Change Management at Woolworths Limited - Case Study Example

ANALYSING CHANGE MANAGEMENT AT WOOLWORTHS LIMITED By Name Course Professor Institution City/State Date Analysing change management at Woolworths Limited Table of Contents List of illustrations…………………………………………………………………………….3 Executive summary……………………………………………………………………………4 Background……………………………………………………………………………………5 Introduction……………………………………………………………………………………6 Needs: Theoretical models of change……………………...………………………………….7 Lewin’s model of change……………………………………………………………..7 Cycle of competitive behaviour……………………………………………………….8 Need for change at Woolworths………………………………………………..…….9 Interventions…………………………………………………………………………………11 Strategic intervention………………………………………………………………..11 Diagnostic Model: Field force analysis ……………………………………..12 Implementation………………………………………………………………15 Human process intervention…………………………………………………………16 Diagnostic Model: McKinsey 7S Model…………………………………….17 Review…………………………………………………….…………………………….…...19 Conclusion……………………………………………………………………………………20 Recommendations……………………………………………..…………………….……….21 Reference list…………………………………………………………………..……………..22 List of illustrations Figure 1: Lewin’s model of change………………………………………………………..9 Figure 2: Strebel’s cycle of competitive behaviour……………………………………….10 Figure 3: Field force analysis model……………………………………………………….13 Executive summary Woolworths Limited is a leading retailer in Australia and New Zealand. In the last decade, the company registered significant growth through an increase in the number of stores and workforce. However, the company has shown dismal performance in the last two years characterized by declining sales and reduced customer loyalty. The strength of Select, a major brand for the company, has reduced significantly. In 2015, several senior managers resigned, thereby necessitating the need for change management in the company. Woolworths Limited lost its traditional leading position to its arch rival called Coles. One of the reasons behind the company’s dwindling fortunes is a lack of visionary leadership. This paper explores the change management at Woolworth Limited. It has identified various theoretical models supporting the need and opportunities for change. These models include Kotter’s model and Lewin’s change models, which explained the need for change management. The study identifies strategic interventions and human process inventions as two significant change interventions. Strategic intervention is anchored on Lewin’s diagnostic model called field force analysis whereas the human process interventions is supported by McKinsey 7S diagnostic model. The study reveals that Woolworths Limited requires change in the management to enable it regain its position as a market leader. The change management process at streamlining the management through reduction of workforce and motivation of employees through training and rewards. It proposes several recommendations, which include the need for Woolworths Limited to involve its employees in the change process. Kew words: Change management, Woolworths Limited, Kotter’s change model, McKinsey 7S model, field force analysis Background The contemporary business environment is characterized by change management (CM) practices, which have significantly influenced the operations of corporate entities and organizations. CM describes the methods that are used to re-direct resources and business processes of an organization (Hayes, 2014). Change management focuses on the full organization by placing emphasis on what should change in the organization. Woolworths Limited has undergone the change management process aimed at overhauling the company’s systems and processes in order to give it a competitive edge in the dynamic business environment. This paper explores change management at Woolworths Limited and identifies recommendations for change interventions. Introduction Woolworths Limited is a leading retail company in Australia, which was founded in 1924. The company has its headquarters in Sydney and operates in New Zealand (Keith, 2012). Woolworths Limited serves twenty-eight million customers every week and has three thousand stores. It has employed 198,000 employees and deals in food, petrol, general goods and liquor. However, the company’s profit margins deteriorated in early 2015, prompting the need for change in its management (Mitchell, 2016). Consequently, Woolworths adopted new change initiatives that involve abandoning its brand and embracing new measures, which include slashing costs, streamlining management, restoring sales, and increasing profit. I. Needs: Theoretical Models Describing Needs (800) Change management can be implemented effectively if it is developed against an existing change model. Various theoretical models governing change management include John Kotter’s 8-step process for change, change management foundation and model, and Deming’s cycle. Kotter’s eight steps involve setting up a sense of urgency, developing a guiding coalition, creating a vision and strategy, communicating the change vision, and empowering employees for change process (Kotter, 2011). Other steps include creating short-term wins, consolidating the gains, and fostering new approaches to change. The change management foundation and model is a pyramid-like model with a base and an apex. People implement the change at the base while the leadership at the apex provide direction to govern the change process. The four stages in this model include determining the need for change, preparation and planning for change, change implementation and sustainability. Edwards Deming proposed the Deming cycle as a method of enhancing control and improvement of