Analysis of the Case Concerning Change Management - Essay Example

Case Study There are some success stories proving that dynamic change brings about remarkable results. Ricardo Semler of Semco Corporation (Brazil) is a leader who dared to venture against convention and did the opposite of what traditionally has been the role of the business leader. He gave up control despite being the owner of his company. He inherited a company that was unable to face competition and that had several layers of hierarchy that could not use the aspirations of its workforce to overcome the difficult times. He therefore decided to reposition his company and took the enactment route to empower every individual hired by his company. Semler has a unique strategy, that of empowerment. The importance of ethical values in relationship with workers is a critical part of this success story. He sincerely believed that each of his employees had the biggest stake in his business and they needed assurance of the safety of their jobs. He used this leverage to ensure their loyalty. This move secured the future of both the employees as well as the company. Maslow (1954) argued that workers achieve their best only when they are recognised for their accomplishments by peers as well as their superiors. Pay does matter but self actualisation is the ultimate motivation. This was the value that Semmler understood well and made the basis of the change he brought about. He used empowerment as the tool for motivating the employees and made them share the responsibility of managing the company by delegating power to them. Empowerment is a tool that is to be employed with the concept of participation with responsibility for consequences. It was introduced and implemented throughout the organisation in a phased manner. Hierarchy was broken down as this is a great barrier towards emancipation and self actualisation. A change plan was crafted to bring every worker into the management loop recognising his ability to contribute towards improvement in operations and the bottom line. Strategic Change It is essential to change according to the environment and evolve strategies to survive intense competition. Porter (1980) had suggested that competitive advantage is what keeps a firm; alive and later argued that when a firm becomes different by offering value, quality and some attributes through which it offers some uniqueness then it will become an above average performer in its industry (Porter 1985). But to arrive at this stage the firm must make difficult choices. Porter (1996) then redefined strategy to be a combination of differently performed activities in a challenging environment. While the activities remain the same, the approach taken to perform them is the strategic decision that pays off. This brings about strategic positions that are unique by themselves and set the organisation apart from others. This paradigm has been challenged by Smirchich and Stubbart (1985) who claim that current theories wrongly perceive that environments dictate strategies and that environments themselves are a creation of actions of organizations. They argue that all actions by all people in the organization contribute to the development of the environment. This is almost diagonally opposite thinking. They break the existing assumption that an organisation is entrenched in and confined within the environment. Ordinarily strategists make linkages between events, objectives and activities and create the environment. This is an external creation. But for Smirchich and Stubbart both the environment and the organisation are results of what they term as “enactment”. This is the outcome of internal behaviour. They support this radical thinking by stating that the social interactions of the individual members of the organisation produce both the organisation and the environment. This novel virtual framework simulates and creates the environment. Consequently it is this pattern of activities that are labelled as organisational culture and pave the way to stimulate new strategies. It becomes the job of all members of the organisation to find meaning and interpretations of these activities or enactments and to determine how to solve issues. The enactment theory decidedly discards the idea of a concrete, material and physical organisation/environment nexus and adopts a socially created world where value is created by all the participants through an integrated effort of all available resources within the system (Vargo et al 2008). This is transfer of the accumulated organisational knowledge that fosters innovation at all levels. McLaughlin and Paton (2005) observed that innovation and managerial transformation is the key to success in the changing environment. It is the accumulated knowledge, both tacit and explicit that is available throughout the organisation and held by the members, which when shared create innovative practices that cause improvements and achieve otherwise impossible targets. Innovation is the lifeline for a business. Without innovation a business is not likely to survive for long. It was previously thought that innovation was the domain of the individual, something that was physical and used physical assets; but this myth now stands demolished. According to Lyons et al (2007) innovation has a new dimension and has assumed new meaning with the involvement of services as it is different from innovations involving physical assets. Such innovations are enhancements that both enrich the internal competencies of the organisations as well as provide immense value to its customers. As a result they achieve the competitive edge