Centralizing Varsity Inc.

Managing and Communicating Change

BUS/OCOM 610

November 30, 2004

Agenda▲Introduction

– Define centralized and decentralized org structure– Advantages and disadvantages, strengths weakness– Change effects– Changing Varsity Inc.’s structure

▲Strategy for centralizing Varsity Inc– Mission/Values Analysis– Cost Analysis– Operations Factors– Phased implementation– Communications impact

Agenda▲ Managing resistance to change

– Sources– Reactions– Group Dynamics

▲ Managing impact of change on culture– Decision-making– Ethics and Corporate citizenship – Motivation

▲ Marketing impact▲ Metrics & monitoring

– Types of Metrics– Methods– Measurement issues

▲ Conclusion & Q&A

Varsity Inc.

Decentralized Organizations

▲Features– Delegated authority– Broad decision-making scope

▲Advantages– Large companies with heterogeneous product lines,

and diverse supply/raw material needs.– Increases delegation and managerial ability to

handling larger workload– Improved customer service: Management resources

closer to customers– Shorter decision-making timeframe– Promotes creativity

Decentralized Organizations

▲Disadvantages– Not a fit for small to medium-sized organizations– Loss of intra-departmental/intra-divisional

coordination– Loss of economies of scale– Reliance on lower-level employee competence

▲Example: NUCOR Steel– 22 people at corporate headquarters– Purchasing decisions at plant level– Line workers freely suggest ideas for improvements

and modifications to policies and practices

Centralized Organizations

▲Features– Authority concentrated with a few key managers– Chain of command decision-making– Strict adherence to policy

▲Advantages– Better fit for companies with homogenous product

lines and less diverse supply/raw materials sources– Most experienced managers drive decision-making– Economies of scale/purchasing power

Centralized Organizations▲Disadvantages

– Increased manager workload– Discourages creativity– Dramatically longer decision-making timeframe– Slower customer service– Higher overhead

▲Example: SouthTrust/Wachovia– Large bureaucracies with many levels of management– Business areas (e.g. Underwriting) centralize

rudimentary decision-making– Chain of command

Change Effects: Centralizing

▲Communication – Flow changes to top-down orientation – Reduces bottom-up feedback

▲Motivation– Decision-making power stripped from lower

levels– Peak performance difficult to maintain or

measure

Change Effects: Centralizing

▲Systems– Ensures uniformity of systems and levels of technology– Lowers costs– Simplifies knowledge transfer

▲Labor– Process orientation– Decision-making shift to management reduces need for

independent, competent employees at lower levels

▲Customers/Marketing– Uniform image and message to customers across geographic

areas– Reduced ability to develop relationships at point of contact

Changing Varsity Inc

▲From Decentralized to Centralized▲Justifications

– Economies of scale– Competition and market factors– Technology decisions

Strategy for Varsity Inc Change

▲Mission/Values analysis▲Cost analysis▲Operations Factors▲Phased implementation▲Internal communication▲Marketing changes▲Measurement / monitoring

Mission & Values Analysis▲Mission

Varsity recognizes that part of being a successful and well-respected company is being socially responsible. Varsity is committed to serve the communities where we do business, to provide our customers with innovative, high-quality widgets and service, and to protect the health of our workers and our environment.

▲Core values– Employees– Integrity– Innovation/quality– Environment, health and safety– Community

Cost/Benefits Analysis

▲Add up the value of benefits, subtract associated costs.

▲Benefits are received over time▲Basic analysis considers only financial values▲Sophisticated analysis considers financial

values of intangible costs and benefits▲Costs: training, lost sales (due to disruption),

lost time for planning▲Benefits: improved efficiency and customer

service

Operations Factors

▲Human Resources– Health care providers

• National vs local• Plant medical staff

– Benefits• Global vs. national vs. local• Financial• Vacation/holidays

– Job placement and training

Operations Factors (cont.)

▲Infrastructure– Systems Compatibility– Logistics

• Shipping

– Maintenance• In-house• Sub-contract

– Suppliers• Materials• Tooling• Office Supplies

Operations Factors (cont.)

