The Management of Change - Essay Example

?The Management of Change Table of Contents Introduction 3 Company Overview 4 General Motor Company 4 Nissan Motor Company 4 Reasons for Change 5 General Motor Company 5 Nissan Motor Company 6 Change Management Process 8 General Motor Company 8 Nissan Motors Company 9 Problem and Success 11 General Motor Company 11 Nissan Motor Company 12 Conclusion and Recommendation 13 References 15 Introduction Change management is an approach which provides a way to transform the organization from present state to desired future state. It is one of the most significant aspects of management which can be regarded as an attempt to ensure that organizations react to the environmental factors in which it operates. Organization change can be implemented in various techniques, such as by altering the mission, strategy, operation, technology, and attitude or behaviour of personnel associated with an organization. It has often been argued that change occurs in an organization due to several forces such as nature of the workforce, economic conditions, competition, social trends, and world politics among others which either relates to the internal or external business environment. Change management is a concept which assists an organization to respond faster to the customer demands. The concept of change management can also be regarded as a theory which tends to motivate the employees of organization to accept the change and execute the organisational process in an effective and efficient manner. Therefore, it can be observed that organisational change management should begin with a systematic diagnosis of the present situation in order to determine both the need for change and the capability of change (Smith & Graetz, 2011). Based on this consideration, this paper will aim at analysing and evaluating the strategies adopted by two real life organizations, i.e. General Motors and Nissan with the purpose of implementing change. Notably, these two companies attempted change management concept with a purpose to reduce its financial distress as well as to solve its dilemma regarding the corporate culture. With this objective the paper considered various internal as well as external factors to examine the effect of change in the particular companies in terms of the reason for change, change management process and problems as well as successes related to change. Company Overview General Motor Company General Motors was established by William “Billy” Durant in the year 1908. In the year 1920s, with a substantial rise in the demand for automobile General Motors was positioned as a leader of global automobile industry. The company added various brands in its product line such as Chevrolet, Vauxhall, and Opel which in turn helped it to diversify its business all around the world. Chronologically, General Motors built a strong existence in emerging markets, especially in China and Brazil and accomplished its transformation into a solitary global economy. In the modern days, the company continued to grow with electric vehicle technology developing a series of hydrogen motorized fuel-cell notion and demonstration vehicles (General Motors Company, 2012). Nissan Motor Company The Nissan Motor Company was established in Yokohama City in the year 1933 by Yoshisuka Aikawa. Presently, Nissan maintains its prime objective to optimize product development and deliver extremely innovative technology to its worldwide customers. It is due to this reason that currently Nissan is recognized for its creation of innovative vehicles and service programs all over the world. The company produces multiple ranges of product brands such as Infiniti G, Infiniti G Coupe, Infiniti M and Infiniti EX among others. The products of the company are praised by customers all over the world with its high reliability in terms of quality and price which depicts that the company has been able to attain high level of satisfaction and brand loyalty in its current performances (Nissan Motor Company, 2012). Reasons for Change General Motor Company The General Motor had to implement the change management process in its company due to internal as well as external forces. External forces fundamentally included the extremely high competition of automobile sector in the global market. It has been identified that North America is one of the largest markets of General Motors. However, its market shares eroding continuously slackened from 30% in the year 1999 to 22% in 2008 which highlights that the company was severely affected by the fiercely rising competition in the global automotive company. One more reason for applying change management in the organisation can be observed as related with the economic factors such as technological change, economic downturn and others. As the price of fuel increased in the year 2000, it generated a significant dilemma for the company since the General Motor’s sales during the year 2000 were that of SUVs and trucks (Scribd Inc., 2012). On the other hand, competitors such as Toyota started introducing new range of cars which were more fuel efficient increasing the competition in the external environment. Therefore, it caused decline in sales turnover of General Motors. With the rise of