BUSINESS MANAGEMENT UNIT 4: AOS 2

CHANGE MANAGEMENT (& OUR FINAL OUTCOME WOOOOOO)

OVERVIEW In this area of study, students examine the importance of change management in large-scale organisations. They consider ways in which change can be managed effectively in both theoretical and practical contexts. Students evaluate various strategies to effectively manage change. This knowledge is then applied to one significant change issue for large-scale organisations.

Teachers can select from a range of issues such as social responsibility, business ethics, globalisation, mergers and acquisitions, technological development, legislative compliance, privatisation or any other significant issue.

On completion of this unit the student should be able to analyse and evaluate the management of change in a large-scale organisation, and evaluate the impact of change on the internal environment of a large-scale organisation.

KEY KNOWLEDGE •  the concept of organisational change;

•  the dynamic nature of the internal and external (operating and macro) environments as sources of change;

•  driving and restraining forces for change in large-scale organisations, including management, employees, time, competitors, low productivity, organisational inertia, legislation, cost;

•  key principles of the Kotter theory of change management;

•  a range of strategies for effective change management, including low-risk practices and high-risk practices;

•  the process of effective change management in the context of a significant issue;

•  the role of leadership in change management;

•  the possible impact of change on the internal environment of large-scale organisations, including the functional areas of operations and human resources;

•  ethical and socially responsible management of change.

KEY SKILLS

• accurately use relevant management terms;

• research related aspects of change management using print and online sources;

• analyse business literature, information and data;

• use management theory to evaluate different strategies to manage change;

• apply change management knowledge and concepts to practical and/or simulated representations;

• analyse and evaluate effective change management in the context of the selected significant issue.

CHANGE MANAGEMENT

GLOSSARY

• organisational change

• driving forces

• restraining forces

• organisational inertia

• force-field analysis

• status quo

• change agent

• globalisation

CHANGE MANAGEMENT

•  While change itself is not a new concept, it is the pace of change that is new. It is important, therefore, for all organisations to be prepared for change, adopt a proactive response, be flexible, and yet also manage to plan for the future.

•  The stability and predictable business environments of the 1950s and 1960s have given way to increased globalisation and competition, technological innovation, limited resources, deregulation, legislative changes, mergers and acquisitions, and the privatisation of public sector organisations.

•  Organisations and managers need to be able to develop strategies to face the many complex challenges and opportunities presented to them.

CHANGE

•  The concept of change can be defined in a number of ways.

•  Change is the process of taking the existing organisation, altering it and establishing a new or altered form.

•  Change occurs because of pressures placed on the organisation to make adjustments to its structures, activities, policies, behaviours, processes and culture.

•  Change can take many forms. It can be widespread in all areas of the organisation or may only impact on one section or department.

CHANGE Organisational change: The adoption of a new behavior or idea by an organisation.

Organisational change: is any alteration in the internal or external environment that results in a change in operations.

•  Organisations can be proactive or reactive

•  Changes can be incremental or transformational

CHANGE MANAGEMENT

The components needed for successful change to occur are:

•  Vision

•  Values

•  Strategy

•  Resources

•  Capability

•  Motivation

•  Feedback

WHAT CAUSES CHANGE?

The dynamic nature of the internal and external

(macro and operating) environments as sources of change

CHANGE MANAGEMENT

Internal environment: activities, functions and pressures that occur

within an organisation over which it has control.

Each enterprise will have a mix of internal pressures that includes

corporate culture, employees, policies and management styles

and roles.

External environment: all elements outside an organisation that will

act as pressures or forces on its operation.

These can include pressures on an organisation or an industry.

External pressures include: the economic environment, social and

demographic changes, environmental pressures, technological

advancements, suppliers, competitors, creditors and trade unions

INTERNAL PRESSURES AS A SOURCE OF CHANGE

INTERNAL PRESSURES AS A SOURCE OF CHANGE

Corporate Culture: Culture can impact on the organisation and cause change. If the culture is seen to be inappropriate or negative, management must decide how it can be changed. This may include training and retraining of employees, changes in the way promotion and performance appraisals are completed, and how new employees and managers may be recruited externally in an effort to bring in new ideas, values and attitudes.

