Managing_Change

3.1 Introduction ‘Change’ is any alteration in the business and work environment; for example, change in consumer tastes, change in production methods, change in markets or products sold, or change in how employees perform their tasks. It could also be a change to the way things are perceived, or new ways of dealing with problems. The rapidly increasing pace of change threatens to overwhelm many businesses. Adapting to change forced by the external environment is never easy for a business. While change may be the most daunting challenge confronting management, the rewards are great for those who are prepared to accept the challenge and not only react to change but also initiate and manage it. As profitable opportunities can arise from change, it must be considered a fundamental aspect of an organisation’s strategic planning. The ability to manage and, in many cases, embrace and adapt to change will increasingly determine a company’s competitive advantage and survival. Successful managers are those who anticipate and adjust to changing circumstances rather than being passively ‘swept along’ or, worse still, being unprepared. Such people are proactive rather than reactive. The crucial management issue is how to manage change to make it as productive as possible, using it to renew and strengthen the business. However, to be constructive as possible, change must occur at a pace at which it can be absorbed and integrated by the organisation. 3.2 Nature and sources of change in business Businesses must keep responding to the never-ending pressure for change. The forces driving change come from both outside (external) and within (internal) the business. External change stems from the changing nature of markets and increased competition. It is also produced by economic, geographic, social, legal, political and technological developments. The forces are being experienced across all levels of business. Internal change from identifying new methods, technology, systems and procedures. New business cultures also affect organisations internally. The external business environment comprises the factors and characteristics that are largely outside the direct control of owners, directors and managers. The internal business environment comprises the factors and characteristics that are within the direct control of owners, directors and managers. External influences Changes within the external environment make it necessary for managers to make adjustments to business operations. For example, new government regulations may require a manufacturer to install pollution-control devices on a product or plant. The actions of competitors may force a business to reassess its operations and implement changes. The changing nature of markets Globalisation is the process whereby hi-tech communications, lower transport costs and unrestricted trade and financial flows are turning the whole world into a single market. The more integrated global economic system has altered the shape of world markets are the nature of the businesses that compete in them. Many Australian businesses must now compete against overseas products in the domestic market, in addition to competing in overseas markets when exporting. Australian businesses are increasingly meeting this challenge, and over the last decade have been forced to restructure their operations. The result has been significant downsizing in many operations, with staff reductions and the ensuing elimination of jobs and positions. The forces of globalisation has created new opportunities, as well as increasing uncertainty. Businesses and job opportunities for those in senior executive positions now show little regard for international borders. Therefore, today’s managers need the skills to conduct business transactions, and manage staff in multiple languages and cultural contexts as Australia continues to become an outward-looking and export-driven nation. Economic influences Economic forces have an enormous impact on both businesses and customers. They influence a business’ capacity to compete and customers’ willingness and ability to spend. Economies do not always experience constant growth. Rather, the level of economic activity changes from periods of growth, known as ‘booms’, and to recession (‘bust’) and back to boom conditions. Information on economic growth, inflation trends, average weekly earnings, consumer confidence, interest rates, consumer spending and unemployment data provide businesses with insight into economic trends. This information on the level of economic activity allows businesses to predict possible threats to, and opportunities for, business activity. Financial markets There have been enormous changes in global financial markets over the past 20 years. Deregulation of Australia’s financial system began in 1983 and it continues to undergo change. This has resulted in a more flexible, market-oriented approach across the financial sector. A substantial number of new banking products have emerged, aimed at the business sector. Some of the financial packages provide for funding against the existing and future market value of cash-generating assets Due to globalisation of the world’s financial markets, it is no longer necessary for many large Australian firms to use only domestic financial institutions for the raising of finance. Global financial markets themselves undergone rapid change over the last decade. Developments in communications technology have enabled the phenomenon of global financial transactions. Global financial speculators may now easily make transactions spread across the globe. Geographical influences Two major factors that will have an enormous impact upon business activity over the next 10-20 years are Australia’s geographic location within the Asia-Pacific region and the economic growth in a number of Asian nations. They provide challenging opportunities for business expansion, sales and profit. ‘Demography’ is the study of particular features of a population, including the size of the population, age, sex, income, cultural background and family size. Change in any of these factors can lead to changes in demand levels and the nature of products and services. Two major demographic issues that are likely to have a considerable impact of businesses are a slow-down in the growth of Australia’s population and changes in the age structure of our population. A slow-down in population growth will have major implications for Australian businesses, as research shows there is a clear link between population levels and economic growth. Social influences Businesses that respond rapidly to social and cultural changes recognise that new demands and new opportunities can have a major impact of business success. The term ‘social change’ can incorporate any one or a combination of factors. These factors may include changes in beliefs, business ethics, work attitudes, cultural changes, spending habits and population changes. Two social issues are leading to significant change or have the potential to influence major change in business practices. The first concerns a growing desire for family-friendly programs. Conflict between work and family responsibilities is a key factor causing women to leave businesses, and this high turnover is expensive for businesses. Consequently, businesses have been under pressure to implement family- friendly workplace practices that assist employees and, at the same time, reduce the associated costs to employers. The second social issue is the changing makeup of the workplace. Workplaces today are a mixture of different races, ethnic groups and cultures. Businesses need to have programs designed to assist understanding among diverse groups, not just tolerance of one another’s existence. Legal influences The processes of ‘deregulation’ and ‘regulation’ in Australia have led to significant change in the legal framework within which businesses must operate. ‘Deregulation’ is the removal of government regulations from industry to enable businesses to perform more efficiently, enhance competition and reduce restrictive practices. This has led to considerable legislative reform. Simultaneously, the process of regulation - the introduction of government policies to promote fair conduct- has increased in some areas. Changes in legislation regarding environmental and consumer protection, occupational health and safety, industrial relations and trade practices reform will have major and increasing impacts on business conduct. Political influences Governments regulate by establishing rules of conduct that influence how organisations operate. These rules cover issues such as taxation, health and safety, competition within the industry, the environment, and trade practices. The Australian Competition and Consumer Commission (ACCC) and the Australian Securities and Investments Commission (ASIC) are two of the Australian Government’s regulators, bot responsible for the administration of the Trade Practices Act 1974 (Cwlth) GST Free trade Technological developments Global technological innovation has increased at a remarkable pace, revolutionising the workplace and every aspect of daily life. With appropriate technology, businesses can increase efficiency and productivity, create new products and improve the quality and range of products and services. New communications technologies allows information to be rapidly transmitted to an ever-increasing number of customers with a speed that now makes communication almost instantaneous. A business that wants to be locally, nationally and/or globally competitive must adopt the appropriate technology. If slow to use and exploit technology, a business is likely to fail: the competition will strive to capture greater market share and develop a sustainable competitive advantage. Internal influences Internal change springs from the desire to develop new and improved ways of doing things. It may be in response to employee requests or the result of constantly striving for higher levels of efficiency and productivity. Effects of accelerating technological change Advances in information and communications technology include email, voice mail, the Internet, videoconferencing, mobile Internet capabilities and pagers. These have reduced time delays and cost, and improved distance communication between suppliers and customers. Many employees can now work from home, a practice known as telecommuting. Several major companies, including AMP, BP Australia, Caltex, Telstra and Pacific Power, provide work-from-home arrangements in a wide range of occupations. However, merely purchasing computer equipment, adopting e-commerce strategies, reorganising work systems and procedures, and transforming the business culture will not automatically bring about improved productivity. What is equally important is how the new technology is used and managed. E-commerce Electric commerce or ‘E-commerce‘ is the use of electronic communications to do business. The term covers all transactions made by electronic methods, including phone, facsimile and the Internet. There are two main types of e-commerce: Business-to-consumer. This covers products and services sold or distributed over the Internet with payment usually by credit card Business-to-business. This covers a business‘ electronic transactions with other businesses, including paying accounts, sending quotes and ordering supplies. The use of e-commerce in this way dramatically reduces the cost of doing business, especially internal processing costs. Communication expenses are also reduced and information sharing is greatly improved. The real benefit of e-commerce is that is provides a mechanism to break with tradition and create new ways of operating by introducing new systems and procedures. New systems and procedures The main changes to existing business systems and procedures brought about by technological development