Leadership and Change Management: The Caterpillars Club and the Child Concern - Research Paper Example

Leadership and Change Management Executive Summary This report illustrates change management process recommended in the merger of two charitable organisations namely, The Caterpillars Club and the Child Concern, both involved in children’s welfare activities. This process is illustrated by the operational director of The Caterpillars Club who is assuming the responsibility of the change agent in this purpose. The entire process has been illustrated based key models proposed by different researchers for different purposes. Firstly, the process begins with assessment of the situation and readiness to change based on McKinsey’s 7-S model. Next, the process of change has been described in a step-by-step manner. Further, applicability of Seiler and Pfister’s five-factor leadership model to the present situation evaluated. Change implementation has been proposed based on Kotter’s eight-step model with emphasis on communication strategies and managing the transition phase of change. Finally, recommendations to sustenance of change have been proposed. Leadership and Change management Introduction Organisational change is a complex and challenging task considering various hurdles such as cultural differences, resistance to change, differences in leadership style and management, governance and political issues etc. Yet, change is inevitable for organisations to improve their existing situation and to sustain their existence. One such situation is faced by the two charities working for Children’s welfare, The Caterpillar’s Club and the Child Concern; the CEOs of these charities have decided to merge in order to sustain their existence which depends upon the funding from the welfare Council. Both these charities are established and have distinct management styles and organisational cultures. This report illustrates the approach taken by the operational director in the capacity of a change agent achieve a successful merger of both the charities. As the internal change agent, I own the responsibilities of effecting a successful change at the organisational level in coordination with other members of the board. This entire change process entails various activities related to organisation and employees such as work and culture transformation, change alignment and vision setting, strategic and change partnerships, organisation communication, employee learning and development, job design and restructuring, performance management and coaching, conflict resolution and resistance handling. In short, change agent’s role is illustrated as a diagram (see appendix 1.1). As the operational director of The Caterpillars Club, my knowledge and experience with this organisation will be of great help in understanding the existing strategies and relating them to future goals; however, formulating future strategies in relation to the other organisation would be challenging. In the change process, gaining trust and cooperation from other stakeholders in both the organisations is essential. In addition, an unbiased view of current assignments of both the organisations needs to be taken so that effective future strategies can be formulated. Another important requirement to effect successful change is ability to build strong interpersonal relationships with employees of both the organisations. Commitment to learn and ability to influence are other essential qualities. Overall, as the change agent, I should be able to add value to the change process in the form of successful merger, which may be measured in terms of increased organisational performance, and improved quality and efficiency (Gilley et al, 2001). Considering that this change is episodic and planned, it can be categorized as the punctuated equilibrium model for change. Researchers argue that change process in any organisation can be categorized as either incremental, punctuated equilibrium or continuous types because all the three phenomena seem to interplay. On this aspect, Brunes (2006) argues that one should consider the sectional, temporal and organisational life cycle differences while typifying the change process. Nevertheless, the present situation renders this change as the punctuated equilibrium one because changes meant to be achieved are planned and intentional, goal-oriented and rational. Romanelli and Tushman (1994) described the punctuated equilibrium perspective as the state which depicts organisations as evolving through relatively long periods of stability (equilibrium periods) in the basic patterns of activity that are punctuated by relatively short bursts of fundamental change (revolutionary periods.) Revolutionary periods substantively disrupt established activity patterns and install the basis for new equilibrium periods (cited in Burnes, 2006; 148). Based on this explanation, it is evident that the merger would require radical changes in critical organisational strategies in order to achieve the organisational goals. Current situation and its assessment: Change specialists have advocated that systems thinking would be ideal for assessing situations for change as it will help in defining present situation and understanding gaps to be filled (Cameron & Green, 2004). Holbeche (2005, 164) asserts, ‘systems thinking suggests that issues, events and incidents should not be viewed as isolated phenomena but seen as interconnected, interdependent components of a complex entity.’ Based on this view, assessment of current situation can be best done by adopting the McKinsey’s 7-S model, which will help in assessing like effects of future changes in an organisation or process. This approach will also help in aligning departments and processes during a merger and to determine appropriate strategies. Designed by Peters and Waterman (1982), this model considers organisation as a system made of seven key elements namely, strategy, structure, systems, staff, style, shared values and skills (Green, 2007). Of these seven elements, the first 3-strategy, structure, systems- form the hard elements because these are easily defined and can be influenced or modified to suit the situation. However, the latter four-skills, style, staff and shared values-form the soft elements as they cannot be easily described and are intangible (see appendix 1.2). Assessment of the situation based on McKinsey’s 7-S model (Green, 2007): 1. Strategy: The present strategy of merging both the companies for achieving common goal of acquiring maximum funding seems lucrative from both ends considering the probable constraints that both might have to face in near future. Here, both the organisations would get mutually benefited by this deal. On the other hand, strategies would have to be changed for both the organisations to achieve individual objectives as well as comply with common goal of sharing the funds. In this process, demands from customers, environmental and legal issues, resistance from employees need to be tackled. 