Telstra Australia Recent Change in Management - Case Study Example

Title: Change management report - Telstra Australia recent change in management Name of student: Course name: Class name: Date assignment due: Executive Summary This report highlights the issue of change management at Telstra both during and after the implementation of the changes. The report contains Telstra’s PEST analysis, SWOT analysis, stakeholders the nature and need for change. In the “during change”, section, the issues highlighted include the nature of change, common changes that take place in an organization, diagnosis for change, resistance to change, implementation of change and the tasks of linking vision and change at Telstra. The report explores various aspects of resistance to change, including signs of resistance, approaches to management of resistance to change, and reasons for organizational change. With regard to implementation of change, both contingency and processual approaches are discussed. The process of implementation of changes at Telstra has been highlighted with regard to strategies and the skills of communication that were used in order for the set goals and objectives to be achieved. In the “after change”, section the report highlights the ways of successfully implementing change as well as sustaining it. This part contains the recommendations of the report. The most important recommendation regards the nature of undertakings that constitute the processing of transforming Telstra and putting it back on the path of profitability and efficiency in service delivery. One of the most overarching influences on change was the high economic and political visibility that the company was getting. This visibility made pressure to mount on the workforce, especially the senior management. Predictions had to be made and followed up on through the use of highly objective approaches that would please the employees, the public and all other stakeholders. Table of contents Executive Summary---------------------------------------------------------------------------2 Introduction------------------------------------------------------------------------------------4 Before Change-------------------------------------------------------------------------------- 4 The environment (PEST analysis) -----------------------------------------4 The nature and need for change------------------------------------------------------5 Change strategies (SWOT analysis) ------------------------------------------------6 Strengths--------------------------------------------------------------------------------7 Weaknesses-----------------------------------------------------------------------------7 Opportunities----------------------------------------------------------------------------7 Threats -----------------------------------------------------------------------------------7 During Change (1750 -2000 words) The nature of change-------------------------------------------------------------------8 Diagnosis for change (and Tushman’s Congruence Model) ---------------------9 Implementation of change-------------------------------------------------------------12 Resistance to change -------------------------------------------------------------------13 After Change (750-1000 words) -------------------------------------------------------------17 Successful implementation of the change-------------------------------------------17 Sustaining change-----------------------------------------------------------------------17 Summary-----------------------------------------------------------------------------------------19 References----------------------------------------------------------------------------------------20 Introduction Telstra Corporations Limited is an Australian media and telecommunications company that was formerly owned by the Australian Company until its privatization stages in various stages in the late 1990s. The company is the largest provider of long distance and local telephone services, dialup, DSL, cable and wireless internet access in Australia. The tasks of change management were undertaken because of poor management that resulted in poor performance. Telstra’s problems may have began in the early 1990s when it started facing competition from Optus, Australia’s second biggest communications company as well as many other smaller providers. Meanwhile, the company had an advantage over other competitors by virtue of retaining a well-established fixed-line telephone network, two pay-TV and competing data cable networks. The implication is that all companies that offer fixed-line telephone and data services have to deal with Telstra at some point except Optus, Transact, plus a few other providers who have put in place their own infrastructure. The need for privatization was occasioned by a monopoly mentality that made it difficult for the company to compete with upcoming competitors such as Optus. When the necessary legislative measures were put in place, the process of change management had begun. This uphill task entailed a change of management, a reorientation of tasks and repositioning of marketing strategies. Above all, new ways of marketing change management both within the organization and externally were needed. This report highlights Telstra’s corporate events and circumstances before and after change in terms of challenges and opportunities. 