Employees: Employees are seen as the most important asset or resource of an organisation and are often its greatest source of competitive advantage. A committed workforce with skills and high levels of motivation usually means a productive and successful organisation.

Employees are an integral part of the organisation and therefore can have an influence on its performance as well as being able to exert pressure on the organisation for changes to areas such as training, performance appraisal and policies.

INTERNAL PRESSURES AS A SOURCE OF CHANGE

Management: It has been found that the most effective managers are masters of delegation and have excellent time management skills. These skills are vital in a time of change, as the manager must help lead the organisation through the required changes.

Policy & Procedure: Policies may be developed or amended for a number of reasons, including changes in the macro environment. A change in legislation or the introduction of a new law may require an organisation to comply with these requirements. For example, changes to or the introduction of new health and safety laws or anti-discrimination legislation will require organisations to review and amend their policies and formulate new ones if necessary.

INTERNAL PRESSURES AS A SOURCE OF CHANGE

OPERATING ENVIRONMENT AS A SOURCE OF CHANGE

Customers: Any organisation that is not customer-focused will find that its customers will not return, whereas those that value customers and deliver quality service will find that customers stay with them. Changing customer preferences have a direct impact on the organisation.

Suppliers: Suppliers provide the organisation with the inputs necessary to produce a product or service. If there is a problem with a supplier, the organisation cannot produce its products as inputs are not available.

Competitors: Changes may be required if competitors change their business practices, while an organisation wanting to be successful will also have to be proactive and introduce changes to stay ahead of the competition.

Unions: Trade unions may exert pressure for change in an organisation, particularly in terms of a collective agreement

Creditors:

OPERATING ENVIRONMENT AS A SOURCE OF CHANGE

THE MACRO ENVIRONMENT AS A SOURCE OF CHANGE

Economic – See next slide

Political - Some changes to laws that may impact on the operation of the organisation include health and safety laws and regulations, trade practices,

taxation requirements, employee and workplace relations, equal opportunity, anti-harassment and anti-discrimination legislation, zoning and planning requirements and deregulation of markets and industries.

Social - Social pressures for change include changes in attitudes, values and lifestyles. Social change has gone ahead at a rapid rate in Australia. Changes in the demographic make-up of the population have impacted on society. The ageing of the workforce and general population has led to changes such as the increased demand for health services, lifestyle changes such as ‘downsizing’ houses and the increased need for investment advice, and has led to the growth of new industries. The increased participation of women in the workforce has also led to changes in organisations.

THE MACRO ENVIRONMENT AS A SOURCE OF CHANGE

Technological: The increased use of computers, the growth of e-commerce and the use of the internet have all influenced the way business is conducted. These changes have also had a significant effect on people’s jobs, their tasks and the skills needed.

Environmental: Many organisations have decided to become more environmentally responsible as a response to the expectations of the community in general. They have adopted environmentally preferred practices for waste management, efficient use of water, recycling of materials, and for reducing greenhouse and carbon emissions.

International / Geographic: Wider access to markets means there are pressures on organisations to manage the diversity of clients and customers and also the need to develop skills in terms of managing the export market, cultural differences, the impact of currency changes and complying with different government regulations and requirements.

THE MACRO ENVIRONMENT AS A SOURCE OF CHANGE

CHANGE MANAGEMENT – ECONOMIC PRESSURE

CHANGE MANAGEMENT

ACTIVITIES

Textbook

Page 229

Question 1, 2, 3, 5

FORCES FOR CHANGE IN LARGE-SCALE ORGANISATIONS In 1969 Kurt Lewin, a management theorist, developed the concept of force field analysis –

Force field analysis: looks at forces that are either driving movement towards a goal or change (helping forces) or blocking movement towards a goal or change (restraining forces)

Driving forces: those forces affecting a situation that are pushing in a particular direction and are supporting the goal or proposed change

Restraining forces: forces acting to restrain or decrease the driving forces for change; these may include apathy, hostility, and poor maintenance of equipment

FORCES

•  Cost

•  Organisational Inertia •  Management & management styles

•  Productivity

•  Legislation

•  Employees

•  Competitors •  Time

•  COMPLECT (Complex as they act as both)

See table from text book

DRIVING FORCES •  Driving forces are those forces affecting a situation that are

pushing in a particular direction and are supporting the goal or proposed change.