various processes within an organization. It encompasses four stages namely planning, doing, checking, and acting. Lewin’s Model for Change According to Burnes (2004), Lewin’s change model runs through many businesses irrespective of their sizes and age. The author added that in the dynamic business world, only organizations that adapt to change would thrive while organizations that fail to embrace change will struggle to operate. Lewin proposed a famous change model called Unfreeze-Change-Refreeze, which consists of three stages of change (Burnes, 2004). He explained change from the perceptive of a block of ice. If an individual has a block of ice and realizes that he prefers a cone of ice, he will first make the ice to change (unfreeze). Once the ice melts, it can be shaped into a cone (change) after which the new shape is solidified (refreeze). The management of an organization should ensure that employees are ready for change because they are primary implementers of change (unfreeze). Once employees are ready, the management should proceed and execute the change (change). The next task for managers is to ensure that change is permanent (refreeze). a. Unfreeze Unfreeze is a holistic process aimed at preparing the organization to anticipate change. It can be achieved by explaining the need for change, the driving forces and danger of not accepting the change. In the case of Woolworths Limited, the driving forces for change include dwindling fortunes, low sales volumes, poor financial turnover, declining consumer confidence and the threat of competition (Burnes, 2010). This process involves challenging the existing beliefs, attitudes and value systems within the organization and developing an analogue of prosperity and success if the anticipated change is implemented. This stage is difficult to execute because it makes the employees very apprehensive about the outcome. The decision by Woolworths Limited to reduce the number of support workers lowered the morale of employees and reduced their enthusiasm and productivity. b. Change This stage involves people looking for ways to do things. Their behaviour and attitude are directed towards supporting the change. During this process, employees of a company take their time to understand and appreciate the change. They also examine the impact of the change on their lives. If the change is likely to benefit them, they become positive and optimistic about their future with the company (Burnes, 2004). The change process at Woolworth focused on reducing costs and streamlining operations. Various top managers who could not stand the change resigned. In this stage, people need time to adjust to the change. Therefore, the change should be communicated promptly. c. Refreeze Organizations exhibit signs of refreeze through job descriptions and organizational charts. This stage helps employees to internalize the changes. Most employees in this stage are stable and are certain about the future of the organization. They tend to incorporate the changes in everyday business. Figure 1: Lewin’s model of change (Burnes, 2004) Cycle of competitive behaviour This cycle is linked to the competitive environment of an organization. The models consist of innovative phase, which involves discovery of a new business opportunity (Raineri, 2011). The innovation leads to a breakpoint in the evolutionary cycle and causes a change in the behaviour of the competitor. The second phase is the efficiency phase characterized by the exit of least efficient companies. Efficient companies survive the competition and retain dominance in the market. Figure 2: Strebel’s The Cycle of Competitive Behaviour (Raineri, 2011) The Need for Change at Woolworths Woolworths’ change process encompassed departure of senior managers at the company including the head of brand strategy (Mitchell, 2015). The company undertook to cut costs by $500 million and reinvesting this money into viable business opportunities. To revive the company’s declining performance, the change process included reduction of price and improving services in the many stores in the countries of operation. This strategy was meant to regain control of the market, which it had lost to rivals like Coles. Central in the change process is the role of customer relationship in the business growth and expansion. The retailer focused on revitalizing falling consumer confidence and customer loyalty, while undertaking marketing and data analytics. The company established that it had lost the trust of consumers and declined to invest in programs that would promote consumer loyalty. The consequence of this inaction was evident in the decline in sales as many consumers sought services from the company’s rivals. The change process encompassed a two-year investment in data analytics. Interventions (2000-2200) According to Boonstra (2008), interventions refer to planned actions that assist in enhancing the effectiveness of an organization. Interventions aim at dismantling the current state of events in an organization and moving it to a state of efficiency and effectiveness. Thus, change interventions seek to disrupt the status quo in an organization. Types of change interventions include strategic interventions and human process interventions. Woolworths Limited requires strategic interventions and human process intervention in the change management process. 