International Business and Strategy Change Management - Literature review Example

International Business & Strategy Change Management Introduction Organizational change is a fundamental and integral part of any successful businessstrategy. As the leader of Samsung electronics, Lee Kun-hee, said two decades ago at an emergency meeting with senior management, everything should change, except wife and children (The Economist, 2014). Business activity being a subject of human activities is closely interrelated with the external environment and changes in various contexts, including economic, political, social, environmental, technological, and legal aspects. Thus, organizations which were successfully operating for many years, might need to change their behaviors and practices in order to adapt to new realities (Cole and Kelly, 2011). Many organizations have recognized the significance of change and its potential for business growth. However, despite its great potential, organizational change is very risky as it is quite difficult to implement and manage within an organization. Many organizations have failed to implement major changes, as this process requires a deep understanding of organization, strategy, systems, change, sociological and psychological concepts (Cole and Kelly, 2011). The aim of this paper is to provide an overview of the main theoretical foundations of change management, to analyze the potential pitfalls and solutions in change management, to evaluate change and leadership activities based on the case study of Tesco Company. SECTION 1: The main theoretical foundations change management Change management identification Organizational change is defined as “the alteration of organizational components (such as the mission, strategy, goals, structure, processes, systems, technology and people) to improve the effectiveness or efficiency of the organization (Cole and Kelly, 2011:266). This definition clearly illustrates that organizational change usually is undertaken in order to deliver positive outcomes or results. It is also clear from the definitions that the scales of change can vary significantly, from the alteration of minor organizational components such as departmental reorganizations and technology replacement to changes of corporate mission and strategy. Therefore, organizational changes are usually divided into two categories: smaller transactional changes (also known as efficiency based changes), and significant transformational changes at the total level system (such as mergers and acquisitions (M&A), outsourcing of major business activities, downsizing, the launch of new products, etc.) (Cole and Kelly, 2011). As it has been already mentioned, many organizations implement organizational changes in order to adjust to external environment or in order to improve internal environment. Some of the major external triggers include: arrival of a new competitor with a competitive products/services; changes in demand; merger of businesses; threatening competitors; political/legal changes; development of new technologies; or failure of major supplier to meet the requirements/needs of an organization (Cole and Kelly, 2011). In contrast to the external triggers, internal triggers are more predictable and open to planning. Some of the internal triggers are: planned changes in strategy; need to improve quality of services/products; need to increase efficiency; need to respond to the market development (new products, new technologies); need to deploy human resources for greater effectiveness; need to improve systems or standards for dealing with suppliers and other stakeholders (Cole and Kelly, 2011). With a variety of triggers of organizational change, there exist different types of organizational change such as revolutionary versus evolutionary, continuous (adaptation) versus discontinuous (reconstruction), as well as episodic changes (Cole and Kelly, 2011; Green, 2007). Change management implementation Models and approaches to organizational change management There exist many different change models designed in order to help managers to implement organizational changes. However, before selecting the most appropriate change management model, it is important to differentiate between two major approaches to change management: an emergent and a planned approach. A planned approach is more likely to be a formal, rational, top-down process, while emergent approach is often forced measure for which management has limited time and resources (Cole and Kelly, 2011). Some of the key models are briefly discussed below. Lewin three-step model Kurt Lewin (1951) was the first who has developed a theoretical concept of change management. His model of widely cited in change management textbooks and articles and is well known among practicing managers. Lewin offers a force field analysis, which explains the role of two forces: changing forces and resisting forces. Further, Lewin has offered a three-step model of organizational change: unfreezing of the current state of affairs; movement towards a new state through involvement and participation, and refreezing of the new state of affairs (Cameron and Green, 2009:111). While this model offers a basic analysis to organizational change management it set a good background for further work as it helps managers to communicate the gap between the current and the end state of the affairs to key actors in the change process (Cameron and Green, 2009). Balogun and Hailey’s framework Balogun and Hailey’s have designed a useful framework for organizational