The Role of Strategy in Company Success - Case Study Example

19 April 2016

Introduction

United Parcels Service is one of the major players of the international post and logistics market. Since its inception in 1907 the company has passed a long way to developing a sustained image of success and profitability. Despite the dramatic improvements UPS has always been useful for millions in all parts of the planet and the change had been a rare companion of the company (Garvin & Levesque, 2006). The situation changed with Mike Eskew becoming the company’s CEO in 2001, when the company entered the new stage in its organizational evolution.

It is a well-known fact that every organization uses its own strategy of organizational change, but it is still possible to define the main drivers: (1) information availability and distribution; (2) the pace of technological advancement; (3) the growing availability of technologies; (4) increased business competition; (5) rapid shifts in the global labor and product markets; (6) changes in environmental responsibility and requirements; and (7) changing customer expectations and demands (John et al, 2001). More often than not companies operating in the present day business environment pursue change to align their strategic goals with the emerging information capabilities and, consequentially, use them to meet the rising consumer demands. In the modern world it is not possible for companies to move in only one direction as globalization brought new competitors and change the market conditions. Thus, every company has to make necessary changes in order to keep the competitive advantage. As the number of companies in the logistics industry increases, the ability to reach customer satisfaction in the most cost-effective manner becomes the main source of companies’ competitive advantage. Nevertheless, the number of challenges faced by companies in the global market does not decrease. “Integrating activities both within and beyond organizational boundaries has become a major challenge at century’s end and will likely continue for the foreseeable future” (John, 2001, p.145). The environment is very demanding and only the cleverest will have a chance to succeed.

These are the challenges affecting companies at the beginning of the new millennium, but back to the beginning of the 1990s the set of problems experienced by UPS was somewhat different. First, the beginning of the 1990s was marked with the growing number of private companies and government-sponsored agencies in the market (Garvin & Levesque, 2001). The diversification of companies in the logistic market had the potential to distract UPS consumers with more attractive rates, prices, and services. Second, before the 1990s discipline and efficiency had always been the company’s top strategic priorities. According to Garvin and Levesque (2001), along with discipline and efficiency, continuous improvement had been the company’s principal legacy. The company had historically operated in the atmosphere of constructive dissatisfaction, which further instilled the values of continuous improvement and service excellence on company employees (Garvin & Levesque, 2001). The historical commitment to efficiency and discipline and continued attention towards operations left many customers dissatisfied. Apart from the fact that UPS failed to envision changes in customer preferences and demands, discipline and efficiency left little room for monitoring changes in the external business environment. Finally, UPS had never had a formal strategic planning process, which made the implementation of strategic innovations difficult and problematic. As the entire world was changing, UPS definitely needed a fresh breath, and the new CEO had to restructure the company’s basic operations.

Since the beginning of the new millennium UPS was constantly trying to define how exactly it could develop and sustain a competitive advantage. The creation of the new strategic planning process became part of the strategic innovations within UPS. Looking further into 2017, UPS anticipates that understanding the factors and forces affecting its market position will become its main strategic goal for years ahead (Garvin & Levesque 2001). Yet, this goal sounds too vague to result in tangible outcomes for UPS. What UPS really needs is (a) to constantly monitor and adapt to changes in the market environment; (b) to ensure that its products and services have value for customers; and (c) to rely on service, managerial and process innovations in its striving to achieve strategic and profitability highs.

It is not enough for UPS to monitor changes in external business environments (Garvin & Levesque, 2001). It is more important to be flexible and adjust to the emerging business trends in timely fashion. In most cases, it is managerial and product innovations that enable flexibility in organizations, and UPS is no exception. “Product, process, and managerial innovations can be used to gain a competitive advantage, to the extent that the technology underlying such innovations remains proprietary” (Bharadwaj, 1993, p.89). The key to using innovations as the source of competitive advantage is keeping them inimitable; for example, UPS can develop new logistics solutions to drive the efficiency and speed of their operations (Woodruff, 1997). However, only those solutions that have considerable customer value will help UPS retain its competitive position and outperform its competitors. Innovations, quality and efficiency do matter, but they no longer suffice to provide a competitive edge (Woodruff, 1997). Process and operations improvements do hold the potential to strengthen the company, but, again, may have mixed impacts on the organization’s bottom-line (Woodruff, 1997). To operate successfully in the highly competitive environment, UPS should re-orient itself to deliver superior customer value (Woodruff, 1997). One of UPS’s direct competitors, Federal Express, has already proved this assumption to be of particular importance for continued strategic success (Woodruff, 1997). It is important to reveal what the clients want and how to provide them with the products and services they want. For example, managers at UPS could shift their attention from internal process to external customer perceptions, through regular surveys. The information gained during these surveys will let UPS managers shape new mental models of customer preferences and guide their actions to achieve and sustain superior customer value (Woodruff, 1997). This is also how UPS can position itself as a customer-centered company.

Mike Eskew became CEO at the very beginning of the new millennium. Like the prevailing majority of all the managers at UPS, Eskew had spent years working for the company and exemplified the triumph of internal career advancement that had always been one of the major company’s principles. Throughout his career as CEO, Eskew was clearly an example of a transformational leader, although he failed to deliver his vision to the followers and turn it into tangible, measurable principles.

