3.6 managing change Flashcards
businesses operate in…
a continuously changing business environment
which 2 broad factors affect businesses?
internal factors - business growth, new business ownership, internal restructuring
external factors - changes to the market, technological advancements
what are causes of change?
-chances in organisation size
-poor business performance
-new ownership
-transformational leadership
the market and other external factors (PESTLE)
causes of change: changes in organisational size
a business will change as it grows
(organically - selling more products)
(inorganically - mergers, takeovers)
↳ create or expand functional areas, open new premises
↳ workforces, resources and capital will need to be integrated and systems are likely to need to be streamlined
a business will also change and become smaller as a result of divestment or market pressures
↳ may require redundancies & the sale of assets
↳ workers may need to transfer to other parts of the business
what is divestment?
the process of selling assets or discontinuing investments
causes of change: poor performance
-a dip in sales or loss of profit could lead to changes in…
-personnel
-product design
-business operations
-leadership team
the pace of changes to combat poor performance:
change following poor performance needs to be swift to avoid problems such as the potential loss of customers and reputational damage
causes of change: new ownership
a change in ownership can significantly change the overall aim and objectives of the business
↳ new policies, changed culture and key personnel to implement changes
the move from Ltd to Plc is also a significant step, the company becomes influenced by public share ownership and stock market forces.
causes of change: transformational leadership
-leaders make change happen
- they set a vision and direction for the company and ensure people are on-board
-new leaders will assert their own ideas and strategy
-extensive changes are likely to be made to the businesses aims, objectives, structure and culture
causes of change: changes in the market (external)
a new competitor may enter the market or existing competitors may change their strategy
causes of change:
political change -PESTLE (external)
change in political leadership can affect legislation & require both short-term and longer-term business response
causes of change:
economic change -PESTLE (external)
economic growth or contraction can impact on demand for goods and services and can be difficult to predict
→ for example, high inflation can lead to decreased consumer confidence & more spending on necessities
causes of change:
social change -PESTLE (external)
long-term changes to consumption habits as a result of social change can require a business to refocus business strategy
→ for example, the UK’s increasingly diverse population means that food retailers now sell a wide range of world foods and related products
causes of change:
technological change -PESTLE (external)
technological change has been particularly rapid over the last few decades, creating significant opportunities but, also, a need for businesses to adapt
causes of change:
legal change -PESTLE (external)
changes to the laws affecting businesses often accompany political change and require adaptation and compliance
causes of change:
environmental change -PESTLE (external)
-environmental change is increasingly associated with political change and subsequent changes to the law
-in recent years numerous environmental issues have emerged and, increasingly, consumers expect businesses to respond to their concerns, even if they are short-lived
which aspects of the business can change affect?
-competitiveness
-productivity
-financial performance
-stakeholders
what are the effects of change on competitiveness?
-change as a result of external factors is likely to be gradual and involve a business carefully selecting and pursuing an appropriate long-term competitive strategy
-change as a result of some internal factors (e.g. following poor performance or the arrival of a new leader) can be rapid and can lead to swift improvements in competitiveness
-change is driven by the need to improve or maintain competitiveness
overall effect of change on businesses competitiveness:
research suggests that change has an overall positive effect on business competitiveness when it brings management and engaged employees together and their efforts are coordinated
how can change affect productivity?
-change may come about through new technology or new ways of working (staff training, organisation structure)
-a driver of change will always be the aim of increasing productivity and improved efficiency
-during periods of external change, businesses may endure a period of unstable levels of productivity and must take steps to manage capacity utilisation and unit costs
the effects of change on productivity in the short & long term:
in the short-term, as change is being implemented and employees get used to new processes, surroundings, leadership or a new product, productivity is likely to be reduced
once changes are embedded, productivity is likely to return to earlier levels and possibly improve , especially if new technology is part of the change
how can change affect financial performance? (short term)
in the short-term, the implementation of change can be very expensive for several reasons
↳ organisational restructure may involve redundancy payments, recruitment & training costs
↳ market research and product development require investment
↳ PR and promotional activity may be needed, especially where change is implemented due to poor
performance
↳ new strategies are likely to involve capital expenditure
how can change affect financial performance? (long term)
financial performance is likely to improve as change becomes the new way of working and teething problems are overcome
how can change affect stakeholders?