•  They tend to initiate a change and keep it going.

•  If a proposed change relates to improving productivity in a work group, the driving forces may be from a supervisor, incentive earnings and competition.

DRIVING FORCES: Positive forces create growth

RESTRAINING FORCES

Restraining forces are forces acting to restrain or decrease the driving forces. These may include apathy, hostility, and poor maintenance of equipment.

RESTRAINING FORCES: Negative forces prevent growth and change

FORCES OF CHANGE

Typically, users of Lewin’s model take the

following steps:

1 Define the target of change.

2 Identify which are driving forces and which

are restraining forces.

3 Analyse the forces that can be changed.

4 Develop an action plan on what can be

changed

THE KOTTER THEORY OF CHANGE MANAGEMENT

KOTTER’S THEORY OF CHANGE MANAGEMENT

John Kotter is a lecturer and author of books relating to change and leadership in organisations. Kotter proposed a method of producing successful change. In his research he had concluded that:

First, useful change tends to be associated with a multistep process that creates power and motivation sufficient to overwhelm all the sources of inertia. Second, this process is never employed effectively unless it is driven by high-quality leadership, not just excellent management.

In another of his books, The Heart of Change, Kotter states:

Our main finding, put simply, is that the central issue is never strategy, structure, culture, or systems. But the core of the matter is always about changing the behaviour of people, and behaviour change happens in highly successful situations mostly by speaking to people’s feelings.

Kotter developed the eight-stage model for understanding and managing change. Each stage acknowledges a key principle relating to people’s response and approach to change, in which people see,

feel and then change.

THE KOTTER THEORY OF CHANGE MANAGEMENT Step One: Create Urgency

For change to happen, it helps if the whole organisation really wants it. A sense of urgency around the need for change needs to be developed. This may help spark the initial motivation to get things moving.

Step Two: Form a Powerful Coalition

Convince people that change is necessary. This often takes strong leadership and visible support from key people within the organisation. Managing change isn’t enough – you have to lead it.

Step Three: Create a Vision for Change

When first thinking about change, there will probably be many great ideas and solutions floating around. Link these concepts to an overall vision that people can grasp easily and remember. A clear vision can help everyone understand why you are asking them to do something. When people see for themselves what you are trying to achieve, then the directives they are given tend to make more sense.

Step Four: Communicate the Vision

What happens with the vision after it is created will determine the success. The message will probably have strong competition from other day-to-day communications within the organisation, so it needs to be communicated frequently and powerfully, and embedded within everything that is done.

Step Five: Remove Obstacles

If these steps are followed and this point in the change process is reached, the vision has been discussed and buy-in from all levels of the organisation has been built. Hopefully, staff want to get busy and achieve the benefits that have been promoted, so any obstacles that may impede progress need to be removed.

Step Six: Create Short-term Wins

Nothing motivates more than success. Give the organisation a taste of victory early in the change process. Within a short timeframe (this could be a month or a year, depending on the type of change), there needs to be results that staff can see. Without this, critics and negative thinkers might hurt progress.

Step Seven: Build on the Change

Kotter argues that many change projects fail because victory is declared too early. Real change runs deep. Quick wins are only the beginning of what needs to be done to achieve long-term change. Each success provides an opportunity to build on what went right and identify what can be improved.

Step Eight: Anchor the Changes in Corporate Culture

Finally, to make any change stick, it should become part of the core of the organisation. Corporate culture often determines what gets done, so the values behind the vision must show in day-to-day work.

THE KOTTER THEORY OF CHANGE MANAGEMENT

STRATEGIES FOR EFFECTIVE CHANGE MANAGEMENT

Practices for effective change are considered either Low Risk or High Risk. Low-risk practices are more likely to be successful in the long term and allow for all stakeholders within the organisation to feel valued as their ideas and feelings are taken into account.

