Strategic Management and Organisational Dynamics - Case Study Example

Organisational Change: Case Study Assumptions Communication is not communicated downward at organisational level The different SBUs need to develop good communication networks across departments and from top to down. This enhances flexibility and innovation. VRD lacks communication which has resulted in conflicts. Poor leadership at the organisational level Leaders act more as managers than leaders. They do not provide a clear direction for lower levels of management and employees. Resistance to change at individual level This assumption applies to VRD because the employees and managers got used to the old ways of the former manager and are trying to oppose changes. They need to understand that the company will not remain the same forever; it needs to change at the individual and organisational level. Cooperation is lacking at the specific team level Teams need to cooperate in order to develop effective processes and systems. Disagreements and conflicts within groups and teams only cause disruptions. 2. Growth and Change in VRD Greiner (1972) suggests that the problems of growth and change in an organisation are based on past decisions rather than present events. For VRD, it is therefore clear that the conflicts and falling sales of the company are caused by the past management of Frank Delacy and not the current change events implemented by Lee and May Wong. The company had relied solely on the past success of the company which occurred due to consistent demand and growth through Detroit. In the past there were little upheavals in these markets and the company enjoyed long periods of convergence. Reliance on these markets has now caused problems to the company as revolution sets in. As a result, the problem of red tape and control is experienced, and the revolution challenges the status quo. Employees are not ready for the changes, and are rejecting them. The company therefore needs to identify issues and develop systems and processes that staff will use to improve changes. According to Greiner, evolution and convergence is accomplished through radical change; hence causing the crisis that is currently experienced in the company. 3. Experiences of the company relate to incremental change This statement by May Wong is incorrect because the company experiences radical and revolution change in the current period rather than incremental change. Incremental change had occurred in the past, and it is now necessary to revolutionize and establish key systems and processes that will keep up with such changes. Because the market also changed, the changes in the company should not be considered as incremental changes but rather some form of revolution. VRD was not ready for such a revolution. 4. Why is it difficult to implement change? Despite the theory-to-practice link, the company is finding it difficult to change because the managers are imposing changes without communicating the need for change. Current leaders may learn from existing theory about how not to do things. Members of the organisation are reluctant to shift from the present processes and systems, especially if they have got used to them. For instance, managers of VRD had gotten used to Frank’s fine-tuning and collaborative style. Tushman and O’Reilly (1996) suggest that the lack of congruence in implementing change is caused by the current performance problems of the organisation. It is difficult to link strategy, people, processes and organisational structure when implementing change. Lack of adaptability and flexibility in the current systems and processes may also impede change. 5. Identification of VRD issues using Open System Model The issues and problems of VRD can be identified using the open system model of organisational change. An open system is a system that engages with the external environment. According to the model, an organisational system consists of external environment, inputs, processes (throughput), outputs, and feedback. The issues of VRD are identified in terms of problems identified in the case and other personal assumptions related to organisational change and the background of VRD case. The figure of an Open System Model shown below shows the issues of VRD and how transformations are conducted to produce the desired output. The issues related to the company’s input include human capital issues and managerial competence. In VRD, managers and employees engage in conflicts which may impact negatively on their intellectual and skillful input contribution into the production process. After the exit of Frank, capital expenditure also reduced, causing difficulties for the implementation of change. Another challenge is that the company maintained the same staff for over 20 years. In terms of Throughput, there have been minimal changes in the management team. As a result, it became difficult for the change implementation team to initiate changes. Various transformations need to be implemented. First, the current managers should use appropriate mechanisms such as recognition and fair terms and conditions of employment in order to gain trust from them and enhance better performance. Communication of the need for change should also be improved by holding meetings with staff and using appropriate terms to communicate the need for change. Emails and memos can also be used to communicate such information. Another transformation needed is to use focus groups and discussions to identify differences among team members and resolve conflicts among them. Restructuring should also be done at the organisational level. Organisational level Inputs Transformations Outputs Increased competition from China, Taiwan and Vietnam Develop new strategies for the company and revise old ones KPI of 5% increase in sales Managerial competence Restructuring at the organisational level Reducing conflict by 95% Group level Inputs Transformations Outputs Lack of staff morale and increased complacency Motivating employees to boost their morale and reduce complacency Increased profits of 3%, increased sales of 5% Conflicts in teams Using focus groups and discussions to reduce conflicts Reducing costs by 10% Individual level Inputs Transformations Outputs Increased pressure on efficiency Managers should advocate for efficiency by encouraging innovation and creativity Improving delivery estimates by 10%, reducing costs by 10% Training needs Employees should be trained on their daily operations and tasks Improving efficiency and delivery estimates by 10%, improving sales by 5% 6. Evidence It is important to apply the Open System approach to the issues of VRD because an open system is essential to organisational change and enhance a smooth integration of technology and innovation (Negandhi, 1975). It also improves communication enhances adaptability of the company. The connecting systems that influence change as identified in the Open System Model above can be explained using theory. An important theory is the theory of evolution and revolution provided by