3.10 Managing strategic change Flashcards
Causes and pressures for change - INTERNAL & EXTERNAL
Internal - changes that happens within the business e.g. restructuring, delayering
External - changes that happen outside of the business e.g. laws and social trends
Causes & pressures for change - INCREMNTAL
Changes occurs over a period of time in incremental, small stages
Usually involves little resistance
Arises as strategy develops
Causes & Pressures for change - DISRUPTIVE
A form of step change (significant + rapid change) that arises from changes in the external environment
Impacts the market as a whole
Rapid movements in technology are the main driver of disruptive change
Lewin’s Force Field Analysis Model
Provides an overview of the balance between forces driving change in a business and the forces resisting change
In order for change to occur the driving force must exceed the restraining force
Lewin’s Force Field Analysis - Forces driving change
INTERNAL FORCES INCLUDE:
- need for higher profits
- poor efficiency
- lack of innovation
- need to change culture & leadership
EXTERNAL FORCES INCLUDE:
- customer demand
- competition
- ethics
Lewin’s Force Field Analysis - Resistance to change
Forces include:
- Self interest –> individuals concerned about implications for them
- Misunderstanding –> communication problems
- Low tolerance of change –> sense of insecurity
Flexible organisations - ORGANIC V MECHANISTIC STRUCTURES
ORGANIC STRUCTURES:
- informal
- flexible & fluid (easy to change)
- favours verbal communication
- associated with decentralised decision making & empowerment
- finds change easier to handle
MECHANISTIC STRUCTURES:
- Formal
- bureaucratic (finds it harder to change)
- formal communication methods
- associated with centralised decision-making
- little perceived need to change
Flexible Organisations - DELAYERING (pros & cons)
Removing layers of management from hierarchy of the business
PROS:
- less layers = less staff = lower labour costs
- faster decision making & better communication
- wide span control = emphasis on teamworking + empowerment
CONS:
- redundancy payments needing to be paid
- increased workload on managers
- impact of redundancies on others –> reduces morale
Flexible Organisations - FLEXIBLE EMPLOYMENT CONTRACTS (pros & cons)
Includes part-time, working from home, temporary contracts
PROS:
- savings on costs e.g. overheads like wages and training
- higher job satisfaction & employee morale for those who want to work flexibly –> balance between work and social lives
- may attract more applicants for available jobs
CONS:
- investment in technology to support effective flexible working
- reduced motivation due to increased isolation
- loss of capability if key employees reduce their hours
Flexible organisations - RESTRUCTURING
Involves changes to the capital structure of the business to reduce debt and reductions in the scale and scope of the business’ activities (e.g. closing down business units)
Kotter & Schlesinger’s 4 reasons for resistance to change
1) Self-interest
2) Low tolerance for change & Inertia
3) Different assessment of the situation
4) Misinformation & misunderstanding
K & S Resistance to change - SELF INTEREST
Powerful motivator
Arises from a perceived threat to job security & financial status
Individuals often place their own interests ahead of those of their organisation, particularly if they don’t feel strong loyalty to it
K & S Resistance to change - LOW TOLERANCE & INERTIA
Many people suffer from inertia or reluctance to change –> preferring things to ‘stay the way they are’
Many people need security, predictability & stability in their work
If there is a low tolerance to change then resistance may grow
K & S Resistance to change - DIFFERENT ASSESSMENT OF SITUATION
Disagreements about the need for change
Some people may disagree with the change proposed –> or they may feel as if they have a better solution
Resistance is based on disagreements about what is best for the business
K & S Resistance to change - MISINFORMATION & MISUNDERSTANDING
People don’t understand why change is needed –> perhaps because they are misinformed about the position of the business
No compelling reason for change
Kotter and Schlesinger’s 6 ways to overcome resistance to change
1) Education & communication
2) Participation & involvement
3) Facilitation & support
4) Manipulation & Co-option
5) Negotiation & Bargaining
6) Explicit & Implicit coercion
K & S Overcoming resistance to change - EDUCATION + COMMUNICATION
Successful change is achieved through effective communication
Honest communication about issues helps people see the logic of change
Effective education helps address misconceptions about change
Education + communication are long-term strategies
