Change Management at IBM, Management Structure within IBM - Case Study Example

Change management at IBM Introduction IBM stands for International Business Machines. The headquarters of IBM are found in the New York City of United States of America. IBM was founded in 1890s (IBM, 2010). It is known world wide as the largest technology company (Hahn, 1991). The main business activities of IBM involve manufacture of computer hardware and related software alongside selling of these components. It also provides hosting and consultation services to its clients. The company has an approximate employee base of about half a million (Meyerson & Martin, 1987). Organization change is usually undertaken to reduce costs and risks of running business and at the same time increase the commitment of stakeholders. The Integrated Supply Chain (ISC) of IBM experienced great management changes between 2003 and 2004. This change management at IBM was mainly driven by the prevailing market forces at that time. The change management had great consequences on the running of supply chains at IBM Company. In addition, the structure and alignment of the organization was also affected by these changes. Furthermore, the changes had far reaching effects on the process of organization in addition to support of information technology at the company. In spite this; the process of change management at IBM had some challenges and problems. This paper analyses change management at IBM outlining drivers of change and the impacts of change. IBM before change management Change management in IBM occurred in the 1990s and involved changes in innovation of new markets and technologies. In spite these changes, the company was in need of changes in its organization mostly in its supply chain and process to enable it to become a successful company. Prior to 1993, IBM had a functional kind of organization, which dated back many years (IBM, 2010). Due to this functional organization, any decision, which was to be made, had to follow a hierarchical protocol with the top management left to make most of the decisions (Winslow, 1993). Therefore, functional executives had to agree on any new changes in innovation to be implemented. This involved agreements on strategy, the resources required, the design of the product, how to roll out the change and making the necessary budget adjustments. This functional structure had several hardships in the running of IBM (Hahn, 1991). For instance, resolution of conflicts at the company was cumbersome. In addition, close working among different groups was compromised by this structure, which was in place. Because of the bureaucracies associated with this functional structure of organization, independence of employees was not possible and therefore innovation was hindered since there was no coordination of activities at the company (Meyerson & Martin, 1987). Senior executives of IBM never received direct reports of marketing and consequently the supply chain in different regions operated below their targets. As a result, the company incurred massive losses. Even though the company had new products, the functional organization structure was not able drive IBM to success and profitability. IBM lacked personnel alignment even though it had elaborate system of information (Hussey, 2000). Therefore, IBM was in need organizational change that could drive it to profitability (Pettigrew, 1987). The structure that was most appropriate was a process based organization structure instead of the functional one (Hahn, 1991). The process based organization structure could enable IBM to realize returns from its elaborate investments in new products innovation. The inflexibility of the “end to end process” that was a characteristic of functional structure that was in place was not capable of meeting the market demand for the products of IBM. The management could not identify and resolve problems of IBM because of the complexity of the end-to-end process of the functional structure of organization that was in operation at the company (Meyerson & Martin, 1987). Therefore, management was involved in addressing the symptoms of problems using functional alignment instead of resolving the key causes of the prevailing symptoms using the process alignment. The situation at IBM was reversed in the course of 2004 when the various management teams of IBM came together and cooperatively identified key causes of problems at IBM that required to be resolved in order to spur the performance of IBM products in the market (Hussey, 2000). Change management at IBM Different initiatives that were geared towards improving the performance of the IBM’s integrated supply chain were identified by the management teams, which were cooperating to bring about the much needed change at IBM (IBM, 2010). The initiatives were very instrumental in the identification of many underlying issues that were hindering good performance of IBM. The cooperating management teams organized these initiatives in the order of priority. This was dependent on the expected impact of implementing the initiative. In addition, the initiatives were assessed to infer knowledge transfer and strategy that was supported by the changes in addition to their impact on the main stages of the flow process (Hahn, 1991). The management team that was cooperating came up with four milestones that were to be used in following up the performance of the process. The first milestone was to involve the evaluation of the time taken to receive and enter an order into the system. The second milestone was to involve the assessment of the time taken from the entry of the order into the system and the manufacture of the order. The third milestone was to involve evaluation of the time taken from the manufacture of the order to the shipment of the order (Meyerson & Martin, 1987). The final milestone was to involve the assessment of the time taken from the shipping of the order to the actual delivery of the order to the customer. The implementation of these milestones greatly improved the flow process of the order (Pettigrew, 1987). The management system was involved in the tracking process of the implementation and management of the four milestones. As a result of implementation and close monitoring of these milestones, the performance of the process of ordering and delivery of the order to the customer greatly improved (Hahn, 1991). These milestones enabled delivery of orders to the customers to take place within the agreed time. Therefore, the milestones enabled management teams to understand the process of ordering running through to the delivery of the order to the customer. This understanding of the process enabled the management to allocate the resources to various processes. This was of much benefit to the performance of IBM (Hussey, 2000). The implementation of the initiatives transformed IBM from being an organization with functional structure to one with process organization structure. Analysis of the management structure within IBM Prior to