-some changes such as seasonal fluctuations or cyclical economic factors can often be planned-for and their impacts on stakeholders considered in advance
-significant long-term change is likely to involve a wide range of stakeholders at some level
how could change affect employees? (example)
employees may fear for their job security and status within the organisation
how could change affect shareholders? (example)
shareholders may withdraw their support/investment if they fear that the change will not be successful and might not lead to return on their investment
how could change affect customers ? (example)
customers may react negatively to new products or processes
Examiner Tips and Tricks
The concept of change is rarely examined as a topic in its own right, yet understanding its implications and understanding how businesses and their stakeholders plan and respond to change is vital.
Some of the following questions may be useful when considering changing external factors or strategic change coming from within the business
Does the change pose a threat or present an opportunity to the business?
What can the business do to manage the threat or exploit the opportunity?
How can competitive advantage be retained or created as a result of change?
How are stakeholders likely to respond to the change?
How may the problems changes cause to stakeholders be mitigated?
which factors have an affect on how successful change can be?
organisational culture
size of organisation
time/speed of change
managing resistance to change
how does organisational culture impact the process of change?
-to successfully implement change, leaders must understand the culture of their organisation and work to align it with the desired changes
-the way employees and leaders perceive change and their willingness to embrace it can be heavily influenced by the organisational culture within a business
organisational culture & reluctance to change:
-if the culture is of routine and predictability, employees may be hesitant to embrace new processes and procedures
-an innovative and flexible culture may mean that employees are more receptive to change
organisational culture & change:
how effectively change is communicated to employees is related to a businesses culture
-in an open culture, communication channels are more likely to be clear frequent and effective
-in a hierarchical culture, communication may be limited and information may not be easily accessible to all employees
organisational culture & strength:
(change)
a strong organisational culture can support employee engagement and ownership of change
↳ when employees feel valued and are part of a supportive culture they are more likely to embrace change and work together to implement it successfully
how does a large organisational size impact the process of change?
larger organisations usually have complex structures, which makes change more difficult to implement
↳ communication is harder due to the number of people involved
↳ more difficult to communicate changes effectively and ensure that everyone is on the same page
↳ complex decision-making processes that can slow down the implementation of change
↳ more layers of hierarchy → more people involved in decision-making → delays
↳ may be many people who are resistant to change → can be more difficult to address their various concerns
benefits of a large organisational structure for change:
larger businesses often have more resources available to support change initiatives (financial resources, technology and experienced staff)
how does the speed of change influence it?
-the pace of change may be determined by external forces imposed on the business (eg: competitor action, new legislation)
how should the pace of change be chosen?
it’s important to find a pace for change that is…
-appropriate for the situation
-which takes into account the needs and concerns of all stakeholders involved
issues caused by a pace of change that is too fast:
-it can create resistance from overwhelmed workers who feel unprepared and that they don’t have enough time to adjust
-it may not be properly thought through or planned, resulting in poor execution
-it may be difficult to communicate effectively to all stakeholders leading to misunderstandings and confusion
issues caused by a pace of change that is too slow:
a too slow pace can result in…
-a lack of adaptability and innovation
-loss of momentum leading to delays or even the abandonment of the change
-communication efforts becoming stagnant leading to disinterest and disengagement
what are some reasons for reluctance to change?
