertaken to align the organization's structure with operations, people, resources and strength to meet the ever-changing nature of the business environment in which the organization operates (6). During an organizational change, an organization transforms its resource base; adds on new functions and uses; alters the dimensions of its survival and growth, social benefits, products or services, customer satisfaction; and gives a new face to materials, money, human efforts, information, etc. (12). There are some 1,000 models of change management in circulation, which include Kathleen Dannemiller's "Wholesale Action" model, the MSP model developed in UK for public service projects, the "Theory of Constraints" model and the best practice model. All these change management models can be used to clarify and simplify complex theories and relationships, as well as provide a useful structure for less articulated concepts by focusing on the main elements and ignoring the less important details. In effect, the organization is prevented from being sidetracked (4). 3.0.2. Types of Change Organizational change refers to total change but there are specific organizational changes such as replacing the recruitment process or offering a new course in the case of educational institutions. It involves not only the way people in the organization work but also the way the organization thinks (10). The major types of change include re-branding, restructuring of business units and introduction of IT systems. Some organizational changes that are partial in character intend to make projects the vehicle for infusing a new sense of dynamism in the organization, while others are carried out simply to understand the desires and behaviors of the target population to forge a better working relationship. The total organizational change is typified by British Telecommunications, which abandoned the mobile telephone market to concentrate on the provision of IT, broadband and land-based telephony. Other examples were the changes implemented at IBM, which shifted from computer hardware to IT strategy and business solutions consultancy, and Wimpey & Tarmac, which engaged in an asset swap to give its undivided attention to stronger business areas. 3.0.3. Principles of Change There are 5 key principles of change management: pain or threat, process, politics, payoff and persistence (4). 1) Pain or threat - most organizations adapt to change only when faced with a level of pain or threat that leaves them with no option. For example, Chrysler Corp. faced a severe financial crisis at one time. To save the company, the firm's managers and executives, employees and labor union agreed to a cut in their wages and benefits. 2) Process - the key strategy is to get the right change management process. The inappropriate process can spell disaster, as in the case of Electronic Data Systems, which used a change management process called "Management by Best Seller." Under this model, EDS took big risks and pushed "mega" deals. When those deals fell through, the company experienced a 53 percent drop in its market capitalization. 3) Politics - there is politics in all types of organizations and this can make a big impact on change. To manage change, it is necessary to probe the power bases in an organization, find out who the power holders are and what their objectives are. 4) Payoff - the people to be affected by change logically ask what benefits they would gain from it. It is important that management let these people see the benefits coming their way. 5) Persistence - organizations are inherently resistant to change, so there is a need to tell the people repeatedly that change is for the good of everybody. 3.0.4. Good Change Management Change management is a good one if the internal structures are so designed as to support the desired change. It is doubly certain that the problem the organization is trying to solve is the actual problem confronting it. All the people involved in the proposed change need to know what's going on so it is imperative that the rationale and circumstances behind the change are communicated effectively through the entire organization. It is also important that the people to be affected by the change must hear it right from the source with the minute details, such that the chosen course of action must be chosen and announced soonest. Then, when the process of change is in place, it is constantly followed up, re-evaluated and modified as warranted by the evolving situation. The stakeholders play an equally important role in change management, such that an input should be solicited from each and every one of them. Good change management makes the stakeholders accept the idea of change, so the reasons must be explained to them in a persuasive manner to get their concurrence. The organization also sees to it that the stakeholders respect the management team that spearheads the change or the former will be cool to the idea. There are four types of stakeholders linked directly to projects undertaken in change management: project owners, users, management and contractors. Among these four actors, the frequent sources of disagreements are changes and extensions of schedule, which are the key drivers for cost overruns that get higher as the project suffers more delays (15). To avoid such cost escalation, the recommended strategy in good change management is to avoid that kind of situation and reduce the negative impact from the forthcoming changes. The key word is "flexibility." Present-day projects are increasingly about value creation, organizational change, provision of business solutions and long-term benefits. This means that considering projects in terms of delivering a single product is no longer appropriate. It calls for a broader vision that incorporates all the elements of service delivery, organizational change, strategy and operational processes (13). 