include: new business tools that assist in accessing and analysing information from a variety of sources the integration of business into the global market the cultivation of an outward-looking, export-oriented business culture improved methods of processing vast amounts of information the shift away from trading in goods to trading in information businesses being able to organise production to ‘Internet time’ schedules in which computerised stock controls reorder products and arrange delivery automatically. being able to find the cheapest supplier from anywhere in the world the freedom to rapidly move information across international borders a dramatic slashing of the costs of everyday processes. New business cultures All businesses have their own ‘business culture’ - a set of mostly unwritten or informal rules that spell out how people are to behave most of the time. These rules are based on the values, ideas, expectations and beliefs shared by members of the organisation. Each business develops its own particular way of doing things. The style or character of a business is consequently reflected in its culture. Formal organisations with an emphasis on bureaucracy, line authority, hierarchical management structures, and defined job titles and areas of responsibility often have prevailing cultures that emphasise accountability, communication and cooperation. They also tend to conform to a culture of loyalty and respect for superiors. Such organisations may also have a culture of resisting change. Change, therefore, must be managed carefully by proving new rules and processes regulating employees, or by changing the structure of the organisation itself. Less formal organisations with flatter management structures, less departmentalisation and fewer defined spans of control often exhibit highly flexible, innovative and risk-taking cultures. Individuality and conflict are tolerated within this culture because it is often results driven. Individuals may exhibit loyalty to the team rather than the organisation. The culture is driven by a desire to achieve, and emphasis is placed on achieving results. This type of culture is common to a team organisational structure. Structural responses to change Organisations need to continually improve and develop if they are to survive change. As the business environment changes, organisations examine and modify their business structures. Managers are involved with the structural changes taking place within the organisation, ‘Structural change’ refers to changes in how the business is organised, that is, the organisational structure. Over recent years, the main structural changes have included: outsourcing flatter organisational structures development of strategic alliances network structures The aim of these changes is to make business operations run smoothly, improve efficiency, streamline coordination and control and empower employees to make their own decisions. Outsourcing A trend rapidly gaining support throughout the corporate world and government establishments is outsourcing - that is, the contracting of some business operations to outside suppliers. ‘Outsourcing’ has had a profound impact on business organisation, particularly on the mix of employees. Many businesses have rearranged their workforces to employ a minimum full-time staff, using as many people from outside the organisation on a contract, casual or part-time rate to keep costs to the lowest possible level. Obviously, outsourcing has both positive and negative social, personal and economic effects, many of which are presently being debated. Flat structures Flatter management structures have become more common in recent times. As middle-management positions are abolished, greater levels of responsibility and accountability are transferred to frontline staff or teams. Businesses need to develop a teamwork approach as well as becoming ‘learning organisations’ that respond positively to change. Such organisations are characterised by fewer formal reporting controls, sharing of ‘best practice’ methods, learning focused on business needs, a supportive learning environment and a focus on continuous improvement. The contemporary workplace is seeing organisations evolve from formal, hierarchical structures with many levels to less formal, looser structures based on networked teams. This trend is likely to continue as workplace reforms filter through different industries. Strategic alliances A ‘strategic alliance’ occurs when two or more businesses join together and pool or merge their resources. A business can pool its resources with one or more other businesses in either the domestic market or an overseas market. Forming a strategic alliance is considered to be a win-win strategy for businesses. Network structures A ‘network structure’ exists solely to provide administrative control of another business or set of businesses. In short, network structures buy a finished product with their brand name on it and then contract other businesses to distribute and sell it. To be successful, such organisations must have excellent relationships with their contractors. Their managers need a sophisticated level of conflict-resolution and negotiation skills. 