adoption of process based management structure, IBM product line definition and improvement of its architecture was through consensus. This was shared among all groups. This improvement of the products had no effect on the IBM performance in the market (IBM, 2010). Thus, teams were created which were involved in the designing of systems, which transformed IBM from being a rigid organization that had a functional structure to a more flexible organization that had process organization structure (Pettigrew, 1987). These teams were made up of technologists and marketing executives. As a result, the process of product development was separated from subsystem development, which was not possible under the functional structure (Hahn, 1991). The products that were produced through this changed system were marketed by an integrated management portfolio team, which was established. In addition, multi functioning teams were established and these faced out the old management structure where departments were independent of one another (Meyerson & Martin, 1987). The facing out of the old management structure reduced the cost of running them and made the process of decision making much easier than the hierarchical structure that was previously in place under the functional organizational structure (Hussey, 2000). In the newly adopted structure, planning was done by multi tasking teams instead of a single department in the old functional structure. In addition, the market was segmented in accordance to the products used by different users (IBM, 2010). Different market segments were supervised by the segment leaders. The segment leaders were involved in overseeing the process of consulting with users and potential users of the different products assigned to them. Direct sales team was involved in accessing small businesses (Pettigrew, 1987). Of most important, IBM transformed its marketing process into what it referred to as e-business. This resulted in increased sales and profits. Therefore, transformation of management at IBM from the rigid functional structure to process organization structure helped to improve the performance of IBM from a loss making organization to a profitable one (Winslow, 1993). The culture of IBM is sales centred and this usually motivates its workers. Individuals at IBM are usually promoted to managerial position in accordance to both academic qualification and the output of the person at the organization (Hahn, 1991). For example, most of executives and general managers at IBM are selected from sales people who are outstanding in their positions. The recognition and rewarding of employees at IBM in accordance to their hard work motivates them (Hussey, 2000). Prior to process based management, employees at IBM used to put on uniforms. This was phased out during the process of change management (IBM, 2010). In addition, the code of behaviour was also changed to be in tandem with that of other organization. This was also a motivation to employees who had a chance to dress freely in casual attires that were business like (Winslow, 1993). The changes that were experienced at IBM in terms of values were done in consultation and thus there were no resistance to the changes since the employees felt they were involved in the process of drafting and implementing them (Winslow, 1993). The consultation process was undertaken online. In addition, the implementation process was done by consultation via online means (Pettigrew, 1987). The result of the changes at IBM enabled employees to be involved actively in the satisfaction of its clients and value innovation. In addition, it improved relationship among employees, clients and business partners. All these values were guided by responsibility and trust (IBM, 2010). Consultation was also done online among the clients, business partners and employees to come up with the innovation process. This encouraged innovation, which was market, oriented instead of imposing products to the consumers, which may not suit their needs as previously seen under the functional structure where products were produced without putting into consideration the needs of consumers. As a consequence of wide consultation in the product innovation, most of IBM’s products had positive reception in the market and thus their sales volume greatly improved. This acted as a motivation to employees at IBM since their products were being received well in the market (Hahn, 1991). Under new process structure, diversity was encouraged at IBM. Thus, employees were hired based on their capability and not their race, gender or ethic origin. In addition, intellectual property rights are good at IBM (IBM, 2010). Any individual or group involved in innovation or invention is assisted by the company patent their products and the returns from such invention or innovation are shared by the company and the inventor (Hussey, 2000). This has encouraged invention of new products at IBM. The employee motivation at IBM has been instrumental at transforming IBM from a loss making organization to profitability. Conclusion The change management at IBM involved a shift from the functional alignment to process alignment. To achieve this, a team, which was involved in the optimization of the process alignment, was formed. The team identified areas in the process, which required improvement. The team also determined the impact the proposed changes and advised the management accordingly. The improvement resulted in time efficiency in the process of ordering, processing and delivering the order to the consumer. Autonomous units under the previous functional structure were also encouraged to work in unison. Top management was expected to understand the impact of cross function and was to lead the process of change. The personalization of information technology systems encouraged innovation and at the same time encouraged change in management. The change from functional to process structure greatly improved sales of IBM and transformed it from a loss making organization to one that is profitable. Thus, any organization which has a functional structure that is not fulfilling the expectation of the firm it should try to adopt a process based alignment. This change should be done by the management in consultation with the employees, clients, and business partners to ensure that the change is received positively by all parties. References Hahn, D. 1991. Strategic Management - Tasks and Challenges in the 1990s. Long Range Planning, 24(1) pp. 26-39. Hussey, D. 2000. How to manage organisational change, 2nd Ed. London: Kogan Page Publishers IBM. 2010. Home. Available at: www.imb.com Meyerson, D. & Martin, J. 1987. Cultural Change: An Integration of Three Perspectives. Journal of Management Studies, 24(6), pp. 623-647 Pettigrew, A. M. 1987. Context and Action in the Transformation of the Firm. Journal of Management Studies, 24(6), pp. 649-670 Winslow, C. D. 1993. Setting a Course for Radical Change - The Human Touch. Journal of Business Strategy, 14 (6), pp. 52-57. Read More