K & S Overcoming resistance to change - PARTICIPATION & INVOLVMENT
Involvement is an effective way of bringing everyone ‘on board’
Effective participation often leads to commitment
K & S Overcoming resistance to change - FACILITATION & SUPPORT
Some people will need support to help cope with change
Might include training, counselling and mentoring
If fear & anxiety is causing resistance then support is important
K & S Overcoming resistance to change - MANIPULATION & CO-OPTION
Co-option involves bringing specific individuals into roles that are part of change management
Manipulation involves selective use of information to encourage people to behave in a certain way
K & S Overcoming resistance to change - NEGOTIATION & BARGAINING
Idea to give people who resist an incentive to change
Involves offering better financial rewards for those who accept requirements of the change programme
Approach is commonly used when the business need restructuring
K & S Overcoming resistance to change - EXPLICIT & IMPLICIT COERCION
This option is the last resort
Explicit coercion - involves people being told exactly what the implications of resisting change will be
Implicit coercion - involves suggesting likely negative consequences for the business of failing to change w/o making explicit threats
Coercion damages trust between people –> damages morale
Handy’s Models of Organisational Culture - POWER CULTURE
Few key people at the centre of the organisation who make all the major decisions
+ those at the centre have an overview of everything –> leading to quick decision making & consistent approach
- however as business expands –> leads to great pressure and heavy workload for those in the centre –> slow decision making & stress
Handy’s Models of Organisational Culture - ROLE CULTURE
People have clearly delegated tasks within the organisation –> they know who to report to and who they are responsible for
Creates order, structure and certainty in a business
Handy’s Models of Organisational Culture - TASK CULTURE
Teams are formed to solve particular problems
Power derives from expertise as long as a team requires expertise
Handy’s Models of Organisational Culture - PERSON CULTURE
Individuals are given their own parts of the business to make decisions on and to control
Power lies in each group of individuals
Hofstede’s National Cultures
1) Individualism v Collectivism
2) Power distance
3) Masculinity v Femininity
4) Uncertainty Avoidance
5) Long-term orientation
6) Indulgence v Restraint
Hofstede’s National Cultures - INDIVIDUALISM V COLLECTIVISM
Some societies value performance of individuals
For others, its more important to value the performance of the team
Has important implications for financial rewards at work
Hofstede’s National Cultures - POWER DISTANCE
Considers the extent to which inequality is tolerated
High power distance suggests a national culture that encourages bureaucracy and high respect for authority and rank
Whereas a low power distance suggests a national culture that encourages a flatter organisation, greater emphasis on personal responsibility and autonomy
Hofstede’s National Cultures - MASCULINITY V FEMININITY
Considers the differences in decision-making
Masculine = hard-edged, fact-based & aggressive style decisions
Feminine = greater degree of consultation & intuitive analysis
Hofstede’s National Cultures - UNCERTAINTY AVOIDANCE
Different attitudes to risk-taking between countries
Low levels of uncertainty avoidance = willingness to accept more risk, work outside the rules and embrace change
High levels of uncertainty avoidance = more support for rules, data, clarity of roles and responsibilities
Hofstede’s National Cultures - LONG-TERM ORIENTATION
Businesses that take a much longer-term perspective which is likely to encourage more long-term thinking
Hofstede’s National Cultures - INDULGENCE V RESTRAINT
Indulgence = society which allows relatively free gratification of human needs –> related to enjoying life and having fun
Restraint = society that suppresses gratification of needs and regulates it by means of strict social norms
Reasons for changing organisational culture
Symptoms for the need of a new organisational culture:
1) High staff turnover and absenteeism
2) culture becomes bureaucratic (revolves around centralisation)
3) Communication more closed & restricted
Key Reasons to change organisational culture include:
1) Business performance
2) New leadership / strategy
3) changes in external environment
4) support change management
Problems of changing organisational culture
Hard to change as culture is deeply embedded
Employees may resist change –> especially if they were performing well beforehand (why the need for change then?)