1. Strategic Intervention These interventions are used to align an organization with the environment in which it operates. In so doing, the company becomes competitive in all aspects. Types of strategic intervention encompass environmental scanning, proactive responses to the environment, collective structures, open systems planning and trains-organizational development (Hall & Hord, 2006). Environmental scanning involves examining certain aspects of the business environment, collecting important information, and communicating the information to stakeholders (Suarez, 2005). It also involves monitoring the environment to ensure that the company has a competitive edge over the rivals. Proactive responses to the environment involve taking part in political activities with the aim of influencing regulations that govern the business environment. It also involves seeking regulation from the government to control entry of companies in respective business industries. It also places emphasis on social responsibility (Anderson & Anderson, 2010). In this regard, companies embracing change management should develop change strategies that promote corporate social responsibility. Collective structures encompass alliance building among organizations. It is done to deal with challenges of environmental uncertainty. The alliances can take the form of joint ventures, contracting, federations and strategic alliances. In open systems planning (OSP), organizations monitor the environment to ensure consistency with environmental expectations. Trans-organizational Development involves an organization seeking partnership with another organization so that the partnership can solve complex tasks that cannot be handled independently. Strategic intervention is an important step for Woolworths Limited because it enables the company to assess the business environment in view of its strengths and weaknesses. Currently, the company has recognized the need to revive its relations with consumers as a strategy of responding to the business environment. It also involves introduction of new products and services in the market and embracing advertising channels to shape consumer tastes and preferences. The change management process at Woolworths encompasses an undertaking towards corporate social responsibility. Diagnostic Model: Lewin’s Force Field Analysis A suitable diagnostic model for strategic intervention is force field analysis. Kurt Lewin proposed this model to analyse and manage the problems that arise in organizations. Lewin identified two competing forces namely driving forces and restraining forces which significantly influence organizational behaviour (Baulcomb, 2003). The driving forces comprise environmental factors which influence change within an organization. On the other hand, restraining forces comprises organizational factors which may impede the change process. These organizational factors include limited resources and low productivity of the workers (Dunford et al., 2013). The company’s strengths and opportunities constitute the driving forces that influence the change process. Lewin further explained that if the strength of the driving forces equals the strength of the restraining forces, the organization is said to be in a state of equilibrium. This model focuses on the addition of more driving forces and elimination of restraining forces to enhance change. Thus, it involves moving the organization from its prevailing state of equilibrium to a state of disequilibrium until equilibrium is restored (Dibella, 2007). Figure 3: Force Field Analysis Model Source: Baulcomb (2003) This model is suitable for understanding the organizational behaviour of Woolworths Limited because it explores the business environment which is the focal point of strategic intervention. How the model entrenches strategic intervention at Woolworths Woolworths Limited has a number of driving forces. The company’s excellent reputation is its major driving force. Paton and McCalan (2008) revealed that a positive image for a company boosts the confidence of customers. In this regard, Woolworths Limited takes advantage of this force in attempting to make a comeback in the competitive business environment. The company’s positive image has been its defining feature for a long time (Suarez, 2005). A strong image also leads to increased revenues because many customers would be attracted to the various products that the company sells. The second strength for the company is strong financial returns it has reported over the years. With higher revenues, Woolworths Limited has opportunities for expansion because it is likely to meet challenges that come its way. In addition, these forces provide enough ground for the company to embrace a change process that can enable it retain market dominance. High profit margins imply that the company can hire highly qualified and dedicated staff in its key departments to ensure critical aspects of the company are protected. Woolworth Limited has enjoyed this advantage and consequently, it has enabled the company to stay on top of its rivals for a long time. Thus, the change process should take cognizance of the company’s financial performance and high returns and invest in areas that would make it regain its lost position. Woolworths Limited has leveraged growth and has employed thousands of people in various stores. The increased shopping centres have given customers an opportunity to experience the company’s products. In so doing, customers have been able to identify with the company’s principle of affordable quality. This sense of identity has made the company to retain loyal customers. The company’s strong brands such as Homebrand and Select have enabled Woolworths Limited to enjoy a market lead for many years (Keith, 2012). Stronger brands sell in the market and enable the company to project a positive image to customers. The company’s change process can recognize these strengths and focus on initiatives that would promote