3.3 Reasons for resistance to change Rapid, complex and turbulent change is now commonplace in most businesses. Australian businesses are becoming more aware of the problems that can emerge in the workplace when organisations face change. Strategies for managing change now occupy a prominent place in management education courses. The first step in managing change effectively is to ensure managers understand the main reasons for resistance to change. Once these factors have been identified, each manager can put in place strategies to alleviate the resistance. Financial costs A major reasons for resistance to change is the financial cost of carrying out the changes. Even with access to finance, a business contemplating change must weigh up the costs and benefits of the change. Businesses need to make well-informed, calculated decisions to proceed with change in order to minimise risk and enhance long-term viability. The main financial costs including purchasing new equipment, possible redundancy payments, retraining expenses and reorganising plant layout. Purchasing new equipment The purchasing cost of new technology can be considerable. The decision to purchase new equipment should be made only after a detailed examination of all the alternatives. such capital evaluation techniques should include a total breakdown of costs and benefits as well as the expected rate of return. Redundancy payment Employees are made ‘redundant’ when their skills are no longer required by the business. The employees who are retrenched because of the changes are entitled to financial compensation in the form of a redundancy payment. The total redundancy payout may be difficult to estimate. Inaccurate estimates may have detrimental consequences for a business. Retraining the workforce As new technology is introduced, employees must be retrained, especially those whose existing skills are no longer required. ‘Training and development’ means changing employees’ attitudes and behaviours. It may involve teaching them specific skills, and allows existing employees to continually upgrade their skills. The full benefits of new technology cannot be realised without expenditure on training and development. Reorganising plant layout To improve efficiency and productivity, the installation of new equipment may require reorganisation of the plant layout. ‘Plant layout’ is the physical arrangement of people or machinery within the business. Minor changes may have little or no effect on plant layout. However, major changes such as the complete re-engineering of systems often requires extensive rearrangement of existing facilities. Inertia of managers and owners Inertia or inactivity is another reason for resistance to change. Inertia of management refers to an unenthusiastic response from management to proposed changes. Some managers and owners resist change because it requires moving outside and away from their ‘comfort zones’. Many employees and managers of typical businesses desire a safe and predictable status quo. Change entails risk and requires sound leadership skills and responsive management structures. Resisting change ultimately results in business failure. The long-term survival of all business depends on the ability of their managers to scan the environment, predict future trends and exploit change. Cultural incompatibility in mergers and takeovers Many mergers and takeovers are undertaken for financial or production reasons, generally driven by the expectation of improved long-term profits. However, the success of such strategies may hinge upon whether the two organisational cultures blend. Staffing considerations Any changes to a business organisation and its operating procedures will eventually impact on the level and type of staffing. Many human resource management consultants argue that staffing considerations are one of the most entrenched reasons employees will resist change. Employees may become fearful of changes if they threaten job status or security. De-skilling ‘De-skilling’ occurs when employees are no longer required to perform skilled tasks due to changes in work methods. Such changes usually stem from new acquired technologies. In response to such as loss of skills, employees may choose to resist change through actively seeking to sabotage the new procedures. De skilling may also occur in relation to management as organisations adopt flatter management structures. Consequently, ‘middle-management’ and line supervisors may find it unusual and particularly difficult to accept their transitioning roles. As they take up more of a coaching or guiding function, they may feel that their power has been eroded and their skills are no longer required. Acquiring new skills Learning new processes requires thinking or learning to think again. This problem is exacerbated if the appropriate training is not provided, because without adequate training, and otherwise positive change may be perceived in a negative light. Loss of career prospects or opportunities for promotion Employees who perceive that new procedures or organisational structures may threaten their career prospects or promotional opportunities may resist a change. Often, the culmination of such situations is a decline in employee job satisfaction, which, in turn, has a negative impact on employee productivity. 3.4 Managing change effectively - Now well entrenched and likely to accelerate, change must be considered a fundamental aspect of an organisation’s strategic planning. The ability to manage, and in many cases embrace and adapt to, change will increasingly determine a company’s competitive advantage. Strategies for reducing resistance to change Businesses often fail to manage change well. The record tends to be poor because in the upheaval of a restructuring process the most crucial group of all, the employees are often neglected. As well, existing communication channels are often inadequate when reporting progress. Such channels often break down in the highly emotional climate that surrounds a change program. A great deal of research has been conducted on the most appropriate methods to reduce resistance to change. The majority of this research revealed that regardless of where or how a change originated, the environment created by the manager or supervisor can greatly affect employee acceptance. Identifying the need for change An effective manager should always be scanning the environment, attempting to understand factors that will have an impact on the business. In this way, he or she may better identify current trends and predict future changes. - Achieving such vision requires a holistic view of the outside world and awareness of the potential impact