Strategy and Change at Pemancar - Case Study Example

Strategy and Change at Pemancar Introduction of the Company Pemancar is a Malaysian company established in the 1970s as a government-owned manufacturer, marketer and seller of automotive parts. As a result of economic liberalization during the 1980s, the company was acquired by the KL Corporation which was one of the largest business groups of Malaysia with an international presence. Following its acquisition, the company was successful in attaining high quality standards because of a technical assistance arrangement with a Japanese firm (Abdullah, 2012). Pemancar is a fairly large organization and employs nearly 1,700 people which includes managers, supervisors, staff and operative level employees. The company is one of the most prolific industrial facilities of Malaysia. In 2004, the company produced an output of approximately 40 million kg. The company has become a major exporter in the industry with its products being sold in Europe, Australia and the ASEAN region. The achievements of the company have not gone unnoticed and it has been awarded with a number of recognitions such as the Malaysian Standard and the Quality Management Award among others (Abdullah, 2012). The company has a functional organizational structure with each department responsible for a specialized function of the manufacturing process. A number of hierarchical levels makes it a tall organization while the organizational culture is based on the bottom line approach to management. In other words, the management of KL Corporation is mainly concerned with the end result as opposed to the strategy adopted. In between 2001 and 2005, Pemancar came to be increasingly owned by Europe-based automotive supplier Nova up to 70%. The new management has been pursuing changes at the structural and cultural level to integrate Pemancar into its global supply chain. The following sections critically analyze and evaluate some of the changes implemented in the light of theories and models of change management (Abdullah, 2012). Description of the Changes Introduced Pemancar is a regional leader of automotive parts manufacturing whereas Nova is a European-based global supplier of automotive parts (Abdullah, 2012). The acquisition of the Pemancar Company was an attempt by Nova to gain a foothold in the ASEAN region and use it to support its global supply chain. As a result, the new management undertook a number of structural and cultural changes at Pemancar to align its processes, systems and people with the Nova way of doing things. The Nova management instituted a flatter organizational structure by encouraging empowerment and individual responsibility at Pemancar. This was accompanied by a great degree of job enrichment as employees at the lower levels were made responsible for subsequent stages of their tasks. Along with these changes, the new management encouraged employees to engage with stakeholders and assume greater accountability (Abdullah, 2012). A new management team was constituted which included a mix of Pemancar and Nova managers as well as some new recruits to the company. The head of the production manager was appointed as the plant manager under the new setup. To bring the Pemancar facility at par with the global standards of Nova, higher productivity goals were set for the production facility (Abdullah, 2012). A large number of employees were laid off to meet the productivity goals when the desired productivity level could not be met through the current workforce. Restructuring was also undertaken by placing the marketing and sales functions of Pemancar under a separate division. The Finance Department was divided into separate accounting and controlling departments. Similarly, the Technical Department was also divided into two separate departments. New reporting procedures, performance evaluation systems and budgeting systems were put in place (Abdullah, 2012). The Context of the Changes The need for the changes instituted by Nova can be explained by using two frameworks—the SWOT analysis and the Ansoff Matrix. The strengths, weaknesses, opportunities and threats are used to develop strategies below: Opportunities: Growing market in ASEAN region Advanced product technology from Nova Strong product dealer network Room for greater operational efficiency Threats: Increased competition in the region Loss of technical partnership with Japanese firm Economic downturn and uncertainty in global economy Reduced sales in foreign markets Rapidly developing technology Strengths: High quality output and multi-skilled workforce Sophisticated technology through partnership with Japanese firm One of the largest plants in Peninsular Malaysia National and international awards Customer and quality focused culture Develop product and process technology to increase market share in the region. Develop partnerships with other manufacturers to leverage strengths. Weaknesses: Low level of personal responsibility and ownership Reactive approach to work Bottom line focus Incremental budgeting Develop proactive culture and empowered workforce to increase efficiency and profitability. Improve internal systems to retain leadership position in the competitive environment. In terms of the Ansoff matrix, the environment offered Pemancar the opportunity to develop new products using cutting edge technology. This is known as the product development strategy. Under this strategy, the company can develop new products for its current markets. This would be an appropriate strategy because Nova possesses sophisticated product and process technology to help Pemancar enhance its product portfolio and operational efficiency. Secondly, the fact that the ASEAN and Australia market is twice as large as the Chinese market (Abdullah, 2012) means that Pemancar can experience considerable growth while continuing to serve its current markets. This strategy was adopted by Nova when it introduced new product specifications, designs, machinery and technology of a higher standard at the Pemancar production facilities. Current Products New Products Current Markets Market Penetration: This strategy would not suit the internal and external environment because it would not solve the problem of reactive culture and low efficiency at Pemancar. Product Development: This is the recommended strategy as the company can develop new products with technology from Nova and serve the current markets profitably. New Markets Market Development: This strategy is not advisable because Nova has a presence in other markets while Pemancar has a strong presence in the ASEAN