A Roadmap for Organizational Change in Parlexceltron Ltd - Case Study Example

A roadmap for organizational change in Parlexceltron Ltd – Proposal submitted to Mr. Martin Stevens in charge of production and operations management Introduction: Organizations are made up of people comprising of different levels of employees and the management. No modern manager would disagree to the fact that employees are one of the most important assets critical to the success of any organization. Human beings are emotional and complex beings, hence managing and leading them towards achieving an origination’s objectives in turn becomes complex. This is especially true when change takes place. Many factors like resistance to change, fear, uncertainty, organizational culture, structure, management policies, quality of leadership etc could become issues during management of change. This paper is an advisory to Mr. Martin Stevens of Parlexceltron Ltd, regarding issues faced by the company as it expands its business. It will provide a roadmap to be followed taking into consideration many theories and observations made by management experts over the years. It should be noted that there is no single formula to manage change and hence the roadmap will provide a solution based on theories and depending on the circumstances of the case. Brief review of the facts of the case: The situation in Parlexceltron based on information and facts provided by Mr. Martin is as follows. The company has earned a reputation among its suppliers as a reliable suppler of quality electronic components. As a result, business began to grow and the company decided to diversify into related areas. The problem started when Mr. Martin was brought in head the production and operations management department. The department was previously headed by Mr. Jon Jones, who resented the intrusion into his territory. Mr. Jones, a popular manager, was able to successfully transfer his feelings (openly) among his subordinates. Even thought Mr. Martin eventually managed to gain the admiration of Mr. Jones, the damage had been done. To complicate matters, the team spirit and bonhomie that used to exist was lost when the company decided to create new departments for diversifying its business. The decision was to restructure the company into separate board and module divisions. One was the different pay scales between the employees of each division and the other was a fear of retrenchment or job loss. Even though the company is able to fulfil its business commitments, the productivity and environment that exists at present is far from satisfactory. It is to the credit of the management that the company has been able to grow consistently over the years. But the rapid expansion has resulted in a situation where the company is unable to handle human relations (HR) problems. The management has rightly felt the need to bring in expert HR advice to correct the situation. The complexities of organizational change: It is obvious that an organizational change process is taking place in Parlexceltron Ltd. According to Kotter, the situation calls for both effective management of visionary leadership. “John Kotter argues that while management is about coping with complexity, leadership is about coping with change” (Grout and Fisher 2007, p. 7). As mentioned earlier, organizations are complex social systems and any change process has to be planned well. One of the essential steps needed for successful change is consultation with employees. All areas of change are to be communicated clearly to them and their inputs and suggestions incorporated into the change process (Dawson 2003, p. 29). It appears from the facts of the case that this was not done in a satisfactory manner by the management of the company. Many of the employees heard the news of the expansion and possible retrenchment from other employees or supervisors. The information should have come from the top management and not through informal channels. But the situation in Parlexceltron is not unnatural due to the fact there is a universal resistance to any form of change. “Employees resist change because it threatens their need for security, social interaction, status, competence or self-esteem” (Newstrom 2006, p. 330). The author adds that some organizational cultures have a natural tendency to criticize new ideas. Some managers become subject to what is called ‘analysis paralysis. Again, unless the need for change is communicated, employees will feel that things should go on as before. The management of Parlexceltron has erred in many of the areas mentioned above. The fear of retrenchment has created a sense of insecurity among employees. The different pay scales has brought about a statues (or self-esteem) issue. Moreover creating a new department has resulted in a change in the social structure of the company. What the company should now focus on is overcoming this resistance and effectively managing the change process. As mentioned earlier, organizations are complex systems. There are two approaches to managing change namely hard and soft approaches. According to Sisaye, a hard systems thinking is to be used in quantitative change, for example, it can be used to improve performance of an employee or quality of a product. A soft systems approach takes a more holistic view of the situation and will take into consideration the qualitative and emotional factors as well. The latter approach is favoured by behavioural and social theorists (Sisaye 2001, p. 43). As per the ‘Change Spectrum’ as developed by Paton and McCalman, managing change that involves people (rather than machines or technology) is highly complex and a soft approach should be adopted (Paton & McCalman 2000, p. 21). But there are other theorists who prefer to use a combination of the two approaches. It is seen that Parlexceltron has adopted only a hard approach in the change process. Qualitative factors like employee needs and wants have been ignored to a large extent. There are other specific theories and approaches to managing change and they include those by Kotter, Lewin, and Kirkbride. According to Kirkbride, changes can be gradual, revolutionary or unpredictable. He envisages three approaches to manage each of them namely modernist, sophisticated modernist, and post-modernist (Kirkbride, Durcan & Obeng 1994, p.158). In the present case, the change is in no way revolutionary or totally unpredictable. It was a planned change that was not managed properly even though it has elements of dynamism unpredictability. So the factors that come under the modernist approach will be more applicable here. They include incremental, piecemeal, evolutionarily and linear change. But a word