Changing culture = changing beliefs and values which are deeply embedded –> values & beliefs are being questioned now
Value of communications in strategic implementation
Good communication is valuable because:
- it can help overcome resistance from all stakeholders
- helps reduce distrust & shows the benefits to those involved
- Allows managers to see flaws in the plan from advice &
communication from others - provides a sense of direction and purpose too
Importance of organisational structure in strategic implementation - FUNCTIONAL STRUCTURE (pros & cons)
Each function (HR, finance, operations & marketing) form part of the business
PROS:
- each member in each function can share expertise
- everyone can help solve problems together
CONS:
- Silo effect where members only prioritise & view the business through their function –> thus disregard the business as a whole
- Silo effect –> lack empathy with other functions and don’t try hard to view the business through other functional perspectives
Importance of organisational structure in strategic implementation - PRODUCT STRUCTURE (pros & cons)
Occurs when a business has multiple product lines that have different customer bases, different challenges & opportunities
PROS:
- different lines of products with different customer needs is logical as it groups specific skills & expertise for that group of customers
CONS:
- the divisions may see themselves as competing against each other rather than looking for opportunities to cooperate
Importance of organisational structure in strategic implementation - REGIONAL STRUCTURE (pros & cons)
Grouping jobs / parts of the business over different regions
PROS:
- having jobs focused on one region may lead to much more in-depth market knowledge and better decision making
CONS:
- may lack resources
- hard and complex to allocate employees over different regions
Importance of organisational structure in strategic implementation - MATRIX STRUCTURE (pros & cons)
When individuals work across teams and projects as well as within their own department or function.
PROS:
- Helps break down traditional department barriers –> improving communication and greater motivation amongst employees
- A good way of sharing resources across departments – which can make a project more cost-effective
CONS:
- Difficult to co-ordinate
- It takes time for matrix team members to get used to working in this kind of structure
- Team members may neglect their functional responsibilities
Critical path analysis
CPA - a project analysis and planning method that allows a project to be completed in the shortest time possible
EST - when 2 or more activities meet, EST is always highest figure
LST - when 2 or more activities meet, LST is always lowest figure
Critical Path analysis - Float time and critical path
Float is the duration an activity can be extended / delayed so that the project still finishes within the minimum time
Activities with a float of zero can’t be delayed or the whole project will be delayed too
Float Time = LFT - EST
Critical path is when EST and LST are equal with zero float
Difficulties with strategic decision making & implementing strategy
Strategic decisions are unfamiliar
They are major decisions which involve high risk
Very high level of uncertainty
Strategic decisions may also be biased through a manager’s own perspective –> leading to flawed decision making
Planned v Emergent strategy
PLANNED:
- the intended strategy
- influence by specific corporate objectives
- based on formal strategic planning (e.g. SWOT analysis)
- described in formal business plan
EMERGENT:
- the strategy that actually happens
- strategy responds to events as they arise
- often involves strategic and tactical changes
- no restricted by formal planning tools and methods
Reasons for strategic drift
When the strategy of a business is no longer relevant to the external environment facing it
Reasons for strategic drift:
- business fails to adapt to a change external environment
- what worked before doesn’t work now
- complacency has set in –> often built on previous success
- senior management deny there is a problem
Possible effect of divorce between ownership & control
Occurs when owners of the business don’t control the day-to-day decisions being made
Corporate Governance
System by which companies are directed and controlled
Key responsibilities of BoD’s
- setting company objective and aims
- determining the strategy to achieve those aims & objectives
- providing leadership to put them into effect
- supervising the management of the business
- reporting to shareholders on their stewardship of the business
Value of strategic planning - PROS v CONS
PROS:
- bases its plans on data –> avoids irrational & poor decisions
- provides a strategy that sets our for managers what the business is doing and how –> plan can motivate & give a sense of direction
CONS:
- external environment can change so fast that strategic plans may need reviewing regularly
- level of detail considered may need altering due to changing external environment
Value of a contingency plan
Occurs when a business plans for possible but unlikely events