region. Diversification: This strategy is not required as it requires considerable investment and does not leverage existing strengths and opportunities. Critical Analysis of the Change Management Process The change management program that was undertaken by Nova aimed to bring about a reorganization of the structure, increased culture of ownership and accountability, and more productive operations. To achieve these aims, the new management followed some change management practices. These strategies were largely counterproductive while some measures were positive. For instance, the decision of the new management not to undergo significant changes during the first two years is good because the management could acquire knowledge about Pemancar’s existing culture and processes. The need to bring about the changes was correctly identified given the context and environment of the organization (Adizes, 1999). However, the new management failed to prepare and motivate the workforce for the coming changes. Bennis et al. (1985) suggest that change managers should employ a mix of informative, persuasive and power-based strategies to institute change. Meyer et al. (1990) also suggest that effective change can be brought about when employees have role models or examples to emulate. However, in the case of Pemancar, the managers relied exclusively on coercive power without informing or persuading the employees and failed to provide any examples of the desired changes. Nadler and Tushman (1997) recommend that change management strategies should be based on the existing processes and people of the organization. Furthermore, Burton et al (2006) recommend that organization redesign should create a good external and internal fit. These aspects were neglected by the new management because it failed to take steps for improving the productivity of the people through proper training or justify the restructuring effort. Miles (1997) states that a compelling vision is needed to motivate employees to embrace change management while a focus on problems does not bring about effective change. Bennis and O’Toole (2000) attribute effective change management to top leadership support. The Novo management failed to provide a compelling vision or a guiding leadership and effectively penalized the workforce for failing to meet productivity goals. The foreign management as well as the plant manager promoted from within did not have the vision or charismatic appeal of a change manager. Another flaw in the change management process was that the management did not distinguish between the needs of different types of employees and workers (Strebel, 1998). It has been stated by Abdullah (2012) that the managers and staff in the accounting department were able to adapt to the new procedures better than the shop floor workers because of their education and social background. Adam regretted that the new management failed to convince the workers about the defects of the previous system and the advantages of the new processes. Instead of building on the strengths of teamwork in the Pemancar culture as recommended by Cameron and Green (2009), the new management highlighted its weaknesses. The problem is that the change was managed in a top-down way rather than an organic way as suggested by Dooley (1997). The classical model of unfreeze-change-freeze (Lewin, 1959) was also not implemented as employees were expected to adapt to the new systems with immediate effect. Very little training was provided and as a result the employees were unable to reconcile the conflicting demands (Beer and Nohria, 2000). The company tried to solve the productivity problem by downsizing the workforce through a Voluntary Separation Scheme which did not address the core issue of workers not being familiar with ways of increasing productivity. A proper succession plan was not developed as senior operators were promoted to supervisors without sufficient training. The management did not practice strategic benchmarking (Carnall, 2003) because it did not assess how the organization could move towards the standards it had set. Generative learning (Kondalkar, 2009) would have enabled the new management to leverage the creativity and innovation of the workers by allowing them to experiment and listen to their feedback. Effectiveness of the Change Management The change management exercise was largely ineffective because it failed to engage employees at all levels. Despite the threat of layoffs, the productivity targets remained unachieved because of the ineffective policies. Employees experienced job insecurity and were searching for other jobs. An oppressive environment replaced the teamwork that was common under the previous management. A degeneration of the communication flows and a seniority culture along with poor supervisor skills were the outcomes of the change management effort. Hayes (2002) acknowledges the importance of social and political processes in emergent change which the Novo management failed to appreciate in its drive for standardization. Schein (1999) recommends that during change management, organizations should clarify the new goals while maintaining some continuity with established practices and systems. Cummings and Worley (2009) further state that change managers should engage employees to empower them but the Novo management relied on enriched jobs while maintaining a distant approach. The Novo management failed to do this while pursuing an aggressive policy of standardizing processes throughout its global network, which created anxiety among the Pemancar employees. Pascale, Millemann and Gioja (1997) suggest that change managers involve workers in problem solving and inculcating the desired attitudes. The Novo management failed to make this effort as it did not recognize that the employees already possessed the capacity to transform the organization in efficient ways (Rawlins, 2008). References Abdullah, Z., 2012. Leadership and Change Management: A Case Study of Pemancar. Asian Case Research Journal, 16(1), pp. 115-132. Adizes, I., 1999. Managing Corporate Lifecycles. New Jersey: Prentice Hall. Beer, M., and Nohra, N., 2000. Cracking the Code of Change. Harvard Business Review, 78, pp. 133-141. Bennis, W. G., Benne, K. D., and Chin, R., 1985. The Planning of Change, 4th ed. New York: Holt, Rinehart and Winson. Bennis, W. G., and O’Toole, W., 2000. Don’t Hire the Wrong CEO. Harvard Business Review, 78, pp. 171-176. Benne, K. D., and Chin, R., 1985. The Planning of Change, 4th ed. New York: Holt, Rinehart and Winson. Burton, R. 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