of caution regarding a rigid approach has to be mentioned here. Sisaye (mentioned above) had stated that any systems approach will have an element of vagueness (or unpredictability) that should be expected in a given situation. The same holds good in this instance also. The management should not expect seamless incremental or piecemeal growth as it does not exist in a real life situation. The unexpected or sudden order received by the company from the Far-East is an example. In this context, another theory which was borrowed from life sciences into management realm is also worth a review. An unstable external environment and the unpredictability of human thought and action has attracted the application of a line of thought referred to as Complexity Theory. A dynamic environment, high levels of competition, globalization, and free trade are some of the other factors that contribute to the complexity. In this instance, the company is able to cope up with the external environment and even managed to maintain a very healthy growth rate. It is the internal environment (employees) that has caused confusion here. The management of an organization should be well aware of the intentions (aspirations, hopes, ambitions etc) of its employees. Shaw and Stacey, quoting Stern, write that one “cannot function with other human beings without reading their motives or intentions. This reading or intentions is our primary guide to responding and initiating action” (Shaw & Stacey 2006, p. 102). Parlexceltron has obviously failed to understand the intentions or emotions of its employees, especially those drawing a lesser salary. The company also acted in such a way that some employees felt that a downsizing was imminent within the company. One of earliest theories on change management is the one developed by Kurt Lewin. Often referred to as the ‘three step model’ it involves unfreezing, transition, and refreezing of employee mindset regarding change. The current mindset has been established over a period of years and it needs to be changed (unfreeze), after which a transition has to be made into the new (transition), which is willingness to change. Once this has been assured, the next obvious step is to refreeze it place so that the changed organization can function efficiently and smoothly. In this instance, the mindset of the employees of the company has not been unfrozen. It still retains the old attitude when the company was growing. The problem with Lewin’s model (and those propounded by theorists like Tosi) is that it is too simplistic in today’s complex environment. Other more detailed models which include those developed by Kotter and Hughes will also be discussed here. Kotter is one of the most widely quoted theorists in the field of change management. “In 1995, John Kotter identified a number of steps [eight] that managers could take to create enduring change. Those steps build on each other and boost the chances that a transformation effort will succeed” (Harvard Business School 2005, p. 71). The first step is to create a sense of urgency within the company with regard to the need for change. The next step is to form a group or coalition comprising of influential employees who support the change process. It should also have a change agent and representation from the top management. A future direction or vision for the company has to be created and communicated in clear terms all the employees. Even so, there will be some who will create problems or obstacles. So the next step is to identify and remove these obstacles. The change team should identify short term targets that will eventually lead to the overall objective of change. Unless short term targets are met, enthusiasm and motivation may be lost which will make the whole process ineffective. The management should then be able to build on the short term targets or changes so that momentum is not lost. The final step in the sequence (similar to refreezing) is to cement the changes so that it stays in place. In the case of Parlexceltron, the company has not followed any of these steps in a serious manner. In fact, none of these steps have been followed in a sequential manner. It only shows the inexperience of the management in a new and changing environment. Hughes’ Behavioural Model of Change does not provide sequential steps as in the case of Kotter. It provides an overall picture of all the elements that can influence change within organizations. He also focuses on the individual employee rather than seeing them as a group. Once the initiation or decision for change has come into existence, two sets of factors can have an influence on the whole process. On one side, it requires employee participation, trust, and two-way communication between management and employees. The other set include factors like organizational culture, influence of groups, past influence, and attitude of key players (Hughes’ Behavioral Model for Change, provided by student). Hughes does not provide an action plan, but only an assessment of what could happen once these factors are identified. For example, a negative outcome could result in resistance, opposition, or just tolerance and disinterest. The positive outcome will range from plain acceptance to active participation in the change process. Here again, the company has failed to make an assessment of the factors. It appears that the mood is one of tolerance which may move towards resistance or outright opposition if not corrected. The word mutiny as used by one of the leaders is indicative of this fact. Leadership style is another factor that could determine the outcome of effective organizational change. There are several leadership styles that have evolved over the years, and they include, autocratic, servant, delegative, watchdog, and participative approaches. The current view is that there is no one single approach to leadership that is suited in all instances. But theories on organizational change stress the importance of employee participation. It appears that the management of Parlexceltron has been autocratic to a large extent with regard to the current change process which is not the correct approach in such a situation. Another issue that is present (as per the reactions of some section leaders) is employee stress. One of the leaders even went to the extent of saying that the announcement of expansion plans could result in a mutiny. Stress can increase productivity and motivation to a certain extent and in some instances (Davis, Eshelman & McKay 2008. P. 12). For example providing challenging tasks to employees can increase stress levels which in turn can increase productivity. But productivity will peak at a certain level after which stress