Change Management in GE, Ford - Assignment Example

Change Management Managing change is specifically a people`s issue. It is about influencing and motivating people`s behavior, about breaking old attitudes and habits and about creating an environment that is conducive to embrace change. The most critical ingredient in bringing about any change is leadership. It is the leadership by the top executives of an organization that is the driving force of an organizational change. Therefore leadership is the most essential ingredient for successfully bringing about change in an organization. Effective leaders address and acknowledge the challenges of change in an organization. Conger felt that there are four dimensions of bringing about change in an organization. The first is signaling or signifying the change, the second is enlisting the constituent, the third is aligning the organization and the fourth is facing resistance. Bringing about change is easier to say than implement because it is the nature of human begins to resist the unknown and the unfamiliar. Good change management is done by the leaders who shake up things and reveal the deeper problems that are often hidden by successes. Gone are the command and control days when executives would manage by decree. Acquiring missionaries is the most powerful way to expand the reach and duration of any change program. It cant be denied that threat of innovation and overall change in corporate strategy is difficult for the executives to face. Effective change agents know when to let go the old ways of doing business and when to forge ahead with the new. To create a change friendly climate, executives first signal the change by creating significant moments. By staging an event or story that resonates with the masses, change agents have greater opportunities to challenge the old system and brand the new initiative. Change agents need missionaries which have to be relevant story for relating to it. Leaders have to be honest with the missionaries about what the change will cost and what is the driving force that will take it to a long run. Other questions that need to be answered are what will be the consequences of bringing about such change?, how will the change be rolled out?, What tools and resources are available for making the change easier? It is essential for the leaders to mobilize their employees towards change by aligning it with the entire organization involving the board of directors to those that are involved in the basic support function. For example Welch of GE used the simple strategy “must do” for being number one or number two in every industry in which they operated. Choosing individual champions rather than committees for new projects enables the staff to feel a sense of ownership and control over the change that is taking place. Finally rewards, new metrics and milestones must reinforce the change taking place. Resistance is a must for implementing change. Every organization faces resistance from the staffs while implementing any change. One of the most effective ways of confronting the naysayers is to put them in a position where they can experience the change themselves. Even at the executive level there can be extreme competition where the top echelons are not willing to give up their power or comfort level. For any change effort to be successful, it is essential that the communication channels remain open so that resistance is transparent and the leaders can intervene. Short term performance improvements are very crucial in this aspect. They prove that change efforts can produce superior results than the old ways of doing business. Short term wins helps to overcome fear and uncertainty that frequently accompanies the change. In this way the organizations natural resistance to change is defrosted. The leaders` initiative helps to establish a sense of urgency throughout the company. A guiding coalition is assembled for overseeing the long and complex efforts. The compelling vision of the leader is linked to the clear and well coordinated strategic plan that is articulated and communicated to the far corners of the company. Change Management in Ford Ford realized quite early that a major opportunity to increase its profits was to take its American car manufacturing skills in other countries. With time it established its car manufacturing units in different countries like Europe, Asia, and Australia. Ford`s decentralization of the decision making authority in each global divisions which controlled its own activities helped in developing cars that were suited to the local markets. The result of such decentralization was that each division came to operate independently from its parent company in USA. For example in Europe Ford became the largest and the most profitable carmaker. Ford remained highly profitable until the Japanese carmakers flooded the market with small, reliable and low priced car. To curb this competition Ford concentrated more on producing fuel efficient cars and not on encouraging co operation between its units in Europe and United States. Later in 1990, Ford embarked on a large scale project for creating a new global matrix structure that would solve the decentralized task and authority related problems that were preventing it from utilizing its resources efficiently. In 2000, Ford laid out a remarkable plan about the way in which its global car making units could cooperate using a set of global support function like designing, purchasing, etc. This change was resisted by managers to preserve their country empires which resulted in the condition that Ford`s Europe, United States and Asia/Pacific continued to operate as a collection of different autonomous empires. This also resulted in the fact that Ford failed to lower its design and cost structure for making a world car that would be profitable and sold to customers all around the globe. After the failure of the plan, Ford restructured itself a number of times where it provided its managers a new set of authority over a specific global operation such as car design or manufacturing. Although it began to design new cars for global market, its new structure never worked for speeding car design and production even though it constantly changed its global line of authority and locations in which they operated for increasing its profitability (Hill, Jones, 2009,P.545). In 2006, Alan Mulally was appointed the CEO and president. He began to work out the change in Ford global structure for reducing costs and speeding product development. The reporting structured where Ford`s American unit reported to the CEO and its global and functional operations were reported to the senior executives, Mark Fields who is the president of Ford`s America`s operation and Mark Schulz who is the president of international operations. Mulalley also decided that downsizing program will be accompanied by a major reorganization of its hierarchy by flattening its structure and recentralizing control. He also focused on team work and adopted a cross functional approach for