LOW RISK STRATEGIES

When implementing change, organisations should try to use low-risk practices . Low-risk practices include:

• two-way communication between management and employees

• empowerment of employees to make decisions

• establishment of work teams to implement changes

• support for those going through the change. This support may include time and counselling if required.

HIGH RISK STRATEGIES

High Risk Practices include:

•  coercion and threats to employees who do not agree with the change

•  manipulation of the situation – for example, information distorted or details left out

•  use of autocratic management styles where employees are told what to do and there is little or no opportunity for discussion

THE ROLE OF LEADERSHIP IN CHANGE MANAGEMENT Managers and leaders play a vital role in the successful implementation of organisational change. There are three skills necessary for effective leadership:

• diagnosing – being able to understand the situation as it is now and knowing what could be expected in the future

• adapting – being able to adapt behaviour and other resources to help close any performance gaps

• communicating – even if a leader knows what needs to be done, it is important to communicate this to others.

If leaders do not have the skills to articulate strategy, implement changes effectively and keep all staff informed about decisions impacting on them, the introduction of a change can lead to a situation where employees become cynical and begin to resist the change.

By cultivating teamwork, coaching, encouraging diversity, developing talent within the organisation and having open communication, change is more likely to be successful.

THE ROLE OF LEADERSHIP IN CHANGE MANAGEMENT

A manager still needs to undertake the Key Management Roles within Change Management.

Planning

Processes involved in developing vision, mission objectives to be achieved through the change, and developing the strategies to implement the change, may include strategies for breaking down resistance.

Organising

Involves the process of putting the plan into action by allocating resources, delegating tasks, setting up appropriate structures to facilitate the change

Controlling

Involves the process of monitoring, evaluating and taking corrective action when needed. This would include measuring performance

THE ROLE OF LEADERSHIP IN CHANGE MANAGEMENT Leading

The process of influencing employees to achieve the organisational objectives (the change) by modelling and setting an example, by providing guidance and direction, motivating and supporting employees with the change.

An effective leader within change management displays the characteristics of being Proactive, Persistent, Courageous and Convincing in articulating a vision to the organisation & motivate staff by inspiring them

Relevant Management Styles and Skills

Management Style should be inclusive and encourage teamwork during change and adopt an appropriate management style.

A leader will also draw on a range of Management Skills such as emotional intelligence, communication, negotiation, delegation and teamwork.

CHANGE MANAGEMENT PERFORMANCE INDICATORS A manager could use the following performance indictors to measure the success of change:

•  Rate of Productivity Growth

•  Results of Staff Satisfaction Survey

•  Results of Customer Satisfaction Survey

•  Net Profit Figures

SIGNIFICANT CHANGE ISSUES Due to a dynamic business environment organisations must implement strategies to effectively manage changes caused by a number of specific issues. These issues may include:

•  Ethics and Social Responsibility

•  Globalisation

•  Mergers and acquisitions,

•  Technological development,

•  Legislative compliance,

•  Privatisation

CORPORATE SOCIAL RESPONSIBILITY Corporate Social Responsibility involves managing organisational processes in order to produce an overall positive impact on the community.

It is an important aspect of Corporate Social Responsibility for the organisation to adopt a triple bottom line approach and monitoring changes against this standard. The Triple Bottom Line is the social, economic, and environmental performance of an organisation.

•  The Economic aspect of the triple bottom line involves the areas of profit, maximizing returns for Shareholders. The Key Performance Indicators of Net Profit Figures and Percentage of the Market Share can measure this.

•  The Environmental Aspect of the Triple Bottom Line focuses on the impact that the organisation has on the environment, which can be evaluated using the Key Performance Indicator of Level of Wastage.

•  The Social aspect of the Triple Bottom Line involves the organisation’s impact on society and enhancing the wellbeing of society either directly or indirectly. This can be measured by the Results of Staff Satisfaction Surveys and the Results of Customer Satisfaction Surveys.