its image. Woolworths Limited enjoys numerous opportunities in emerging markets like Asia. The company can make new entry into India to exploit its diverse market. Due to its large financial base, Woolworths Limited can expand by acquiring rival companies so that it can transform into a monolithic enterprise (Keith, 2005). Through this strategy, the company can diversify its products and access distant markets. In addition, Woolworths Limited can access emerging opportunities in South East Asia. The suitable business environment under which Woolworths Limited operates is an important driving force. Despite the driving forces, Woolworths Limited has restraining forces, which require immediate intervention. The company’s scale of operations has been slow in the last three years. Keith (2005) identified some of the problems facing the company as lack of proactive leadership. Instead, the leadership is reactionary and lacks strategy on the best ways to face competition from rivals. Another restraining force is the presence of a large number of casual labourers, which has often led to high turnover. The company’s change strategy encompassed reduction of labour force by 400 workers. This strategy involved merging various departments and limiting the number of workers to ensure that the company realizes high profit margins. A large workforce implies that Woolworths has increased recurrent expenditure and may not operate efficiently in view of the cycle of competitive behaviour. Again, there is a wide disparity in the wages between senior level of management and casual workers. Zhao and Liu (2010) revealed that such disparities have often led to tension in the workplace and increased advocacy for high salaries. The morale of casual workforce declines when there is a feeling that the senior management shows little concern for low-level workers. This weakness is a motivating factor in the change process. Woolworths Limited faces stiff competition from Coles. Numerous independent retailers in Australia pose a serious threat to the company. This challenge implies that Woolworths Limited must adjust to the changing times and embrace innovative methods to stay on top of the competition (Keith, 2005). The changing social trends have affected the retailer’s performance. The fluid nature of consumer tastes has made it difficult for the company to predict emerging consumer trends and behaviour. Implementation The decision by the management to initiate change process at Woolworths Limited is consistent with the company’s driving forces. First, the company is keen to retain its global reputation as a leading retailer in Australia and New Zealand. The company is introducing new products that meet the varying tastes and preferences of customers. Woolworths Limited is also improving the speed of production to ensure timely arrival of finished goods in the market. In order to increase revenues, the company has taken cognizance of the high maintenance costs. Consequently, it has lowered the costs of maintenance significantly through outsourcing exercising prudence in resource management. Woolworths Limited has developed mechanisms for eliminating the restraining forces to ensure that the company’s change process is effective. These mechanisms include worker motivation through various training opportunities to increase worker productivity. The company has embarked on initiatives aimed at motivating employees through the use of rewards. Employees whose actions and behaviours are considered right are encouraged through various events where gifts are issued. This strategy helps in enhancing employee confidence and productivity. 2. Human Process Intervention This type of intervention includes the use of market experts (human processes) who understand the market trends. The various types of this intervention include interpersonal processes and organization process approaches. Interpersonal processes are further broken down into T-groups, third party interventions, team building, and group process interventions (Hayes, 2014). Third party interventions involve the use of people who understand the retail market in Australia. These people can be very instrumental in diagnosing the factors to consider in operating retail market. Team building is an essential change intervention that Woolworth should adopt to boost the morale of its employees. Downsizing usually causes uncertainty in the workplace and lowers the productive level of employees (Cummings & Worley, 2014). In this regard, the change process needs to recognize the centrality of team building. T-groups present employees with the opportunity to improve interpersonal and communication skills. Studies by Hayes (2014) revealed that companies, which offer their employees team building opportunities, have vibrant and motivated workforce. Thus, Woolworths Limited should provide training opportunities for its staff. Organizational process approaches include intergroup relations, large group intervention, and organization confrontation meeting (Hayes, 2014). These approaches stem from an organization’s perspective and focus on groups rather than individuals. For example, intergroup intervention focuses on bringing in an organization through different groups in the organization. In the case of Woolworths Limited, intergroup relations target the members of different departments. The relationship between marketing department and finance department is important because the marketing department seeks finances from the finance department to facilitate product promotion. Diagnostic Model: McKinsey 7S Model This diagnostic model was named after the consulting company that developed it. The model