handling enormous value chain challenges. The position of international operations was eliminated and two levels in the hierarchy were also eliminated. The fresh organizational design defined each global executive`s role very clearly. Problems in Implementing a Multidivisional Structure Although large companies that adopt multidivisional structures outperform that those that retain functional structures, multidivisional structures have certain disadvantages. They are inherent in the way all structures operate and can be eliminated by good management. Corporate managers have to continuously pay attention to the way they operate for detecting problems. The authority relationship between the company headquarters and the divisions has to be specifically established. The multidivisional structure involves establishing a new level in the management. The multidivisional structure introduces a new level of hierarchy of hierarchy in the management at the corporate level. The problem for corporate managers is to decide the level of authority and control they should delegate to the divisional managers and the amount of authority they should retain at the corporate headquarters for increasing profitability in the long run. When corporate managers retain too much power in the multidivisional structure, the managers of its business divisions lack the autonomy that is required to change the business model for meeting the rapidly changing competitive conditions. The need to gain approval for corporate managers slowdowns the decision making process. Again when too much authority is delegated to the divisions, managers may have to start to pursue strategies that would benefit their own divisions but add little to the company`s profitability. The most important issue in managing a multidivisional structure is to decide what amount of authority is to be centralized at the headquarters and the amount that should be decentralized to the divisions. Corporate managers have to consider the company`s multi business model and thee strategies that will be affected by their decision making in the future. However the effect of environmental changes and the alteration of the company`s multi business model definitely changes the optimal balance between centralization and decentralization of authority. Corporate managers also have to emphasise on the profitability of each individual divisions. At times divisional managers may have to distort the information that the supply to the corporate managers for hiding the declining divisional performance or start pursuing strategies that would increase short run profitability but decrease long run profitability. Change Management in GE Jeffrey R Immelt, the chairman and CEO of GE has been trying to bring about a cultural revolution. He has been in a mission to transform the hard driving, process oriented company GE into one that is steeped in creativity and wired for growth (Hitt, Ireland, Hoskisson, 2009, P.143). He wanted to move GE`s average organic growth rate for increasing the revenue that comes from their existing operations rather than dealing with currency fluctuations. Immelt has initiated the change process by welcoming outsiders into highest ranks (Martin, 2010, P.58) He has been pushing more a global work force that will reflect the communities in which GE operates. He encouraged his managers to become experts in their particular industries rather than managing. Immelt has been successful in producing quantifiable and scalable process for coming up with money making. The members of the commercial council of GE holds phone meetings every month for discussing the growth strategies. New ways of reaching the customer and evaluate ideas from the senior ranks(DuBrin,2008,P.289) Every year the business leaders have to submit “Imagination Breakthrough” proposals that go before the council for review and discussion. The projects help in taking GE into a new line of business, geographic area and customer base. These abilities of the managers to come up with new ideas has shown improved customer service, greater cash growth, high sales instead of bottom line targets. Twenty percent of the bonuses that the managers get comes from meeting pre established measures of how well the business is improving in meeting the needs of its customers. Some of the significant changes applied by GE are: Bonuses were limked to new ideas, customer satisfaction and sales growth Billions of dollars were spent for funding “Imagination Breakthrough” for extending the boundaries of GE Experts were less rotated and outsiders were broght in for creating industry experts rather than professional managers(Shani, Pasmore, Woodman, 2012,P.32) GE made it compulsory for every employee to have at least a green belt training and wanted them to be involved in one quality control project to be eligible for promotion in the management level. Black belts and master belts were awarded for higher level of management.GE ensured that the best employees were trained for the black belts and master belts(Bertels, Rath & Strong, 2003,P.263) At GE management meetings, head of all businesses were encouraged to talk about the new initiatives in their own units so that the ideas and best practices could be transferred among the various businesses(Harvard Business School Press,2010,P.25) The business heads speak mainly about the methods that are used in every individual center for decreasing cost and increasing efficiency. Communication was emphasized in all direction i.e. top down, bottom up and lateral communication. Effective communication has helped in promoting GE`s informal culture. Every employee in GE is encouraged to express their opinion candidly to their superiors (Nilakant, Ramnarayan, 2006, P.70). The GE Change Acceleration Process measures the effectiveness of change as the product of quality (the technical aspect of change) and the acceptance (by those who embrace it). The only way to get a very high score is to score high on both the factors. For years GE has applied this thinking to the Six Sigma by giving change management methods and tools to the leaders and trained employees. References Hitt, M. A, Ireland, R. D, Hoskisson, R.E. (2009). Strategic Management: Competitiveness and Globalization : Cases. U.S.A: Cenpage Learning Martin. J. (2010). In Good Company: The Fast Track from the Corporate World to Poverty, Chastity, and Obedience. U.K: Rowman & Littlefield DuBrin, A. J. (2008). Essentials of Management. U.S.A: Cenpage Learning Bertels, T, Rath & Strong. (2003). Rath & Strong's Six Sigma Leadership Handbook. Canada: John Wiley & Sons Nilakant,V & Ramnarayan, S. (2006). Change Management: Altering Mindsets in A Global Context. New Delhi: SAGE Shani, A. B, Pasmore, W. A, Woodman, R. W. (2012). Research in Organizational Change and Development, Volume 20. U.K: Emerald Group. Hill,C & Jones,G.R. (2009). Strategic Management Theory:An Integrated Approach.U.S.A: Cenpage Learning. Harvard Business School Press. (2005).Managing Change To Reduce Resistance. U.S.A:Harvard Business Press. Read More