-self-interest
-prefer present state
-different assessment
-misunderstanding
how may self-interest lead to reluctance to change?
individuals may lose out in terms of pay, status or have to work harder
how may preference for present state lead to reluctance to change?
dome employees may be very comfortable with the current situation, change will take them outside their comfort zone
how may different assessment lead to reluctance to change?
some employees may simply disagree and believe that change is not necessary or that a different approach would be more successful
how may misunderstanding lead to reluctance to change?
employees may not see the need for change or may not understand what the change process will involve, causing the change process to be miscommunicated
approaches used to overcome resistance to change:
-education and communication
-facilitate and support
-participation and involvement
-manipulation and co-option
-negotiation and bargaining
-explicit/implicit coercion
approaches to overcome resistance to change: education and communication
-clear communication is essential when introducing change in a business (reasons behind the change, benefits that the change will bring)
-necessary training in new
approaches should be provided
-emails, meetings, presentations and one-on-one conversations
approaches to overcome resistance to change: facilitate and support
-give employees what they need to accomplish the change along with encouragement & support
-providing training & support will help employees adapt to the new changes and learn new skills and technologies
-feedback throughout the process with all key stakeholders is essential
approaches to overcome resistance to change: participation and involvement
-involving employees in the change process can help to build buy-in and support for the change
↳ more likely to embrace change
↳ feel a sense of ownership over the change
approaches to overcome resistance to change: manipulation and co-option
-involve and influence key people. -get individuals with influence on-board and use them to drive the change
approaches to overcome resistance to change: negotiation and bargaining
compromise may involve employees receiving higher wages or better working conditions for adopting change
approaches to overcome resistance to change: explicit/implicit coercion
-force change through using authority
-threats may be involved (openly or implied)
-success may be more important than short-term agreement
which factors determine which are the most appropriate tactics to deal with the change process?
-the reason for resistance
-the level of resistance
-the time available
-the leadership style of the managers involved
reasons for stakeholder resistance to change: employees
-employees may worry about how the change will affect their job security or work environment
-employees may not understand why the change is needed or what the expected outcomes are
-employees may be used to doing things a certain way and may be reluctant to learn new skills
reasons for stakeholder resistance to change: owners
-owners may fear that changing their current processes may cause disruption to their daily operations and affect productivity
-owners may be reluctant to agree to costs (esp if they involve a personal financial or time commitment)
-may prefer to maintain the status quo rather than taking risks that could potentially harm their business (risk averse)
amay not fully understand the benefits of the proposed changes or lack the knowledge or expertise to implement them effectively
reasons for stakeholder resistance to change: customers
-customers may be hesitant to try something new or unfamiliar
-they may fear losing something they value (losing features, inferior service)
-customers may be used to buying certain products or accessing a service in a particular way and don’t want to make the effort to change
reasons for stakeholder resistance to change: suppliers
-suppliers may be reluctant to change their processes or systems
-may be worried that change will lead to a decrease in quality or additional costs
-may have invested a significant amount of time, money and resources in their current systems and are hesitant to abandon them
what is scenario planning?
it involves a business analysing the current and future environment and anticipating potential risks
↳ once risks have been identified the business can create contingency plans to ensure business continuity and minimise the impact of risk
steps of conducting a scenario plan:
-identify possible trends and future issues
-build possible scenarios
-identify probability and most likely scenarios
-put plan in place associated with the scenario
what is risk?
the likelihood of a negative event occurring x the impact of that negative event
how is risk identified?
through a risk assessment
what is a risk assessment?
where a business identifies and evaluates risks and decides the precautions that may be taken to protect against them
what do businesses do once a risk is identified?
they will adjust their plans in order to minimise the risk or put in place a plan to deal with it
why may the risk of a negative outcome be low even if the outcome is catastrophic?
if there is an extremely low percent chance of it occurring
examples of hazards commonly covered by business risk assessments:
-natural disasters
-IT systems failure
-loss of key staff
natural disasters:
-often unpredictable
-their impact can be very devastating to business operations
IT systems:
-information technology systems are used extensively by most businesses
-an IT systems failure can have a devastating effect on a business’s ability to continue operating normally
what are business IT systems at risk?