required for support and prosperity. Usually change requires new perceptions and is lead by the leader of the organisation. Prahalad and Ramaswamy (2004) perceive the new enacted environment as a space that enables dialogue, access and transparency between all the members of the organisation. This process creates a new balance at the top where the worker and the management cooperate to bring change. This is radical as normally change is initiated at the top level only, but when it is done simultaneously from below as well it is both creative and innovative. This gives rise to new methodologies of managing in the enacted world which is nevertheless real. The managers do not set objectives; rather they seek answers to questions like what to do and where to go. This creativity forms the strategy by thinking out of the box. This is what gives shape and meaning to desires rather than trying to fit a mould that might be meaningless. They forgo traditional thinking of a fit (Porter 1996) and try novel methods thereby creating unprecedented values. Enactments are really about doing things differently and will mean discarding past practices, forgetting previous learning, innovating and persuading the masses to go along with thinking and acting out different perspectives. This calls for a highly democratized model of running a business in which all its process and components are broken down to miniscule levels for optimum group level decision making that will still be well within the overall policy for co-ordination and collaboration to work; precisely what Semmler did at Semco. Implementation The change process however has to be well planned and executed. Semmler did not go about this change quickly. Indeed it took him over a couple of years to see that it was implemented at every stage of his company. Three major decisions were taken by Semmler. He knew that his competition was weaning away customers and that to survive he had to offer competitive rates, quality and satisfaction to his customers. Costs could be reduced by greater productivity, quality could be raised by adopting standards and reducing rejects and wastage and customer satisfaction could be achieved by offering better service both in sales and after sales. In each area the role of the worker was crucial. He decided to let the worker have the ownership of his work, to give him the pride that he deserved and to bring him closer to understanding the need of the customer. For achieving these objectives he first opened his financial status to open view by workers. They could see the revenue charts on the company notice board and see where they company was lagging in terms of costs. Simultaneous display of rival costing and market rates made it clear where the workers could contribute in cost reduction and quality control. However mere information was not enough for motivation. The company asked them to become participants in regular dialogue and in the decision making process. They were also offered to decide how they would work to achieve targets. Further they were given a say in how they wanted to be supervised and what competencies in managements would be useful to make them more productive. This called for great empowerment of the worker. This was a great risk as this could be misused. A balance was created by ensuring that there was a layer of competent managers who would act as coordinators between the workers, the supervisors and the customers so that expectations at levels could be matched and met. Under his plan the workers have been empowered to hire managers who they believe will lead them to growth of their company as well as their individual careers. They have equal say in all appointments and at any one time as many as thirty five people interview managerial candidates at least four or five times before confirmation. This gives both the workers and the would-be managers an equal opportunity to assess each other and find a proper fit. The workers also have right to fix their own wages and the salaries of their managers. This was a controversial issue as each person would then look after his well being but the answer lay in the open access policy of revenue earning and distribution of cash wealth. Open display of the revenue and expenditure status sobered up everyone as it was realised that without equitable distribution of wages the company would not make profits nor could survive competition. It was the same in case of working hours and output. Groups of workers undertook to be present at specific times in order to see that the assembly lines were kept in motion and targets as well as quality matched each other. Flexibility was the watchword and a Sunday or holiday was equally important like any weekday; the priority in all case was work and productivity. As a result Semco has become a truly democratised company with hardly any attrition. While Semco is a closely held company and owned by the Semler family, he was personally elected to be chairman by his entire workforce due to his leadership abilities and not because of his shareholding. He has one vote like any other person and his recommendations have sometimes been turned down. Yet the workers realize that his contribution to decision making is vital for the company although not essential. Numerous decisions are taken in his absence. In fact he does not even have a regular office in the company premises and works out of wherever he is. When a few years back he met with a serious accident and was in intensive care for 9 months on account of multiple surgeries, the company carried on business as usual and there was neither a dip in the profit/growth