Development of Management of Change - Essay Example

Management of Change 2007 Outline: A) Introduction B) Management of change and its importance for modern companies Proactive and reactive approaches to change 2. The multiple roles of a manager and approaches to change management 3. The nature and types of changes 4. Complex business environment as the source and driver of change C) Conclusion A) Introduction The development of a company does not happen in an ideal environment, and therefore at every stage of its development, the organization has to attain an essentially new level of its performance, and this requires constant systematic changes of all its elements. In the competitive environment of the business world in the XXI century, change management has become a must for every company. Nowadays, the constantly changing market requires from every company maximum flexibility as in organizational culture, HR management, structure, thinking, as well as spheres of interaction with other companies and customers. A company's market potential is necessary for its successful and efficient performance, the basic elements of the company's market potential being its resources, strategic planning system, leadership, and marketing. Strategic planning is closely interrelated with change management. E.g., K. Warren states that "[t]oday's performance [of a company] depends on today's strategic resources". (1999, p. 3) According to Kleiner, the process of strategic planning consists of the following stages: "establishing the ground for the company's activity by means of determining its mission; determining company's main goals; analysing the company's environment by indicating all factors influencing company's activity; determining company's market potential, and its strengths and weaknesses; developing several alternatives as far as strategic development is concerned; analysing these strategic alternatives from the standpoint of the company's goals, vision, mission, as well as conditions in the environment and on the market; forecasting the efficiency of each of these strategic alternatives; and, finally, forming the ultimate strategy of the company, i.e. choosing the strategy that looms the most favourable for increasing the company's competitive advantage. (Kleiner, 1998, pp. 46 - 50) B) Management of change and its importance for modern companies 1. Proactive and reactive approaches to change In the quickly changing environment, the modern organizations have to change continuously. Very often, managers utilize reactive approach to changes, which often results in decrease in their companies' competitive advantage, and sometimes even in ruin of organizations. Proactive approach to introducing changes is considered to be much more beneficial, however it demands profound knowledge of the basic features of change process, sources of opposition to these changes, and methods of overcoming opposition. The world-known companies have considerable experience as far as managing changes is concerned. One of the most efficient approaches in this sphere is organizational development that presupposes introducing step-by-step deliberate changes into corporate culture with the goal of adapting the company to the outer environment. Organizational development influences, above all, social subsystem of organization, and is therefore inseparably connected with HR management. However, technological progress should not be neglected either, especially in the IT sphere, and every company undergoing changes should develop the methods of restructuring technical subsystem. A problem that managers often face when introducing changes into companies is the problem of natural resistance on the part of personnel, as well as the company as a system. It is important to combine organizational development with reengineering of business processes for achieving a better result and decreasing the level of resistance. The essence of proactive approach to change management is that all changes are introduced with considering all possible obstacles that may arise within organization, above all those connected with resistance and as a result, non-effective realization of the strategies of change. Proactive approach presupposes eliminating the root of this resistance rather than purely regulating the process of implementing new strategies. Resistance to changes on the part of company and/or separate members of its staff is a very natural process, as the very nature of a human being presupposes resistance to changes, however this resistance can be minimised using proactive approach to change management. In order to do it, and persuade people working in a company in the necessity of these changes, it is necessary to do the following: make sure all employees are aware of the organization's goals and mission; provide the staff with information concerning the consequences of the changes that are to be introduced; make up a special group of employees who will think of these changes, and actually implement them; within this group it is crucial to have managers and non-formal leaders; create a system of controlling and monitoring changes. In contrast to the proactive approach to managing changes, reactive approach normally only pay attention to the very process of introducing changes and overcoming resistance, whereas the reasons for this resistance are not taken into consideration. This approach is less "HR-friendly", as it does not account for human factors of changes. Reactive approach cannot be called utterly ineffective, but it is based upon authoritativeness of managers, not upon complex approach and human resource management. Reactive approach hardly makes possible the elimination of resistance, and it should also be noted that even if the resistance is fought successfully, it is very likely to appear again from time to time. Whereas reactive approach to management of change might work in relatively stable conditions, when not many changes are required, it is not effective in the modern business world that is changing quickly. The obvious advantage of the proactive approach is that the situation in the company, as well as its external environment, is analyzed complexly and in detail. Moreover, paying attention to HR, the atmosphere of support is created in the company rather than opposition and resistance. All in all, proactive and complex approach to managing changes can decrease business risks, and ensure effective strategic planning. Judging from the experience of the world-known companies, the companies that do not follow proactive approach to change management, are normally in disadvantage when compared to the rest. Quality management and leadership are vital for a company's success. As the market becomes increasingly competitive, managers are responsible now for ensuring their companies' competitive abilities and developing their competitive advantage - which is impossible without quality leadership. In order to improve leadership it is vital to be aware of the market opportunities, develop the company's infrastructure, as well as manage human resources efficiently. That is why proactive approach to managing changes is obviously preferable. 