4. a) Before Change The environment (PEST analysis) The problem at Telstra started when the company started recording a slump in its share price. The drop in the price seems to have been caused by the Rudd government’s draft legislation aimed at establishing a regulatory framework for the National Broadband Network valued at $43 billion. Telstra’s stock fell by 11.5 per cent since its announcement of a worse-than-expected provisional profit report early in February, 2010. Telstra’s shareholders blame the telecommunication giant’s poor performance on a series of bad management decisions, delays in pursuing a deal with the Rudd Government on the issue of NBN and a monopoly mentality. The political interference at Telstra has led many people to develop negative perceptions about the company, leading to a drop in the value of its stock. This is well illustrated in the report findings showing that fifty three percent of all investors think that Future Fund is going to sell its entire stake at Telstra, whereas 30 percent believe that such a move will be detrimental to the company. Before the change of management at Telstra, structural issues were a major cause of concern for the managers, who were accused of misjudging their customers and holding back technological breakthroughs because of a monopoly mentality. The recent poor performance by the management was evident in the priorities that shareholders listed in order for the company to resume successful business operations. The nature and need for change The need for change was identified by the Telstra management as early as 2003, when introduction of a completely new technology regime led to drastic drop in the company’s fault repair performance. A new work management piloting system together with storms and bushfires, were blamed for a fall in the timeframes of the company’s Customer Service Guarantee (CSG) from 91 percent to 85 percent. The piloting system was aimed at identifying various problems before the deployment of the system nationally. It is not surprising that the poor performance figures heightened political temperatures at a time when the Rudd government had barely introduced laws in parliament, as the preliminary stages of fully privatizing Telstra got underway. The poor performance at Telstra led the government with no other option than to institute a transformation of the telecommunications regulatory regime. This transformation would bring many undesirable changes, including causing a serious dent in the ability by Telstra to generate a free flow of cash. The need for change at Telstra was further underscored through reports indicating that as far as incumbent telecommunication operators in the Asia Pacific region are concerned, the company faced the greatest risk of regulation by the government. The risk facing was identified through reference to the company’s industrial policy, social policy and the management’s inability to offset regulatory risks through negotiations of a deal with the government. Change strategies (SWOT analysis) Strengths Telstra Corporation (Telstra) remains one of the leading telecommunication companies in Australia. The company provides many mobile, broadband, fixed telephony, Pay TV services, hosting, directory, and broadband services. The company has a workforce of 43,000 people and recorded revenues of $19,080 million. Telstra remains one of Australia’s biggest brands. It owns an extensive network infrastructure that gives the company a competitive edge over rivals. Weaknesses Telstra lacks the initiative to pursue international diversification initiatives. It also suffers from lack of a growth strategy. The prices of broadband and mobile phone plans are higher compared to those of other companies. The company also focuses on promotion of new promotion of new products, for example the Next G Network instead of increasing fixed line advertising. Opportunities Telstra has been contracted by the Australian government as the sole data supplier. Through an initiative of the government, Telstra has expanded its CDMA network in order to cover rural areas. There are opportunities for demand for broadband to increase. The company can position itself to profit from this increase in demand by expanding service delivery in 3G, high-demand area. Threats Customer behavior continues to change as the mobile phone market approaches a saturation level in Australia. Telstra may find the task of competing for new customers an increasingly difficult thing to do. The company’s equipments face the threat of destruction by bushfire. During Change (1750 -2000 words) The nature of change According to some commentators, organizational change towards the end of the 20th century was typically significant and traumatic. Another way of thinking about organizational change is looking at it from the perspective of large-scale transformational overhaul that does not acknowledge the role played by the changes in ensuring that there is organizational survival. At Telstra, change is ongoing. In March, the company’s CEO reshuffled the executive team at a time when the company was facing many challenges relating to adoption of different structural models. The challenges are complicated by the ongoing negotiations on whether Telstra is going to play a role in the plan by the Australian government to invest in a new national broadband network worth $43 billion. In other words, there are many ways in which organizational change occurs. There are two different types of organizational change: first-order change and second-order change. In either type of change, managers are likely to be confronted by three common organizational changes: introduction of new technologies; downsizing; and mergers and acquisitions. The perceptions of