becomes counter-productive. In this instance, the stress has not been caused by (challenging) tasks provided or even if that was the case, it has not been managed properly. The stress has primarily come about due to issues regarding pay, overwork and fear of retrenchment. According to a study by the Chartered Institute of Personal Development (CIPD) organizational change itself can bring about negative or unproductive stress. If this is not corrected, the company will soon find productivity coming down drastically along with probable employee turnover. Roadmap for success: The Johari Window can help an organization to understand the gaps that exist between stakeholders in a given situation (World Bank 2007, p. 1). Hence a representation of the current situation is provided here which can be used to bring down the gaps between employee needs and organizational goals. Employee awareness Lack of employee awareness Management awareness Perceived retrenchment Opposition to change Organizational change process Salary difference Need for change Job security Lack of management awareness Actual employee needs and aspirations Complexities of organizational change (Johari Window of the current situation in Parlexceltron Ltd It can be seen that both management (employer) and employees are aware of the change process taking place. The management should ideally provide the same compensation to employees of all departments based on qualification and the task involved. Again, both these stakeholders are aware that there exists a threat of retrenchment and opposition (to change) on behalf of the employees (Top left hand corner of the grid). The employers should take steps to educate employees regarding the need for change and also assure them that their jobs are safe (Top right hand corner of the grid). This paper will provide a picture to the management regarding actual employee aspirations and needs, which will correct the situation in the bottom left hand grid. Again, the roadmap and the change process will correct the situation in the bottom right hand corner of the grid. In other words, it will provide awareness to both stakeholders regarding complexities of organizational change. A force field analysis of the situation is also useful. “Force Field Analysis is a useful technique for looking at all the forces for and against a decision. In effect, it is a specialized method of weighing pros and cons” (Mind Tools 2009). Force field analysis of Parlexceltron Ltd The diagram essentially involves forces that support change on the left side and forces against change on the right side. Weighted scores should be provided for each of these forces which will provide an overall view of supporting and opposing forces. If the opposing force score is too large, it is better to abandon any plans for change. On the other hand, if they are somewhat balanced and if any steps can be taken to reduce it (like implementation of this proposal) then the change plan should be implemented. It is estimated that implementing this proposal will bring down resistance and will result in the balance tilting in favour of forces that support change. In this case, proper implementation of this proposal will bring down the resistance score to 6. A soft approach should be taken in order to make the employees understand the need for change and to assure them of their security. It should also address issues of parity of pay and social and emotional issues. Once this is achieved, a hard approach at improving performance and commitment can be taken. The company should form a change management team and should also appoint a change agent. One good candidate would be Mr. Jon Jones, since he is shown as having a strong influence over other employees. He wields ample informal power and may be effective in bringing down the influence of the organizational politics that is present in the company today. A stress audit to gauge the extent of the problem will also be useful for effective implementation of the process. The management is advised to take into consideration the steps formulated by Kotter and implement the change plan based on it. It should also review the situation using Hughes’ model of organizational change. It can be seen that employee reactions are nearing the opposition stage as shown in the model. The implementation of Kotter’s steps will help to bring their attitude towards the ‘active cooperation’ stage. Employees should then be provided challenging tasks so that they will be motivated (stressed enough) to improve productivity and commitment. An open channel of communication should be ensured so that future misunderstandings do not occur. The management should adopt a more participative style of leadership in this situation. It is true that the company was a family run business, but it should now take a more professional approach since it has ample scope for expansion. Conclusion: A change management proposal has been provided to Mr. Martin Stevens regarding the issues that have come about due to expansion plans by the company. It is seen that the management is not familiar with human relations management and has resulted in a lot of problems cropping up in this area. This proposal has taken into consideration the present issues and had provided a roadmap based on theories and observations of management and sociology experts. There is no single solution to such HR issues and a combination of approaches has been suggested here. If implemented properly, the company can sustain its growth in partnership with a committed and motivated workforce. References Davis, M, Eshelman, ER & McKay, M 2008, The relaxation and stress reduction workbook, 6th edn, New Harbinger Publications Dawson, P 2003, Understanding organizational change: The contemporary experience of people at work, Sage Grout, J & Fisher, L 2007, What do leaders really do? Wiley Harvard Business School 2005, The essentials of managing change and transition, Harvard Business Press (Hughes’ Behavioral Model for Change, provided by student). Kirkbride, P., Durcan, J. & Obeng, E 1994, Change in a chaotic post-modern world. Journal of Strategic Change, Vol 3, pp 151-163. Mind Tools, Force field analysis, Mindtools.com, viewed 25 December 2009, Newstrom, JW 2006, Organizational behaviour: Human behaviour at work, Tata McGraw-Hill Paton, R & McCalman, J 2000, Change management: A guide to effective implementation, Sage Shaw, P & Stacey, RD 2006, Experiencing risk spontaneity and improvisation in organizational change, Taylor & Francis Sisaye, S 2001, Studies in managerial and financial accounting – Volume 10, Elsevier Science World Bank 2007, Johari Window, WBI Evaluation Group, viewed 25 December 2009, Read More