the Japanese automakers in the 1980’s, General Motors was beginning to be threatened with declining sales after 2001. This resulted in a major financial crisis for General Motors. Due to these influences, had to file for bankruptcy on June 1, 2009. This became the fourth-largest bankruptcy filing in the US history. As a result General Motors had to sell or discontinue several brands, such as the Luxury Hammer brands to re-organise its financial structure (Scribd Inc., 2012). The internal factor concerning change management in the case of General Motors’ can be witnessed as the previous agreements with the trade union. For instance, the Union Auto Workers (UAW) of General Motors’ employees was criticized for imposing high wage costs on employers. Notably, Toyota employees were receiving $44 an hour whereas General Motors paid its employees on average $74 per hour (Scribd Inc., 2012). Nissan Motor Company In the year 1991, Nissan was recognized as a highly profitable company compared to other automobile organizations. However, in the year 1993-1999 Nissan incurred huge losses. One of the reasons for it to incur losses was the then Asian financial crisis. This crisis caused a 10% decline in the valuation of the Yen which in turn created an impact on the profit margin of Nissan. Consequently, it led to the inflation with the increase in the rate of interest. This created constraint to the company to afford a loan on that period of time which resulted to financial distress for Nissan. As the currency of the country devalued, Nissan had to pay higher amount for importing resources from other country which automatically raised the cost of the product. Subsequently, with the rising price of Nissan products, the demand for Nissan brand in consumer market started declining which in turn hampered the competitive position of the company to a large extent. Nissan’s share of the Japanese market in the year 1999 was below 19% which was a result of gradual decrease from a peak of 34% in 1974 due to the financial turmoil. The international market share of the company had also decreased from 6.6% in 1990 to 4.9% in 1999. Nissan incurred net operating loss of ?684.4 billion during financial year 1999 (Nakae, 2005). The financial crisis faced by Nissan led to various internal challenges such as low morale within the employees. The company announced downsizing to overcome the difficulties regarding financial distress. Three assembly plants were shut down by Nissan. Simultaneously, the company also decided to shut down two power train plants in order to minimize their losses through retrenchment. As a result of the plant closure, 5,200 employees were laid-off. Almost 3,840 were transferred to other plants and 1,300 retired from Nissan. This downsizing caused de-motivation amid the employees. This forced Nissan to consider change management to alter the situation and attain a sustainable growth rate (Nakae, 2005). Change Management Process General Motor Company General Motors suffered from a negligent approach that came with market leadership in the 1960s and ‘70s. Although by 1990s, it began to restructure its processes and become more competitive, especially from the Japanese automakers and from Ford & Chrysler. These objectives were later achieved with the implementation of change management process providing a focused idea to General Motors regarding what to change in its business operations. General Motors has been primarily focusing on cultural change and cost cutting programs. General Motors has two boards in its company namely automotive product board and automotive strategy board which are concerned about the product development and strategy development process respectively (Scribd Inc., 2012). General Motors applied the cultural change in its organization by establishing its automotive product board and automotive strategy board with an 8-mn decision making team. The team had the instruction to report directly to the CEO of the company. The objective behind formation of this team in the organization was to develop the decision making process in the organisation as time efficient as well as cost efficient. It resulted in effective and efficient working environment for the employees of General Motors inspiring its employees for their better effort. In addition General Motors took measures regarding its accountability and responsibility. The company put forward its employees with greater accountability and responsibility towards their work. It also provide the employees with a few decision making abilities concerning their efforts and hard work as well as put emphasis on the need for risk-taking with regards to their decision. This change gave an encouragement and motivation to its employees for putting their best effort in their work. In the direction of rising from financial distress, General Motors focused on applying the cost cutting process in its organization. It was done through offloading of its brands such as Saturn and Hummer to other companies (Scribd Inc., 2012). Thereafter, General Motors focused on its other four core brands Chevrolet, Vauxhall, and Opel and Daewoo. It also included retrenchments and pay-cuts, after it was discussed with the union and limited by their