change, which is comprised of several key elements, including the following: change path, change start point, change style, change target; change levers; and change roles (cited in Green, 2007: 165). McKinsey 7’s model Another helpful tool in managing organizational change was derived from the McKinsey 7s model, which includes the following seven dimensions: (1) strategy; (2) structure; (3) systems; (4) styles; (5) staff; (6) skills; and (7) shared values (Green, 2007). Generic change model For planned type of change there is often applied generic change model (Figure 1). This model requires management to carry out analysis of the external environment in which the company operates, and then decide what the future vision of the company is and what needs to be done in order to achieve this vision (Cameron and Green, 2009). Thus, the company’s management will make a rational planned decision of what to change. Figure 1. Generic change model (Cameron and Green, 2009: 278). Cameron and Green Cycle-model of change Cameron and Green (2009) also have designed a cycle-model of change, which is presented in Figure 1. This model is a combination of many other models, which have been already developed and is viewed as the most comprehensive one. Figure 2. Cycle-model of change (Source: Cameron Change Consultancy Ltd, Cameron and Green, 2009). The first step in the cycle-model is obvious: the company should recognize a need for change. The second step implies that there should be built the change team and then created vision and values. This approach can be not the ideal one, as some researchers believe that vision identification needs to go first (Cole and Kelly, 2011; Kotter, 2007). The step of building the change team is also important. In order to succeed many organizations create change teams and assign a change agent. Change agent is a person who promotes, supports, sponsors, initiates, helps, implements or helps to deliver organizational change (Cole and Kelly, 2011). In addition to determination of the future vision and building the change team, it is also important to ensure effective implementation of these changes by ensuring effective communication of vision and change plan throughout the organization (Cole and Kelly, 2011). Employees should clearly understand the company’s plans and act in alignment with the corporate plans. Implementation of organizational change also requires resource allocation and effective decision-making (Cole and Kelly, 2011). This step is defined by Cameron and Green (2009) as “empowering others”. The final two steps are more referred to post-implementation process of organizational change. Even though this model is quite comprehensive, the consequence of these steps is quite questionable. Common pitfalls in change management Resistance to change is recognized to be one of the major barriers/hinders to effective change implementation. It can take different forms and occur in different stages of the change process (Green, 2007). Therefore, for successful change implementation it is vital to manage the risk of resistance to change. Employees need to understand the need and goals of change and their concerns and fears should be properly addressed (Cole and Kelly, 2011). It is also important to understand the two fundamental anxieties of employees who face organizational change. These anxieties are: learning anxiety (lack of confidence that employee(s) will be able to learn the new ways of performing work/tasks) and survival anxiety (anxiety that employee(s) that they will appear incompetent, unwilling to change and be dismissed) (Cole and Kelly, 2011). In addition to the risk of resistance of change, there are identified eight common pitfalls because of which many organizations fail to succeed in organizational change process. These mistakes are derived from the Kotter’s eight step model and include the following: 1) Allowing too much complacency; 2) Underestimation of the power of vision; 3) Failure to create sufficient leadership 4) Under-communication of vision and change objectives/purpose; 5) Failure to create short-term wins 6) Declaration of victory too soon 7) Inefficient approach to changing organizational culture (Kotter, 2007; Cameron and Green, 2009). Section 2: Change management in Tesco Brief overview of the company and need to change implementation Tesco is the UK-based retailing chain of supermarkets, operating in the European and Asian markets. On the 15th of February the company has announced about its plans to reduce overheads by 30% and close 43 stores. As it has been announced, Tesco will close these stores in order to cuts the costs and thus to respond to the current economic climate (Jenkins, 2015). This information will serve as a case study for further analysis of change management process with the use of theoretical background given in the first section. By closing 43 stores and deciding to axe up to 10,000 employees Tesco is planning to improve the efficiency of the organization (Cole and Kelly, 2011). Decision of Tesco’s management to downsize it’s headquarter and store’s staff is definitely referred to the category of planned organizational change decisions (Hayes, 2009). While evaluating the scope of this change it is possible to refer it to the transactional type of organizational change, as it involves tactical operational processes in Tesco. Tesco’s current market position is declining, and the competition becomes tougher. Thus, the company aims to implement organizational change in order to adjust to external environment