organizational change tend to differ depending on the perspective from which one interprets change (Bezboruah 2008, p. 131). The introduction of a new broadband network at Telstra is a good example of an introduction of new technologies. First-order change is incremental and continuous. It often involves adjustments in processes, systems or structures, though no fundamental changes in strategy, corporate identity or core values are identifiable. First-order changes are aimed at maintaining and developing the organization. Paradoxically, the changes are aimed at supporting organizational order and continuity. The changes being undertaken at Telstra may be described as falling on the borderline between first-order and second-order. Second-order change is discontinuous, radical, and transformational. It leads to a fundamental alteration of the organization at its core. This type of change does not develop the nature of the organization; rather, it transforms the organization. Downsizing; mergers and acquisition; and implementation of new technology are all regarded as second order changes, notwithstanding frequent arguments about the scale of organizational change being wholly dependent upon the perspectives adopted by the person(s) involved. Downsizing intentionally and permanently reducing staff. Various approaches to downsizing include downscaling, downscoping and retrenchment. Technology change entails introduction of new technologies such as Customer Relations Management (CRM) and ecommerce. Mergers and acquisitions are a very important way through which organizational growth is accelerated. Diagnosis for change (and Tushman’s Congruence Model) Nadler and Tushman’s (1987, p. 196) congruence model is based on the belief that all organizations can be viewed simply as sets of interacting subsystems whereby changes can be scanned and sensed in the external environment. This model is founded on the schools of thought that dwell on open systems, whereby the concept of organizational metaphor is used to understand organizational behavior. The need for change at Telstra was identified through a critical analysis of the quality of services offered and the resulting financial performance. In the congruence model, the organization is viewed as a system whereby both internal and external sources are drawn upon in the form of resources, strategy and environment (Schaafsma 2009, p 52). These sources are then transformed into outputs (performance, activities and environment). The outputs are generated within three levels, namely, individual, group and total. The heart of this model is the opportunity that it provides for the analysis of the transformation process in such a way that prescriptive answers are not given, but instead stimulation of thought occurs on what needs to be done in a specific organizational context. According to Nadler and Tushman, it is important to understand the congruence model as merely a tool for one to use in organization of thoughts instead of a rigid template for dissecting, classifying and compartmentalizing one’s observations. It is simply a way of making sense of a kaleidoscope of impressions and information. The model largely draws on the sociotechnical view of organizations, with focus being on the strategic, managerial, technical and social aspects of various organizations, with emphasis being the notion that everything must rely on everything else. The implication is that different elements of the entire system must be aligned in a specific manner in order for the highest level of performance to be achieved in the entire system. For this reason, the higher the level of congruence, the higher the level of performance. At Telstra, only elements of change that relate to congruence have been seen to bring about change. According to Nadler and Tushman (1997, p.34) cited in Bezboruah (2008, p. 131), congruence is the exact degree to which the demands, needs, objectives, goals and/or structures of a specific component remain consistent with the demands of the other. in this regard, the comprehensiveness of this model is identified by virtue of its ability to specify inputs through outputs. Resistance to change There are two main forms of resistance to organizational change that have been experienced at Telstra since 2008: active and passive resistance (Kitchen & Daly, 2009, p 51). In active resistance, employees openly question the changes being made and they even indicate that they do not support them. Active resistance can be handled more easily since it is explicitly identifiable. This has been clearly manifested in the case of Telstra in early 2009. The organizational problems that arise in the course of implementing change can be worked out one way or the other. In worst cases, the implementers of change may even choose to work around the person causing the resistance (Baloguna & Jenkins 2003, p. 252). Passive resistance may be very difficult to detect. At Telstra, this type of resistance was experienced in early 2008 when plans by the Rudd government to pump $43 billion into a national broadband network surfaced. It takes time for managers to uncover signs of passive resistance among people. This is because they may express support for all the impending changes, yet when change gets closer to the implementation stage, resistance starts to come out in the open. Alternatively, resistance can also be detected within two perspectives or frameworks: open versus underground resistance. Underground resistance is even more difficult to deal with than passive resistance. This is because it is