2. Structure: The present individual organisational structures in both companies have been successful. Post the merger, the entire structure and number of employees would require modification. It is presumed that these changes may result in losing some senior employees. Decision making authorities and communication strategies would require changes. 3. Systems: Reports indicated that the financial, HR, IT etc have been working well for both the organisations; however, the financial system needs revision post merger, which will impact other systems also. This would require changes in the controls, measurement system, rules and policies that should be accepted by both the organisations and beneficial for both. 4. Staff: The present staff is able to meet all objectives of respective organisations; this staff would be expecting an elevation to their own roles and responsibilities. However, the merger would demand restructuring of staff, which will further bring changes to their positions. Overall, this could have a negative impact on their motivation and commitment. If a job redesign is considered, then altered competencies would pose greater challenges. 5. Skills: Considering the previous performance of both the organisations, it is evident that the staff’s skills are competitive and efficient. The Caterpillar Club is known for achieving sustained wellbeing of the local community; it also enjoys a good reputation for attracting users from all sections of the community. Child Concern is known for its excellent relationship with the council and their quality of work on children’s matters. It is involved in key decision making related to the Social Services and other trusts. Post merger, some of these attributes might be lost because of employee turnover. Moreover, changes in structure and responsibilities could lead to gaps in required competencies. 6. Style: Merger would result in change management style as there would be addition and deletion of key management positions and people. Hence, these changes would bring about questions of cooperation and competitiveness among staff and the merged board members. Furthermore, these changes would also challenge the teams’ performance within the organisation. 7. Shared values: Both organisations have respective values, which post merger would be required to be modified or changed according to the new objective. This would bring about changes in existing corporate culture determined as well as management style. Gaining acceptance of the new shared values would be a challenge. Based on these assessments of the seven critical elements, gaps can be identified which will act as guiding principles to formulate the change implementation plan. A broader sequence of steps to change management: Effecting this merger is a complex and challenging activity for the management group. It would be best to cause this process in a phased and slow manner rather than in a short term and as a continuous process. Manns and Rising (2010) have indicated that any change will be successful if carried out in a step-by-step manner with a vision including short-term goals and willingness to adjust plans throughout the process. A broader sequence of activities in this process should include creating a vision; assessment of the situation; integrating executive and leadership group; cultural integration process; employee interaction and feedback; implementation and testing phase; and stabilizing phase. Vision and Strategies: The first step to achieve successful merger would be to create a shared vision that would show the way ahead for both the organisations. Considering previous performance and reputation of both the companies, this merger would work best if both the charities become subsidiaries of a new Charity that will be the holding member of both, as described by Warburton (2001) as form 8 type of merger. This merger can be compared to Cameron and Green’s (2004) M&A classification in the category of Synergy or Integration. In either type, the process requires great efforts are required to achieve successful merger the problems of which usually involve issues with cultural integration, resistance from employees, and some administrative issues. Post merger, its success depends upon the governance and vision shared by both the companies involved in the merger. However, vision is the key element that will drive the organisation in the right direction. Assessment of the situation: Assessment of the situation based on McKinsey’s 7-S model would be of great help in understanding the seven critical elements of both charities. These critical elements need to be modified in accordance with the new vision and strategies. Next, evaluation of the existing skills and competencies in relation to required skills and competencies in both charities will help in understanding gaps and determine skill deployment in different functions. Considering the previous performance of both the charities, it would be best to retain previous skill deployment to the extent possible. Integrating executive and leadership groups: The process of merger needs to be owned by both the sides equally. For this, leadership plays a critical role at every level (Eisenbach, Watson and Pillai, 1999). The executive and leadership groups are involved in making new strategies and drive the change in their respective functions. Here, the executive management teams do the planning and organising related change activities, which are driven by the leadership teams by creating motivation and by helping members to cope and adapt to change. The process of formulating new vision, mission and strategies should be carried out by executive leadership team from both the organisations. Warburton (2001) asserts that the merger process should be kept as simple as possible. Significant number of knowledgeable and experienced representatives from both organisations would be a good practice to start the process. All organisations involved in the merger should follow ‘due diligence’ whereby every aspect related to the