-malware
-phishing
-data breach
-downtime
how can malware affect IT systems?
malware (e.g. viruses) can infect a business’s IT system and cause significant damage including loss of data and system downtime causing financial loss
how can phishing affect IT systems?
cybercriminals trick employees into giving away sensitive information such as login or financial details
how can a data breach affect IT systems?
a data breach occurs when sensitive or confidential data is lost due to a cyberattack, human error or negligence
how can downtime affect IT systems?
when a system or application is unavailable as a result of hardware or software failures, power outages or cyberattack
how can loss of key staff be detrimental?
-especially bad if unplanned (e.g. as a result of sudden illness or incapacity)
-loss of experience and knowledge can impact a business’s competitive advantage
-losing a figurehead can affect the morale of remaining employees as well as the culture and direction of the business
Examiner Tips and Tricks
As well as carrying out detailed risk assessments, many businesses also plan for those uncertain events that can bring opportunities in a wider exercise known as scenario planning.
These businesses are in a good position to respond swiftly to external factors that operate in their favour as they have weighed up the various options in advance.
what is risk mitigation?
measures that a business might put in place measures to mitigate against risk
two key elements of risk assessment plans are…
-business continuity plans
-succession plans
what does a business continuity plan set out?
it sets out how a business will operate following a serious incident or disaster and how it expects to return to normal as soon as possible
steps of continuing planning:
1) ensure sufficient insurance is in place
2) risk assessment
3) impact analysis
4) strategy development
5) plan development
6) testing and training
7) maintenance and review
step 2 - risk assessment
involves identifying potential risks that could disrupt business operations
step 3 - impact analysis
assessment of the potential impact of these events on the business
(may involve identifying critical business functions & determining the potential financial and operational impact of disruptions)
step 4 - strategy development
-formulation of the approaches to be taken to respond to disruption
(eg: implementing backup systems, developing communication plans, identifying alternate work locations)
step 5 - plan development
-outlines the specific steps that will be taken in the event of a disruption
-may include detailed procedures for handling different types of disruptions, guidelines for communication and decision-making
step 6 - testing and training
-ensures that the plan is effective and all stakeholders understand their roles and responsibilities
-may involve conducting drills and simulations & providing training to employees and other stakeholders
step 7 - maintenance and review
-involves regular review and updating of the plan to ensure that it remains relevant and effective
-may involve reviewing and updating the risk assessment, revising procedures and guidelines, and ensuring that stakeholders are aware of any changes
what is succession planning?
involves identifying and developing current employees who have the potential to move into key roles in the future
what does succession planning usually prepare for?
the eventual retirement death or departure of a senior executive, it ensures the smooth transition of the business to the next generation of leadership
key elements of succession planning:
-identify future talent and leadership from within the organisation (potential successors)
-ensure key knowledge is recorded in systems
-put in place a recruitment plan
-train and mentor
-communicate with stakeholders
-reviewing and updating the plan
what does identifying successors include? (succession planning)
-businesses may look at family members & key employees, to develop a pool of potential candidates
-may involve assessing their skills, experience and commitment
what does developing a succession plan include? (succession planning)
-once potential successors have been identified, a plan to prepare for the transfer of leadership is developed
what does training and mentoring include? (succession planning)
-potential successors need to have the skills and knowledge needed to take over the business
-providing education, coaching and on-the-job training
what does communicating with stakeholders include? (succession planning)
-all stakeholders need to be informed of the plan including (employees, customers, suppliers, investors)
-this can help to build trust and ensure a smooth transition
what does reviewing and updating the plan include? (succession planning)
should be done regularly to ensure the plan remains relevant and effective as the business evolves over time
what does successful succession planning do?
-can help to ensure the long-term viability of a business
-can provide peace of mind to key leaders or employees as they plan for their departure