agreement. Therefore, it can be stated that General Motors pursue participative approach for their stakeholders such as employee. The company also follows the rules and regulations enacted by the government at the time of implementing change processes concerning retrenchment and pay cuts. This also highlights that it adopted participative approach for their stakeholders (Scribd Inc., 2012; Baekdal, & et. al., 2006). Nissan Motors Company The change management process in Nissan was started when Mr. Carlos Ghosn joined the company as its CEO and decided for an alliance with Renault accounting for nearly all of the major changes at the company. Mr. Carlos Ghosn is well known by the Japanese people for his previous achievements at Renault and Mischelin. He introduced a Nissan Revival Plan (NRP) in regards to change management process. This plan included, cost reduction strategies, strategies related to sustainable growth and also related to restructuring of the overall business process. These objectives have been achieved by Nissan creating centralized control over global operations such as business planning and brand management. Nissan initially made reductions in terms of production capacity and decided to shut down its three assembly plants as well as two power train plants so as to attain its objective (CEO Q Magazine, 2010). Ultimately it reduced the total employment by 14% by laying-off around 21,000 employees. This objective was supposed to be achieved by Nissan implementing natural attrition and early retirement programs such as Voluntary Retirement Solution (VRS). One more change was implemented by Nissan to deal with its Supply Chain networks by refurbishing its dealer networks. With this concern, NRP proposed to reduce the allocation of subsidiaries by 20% as well as shut down 10% of the total retail outlets. It shows effectiveness in reducing regional overlap and intra-dealer competition (CEO Q Magazine, 2010). With a purpose to overcome its financial crisis and reduce its automobile debt, NRP planned disposal of fixed assets, securities and other non-core assets. Beyond reducing cost, NRP also focused on investing on other opportunities. It emphasized on increasing the company’s technological potency and quality of the product with due significance. In support of this, Nissan created an internationally incorporated R&D structure which guides the company to manufacture high-tech and user friendly cars. Therefore, it shows that Nissan was aggressively pursuing a global strategy, taking the advantage of its alliance with Renault with the aim to achieve an “indisputable performance leadership” in the international automobile industry (CEO Q Magazine, 2010). Problem and Success General Motor Company General Motors implemented the cultural change in its environment to instil its employees with greater accountability and responsibility although in a limited manner as a mode of implementing change. The top executives of General Motors do not consider employee participation as significant while making decisions regarding strategy, structure, process and procedure of the company which in turn generated problems for General Motors in its changing process. So, in order to make cultural change successful General Motors should empower its employees and make them feel that they are also one of the important aspects of the company in order to increase the employee productivity. The cost cutting strategy of the General Motors was impacted by agreement with the UAW about maintaining the minimum wages as this strategy can reduce the employee wages to a certain extent which in turn negatively affect the relationship with workforces (Scribd Inc., 2012). The cultural change program which was implemented by General Motors was effective to a certain extent. However, it was likely to result in unsatisfactory circumstances at times as it was observed to be unable to boost the morale amid the employees in General Motors. It is in this context that the company had to face considerable challenges caused by retrenchment strategies in terms of hindered employee satisfaction. This in turn hampered the performance of the company and negatively affected its competencies as well as growth rate (Scribd Inc., 2012). Nissan Motor Company The difficulty related to the change management process of Nissan was regarding its 21,000 job cuts planned by NRP and reducing dealer networkers. In addition, the government response towards the plan of Nissan was not pleasing. Government showed its concern about the employees and stated that the companies should find ways to survive on their own. However, the government provided its assistance for their sustainable growth and development of the company. Investors also showed their anxieties about NRP (Sutherland, & et. al., 2006). Apart from the limitations, Nissan also achieved success by implementing its NRP programme during its change management process. Nissan achieved net income of ? 331.1 billion and operating income of ? 