2. The multiple roles of a manager and approaches to change management Managers in companies are the people who eventually determine the company's strategies, generate and group ideas, and integrate their employees into a team. Leadership is closely interconnected with the organizational culture, which, in its turn, is inseparable from change management. (Kotter, J., 1996) Katzenbach stated that it is not enough to be a good manager in order to introduce fundamental changes into a company: this also requires a new way of thinking and particular abilities (e.g. to influence people, invent new leading and managing methods, and adjust their management style to the circumstances). (Katzenbach, J., 2004) Continuous and overlapping change has become a way of life in the corporate environment. Leaders who want to get ahead in today's marketplace must learn to respond to a growing number of changes in how they structure companies, conduct business, implement technology, and relate to customers and employees. (Suresh, H., 2001, p. 3) Let us consider the experience of WalMart - is one of the "business wonders" of the 1980s - 1990s (during the last twenty years, this international company has been twice as profitable as its competitors. (Barney, J., 1995)) that has created "the controversial 'WalMart effect'" which has been the object of many a heated argument among the USA economists: "rising labour productivity and lower inflation". (Schafer, S., 2005) Some of the elements of WalMart's organizational culture are unique and cannot be copied by competitors: for example, WalMart chose to build its stores in geographically remote locations, where its competitors did not serve customers; local managers can choose the goods they think should be sold in their stores, as they have more opportunities to observe changes in customers demand than top-managers in the headquarters; moreover, WalMart authorizes local managers to pursue a pricing policy depending upon the local market. (McNeal, B.) As a result, WalMart's attributes, its capabilities and resources become more beneficial and reliable for its development than the constantly changing factors of the environment and market. Communication at all levels is one of the most important factors of WalMart's success, and it ensures truly proactive approach to managing changes there: Effective communication in WalMart is demonstrated with the associates' identification with the company. They know the goal, objectives, strategies, and policies of WalMart in the same dimension the top management do. WalMart uses different methods of communication like interpersonal, professional, managerial, cross-cultural and organizational. Managers play a key role in downward and upward communication. With organizational communication WalMart give identity to employees. Also cross-cultural communication is greatly challenging to communicate effectively with people in diverse international locations. (Chiang, T. et. al 2003, p. 12) Therefore, it would not be a mistake to state that WalMart's most important concerns is its human resources. Creating a solid, enthusiastic and well-performing team has become one of the major goals - and simultaneously one of the main success factors - for WalMart. The company's top-management aims at hiring, training and retaining well-qualified personnel and involving its workers into the process of running the company by means of giving their advice and suggestions, helping to tackle problems and coming forth with their own ideas. WalMart sticks to three principles introduced by Sam Walton: respect for the individual, service to customers and striving for excellence. (Chiang, T. et. al 2003, p. 13) As far as its workers' benefits are concerned, WalMart offers them good wages, profit sharing, stock ownership program, paid vacation and holidays, a discount card, medical and dental coverage, life insurance, short- and long-term disability insurance, free confidential professional counseling and assistance, scholarship bonuses and child-care discounts. (Chiang, T. et. al 2003, p. 13 - 14) WalMart has been expanding abroad quite actively, so it is trying to adapt to these changes in all spheres of its activity, including HR (this area "constantly meets the changes" (Moynihan, M., 1993, p. 3). It is evident that a pure Western model may prove absolutely or partially non-suitable for Eastern countries, mainly China. "When it comes to doing business in China, the first rule is to throw away the rulebook, along with the business-school texts and western management theory". (A disorderly heaven, 2004) WalMart faces the necessity to introduce into its leadership and management style both elements of the Western and Eastern style. 3. The nature and types of changes It is important that the company be ready to introduce different types of changes that should be addressed using complex approach. Introducing changes into a company is meant to correlate its resources with its opportunities and, of course, environment. According to the modern theorists of management, if the company wants to survive in the conditions of competition, its managers should follow a strategic management paradigm. It means, it is crucial to form the company's mission, determine its goals, as well as strengths, weaknesses, external threats, and opportunities (using the SWOT analysis), and allocate its resources. Then, it is necessary to monitor the overall performance, and in case the chosen strategy does not lead to positive results, it should be changed. It is not enough to plan and implement changes in accordance with the outer environment, since it is also very important to retain whatever unique there is about the company: "Companies that enjoy enduring success have core values and a core purpose that remain fixed while their business strategies and practices endlessly adapt to a changing world;" (Collins, J. and Porras, J., 1996, p. 65) 4. Complex business environment as the source and driver of change The company's plan of changes should take into account current tendencies in economic processes and determine the company's behaviour, and serve as an adequate reaction to the economic changes. Flexible response to any changes occurring in the external environment, and the combination of strategic planning (both long-term and short-term planning), are typical techniques of effective change management. Proper application of these methods can ensure the company's efficient performance on the market. Management needs a new, more powerful means of responding to changes while learning to adapt in a very different business environment. Strategy-driven management is the answer. Strategy is defined as a disciplined way of thinking and managing. No organization can succeed long without having clearly defined purposes and objectives, the means to deploy its forces and resources, and the power to motivate its people to forge ahead. (Chang, Y. and Platt, W., 1987, p. 52) Strategic management principles should be used accurately, so that the company can get more power for its normal functioning and development. Whereas Porter proposes to work out an organizational strategy basing upon the analysis of competition (Porter, M., 1980; Porter, M., 1985), this approach is being criticised by some theories. (Barney 1995; Hamel & Prahalad 1990; Efremov, V., 1999) D. Hamel and C. K. Prahalad stated that some of these companies (e.g. Honda, Komatsu, or Canon,) performed and developed more efficiently if compared to some others, like Caterpillar, General Motors, or Xerox, and it happened because these two groups have different ideas as far as the driving forces of their development and change are concerned. While the external conditions for these two groups of companies are the same, the companies that prove to be less efficient continue to follow the "traditional" postulates of the "classic" strategic management theory, and they aim at maintaining and developing their old qualities which had previously secured their success on the market and ensured their strategic breakthrough in the competitive environment. On the other hand, the companies that are more successful prefer the strategy of manipulating their resources, and they utilize the assets that they possess in some new ways, and try to introduce as many innovations as possible. C) Conclusion Therefore, the development of a company is accompanied by systematic changes, and it is a continuous process. The importance of management of change for the modern companies becomes clear if we consider the fast and constant development of technologies, and as a result - the increasing market competition. 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