Transformational leadership is believed to be directly associated with change. The nature of transformational leadership by itself is to transform. Transformational leaders support companies in achieving superior performance by broadening followers’ outlook, generating their awareness of the mission, vision, and purpose, and motivating the followers to look beyond their direct interests (Bass, 1990). Transformational leaders use different ways to achieve these results – they may stimulate employees intellectually or try to meet their emotional needs (Bass, 1990). No matter what way they may use, being charismatic is the key to being a good transformational leader (Bass, 1990). The essence of transformational leadership is in persuading employees so that they can accomplish the most impossible tasks if they apply extra effort (Bass, 1990). Transformational leadership is one of the management styles, which can inspire those who follow the leader to make positive changes. Transformational leaders are, as a rule, vigorous, full of enthusiasm and passion. They are not only interested in their own work and deeply shipped in process, but also they help other members of the group achieve success. Transformational leaders are the converters, which initiate the direction on the strengthening and developing the position of the organization, strategic changes (Johnson et al, 2005). Transformational leaders motivate workers to work not for satisfaction of momentary interests, but for the achievement of long-term goals. Transformational leadership is considered to be a special form of transactional leadership, which prescribes the remunerations of subordinates. Forming vision, a transformational leader makes subordinates work hard for the achievement of the new purposes. They make essential changes of the mission of a firm or a division, the way of business and management of human resources to reach the vision. A transformational leader revises all the philosophy, system and culture of the organization.

Here transformational leaders also recognize the existing differences between them and followers and create mental models to address these differences. Transformational leadership works showing employees new ways to deal with the old problems (Bass, 1990). This is exactly what Eskew tried to do when he became CEO. His careful attention to the structures and processes within UPS could not be disregarded. Back in 1972 Eskew redesigned one of UPS’s parking lots, to accommodate more trucks (Daft & Lane, 2007). As CEO, Eskew fulfilled the same transformative mission and was rather successful in motivating employees to make their contribution to the company’s performance and be rewarded for it.

The most serious result of Eskew’s transformational leadership was a profound shift in the organization’s and employees’ mentality, the so-called mind-set shift that led managers and planners to think beyond the conventional business strategy horizons (Garvin, & Levesque, 2001). “Eskew doesn’t like the attention that comes with being CEO; he prefers that the focus be on the people who do the day-to-day work of the company. When he visits facilities, he tells employees “What you do is noble… You make business better. You bring order to chaos”” (Dalt, 2008, p.359). Scenario planning initiated by Eskew enabled managers to put themselves in the context of business and strategic operations (Garvin & Levesque, 2001). Scenario planning and analyses offered a broader perspective compared with traditional competitive analyses, as it provided for much richer outcomes and allowed seeing the big changes affecting the company at the very beginning of its change process (Garvin & Levesque, 2001). However, with all its advantages and positive sides, Eskew’s leadership is not without controversies. Of the major importance are his top-down approaches to decision-making, excessive emphasis made on qualitative thinking, and failure to engage operations managers and professionals in scenario planning/ analysis.

Much has been written and said about organizational change in theory and practice, but based on the recent findings change is (a) a nonlinear process and (b) change interweaves numerous improvement efforts (Moran & Brightman, 2000). In terms of the former, effective change is that which involves a series of smaller shifts that embrace all people working in the organization and create a sense of purpose. The latter presupposes using different processes and efforts to achieve the desired goal (Moran & Brightman, 2000). Needless to say, involving operations departments in the process of change could contribute to the efforts and achievements made by UPS with Mike Eskew. Change is impossible without active employee involvement, and when some employees feel that change processes and decisions pass them by, they have no motivation to work toward its goals; nor are they willing to make improvements and invest their knowledge in the proposed strategic decisions. It comes as no surprise that, by the end of the day, Eskew feels that not all followers understand and accept his mission.

Effective change is both top-down and bottom up (Moran & Brightman, 2000). Leaders and managers working at the top provide vision, communicate mission, and develop ways to achieve them. Those working at the bottom provide the encouragement and support for implementing change (Moran & Brightman, 2000). Those at the bottom are actually primarily responsible for change implementation. Leaders alone cannot produce a positive change. Successful change is that which operates as a shared responsibility of all organizational members (Moran & Brightman, 2000). The important task of a leader is to make employees take an active participation in the process of change and overcome their resistance. Resistance is a natural phenomenon, which every leader faces when he is going to impalement changes. It is very essential to find the ways to overcome the resistance and encourage employees take part in the process. However, Eskew did not consider that to be important. Regrettably, during his leadership career Eskew preferred top-down management, and this inclination was not going to change. Although by the end of the first decade of the millennium Eskew broadens the circle of those who participate in change decisions, he fails to anticipate the comments, knowledge, and experience that may originate at the bottom of the company’s hierarchy. The entire process of strategic planning at UPS is about Eskew’s giving commands to planners, with no feedback provided by them. In this situation Eskew cannot guarantee that followers understand and accept his mission.

Conclusion

Eventually, Eskew asserts that strategic planning and strategy development has little to do with numbers (Garvin & Levesque, 2001). Here, Eskew as a leader makes two serious mistakes. First, change cannot be effective without measurements. Measurement is the key factor of productive change (Moran & Brightman, 2001). Therefore, even if Eskew sets qualitative goals, there should be some space left for quantifying these goals and measuring changes in performance. Second, when Eskew says that operationally minded execs have difficulty overcoming their ‘numerical’ mindset, he actually rejects an effective way to communicate his vision to the followers (Garvin & Levesque, 2001). Transformational leadership presupposes creating vision and communicating it to the followers, so that the latter feel motivated to implement the proposed change. Unfortunately, Eskew’s transformational leadership ends with delineating the vision, and he is still a mile away from having his vision and strategy accepted by employees at UPS.