290 billion in the financial year 2000 after implementing NRP. Surprisingly, it was the best financial performance in Nissan’s history. The company also achieved its commitment regarding reducing the net automotive debt. In addition, Nissan’s share price increased by 46% in the year 2000 when it announced the financial results of the year 2000. The Nissan Revival Plan (NRP) was implemented with the purpose of improving the financial position of the company which at present positioned Nissan as a growing and profitable company in the international market (Sutherland, & et. al., 2006). Conclusion and Recommendation It is quite apparent from the above mentioned facts that organizations in modern era have to face various challenges regarding its marketing operations as the competition level is rising day by day in the global stature. For instance, Nissan faced various challenges due to its external factors as well as internal factors existing in the business environment. The company incurred huge loss continuously for seven years resulting in financial distress of Nissan. The main reasons for this dilemma was Asian financial crisis which led to inflation on Japan and caused various dilemma such high interest rates, increase in production cost which in turn reduced the demand of the product in the international market. The market share of Nissan also decreased and hampered the investors’ interests. However, Mr. Carlos Ghosn joined the company as its CEO and took the decision in terms of implementing change process and merged with Renault. He applied the change in order to reduce the impact of its financial crisis and to make improvements in its corporate culture. Mr. Carlos Ghosn introduced strategies regarding cost cutting and reducing the number of supplier and dealer network. It is worth mentioning in this context that the change process implemented in Nissan rendered success to the company leading it to the path of better growth and sustainability (Baekdal, & et. al., 2006). Similarly, in General Motors immense pressure was faced by the top level executives regarding its corporate culture and day to day reduction in sales turnover due to high competition in the global automobile industry. The internal environment also created a few dilemmas for General Motors as the employees were observed to lack satisfaction with the company. General Motors implemented the cultural change in its environment and instil its employees with greater accountability and responsibility, although in limited manner, which rather de-motivated the employees to give their best efforts. Hence, to avoid all these difficulties in the General Motors, top level executives took the decision to implement change process in the organisational culture (Pasmore, 2011). Therefore, it can be stated that both the companies, i.e. General Motors and Nissan Motors Company should take necessary steps regarding its difficulties mostly caused due to internal and external influencing factors such as environmental issues, political and economic fluctuations along with communication processes executed within the organisational structure. For instance, Nissan should consult the government when it prepares its Nissan Revival Plan (NRP) for implementing change process to avoid criticism from the governments. As was observed in the case of Nissan, investors also depicted their anxieties about NRP. They were concerned that the company may face difficulty since the plan was quite aggressive in terms of its supply chain management. Correspondingly, General Motors should provide their employees with a few authorities in terms decision making process and motivate them to participate in decision making process which in turn shall boost their morale and lead them in the process to give their best efforts (Baekdal, & et. al., 2006). References Baekdal, T. & et. al., 2006. Change Management Handbook. Company Change. [Online] Available at: http://www.baekdal.com/downloads/changemanagement-en.pdf [Accessed February 17, 2012]. CEO Q Magazine, 2010. Most Respected CEOs: Carlos Ghosn Nissan-Renault. [Online] Available at: http://www.ceoqmagazine.com/mostrespectedceos/mostrespectedceos.pdf [Accessed February 17, 2012]. Firkola, P., 2006. Japanese Management Practices Past and Present. Economics Journal of Hokkaido University, Vol. 35, pp. 115-130. General Motors Company, 2012. Company. History & Heritage. [Online] Available at: http://www.gm.com/company/historyAndHeritage.html [Accessed February 17, 2012]. Nakae, K., 2005. Cultural Change: A Comparative Study Of The Change Efforts Of Douglas Macarthur And Carlos Ghosn In Japan. Massachusetts Institute Of Technology. [Online] Available at: http://dspace.mit.edu/bitstream/handle/1721.1/32114/63201635.pdf [Accessed February17, 2012]. Nissan Motor Company, 2012. Corporate Information. Business Overview. [Online] Available at: http://www.nissan-global.com/EN/COMPANY/ [Accessed February 17, 2012]. Pasmore, W. A., 2011. Research in Organizational Change and Development, Volume 19. Emerald Group Publishing. Scribd Inc., 2012. Brief History & Overview of General Motors. General Motors Change Management. [Online] Available at: http://www.scribd.com/doc/46503268/General-Motors-Change-Management [Accessed February 17, 2012]. Smith, A. C. T. & Graetz, F., 2011. Philosophies of Organizational Change. Edward Elgar Publishing. Sutherland, M. & et. al., 2006. Global Strategy of the Renault- Nissan Alliance. Slideshare. 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