3.6 Managing Chnage Flashcards
What is organisational change
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
What is transformational leadership
Where new leadership such as a new CEO brings about change with the purpose of improving business performance
What are causes of change in business?
- changes in organisational size
- poor business performance
- new ownership
- transformational leadership
- the market and (PESTLE)
What are the possible effects on a business after a change
- competitiveness
- productivity
- financial performance
- stakeholders
Why will a business change organisational size?
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.
What are the effects of changes in organisational size?
1) competitiveness - there are significant advantages to growth in the form of economies of scale, brand recognition and financial security
2) productivity - firms are certainly more productive as they grow in size. For some organisations this may require investment in automated production facilities and the loss of a highly skilled small workforce.
3) financial performance - with growth comes the need to invest. This investment could come form the reinvestment of profits , but more often than not, a firm will need to finance growth through borrowing
4) stakeholders - growth brings with it new opportunities for employees through bonuses and promotion prospects.
Poor business performance
- The 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.
What are the effects of change on business performance?
1) Competitiveness - Poor performance will often go hand in hand with a loss of competitiveness.
2) 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.
- Financial performance- A firm going through a period of poor performance is likely to be subject to liquidity problems. A reduction in sales will result in a reduction in cash flow and this might lead to cost cutting.
4.) Stakeholders - poor performance brings uncertainty and this can have a negative impact on motivation within the workforce.
Effects of change to the market and other external factors (PESTLE)
1.) Competitiveness - The impact on competitiveness of PESTLE factors is very much determined by how quickly a business is able to respond to these changing forces.
2.) Productivity- new technology can feed into the production processes of a business. New technology brings with it the opportunity to increase sales , productivity and efficiency
3.) financial performance- increase in costs for a business
4.) stakeholders- the impact of change as a result of a business having to respond to external influences is likely to be felt by all stakeholders.
How does technology change the market ?
Advances in ever more powerful computer components, telecommunications and the power of handheld devise change not only how businesses communicate with their customers and suppliers, but also the pace of innovation and business processes.
How does social change the market ?
Businesses must be prepared for changes in the tastes of consumers. Population changes will also affect the age and makeup of the workforce. A failing population is also likely to change how a business plans its Human Resources.
How does legal change the market ?
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 operates
How does economy change the market ?
- The economies go through periods of boom and slump , recession and recovery known as a 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.
How does change of ownership affect a business?
The change in ownership of a business may come from internal growth , the transition from a private limited and public limited company and flotation of a firm’s shares on the stock market.
What is floatation
Floatation is often termed as a company “Going Public” or ‘Listing’ as it is the process of shifting a company from being privately held into being a publicly listed and held company.