Greiner (1972). The theory provides an evidence-based approach to the identification of key forces of development. Greiner (1972) contends that any model of development (including the Open Systems Model) takes into consideration the lifespan of an organisation. Using evidence from historical data, Greiner (1972) argues that “management problems are rooted in time” p. 39. This statement can be applied in VRD case. The problems of VRD are rooted in the past management problems during the leadership of Frank Delacy. The Open System Model in section 5 indicates that VRD’s change implementation is influenced by rigid management practices which do not adapt to the changing environment. These practices including human resource management, communication, job design and production processes were initiated by the past management many years ago. These practices involved inflexibilities and slow production which led to conflicts and poor communications across departments. Past management also failed to foresee future changes in the market and industry. The appointment a new manager in VRD coincided with the changes that occurred in the market, including increased competition and discontinuities. According to Greiner (1972), passage of time also leads to the institutionalization of managerial attitudes. In this regard, the behaviour of employees becomes predictable and difficult to change when they become outdated. In the case of VRD, 30 years of Frank’s management resulted in institutionalization of certain managerial attitudes and competences which were difficult to change when the new CEO was appointed. The senior managers of the company had established long standing relationship with junior managers and employees. Therefore, when Lee wanted to reduce staff by 10%, he faced management rigidity because managers had developed strong relationships with each other. Brown and Eisenhardt (1997) also suggest communication enhances effective product portfolios while organic structure does not. VRD’s past and current structure can be termed as organic because it does not involve well defined job design and specification. This organic structure in VRD has led to poor communication strategy and increased conflicts within Strategic Business Units. Organic structures offer strong resistance to change (Brown and Eisenhardt, 1997). The company can implement changes effectively by providing clear managerial responsibilities and project priorities. Brown and Eisenhardt (1997) demonstrated the effectiveness of good communication using Cruising Company. The researchers observed that the cross-project communication in Cruising enabled its managers to borrow ideas from each other in a short cycle and increase pressure on efficiency. This is the approach that Lee, the new manager, is trying to implement. The poor communication structure in VRD and conflict among its managers has caused an organic system in which communication is not given special attention. The company operates in a system whereby responsibilities overlap and managers accuse each other for the problems of low production and sales in the company. Given the evidence of the importance of communication as provided by Brown and Eisenhardt (1997), it is clear that lack of communication in VRD is one of the leading causes of failed implementation of change. Therefore, the new manager’s approach to increase communication and address issues that cause conflicts is an important step towards organisational change and successful production and distribution. Theory also shows that actual design process needs to be well structured so that everyone understands his/her responsibilities in production (Murray, 2003). One of the issues facing VRD in terms of throughput is the presence of an old job design process. This leads to rigidity and unclear responsibilities. In order to adapt to the changing environment and industry needs, the company needs to develop a flexible job design process which can change from time to time (Tushman and O’Reilly, 1996). This will ensure that the design process can keep up with the pace of the overall industry and meet the needs of the markets. Brown and Eisenhardt (1997) evidently suggest that this can be achieved by adopting a cross-functional project management so that each SBU is involved in decision making regarding the changed being implemented in the company. However, engagement in cross functional projects and communication requires a collaborative system. Greiner (1972) argues that collaboration eliminates red tapes which could cause resistance to change. According to Greiner, this reflects phase 5 of evolution. This phase of evolution or organisational change enhances management through teams and skillful elimination of interpersonal differences and conflicts. This enhances the improvement of human capital input into the production process. Collaboration involves problem-solving by team action, combination of teams across functions, reduction of headquarters staff, development of matrix structure and simplification of previous formal systems (Stacey, 2003). These characteristics of collaboration are relevant to VRD because the company also needs collaborative change implementation to avoid managerial conflicts, complex rigid systems, poor communication and unrealistic delivery estimates. Lefter et al (2008) also suggests uses the theory of organisational learning to explain the importance of intellectual capital in organisational change. They suggest that intellectual capital in form human capital, structural capital, and client capital can be used to create value in production (Murray and Donegan, 2003). This shows the importance of human capital as indicated in the input section of the Open System Model provided in section 5. References list Brown, SL. and Eisenhardt, K.M. 1997, “The Art of Continuous Change: Linking Complexity Theory and Time-Paced Evolution in Relentlessly Shifting Organisations.” Administrative Science Quarterly, Vol. 42, No. 1, pp. 1-34. Greiner, E.L. 1972, “Evolution and Revolution as Organisations Grow.” Harvard Business Review, July-August 1972. Lefter, V. Bob, C., and Saseanu, A. 2008, Intellectual Capital and the Organisational Learning in the Knowledge Society. Wspó£Czesna Ekonomia, vol. 2, no. 6, pp. 59-66. Negandhi, A.R. 1975, Organisation theory in an open system: a study of transferring advanced management practices to developing nations. New York: Kennikat Press Corp. Murray, P., and Donegan K., 2003. “Empirical linkages between firm competencies and organisational learning.” The learning Organisation. Vol.10, No. 1. Murray, P. 2003, “Organisational learning, competencies, and firm performance: empirical observations”, The Learning Organisation, Vol. 10, No. 5, pp.305 - 316 Stacey, R.D. 2003, Strategic management and organisational dynamics: the challenge of complexity. Harlow: Prentice Hall. Tushman, M.L. and O’Reilly, C.A. 1996, “Ambidextrous Organisations: Managing Evolutionary and Revolutionary Change.” California Management Review, vol. 38, no. 4, pp. 8-30. Read More