and more likely to improve internal efficiency. Applying the Lewin’s concept of changing and resisting forces it is possible to suggest the following (Band and Tustin, 1995): The case illustrates that Tesco has already recognized a need for change and aligned it with the corporate visions and values. The next step would be to build an effective management team for change implementation and to implement organizational change. Below are discussed some strategies and recommendations for Tesco’s downsizing strategy. Recommendations The company needs to evaluate the impact of downsizing on the overall corporate productivity. Tesco should recognize the risk of adverse effect of headquarter staff on quality, accuracy, speed of corporate office work. In order to mitigate this risk Tesco needs to determine the appropriate organizational/workforce structure and conduct a skills needs analysis. Tesco’s management needs to ensure that the process is integrated with the company’s strategic plans, and all corporate functions (Band and Tustin, 1995). Tesco is strongly recommended to consider all potential pitfalls and risks in change management, including: under-communication of vision and corporate goals, resistance to change, lack of communication, failure to create sufficient leadership, failure to create short-term wins, etc. (Kotter, 2007; Cameron and Green, 2009). The company should consider the effects on productivity and morale of those employees who remain (Band and Tustin, 1995). Communication of company’s vision and objectives with employees throughout the organization is especially critical as under-communication might lead to increased resistance of change, whereas employees will more likely demonstrate survival anxiety, become nervous and unsure about their future career and employment in Tesco (Cole and Kelly, 2011; Band and Tustin, 1995). Therefore, Tesco should implement internal communication campaign, before, during and after the downsizing. In such a way, Tesco needs to ensure that those employees who stay in the company are well-informed and still are valued by the company. This aspect relates not only to line employees but also to line managers who also are under the risk of “survivor sickness” and reduced job satisfaction (Band and Tustin, 1995). In addition to the risks common for any organizational change, Tesco faces a number of risks that are more specific to the downsizing process. As the company is planning to reduce the headcount up to 30% it means that those employees who stay in the company will more likely perform greater amount of work. By changing the nature of the job, Tesco needs to ensure that there are introduced effective motivation/incentive schemes for its employees (Band and Tustin, 1995; Catlin, 2003). The company also needs to ensure that employees are involved into the process and are highly committed to perform their jobs. In order to gain employee commitment, Tesco is recommended to make sure that employees: understand the necessity and inevitability of downsizing; are guaranteed personal employment for a specific period of time; can trust managers and be fair with them (Band and Tustin, 1995). The last point related to trust to management indicates on the significance of strong leadership in this change management process. Some of the key leaderships skills required for effective implementation of Tesco’s organizational change are: focusing on people, long-range perspective vision, developing, innovating, challenging, inspiring, motivating, and others (Cameron and Green, 2009). Conclusion This paper has provided a brief theoretical overview of change management and discussed some key change management models. As it has been shown there are different internal and external factors that drive different types of organizational changes. In order to implement effectively organizational change any organization needs to assess the internal and external environment, consider changing and resistance factors, and develop organizational change plan. However, development of organizational change plan and building up of a change team would not be enough in order to ensure successful change implementations. Managers should take into consideration all potential risks associated with change management, making a special focus on the risk of resistance to change. The second part of the report has presented a real-life case study of Tesco Company based on the last news. Tesco has announced about its plans to reduce its headcount up to 30% and close more than 40 stores. In order to ensure that this organizational change will be successfully implemented, there was given a number of practical recommendations of how better to implement this strategy and what risks to mitigate. References: Band, D. and Tustin, C. (1995). Strategic downsizing. Management Decision, 33(8), pp.36-45. Cameron, E. and Green, M. (2009). Making sense of change management. London: Kogan Page. Catlin, K. 2003, "Downsizing right", Executive Excellence, vol. 20, no. 3, pp. 10. Cole, G. and Kelly, P. (2011). Management theory and practice. Australia: South-Western Cengage Learning. Green, M. (2007). Change management masterclass. London: Kogan Page. Hayes, A. (2009), "Downsizing", Leadership Excellence, vol. 26, no. 3, pp. 20 Jenkins, L. (2015). Tesco to axe up to 10,000 positions, reports suggest. [online] the Guardian. Available at: http://www.theguardian.com/business/2015/feb/15/tesco-job-cuts-store-closures-dave-lewis-reports Kotler, J. (2007). 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