active but non-violent. Open resistance is one in which employees come out in the open to express their displeasure with the changes being implemented. It may be violent or non-violent. It is also easy to understand Resistance to change can also the thought about in terms of its source. Emotional sources of resistance at Telstra may be in the form of the fear of losing a job, the fear of power loss and the dread of learning new things. Throughout civilization, problems have always occurred in the quest to facilitate the adoption of new methods and technology (Graetz 2000, 552). The best to manage resistance to change is to motivate people through accentuation of both the positive and negative elements of change. Waiting until resistance surfaces is a great mistake. Expecting resistance and preparing for it is the most prudent thing to do. Implementation of change The best way to implement change at Telstra is to market all elements of change management. Marketing forces people to understand the efforts being taken in the process of implementing change (Simpson & Cacioppe, 2001, pp. 396). Through marketing initiatives, managers overcome the temptation of being complacent and internally focused. Being soft, as opposed to being heavy-handed helps the employees to understand that change is not being imposed on them. It is important to indicate and draw attention to the things that will go wrong when change is not undertaken. When the downside of the status quo is stressed, people can rethink their decisions to oppose the impending changes (Ledez 2008, p. 111). Experience among the management team ensures that a situation where there is overreaction and resistance to the politics of resistance (Stroh & Jaatinen 2001, p 150). Experience restrains the management team from attempting to correct the situation on the spot, a major mistake that makes them seem to be on the defensive (Bordia 2004, p. 346). Making such a mistake only adds fuel to the resistance, while at the same time driving it underground. Putting the politics of resistance into perspective is a great idea, since organizational politics can be very addictive. It is common for middle level managers to support change openly in the presence of their own management, only to raise many issues when the change is being implemented. This is often an indication that they need some more time to study the potential effects of change and to explain it to their subordinates. Waiting until such a problem occurs is a big mistake. Instead, any potential hurdle should be addressed to higher management beforehand; it should precede any presentations made in the presence of other employees. Linking vision and change Vision provides everyone within an organization with both a sense of enduring purpose and a corporate sense of being. It is therefore a good tool of implementing change. Vision transcends all day-to-day issues while incorporating an accurate measure of today’s success. It provides a meaning to both the present and the unforeseeable future. By linking vision to the survival of the organization, people who implement change can be sure to get little or no resistance in their endeavors at change management. In every society, change is pervasive. The impetus for change comes from the environment. In the case of Telstra, poor performance presented an environment whereby organizational change was inevitable. When such a change is linked to an organization’s vision, both the leaders and their subjects understand the changes in positive light; as a continuous process that need not be cruel and disruptive. Vision ties together both reactive and proactive responses to change. Both the internal and external environments have a great influence on the need for change, although the external environment, more often than not, exerts a greater influence (Armenakis & Stanley 2002, p. 172). Organizations are always awash in the external environment. Changes in market competition and developments in the information age are just examples of external events of which the organization has not control, and to which it must be responsive in order to survive. One of the most important elements of strategic leadership is having an understanding of when a change in the external environment necessitates changes in the organization and when it does not (Fornaciari 1993, p. 276). Changes that are made in the internal structure of the organization in order to accommodate external change is said to be reactive. Strategic leadership, just like the implementation of a vision, should be proactive, that is, change that is implemented in anticipation to future changes in the external environment. However, in the practical world, this seldom happens, and managers often find themselves dealing with change management through striking a balance between reactive and proactive forces. Strategies for communicating change People tend to be less motivated whenever they are faced with uncertainty. Uncertainty manifests itself through inability to know what is happening and why. In the extreme, when there is lack of information, a feeling of insecurity creeps in, taking away all the existing natural energy in employees, robbing them of the drive to succeed. Intelligent managers need to employ certain strategies for communicating change. Communicating strategies through middle managers is not one of them. Middle managers are conventionally perceived as power sponges. Middle managers do not spend much time moving information through various organizational layers. Additionally, even before the information