comprises what the authors called ‘levers’ which begin with S, hence the 7S Framework. They include skills, style, staff, systems, strategy, structure, and shared values. Structure describes the skeleton of a company. It is sometimes called the organizational chart. Strategy refers to the course of action and it details the plan by which an organization intends to achieve its key objectives within a period of time (Molineux, 2012). The systems describe the procedures that are followed in the company while skills describe capability of the staff of an organization to realize the objectives of the company. Staff refers to the people who work inside the organization while the style describes the behaviour that managers within an organization exhibit in realizing the goals of the organization. Shared value describes the principles that guide all stakeholders within an organization. These principles are shared by every member of the organization. Most companies tend to focus on variables that are likely to vary with time such as structure, systems and strategy (Decker et al., 2001). Variables such as style, skills, staff and shared values are called soft variables. The success of Woolworths Limited is tied to its ability to integrate strategy, systems, and structure with the soft variables. In this regard, a holistic change in an organization requires a change in all the variables. How McKinsey 7S model entrenches human process intervention This model furthers the use of human process intervention in initiating the change process at Woolworths Limited. The model places centrality staff, skills, style, and share values as key components in the change process. Like most organizations, Woolworths Limited has employed over three thousand people who work in the various stores spread in Australia and New Zealand. The company has vibrant and productive workforce that works hard towards its fundamental goals and objectives. Without personnel, there would be no organizations. The company places emphasis on mentoring for employees because it recognizes the impact of mentorship on employee performance. The company’s staff consist of the chief executive, food managing director, financial manager, human resource manager, receptionist, personal assistant, and payroll administer among others (Keith, 2012). Employees in every department perform integral duties that contribute to the greater goal of the organization. The company undertook brought changes in the staff and announced that it would reduce the number of jobs by 400. This announcement implied that the affected employees would lose their jobs in order to streamline operations in the company and simplify management. According to Mitchell (2006), the company lost two senior executives while another two executives had expressed their intention to leave. They include director customer experience, chief marketing officer, director of retail services, and data officer. It is not clear whether the company’s change process is causing the departure of senior executives. However, it is indubitable that the company’s desire to bring about change in the management comprises a review of its staff. Review A periodical review the interventions should be done to ascertain their effectiveness in producing desired change. A formative evaluation should be done prior to implementation of the interventions to examine the position of the company before change. A summative evaluation should be done at the end of the change process. If the outcomes are positive, then company would have met its objectives for change. Otherwise, a new set of interventions should be sought to enhance the change process. Conclusion This paper sought to analyse change management at Woolworths Limited. Two change interventions were assessed. They include strategic interventions and human process interventions. The study found out that Woolworths Limited has registered declining sales volumes and faces stiff competition, which have triggered the need for change in the management. The study reveals that strategic interventions focus on the business environment. Woolworths Limited should assess its environment and review its capacity to face internal and external market forces. The human process intervention recognizes the significance of people in an organization. Thus, Woolworths Limited should encourage human processes that lead to the productivity of employees. Recommendations The study suggests the following broad-based recommendations: It is imperative that Woolworth recognizes the reality of the competition and develop initiatives that can make it compete effectively. These measures include product diversification, brand image, and product quality. Consumer confidence is paramount in business undertaking. In this regard, Woolworths Limited should improve customer loyalty, and enhance the satisfaction of buyers through an integrated customer relationship management framework. The change process should be smooth and successful. Employees should receive communication regarding the change process in time to enable them to internalize the likely outcomes and prepare to adjust accordingly. Involve employees in the change process. In so doing, employees would own the process and cooperate with the outcomes. As mentioned earlier, employees are the primary implementers of change. Thus, their participation in the change process cannot be gainsaid. Woolworth Limited should scan its environment and assess the prevailing gaps in the market. Woolworths Limited should adopt a proactive response to the environment and embrace business practices that are socially responsible. 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