3.0.5. Changes in CM Concepts The earliest model developed by Kurt Lewin in 1951 views change management as a three-stage process, which consists of unfreezing, occurrence of change, and re-freezing. In the initial stage, the task is overcoming inertia and dismantling the existing mindset, which may be inhospitable to change. This is followed by the occurrence of change, when the people involved are confused because they don't have a clear idea of what will replace the old ways. In the re-freezing stage, a new mindset crystallizes and the comfort level returns to its previous place (2). The Lewin model has since given way to other models, such as the Kubler-Ross model, which anticipates five stages in human reaction to change. These are: 1) denial, when the people affected by change go through the "this can't be real" stage; 2) anger, in which the same people say "how dare they do this," 3) bargaining ("allow us to keep our old privileges and we will buy in"); 4) depression ("I can't bear this"); and 5) acceptance (the change is "going to happen anyway, so we're in"). In sum, the old models of change management postulate that change may generate confusion and anger at the start but in the end, people in an organization eventually accept the change (22). The later models of change management, such as Dannemiller's "Wholesale Action" and "best practice" models of Clarke & Garside, take care not only of relationships but also of processes. Thus, they yield these benefits: enable control over a dynamic and fluid process; enable organizations to measure their performance against the performance of others; enable identification of priorities; improve organizational learning; foster collaboration between various units; and resolve conflicts (4). 3.0.6. Drivers of Change Most working environments cannot without change management, which is never an easy task for several reasons: 1) different people react differently to change; 2) everyone has basic needs that need to be met without neglecting the others, 3) change often involves a loss of something, expectations need to be managed effectively, and 5) fears have to be dealt with (21). The known drivers of change in organizations include new technologies, globalization, mergers and acquisitions, reorganization, right sizing, re-engineering, centralization or decentralization (12). Of these elements, the most appropriate for Northumbria are globalization, reorganization and decentralization. 3.0. Test of Theoretical Concepts By adopting globalization as key driver of change, Northumbria takes advantage of the educational trend in which students from non-English speaking countries troop to the US, UK and other English speaking nations to learn the language of globalization. English is the language of globalization and the Internet, which explains why the teaching of English as a second language (ESL) is the world's most in-demand profession these days. At present, Northumbria harbors 3,300 international students, which makes it the 21st of UK universities with the highest number of foreign students. Under the change management program, the university seeks to increase this number from 12 percent to at least 20 percent within five years. On reorganization, Northumbria has taken the first steps by re-branding itself and transforming its polytechnic status into a university. In the process, the bureaucratic structure inherent in a state-funded institution has been dismantled and a new management setup established in its place. This reorganization and restructuring process is accompanied by an effort to decentralize management functions in the school. Even the student body was given a voice in decision-making. 5.0. Conclusions Organizations need to cope with the fast-changing environment that challenges their viability. In the case of Northumbria University, change came in the form of a government policy that encouraged the transformation of polytechnics into universities and reduced funding for state-assisted schools that have richer than poorer students in its rolls. Management scholars agree that organizations have the option to ignore and avoid such changes in the classic business-as-usual stance, but this has been compared to accepting a sad fate without doing anything about it. The literature on organizational change is unanimous on the view that changes should be managed and influenced so that they redound to the benefit of the organization instead of disrupting it. This was how change affected Northumbria. When the new government policy on the assistance program for higher education was announced, it suddenly occurred to the university that its over-dependence on government largesse made for a highly bureaucratic structure that discouraged progress on many fronts. That bureaucracy is generally counterproductive is precisely the rationale for the large-scale privatization of state-owned utilities. Experience shows that unproductive utility firms acquired new levels of efficiency and competitiveness after they were privatized. 6.0. 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