Ecological Sustainability

Ecological Sustainability is an area of Corporate Social Responsibility. It involves ensuring that economic growth meets the needs of the present population without endangering the ability of future generations to meet their needs. It balances the pursuit of profit with environmental concerns.

ETHICS Business Ethics refers to the application of moral standards to organisational behaviour. Managers should encourage standards of fairness, equity, honesty and integrity and expect ethical behaviour from all employees towards other stakeholders.

GLOBALISATION Globalisation refers to the process in which an organisation begins to operate within the international market. This typically involves the use of technology and increases the level of international competition. This can require an organisation to make changes to their locations, production, shipping and transport as well as their budgets and costs.

MERGERS & ACQUISITIONS •  A Merger is a combination of two companies to form a new

company.

•  An Acquisition, on the other hand, is the purchase of one company by another with no new company being formed.

•  In this event it may be necessary for the organisations to change their policies, practices and induction so as to avoid cultural clash of the employees of the newly formed organisations.

TECHNOLOGICAL DEVELOPMENTS •  Technological Developments refer to the constant

changes and improvements in technology that are accessible by organisations.

•  Employees need to acquire new skills through training and development or may need to manage employees who are made redundant due to the introduction of new technology

LEGISLATIVE COMPLIANCE Legislative Compliance refers to an organisation ensuring that their activities and operations abide by the current laws of which they are within their jurisdiction. The creation of new laws or new interpretations of laws may require organisations to alter their practices so as that they comply with the current laws. 

PRIVATISATION

•  Privatisation refers to the process of transferring a enterprise, business or organisation from the Public Sector into the Private Sector.

•  This involves a change in the legal and Managerial Structure, Corporate Culture, and size of the workplace.

THE IMPACT OF CHANGE Types of Impacts

Transformational Change refers to a change that is classified as major within the organisation. These types of changes often result in a complete restructure throughout the whole organisation, such as the creation of a flatter management structure.

Incremental Change refers to a change that is classified as minor within the organisation. These types of changes result in minor changes, usually involving only a few employees.

Internally, change can impact:

•  Organisational Structure

•  Corporate culture

•  Human Resource Management

•  Operations Management

IMPACT OF CHANGE ON THE ORGANISATIONAL STRUCTURE

Structural Change refers to changes in the organisation’s structure, which is the organisation’s chart.

Main structural changes introduced include:

•  Outsourcing, which is the contracting of some organisational operations to outside suppliers. This may be necessary to help an organisation contain its costs and survive in the global market.

•  Flatter organisational structure. The change to flatter structures is more common in recent times. This change provides grater levels of accountability and responsibility being transferred to front-line staff.

•  Work teams which are typically associated with a change to a flatter management structure.

The aim of these changes is to streamline organisational operations, improve efficiency and empower employees to make their own decisions.

IMPACT OF CHANGE ON THE CORPORATE CULTURE

•  For an organisation to survive in the long-term, changes within the external or internal environments should be reflected in its Corporate Culture.

•  If organisational culture fits the external environment, managers, and employees have the attitude that they need to compete successful.

•  However the existing organisational culture may have to change, as it may not fit the real-world requirements.

IMPACT OF CHANGE ON HUMAN RESOURCES MANAGEMENT

The possible impacts of changes to the organisation that may affect the Human Resources Management Function includes:

•  Recruitment and selection

•  Training in teamwork, problem solving, decision making & change management

•  Performance appraisal and Reward Systems

•  More autonomous and empowered employees 

IMPACT OF CHANGE ON OPERATIONS MANAGEMENT

The main impact of changes on the Management of Operations may include:

•  Emphasis on Quality Assurance

•  Human relations are improved.

•  New advances in production Technology

•  Refit and reorganize their factories to take advantage of improvements in technology

CHANGE MANAGEMENT

THE KOTTER THEORY OF CHANGE MANAGEMENT

CAN YOU ANSWER? 1.  What is organisational change?

2.  Identify two internal and two external forces that might influence change in large-scale organisations.

3.  Discuss the importance of organisations responding to pressures for change.

4.  Explain two factors that an organisation needs to consider when implementing change

5.  Explain in detail one current change management issue organisations face.