▲Operations– New Functions

• Specialization• New lines• Old lines

– Reassignments• People• Plant capacities

– Restructuring divisions

Phased Implementation

▲Infrastructure▲Supplier/Vendor relationships▲Employee Issues

– Communications– Benefits– Holidays

▲Small trial runs – closed cell processes▲Build to large-scale implementation

Communications Impact

Five Principles of Communication Strategy

▲Active Involvement of Senior Leaders▲Communications development and

deployment▲Integrate basic elements of effective

communications▲Individual is the ultimate audience ▲Assure credibility

Communicating Change

▲ Shape the political dynamics Communications Strategies• Articulate a compelling case for

change• Build cohesion through consistency• Solidify support and build

momentum• Reinforce the perceived acceptance

of change

Communicating Change

▲ Motivate constructive behavior Communications Strategies

• Use communication to help people understand

• Design communications to build participation

• Spotlight performance and behavior that meet the new requirements

• Recognize success and celebrate milestones

Communicating Change

▲ Manage the transition Communications Strategies

• Describe a clear direction and transition process

• Constantly update people on change that will directly affect them.

• Keep lines of communication open during periods of instability

• Actively seek feedback

Lewin’s Force Field Analysis

Current State Desired State

Individual Sources of Resistance

▲Habit▲Security▲Economic▲Fear of the Unknown▲Social

Decision Making Structure

▲Centralized vs. Decentralized Organization

Decision Making

▲Centralized– Hierarchy– Decisions from Main Headquarters to field

units– Policies and Procedures– Operations Manual– Committees– Bureaucracy/ Red tape

▲Decentralized– Flat organizational

structure– Autonomous

operating units– Guidelines– Operating principles– Decision making at

local level

Middle/Lower Management Role

▲Centralized Organization– Manage– Follow the rules and procedures– Process environment– Execute plans from main office– Paperwork/ administrative tasks

▲Decentralized Organization– Lead– Make business decisions– Create work environment

Transition to Centralized

▲Pros– Standardized processes– Consistency– Control – Resources

▲Cons– Less local input– Bureaucratic– Operate within the “box”– Reaction time for issues in gray areas

Ethics

▲Centralized Leadership and Communication Improves overall message

▲Defined Direction of Initiatives– Single Overriding Messages

▲Consistency– Human Resources– Motivational Initiatives

Corporate Citizenship

▲Better serve the community on a united and centralized Front.

▲Improve implementation of overall organizational mission and strategy

▲Higher level of control with public relations with regard to image and branding.

▲Consistency in corporate citizenship– Structure in various community contribution– Defined set of values shared throughout

Motivation

▲Professional development▲Recognition

– Quarterly/Annual public recognition

▲Compensation▲Incentives

– Non-monetary “perks”– Company-wide benefits

Marketing

▲Implications of change for marketing strategy– Customer relationship management– Vendor/supplier relationships– Advertising– Financial Relations– Public Relations/Public Affairs

Metrics & Monitoring▲Types of Metrics

– Operations• Productivity• Cost Reduction

– Staff/Line Performance• Competencies• Satisfaction• Values orientation

– Financial• Sales Volume• Return on Assets

– Perception• Market Share• Image

Metrics & Monitoring (cont.)

▲Metrics Methods– Financial Analyses

• Productivity• Cost Reduction• Sales

– Surveys• Baseline internal• Baseline external• On-going

Metrics & Monitoring (cont.)

▲Measurement Frequency▲Feedback▲Adjustment to plan

Summary & Conclusions▲Both centralized and decentralized structures have

advantages and disadvantages.▲Make a strategic decision to change based on analysis

of mission, values, operations, human resources, and market factors.

▲Plan structural change in phases, with go/no-go decision points.

▲Communicate constantly and consistently, recognizing cultural and group-based limitations, obstacles and potential.

▲Monitor and modify plans according to results and feedback.

Questions & Answers

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