is conveyed, it not in its neutral form; the messages may be withheld or modified in such a way that the middle managers’ power is enhanced. Change management initiatives work best when top executives bypass middle-level managers in order to deliver the message straight to the employees. If the choose to pass through middle managers, the messages may be altered and the result of it is that the resulting messages are needlessly complex and unnecessarily difficult to understand. Middle managers tend to be more satisfied with networks and information than line supervisors (Pettigrew & Woodman 2001, 699). This is because they have access to both the formal sources of information from the senior management; at the same time, they have put in place semiformal links with various individuals in all departments throughout the company. When change is major, problems should be solved through a direct communication between senior managers and first-line supervisors (Gill 2001, p. 311). A transmission check is necessary in order to ensure that supervisors have received the message and that they fully understand it. The best strategy for communicating changes in the customer service is setting up a task force that comprises of employees representing all organizational levels in order to drive the campaign. Getting insights from companies that have succeeded in customer service is a good idea. In this case, receiver orientation is of critical importance. In this case, for communication to succeed, the information needs to be grounded on the values of the recipients. Skills for communicating change Communication is the foundation upon which successful organizational change management is built. Communication during organizational change management facilitates the delivery of information that brings about a change of behavior among front-line employees. Many managers continue to embrace intranets, email, and many other technological innovations as very efficient solutions during times of change. However, simply facilitation the provision of information is not equivalent to communication. During organizational change, there is a feeling of fear of loss of loyalty and employment security among employees, who feel that they are in turmoil. They tend to fear that they may lose loyalty to those employees who seem to be seemingly uncaring. Information technology, for its capacity, gives employees only a limited relief from frustration and anxieties of a workforce that is burdened by change (Bordia 2004, p. 507). During organizational change, perception is viewed as the reality . Managers should anticipate and adjust all their communication in order to minimize negative perceptions of threat in the course. In August 2008, Telstra displayed an unethical business practice by cutting down on thousands of employees working in the company’s call centers. The management chose to claw back a mandated rise in superannuation contributions of the employer. Employees’ fears are therefore not unfounded when they dread change. Telstra management communicated the change through an internal memo, a means that many people do not consider a wise choice for breaking such undesirable news. The changes were aimed at making sure that employers always meet their responsibility of paying 9% of the worker’s salary, inclusive of commissions and performance-based initiatives. Managers need to understand the basis of trust in order to reap the benefits of trust. The basis of trust is honesty and openness; dedication and commitment; caring and empathy; and competence and expertise. After Change (750-1000 words) Successful implementation of the change During the process of transforming Telstra, the company’s CEO Sol Trujillo had a complex undertaking before him. As researchers found out, whenever executives master change, they can spearhead it again and again, in almost any company. Sol Trujillo’s most difficult task was to avoid temporary derailment upon taking over at Telstra. This Australia's leading telecommunications company did not seem to be dealing efficiently with its rich legacy of landline business, leave alone handle the threat of new competitors who were bringing new, cheaper products into the market. Trujillo’s thirty years experience in Qwest Communications and an Orange, a large French telecommunications company, where he had spearheaded change in both, enabled him to pursue change at Telstra. The main challenge at Telstra, as of 2008, was to improve financial results and market performance. Telstra’s main problem was a very high degree of visibility by the public, a tremendous performance pressure and very aggressive milestones that the company was expected to meet. Through an aggressively ambitious strategy, the company was able to roll out a national 3G+ service that took all competitors by complete surprise. The lead phase of transforming Telstra, for Trujillo, involved the appointment of Greg Winn as the Chief Operations Officer. The position was required to be filled by a person who had the clout and resources of ensuring that were made towards change in order to ensure that ambitious goals were achieved. The senior management was sourced from outside Telstra whereas new teams were staffed with new and upcoming leaders who were ready for new challenges. The lead phase was meant to be an implementation of the milestones that had been laid down during the Plan phase. During the Lead phase milestones were communicated to the workforce while at the same time motivating them to achieve each of them. Milestones were created through think