path nor were the suppliers or customers worried over his absence. Semco does not face succession problems unlike most other corporates of the world. Semler found convincing ethical answers to the core question posed by stakeholder theory, which buttress the moral assumptions of managing. He gave total control of the company to his workers. This was done over a period of several years in gradual fashion and as a result of this democratisation of the corporate structure Semco has become a billion dollar company; with amazing average annual growth of 27.5% over the last 15 years. Critique Until the nineteenth century work was largely controlled by the worker. He was expected to define the time required to finish a job and the attendant quality that resulted out of his skills. Taylor proposed a radical program of removing planning and decision-making authority from skilled workers on the shop floor and simultaneously centralized both mental and conceptual work in the hands of a new managerial class. Then, splintering the working procedures into simpler components, he achieved both reduced labor costs, by employing fewer skilled workers, and increase in productivity. Production was now controlled by the managers through the transfer of control over the velocity, speed and concentration of the production process itself. This generated further class disparities between workers and managers. This was refined to such an extent that work is now fragmented and deskilled for the working class that makes it more manageable by the employing class (Braverman, 1974, Moody, 1997). Later Fordism, which is an extension of Taylorism, fortified planning and control in the hands of the managers. This alienated workers. In the nineties it was realised that worker participation was essential to bring back quality and cost effectiveness and a reversal began by empowering the worker. Lane (1995) argues that the Fordism came to be related to rigidity and was obviously unable to respond to the new problems and challenges created by new market demands and the competitive challenges facing managements. This created a crisis of sorts in the Fordist’s world. The importance of the worker as a central piece in the production planning process has come a full circle and his role in the organisation as an important stakeholder is now well established. Conclusions It is concluded that the rigid supervisory procedures under Taylorism and Fordism were a demand within that social and educational context, and were both a need and an opportunity within that evolving economic context. The evolution still continues and as a result Post-Fordism revived the individualism and specialization of the pre-Taylorism days, but with a difference that while Fordist productivity paradigm still dominates the situation, the worker is being recognised as the pivot for competitive advantage. The assembly lines still rule the day; mass production is still the calling for satisfaction of mass consumption, but the worker now has a larger rolein the organisation. It is well known that corporations are fiefdoms or small kingdoms in their own right. However much they publicise their democratic nature of selection, election and good governance, they are conceited and veer towards the investors more than any other stakeholder. The leaders, some of whom are investors too, keep a tight control and this can be easily seen as they have the final say in most important matters. In very large corporations there is delegation of decisions, but a pattern can be clearly seen to note where the policy is decided. It is the policy making decision that defines the level of delegation. A supervisor making a spot decision on a shop floor cannot be said to be a leader since his decisions are still within the framework of the iron-clad policy decided at the board or senior management level. It is therefore concluded that when there is delegation of decision making to the individual or the smallest group it brings about best outcomes. This is not to say that the entire process will work according to the whims and fancy of small groups in isolation, but when there is coordination and integration of all efforts by each group a cohesive programming will be possible for highly productive and qualitative results. This will bring about a uniqueness that makes change strategies useful for survival and growth. Bibliography Braverman H. (1974). Labor and Monopoly Capital, Monthly Review Press, NY Lane, C. (1995). Industry and society in Europe, Aldershot/U.K, Elger, Lyons, R. Joyce, C. K. & Chatman, J. A. (2007). Innovation in services: Corporate culture and investment banking: California Management Review, Vol. 50, No. 1, p. 174-191 McLaughlin, S and Paton, R.A. (2008) Identifying Barriers that Impact Knowledge Creation and Transfer within complex organisations, Journal of Knowledge Management, 12 (4).  Maslow, A. H. (1954). Motivation and Personality. New York: Harper & Row Moody, K. (1997). Workers in a Lean World, Verso, London Porter, M. E., (1980), Competitive Advantage. New York: Free Press: Porter, M.E. (1985) "Competitive Advantage", The Free Press, New York, Porter M.E., (1996), What is Strategy, Harvard Business Review, Prahalad, C.K. and Ramaswamy, V. (2004). The Future of Competition. Co-creating unique value with customers. Boston: Harvard Business School Press. Smirchich, L. and Stubbart, C., (1985), Strategic Management in an Enacted World, University of Masschusetts, Amherst Vargo, S. and Maglio, P. (2008) On Value and Value Co-Creation: A Service Systems and Service Logic Perspective, European Management Journal, Vol. 27(3) Read More