3.6 Managing Change Flashcards
How is Organisational Change defined?
A process in which a large company or organisation changes its working methods or aims, for example in order to develop and deal with new situations or markets
How is Transformational Leadership defined?
Where new leadership such as a new CEO brings about change with the purpose of improving business performance
What are the Potential Causes of Change in a Business?
- Changes to organisational size
- Poor business performance
- New ownership
- Transformational leadership
- The market and other external factors (PESTLE)
How can Changes in Organisational Size affect Competitiveness?
There are significant advantage to growth in the form of EoS, brand recognition and financial security
How can Changes in Organisational Size affect Productivity?
- Firms are certainly more productive as they grow in size
- However, in order to capitalise on size a business will have to alter the scale and methods of production
-For some organisation this may require investment in automated production facilities and the loss of a highly skilled small workforce
How can Changes in Organisational Size affect Financial Performance?
- With growth comes the need to invest
- This investment could come from the reinvestment of profits, but more often than not, a firm will need to finance growth through borrowing
- A highly geared business is a risky business
- Nevertheless, growth will often bring with it increased profit in real term and this is likely to please shareholders
How can Changes in Organisational Size affect Stakeholders?
- Growth brings with it new opportunities for employees through bonuses and promotion prospects
- It may also be necessary to recruit new employees and this is another important change to manage, individual workers might be concerned that they will no longer work with ‘friends’, or may be moved to a job that they dislike
- As a firm grows there is danger of losing connections with its customer base
- Larger organisation sometimes find it more difficult to offer a personal service
- Trying to maintain a personal service has been focus of many high street banks
- The expansion of business can also create pressures for local communities
Why does a Business Organisational Size change?
- The size of an organisation will naturally change as it seeks to grow
- growth is a key corporate objective as it allows a firm to satisfy shareholders and create security for its stakeholders
- One of the most significant drivers of change as a business grows is the need to restructure and adopt policies and processes to manage expansion
- Sometimes a business will look to grow externally by merger or takeover
-This can bring a very sudden change to all aspects of the business - How an organisation manages growth can be difference between success and failure
- Most businesses are unable to operate as thy once did where they were a small business, which can be lost as companies grow
How can Poor Business Performance lead to Business Change?
- This poor performance of an organisation will invariably bring with it a period of change as the company strives to regain customers, sales , profit or reputation
- Often the change after a period of poor performance will happen quickly as the business leaders try to ‘turn the tide’ and improve the fortunes of the company before failure and possible closure
- For this reason, change will often be very quick and may focus on corporate strategy
- Sometimes when a large business has a period of poor performance, a change of higher management or the CEO is made
- New leadership usually bring significant change as the new boss attempts to assert themselves and strike a new course for the business
How can Poor Business Performance affect Competitiveness?
Poor performance will often go hand in hand with a loss of competitiveness
How can Poor Business Performance affect Productivity ?
With poor performance comes a fall in sales, productivity and profitability
- A fall in production will leave the business with a low rate of capacity utilisation
-the key question is hoe will the firm manage its excess capacity and the threat of rising unit costs?
- Business must take account of changes in their human resource planning
- This could mean employing a more flexible workforce that could be changed quickly to meet the needs of the business for example , employing part-time workers, introducing job sharing.
- It might also mean employing workers in low-cost countries, such as in call centres abroad
How can Poor Business Performance affect Financial Performance?
- A firm going through a period of poor performance is likely to be subject to liquidity problems
-A reduction is sales will result in a reduction in cash flow and this might lead to cost cutting
-In times of financial difficulty it is important for a business to find ways of being leaner and more efficicent
How can Poor Business Performance affect Stakeholders?
- Poor performance brings uncertainty and this can have a negative impact on motivation within the workforce
- A firm can find itself manage low morale and giving reassurances
- Nevertheless, poor performance sometimes signals redundancies and this can be an extremely difficult process to manage
- All corporations are answerable to their shareholders and a poor performing company is likely to lose value on the stock markets
How does Technology change Business?
- The introduction of new technology can affect a business in many ways
- Advances in even more powerful computer components
- Telecommunications and the power of handheld devices change not only how businesses communicate with their customers and suppliers, but also the pace of innovation and business processes
How does Social factors change Business?
- Businesses must be prepared for changes in the tastes of consumers e.g. include the increasing demand for environmentally friendly products, the desire for greater knowledge and products or the need for more convenient methods of shopping , such as purchasing via the internet
- Population changes will also affect the age and make-up of the workforce
- The ageing of the population in the UK in the early part of the twenty-first century is likely to result in changing recruitment policies for businesses
- A falling population is also likely to change how a business plans its human resources
How does the Law change Business?
- Government legislation can force changes in business activity,
- Taxation of pollution for instance, would affect the production methods of many firms.
- Safety standards, such as EU regulations, the minimum wage or the governance of zero hour contracts are likely to determine how businesses operate
How does Economics change Business?
- It is argued that economies go through periods of boom and slump, recession and recovery
- This is known as the business cycle
- Income, spending, saving, investment and economic variables, such as unemployment and inflation, are all likely to be different at different stages in the cycle
- Business have to deal with these economic factors e.g. the financial crisis of 2008 many firms had to find ways of becoming leaner and more efficient in order to survive
How does Change to the Market and other External Factors (PESTLE) affect Competitiveness?
- This impact on competitiveness of PESTLE factors is very much determined by how quickly a business is able to respond to these changing forces
- For example, if a business is the first to innovate or adopt a new technology, responds fastest to consumer needs or embeds policies that adhere to new legislation, it might be able to gain an advantage over its competitors
Hoe does Change to the Market and other External Factors (PESTLE) affect Productivity?
- New technology can feed into the production processes of a business
- Whether that be a manufacturer or service provider, new technology brings with it the opportunity to increase scale, productivity and efficiency.
- As the economy goes through periods of boom and slump, businesses will be required to adapt to changing demands for their products and services
- As productivity rises and falls a business must change to cope with different levels of capacity utilisation
- These can require fast expansion or the need to rationalise
How does Change to the Market and other External Factors (PESTLE) affect Financial Performance?
- In most instances any change in these external forces means an increase in costs for a business
- From simply having to adapt its packaging to meet new consumer legislation or the complete revamp of its product line to introduce new technology, these changes are not going to be cheap
- However, it is likely what the costs will have to be absorbed by the whole industry and not just one firm
How does Change to the Market and other External Factors (PESTLE) affect Stakeholders?
- The impact of change as a result of business having to respond to external influences is likely to be felt by all stakeholders
- Any impact of rising costs though legal implications is likely to be passed on to consumers
- New technology may require retaining or, in a worse case scenario. could lead to parts of the workforce becoming redundant
How can Ownership Change?
- The change in ownership of a business may come fro internal growth, the transition from a private limited company to a public limited company and flotation of a firm’s shares on the stock market
- With the flotation of a business on the stock market comes the opportunity to raise fresh capital for further investment and expansion, again fuelling more change ahead
- A change in ownership may also become necessary as a business goes through the process of a merger or acquisitions which can bring very sudden change to a company