organisations’ financial, political, legal and other critical areas is made clear to everyone on the board. Cultural integration: Next step involves cultural integration, which Cameron and Green (2004) assert is very difficult in this type of merger. As quoted by Carleton and Lineberry, ‘cultural integration is an essential factor in implementing the new organisation’s business plan and gaining support for and commitment to the plan and to the new organisation rapidly from the organisation’s people’ (2004, p.89). Bijlsma-Frankema (2001) asserts the significance of leadership in achieving cultural integration between two formerly independent organisations. Bijlsma-Frankema (2001) outlines three key steps for cultural integration. The foremost player is ‘trust,’ which can be gained only through daily practices of sharing and exchange. Secondly, shared norms can enhance trust because they reduce chances of misinterpretations. Thirdly, establishment of regular dialogue between two groups can improve connectedness. Next, shared goals can foster cooperative behaviour and promote win-win situation. When members are set out to achieve common goals, monitoring of behaviour and providing feedback becomes important. Other important elements of cultural integration include handling deviance and conflict resolution. Further, constant reinforcement by leaders to eliminate feelings of insecurity can establish psychological safety and eventually eliminate resistance to change. Leadership model applicable to this situation: Application of the 5-factor leadership model described by Seiler and Pfister (2009) will be ideal in the present situation (see appendix 1.3). Leadership has been defined from many perspectives, mainly oriented towards people. The 5-factor model includes five critical perspectives that determine leadership behaviour: individual competence, group, organisation, context and situation. This model provides a comprehensive analysis of requirements of leadership behaviour in the present situation unlike many other models that mainly focus on single elements such as leaders’ attributes, people, and/or tasks. These five-factors cover the seven critical elements of organisation described in the McKinsey’s 7-S Model (see appendix 2.1). At the individual level, leaders require professional competence in the form of job knowledge in order to guide the staff towards achievement of desired goals. Strategic competence will aid in key decision making and problem solving thereby putting employee skills to right use. Self motivation, able communication skills, empathy and tolerance will help in establishing good relations with the staff and aid in cultural integration by gaining trust and creating a dialogue; motivate the staff and align them towards shared goals. These attributes will also help at the group level and in understanding group dynamics. Strategic competencies will help in goal setting, and in assigning right roles and deciding on right group norms. At an organisation level, strategic competencies would be required to decide strategic goals, internalization of processes and systems, and creating performance management system. Structural and process knowledge would be required to change and standardize processes between both the charities; manage knowledge transfer activities; and in performance management and feedback process. From a context perspective, leaders’ awareness of historical, geographical and cultural aspects would be necessary for making strategic decisions at organisational level and in job redesigning; knowledge of political, economical, social and legal aspects will aid in creating the right employment and non-profit business practices and opportunities. From situation perspective, leaders require clarity of information related to organisational strategies, goals, vision and mission and employee competencies. They need to have experience related to the work and be able to work under pressure. Effecting organisational change through Kotter’s eight-step model: Cameron and Green (2004) have put forward that Kotter’s eight-step model is the most congruent approach to organisational change. Considering the systems metaphor in present context, Kotter’s (1995) model can provide effective change through the merger. This model is most appropriate considering McKinsey’s seven critical elements and the five-factor leadership approach described in this context. Moreover, this model is applicable to individual, team and organisational levels, and is applicable to achieving planned outcomes (Cameron & Green, 2004). Kotter’s (1995) eight-step model to implement change: 1. Establish a sense of urgency: This can be done by making the board members and leadership team aware of the future changes to funding structure as decided by the Council and its impact on both the charities. This will also help in making them accept the need and urgency for merger. This team will further pass on the same information to their staff, thereby improving clarity for merger and minimizing potential resistance. In a sense, a readiness for change can be set. 2. Create a powerful guiding coalition: The executive board members and leadership team from both the organisations can form a powerful coalition team that will further decide new strategic goals, vision and mission of the newly formed organisation. This team needs to constantly practice and represent strong team work practices which will pass down in due course. 3. Develop a vision and strategy: A common vision needs to be created by the newly formed board members, which will be inspiring and guide the leadership and staff towards organisational goals. 4. Communicate the new vision: The vision formed needs to be communicated to every member of the organisation in every possible manner so that the vision and strategic goals are stamped on every employee’s mind. Communication of vision and strategies has a strong impact on individuals’ commitment and motivation. 5. Empower employees for broad-based action: Leaders need to find new ways of achieving the new goals and can give this responsibility to individuals to come up with new methods and ideas of completing the tasks. Empowering others will improve their commitment, reduce resistance, and enhance the process of accepting and embracing change. In turn these will improve cooperation, communication and coordination within groups thereby bringing people, from former different organisations, emotionally closer. 