sessions that involved key managers, and where it was deemed necessary, outsiders. The objective was simply to come up with plans that would necessitate the achievement of critical interim goals. The laboratory team’s core responsibility was to project improvement in various aspects of the company’s operations. In 2008, the company dubbed its change management process “Telstra’s Transformation”. This process was made up of highly elaborate milestones, both small and big. This process would entail the expansion and broadening of broadband coverage, products, services and applications that were already available. Only the 3G+ service was going to be an additional product in the market offering. All the initiatives were big-picture undertakings that were strongly tied to precise timetables. Internally, Telstra mapped plans aimed at simplifying various IT systems, reduction of operational platform by 75% within 3 years and 80% within five years. This would entail an increase in the company’s property portfolio, increase in ADSL capacity, mobile coverage, through the establishment of a “learning academy”. This “academy of change” would train people about next-generation technologies. These milestones were a good source of understanding of the pace of change. Once things began to happen, they were able to know where every new development would fit into the bigger picture. Summary Change at Telstra was necessary since among many other reasons, the company’s management was exposed to high economic and political visibility. The company had to predict and make follow-ups on each program milestone upon which plans had been made. Follow-ups were being made by employees, the public and shareholders. Sustaining growth at Telstra involved making very difficult decisions and tough choices. There was a need to make even the most unpopular of decisions as long as they were based on discipline of data. There was need for the management to ensure that information was objective and verifiable before being acted upon. For change to stay on track, people had to hold one another vigorously accountable, not so much through punishment for all wrong decisions made, but so that all people can learn from their mistakes. This report explored various aspects of resistance to change. The process of implementation of changes at Telstra was highlighted with regard to strategies and the skills of communication that were used in order for the set goals and objectives to be achieved. The most outstanding aspect of the after-change events was the need to stick to the rules, to adhere to objectivity, to respond to a highly inquisitive public, and to ensure that the interests of shareholders are met. The teams set up by the senior management seem to be working as Telstra has been inching back on the path of improvement in performance. The “learning academy” has brought about improvements in the workforce’s understanding of products relating to the next generation technology. The learning efforts may be attributed to Telstra’s success in increase in property portfolio including ADSL capacity and mobile coverage. References Armenakis, A, & Stanley, H, 2002, ‘Crafting a change message to create transformational readiness’ Vol. 15, No. 2, pp. 169 – 183. Baloguna, J, & Jenkins, M, 2003, ‘Re-conceiving Change Management: A Knowledge-based Perspective’ European Management Journal, Vol. 21, No. 2, pp. 247-257. Bezboruah, K, 2008, ‘Applying the congruence model of organizational change in explaining the change in the Indian economic policies’ Journal of Organizational Transformation and Social Change Vol. 5, No.2, pp. 129-140. Bordia,P, 2004, ‘Uncertainty during organizational change: Is it all about control?’ European Journal of Work and Organizational Psychology, Vol. 13, No. 3, pp. 345 – 365. Bordia, P, 2004, Uncertainty during Organizational Change: Types, Consequences, and Management Strategies, Journal of Business and Psychology, Vol. 18, No. 4, 507-532. Fornaciari, C, 1993, Incremental and Revolutionary Strategic Change: An Empirical Test of Common Premises, International Journal of Organizational Analysis, Vol. 1, No. 3, pp. 273 – 290. Gill, R, 2001, ‘Change management--or change leadership?’ Journal of Change Management, Vol. 3, No. 4, pp. 307 – 318. Graetz, F, 2000, Strategic change leadership, Management Decision, Vol. 38, No. 8 pp. 550 – 564 Kitchen, P, & Daly, F, 2009, ‘Internal communication during change management’, Corporate Communications: An International Journal, Vol. 7, No. 1, pp. 46 – 53. Ledez, R, 2008, ‘Change Management: Getting a Tuned Up Organization’ Business Intelligence Journal, Vol. 3, No. 4, pp. 111-119. Pettigrew, A, & Woodman, R, 2001, ‘Studying Organizational Change and Development: Challenges for Future Research’ The Academy of Management Journal, Vol. 44, No. 4, pp. 697-713. Nadler, D, & Tushman, M, 1987, ‘Organizational Frame Bending: Principles for Managing Reorientation’ The Academy of Management Executive Vol. 3, No. 3, pp. 194-204. Schaafsma, H, 2009 ‘A networking model of change for middle managers’, Leadership & Organization Development Journal, 1997, Vol. 18, No. 1,pp. 41 – 49. Simpson, S, & Cacioppe, R, 2001, Unwritten ground rules: transforming organization culture to achieve key business objectives and outstanding customer service, Leadership & Organization Development Journal, Vol. 22, No. 8, pp. 394 – 401. Stroh, U, & Jaatinen, M, 2001, ‘New approaches to communication management for transformation and change in organizations’ Journal of Communication Management, Vol. 6, No. 2, pp. 148 – 165. Read More