on the business of a variety of factors. Correctly anticipating these factors greatly assists the manager in identifying the need for opportunities that favour its long-term survival in an increasingly competitive world. Creating a culture of change - encouraging teamwork Adopting changes to work procedures or organisational structures requires a degree of risk taking by the participants. A ‘change agent’ is a person, or group, who acts as a catalyst and assumes the responsibility for managing the change process. Such people fulfil a crucial role in helping to establish a positive and supportive workplace culture. Change agents may include members of the management team, employees of the business or outside consultants. Change models A ‘model’ is a simplified version of reality. Models are useful tools when dealing with complex issues. For example, a street directory is a model of a highly complex geographical area that helps you get from one location to another. Force-field analysis Any organisational change program will experience two types of force that govern the effectiveness of the change. These are the driving forces and the restraining forces. ‘Driving forces’ are those forces that initiate, foster, and encourage and support the change. They include the workplace culture, change agents, availability of training and other resources necessary to drive forward the change. ‘Restraining forces’ are those that work against the change, creating resistance. They are the opposite to driving forces and hold the change back. The current conditions, or status quo, are a result of the two forces pushing in opposite directions. Unfreeze/change/refreeze Lewin advocated that change agents unfreeze, change and then refreeze the organisation. Lewin outlined the three steps as follows: 1. Unfreezing. This process breaks down the forces supporting the existing system. It prepares the organisation for change as well as identifying the need for change 2. Change. The change itself now begins. The new procedures, systems and behaviours must be identified, communicated, modeled and practiced. 3. Refreezing. This requires that the changed behaviour be reinforced to make sure it lasts. The manager has a crucial role to play by offering praise and positively reinforcing employee efforts to change. 3.5 Change and social responsibility ‘Social responsibility’ is how well a business manages the social, environmental and human consequences of its actions. A socially responsible business will attempt to achieve two goals simultaneously: maximising profit (double bottom line) and proving for the greater good of society (triple bottom line). A central theme of social responsiblity is that businesses should act ‘above and beyond’ making a profit and obeying the law. Therefore, businesses should always monitor any changes against this standard. Ecological sustainability Economic development must be accomplished sustainably - that is, using methods of production that conserve the Earth’s resources for future generations. There needs to be a balance between economic and environmental concerns - in other words, sustainable development. Consequently, businesses are being asked to take increasing responsibility for the protection of the environment. The social conscience of responsible business owners (and, increasingly, government legislation) has led them to adopt strategies of conservation, recycling and restoration. The principle of ecological sustainability requires businesses to evaluate the full environmental effects of their operations. Quality of working life The changing composition of the workforce and the need for increased business flexibility and productivity have meant that quality of working life issues must be taken into account when changes are introduced. The quality of employees’ working life can be improved by: programs to enhance employee dignity improvements to the physical and emotional wellbeing of employees efforts to enhance job satisfaction safe and healthy working conditions opportunities to use and develop talents and skills the right to personal privacy, free speech and equitable treatment family-friendly work arrangements; work schedules and job demands that do not regularly take up family time. Technology A socially responsible business will endeavour to contribute to the transfer of environmentally sound technology and management methods. As the use of technology increases, more and more people experience dramatic changes to the way they do their jobs. As the use of computer technology continues to accelerate, it is estimated that eventually all workers who perform a service for others will have access to a PC, workstation, or laptop. Such a change has enormous implications, especially in terms of interpersonal relationships, work design and communication. Globalisation and managing cultural diversity Globalisation has brought a change in the ‘cultural diversity’ of workplaces. Cultural diversity means the multitude of individual differences that exist among people. WIth the pressure to globalise, organisations are having to find new approaches to staffing. Workplace diversity in terms of gender, race, ethnicity, religion, ability, sexual preference and age is a permanent feature of today’s workplaces. Managers, therefore, are required to effectively manage a culturally diverse workforce Fostering cultural diversity should be given a high priority because it brings many benefits. These include the following: Businesses may recognise their social responsibility to provide an equal opportunity environment New markets may be more easily penetrated, especially by those employees who identify with the different cultures that support those markets. Customers’ needs may be better served Creativity, flexibility and responsiveness to change are enhanced. Socially responsible business practices should, therefore, he designed to contribute to the quality of employees’ working lives