6. Generate short-term wins: Achieving long term strategic goals is very difficult if not measured on short-term basis. Hence, strategic goals need to be divided into short-term tasks, which are achievable in short term. Appreciating and celebrating these short-term wins will improve trust in leadership as well as commitment and cooperation among staff. 7. Consolidate gains and produce more change: Freezing on successful processes or activities will bring in sense of security and will keep staff aligned to the vision. Constant monitoring and feedback are also required to keep them aligned to their new tasks. However, staff needs to be encouraged to continue to try new approaches, which will keep them challenged and motivated. 8. Anchor new approaches in the culture: New approaches that produced successful results need to be communicated to all members so that everyone gains an understanding of new approaches and significance of such behaviours that promote innovation and ideation processes. Communication Strategy: As highlighted by Kotter (1999, 37), education and communication about change is extremely important in effecting any organisational change. Communication of vision, mission, strategy and values is extremely important and should be extensive reaching all employees of the organisation. Managers, as change agents, play a very important role in communication (Eisenbach et al., 1999). A few ways of communicating various aspects linked to change process like vision, mission, strategies, values and updates include team briefings, notice boards, newsletters, email communications, confidential help lines, conference calls, questionnaires etc (Cameron and Green, 2004). A combination of two or more, of all of these modes can be used to ensure effective communication process. Managing the transition: The entire process of achieving successful merger will take much more time than strategically planned. The planned time only accounts for time required to form structures, hierarchy, teams, formulation of strategies etc. However, gaining acceptance by staff and achieving desired outcomes cannot be judged by time. This depends on the leaders’ efforts and tact in dealing with new challenges that crop on a daily basis. These challenges could be in the form of resistance from staff, productivity losses, employees leaving the organisation, group gossips, conflicts and noncooperation etc. Therefore, it is very difficult to announce completion of a successful merger or achievement of successful change. However, certain key indicators need to be carefully studied during the entire process of change, which will keep a check on underlying issues from causing any devastative effects on the individuals and organisation. Firstly, communication is the key. Drawing from Nguyen and Kleiner’s (2003) postulation, as the change agent, I will ensure clear, consistent, factual, sympathetic and up-to-date information is provided to the staff on a regular basis. This will help in improving coping abilities as well as reduce gossips from having negative impact on the staff. This will also help in causing the desired change in organisational culture. Role and goal clarity will help staff alignment to goals and maintain productivity levels. A close watch on customer satisfaction and behaviour will help in retaining customer confidence. Customers need to be made aware of the new organisation and services. They need to be assured of the service that they had previously experienced, which will improve their confidence. Next, leaders need to be flexible in their approaches and allow innovation from employees. This will not only motivate staff but also speed up the process of change because opportunities for new approaches will increase (Nguyen & Kleiner, 2003). Recommendations and Conclusions: Finally, endurance of the new positive outcomes has to be achieved before declaring the merger as successful. Considering this merger as the punctuated equilibrium type of change, small changes that occur at various levels and times have to be constantly observed and recorded. Based on the outcomes of these small radical changes, the new processes need to be sustained. A strong monitoring system and effective communication are recommended. Leaders need to be observant of these processes and their outcomes; successful outcomes need to be appreciated and celebrated, a process described in latter half of Kotter’s (1995) change implementation model. Upon achieving positive outcomes, managers need to continue to monitor and evaluate the performance; this will keep the pressure on and not allow complacency to enter. In addition, continued achievement of positive outcomes will reinforce the desired behaviour and attitude in staff members, which will be the first step to sustain change. Sustenance of change and positive outcomes is a continuous process and requires all eight steps described in Kotter’s (1995) model to be repeatedly followed. Moreover, sustenance of the outcomes and the organisation’s competitive position requires this change to be viewed as continuous process, apart from punctuated equilibrium. For this, innovation, flexibility, empowerment, motivation and commitment are the key criteria. References Burnes, B. 2006. Kurt Lewin and the Planned Approach to Change: A Reppraisal. In Gallos, J.V’s Organization development: a Jossey-Bass reader. California: John Wiley and Sons. (Ch.5, pp:133-158). Bijlsma-Frankema . 2001. On managing cultural integration and cultural change processes in mergers and acquisitions. Journal of European Industrial Training. 25(2): 192-207. Cameron, E and Green, M. 2004. Making sense of change management: A complete guide to models, tools and techniques of organizational change. London: Kogan Page Publishers. Carleton, J.R and Lineberry, C.S. 2004. Achieving post-merger success: a stakeholder's guide to cultural due diligence, assessment, and integration. 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Vol.13(2). Nguyen, H and Kleiner, B.H. 2003. The effective management of mergers. Leadership and Organization Development. Vol 24(8), pp: 447-454. Seiler, S and Pfister, A.C. 2009. ‘Why did I do this?’: Understanding Leadership Behaviour through a Dynamic Five-Factor Model of Leadership. Journal of Leadership Studies. Vol 3(3); pp: 41-52. Warburton, J. 2001. Mergers: A legal good practice guide. Liverpool: Charity Law Unit. Appendices Appendix 1.1 Source: (Gilley, 2001; p.6) Appendix 1.2 Source: Green, 2007; p.41 Appendix 1.3 Source: Seiler and Pfister, 2009; p.47 Appendix 2.1 Source: (Seiler & Pfister, 2009; p.44) Read More