THEME 3: SECTIONE 6 (MANAGING CHANGE) Flashcards
what internal factors can lead to (cause) change in a business?
- organisational size changes
- organisational culture
- new ownership
- poor business performance
- transformational
How can organisational size growing effect a business negatively?
- If the change was due to the business expanding through inorganic growth
- if the business cannot manage new employees then diseconomies of scale could occur and increased production time
- Becomes harder to communicate as the structure expands = reduced productivity = employee turnover rising
- not managing cash flow effectively = issues with working capital
- Shareholders sell there shares on and the businesses value decreases
How can organisational size growing effect a business Positively?
- Increased workforce , if managed well = reduced labour costs and economies of scale = lower costs = lower prices
- More employees can mean more flexible working = increase motivation
- shareholders receive larger dividends
- less unemployment = more disposable income
- New technology being introduced to help employees
How can a decrease in an organisations size affect the business positively?
- Possible better communication within the business
- Better manager delegation
- Reduced costs
- More opportunities for remaining employees, so staff motivation could increase
How can a decrease in an organisations size affect the business negatively ?
- Loss of economies of scale = increased costs = increased prices
- Shareholders receive less dividends
- Loss of jobs = decreased motivation of remaining employees = lower productivity = high turnover = recruitment costs
How can changes to the organisations culture affect the business (positively) ?
- If the culture has been causing absenteeism / turnover to be high = could decrease = less costs = increased motivation
- new cultures to increase efficiency = increased production = increased supply
- can increase competitive advantage
- will allow for future changes to have decreased resistance
How can changes to the organisations culture affect the business (negatively) ?
- means changing attitudes and behaviours = employee resistance
- increased costs
- short term loss of profit
- can be time consuming to implement effectively
How can changes to ownership affect the business (negatively) ?
- new cultures , ideas, training = resistance = less productivity
- change in responsibilities / possible loss of jobs = decreased motivation
- sharing profit (if changing to a limited company or merger )
- customer loyalty lost if products change
- diseconomies of scale
How can changes to ownership affect the business (positively) ?
- increased input and ideas = possible comp adv = increased value
- access to new customers or economies of scale ( if through merger / takeover)
- Increased investment and funding = more opportunities for growth
How can poor business performance affect a business (negatively) ?
- reduced competitiveness = poor financial performance
- reduced productivity =inefficiency = increased costs
- redundancies = reduced moral
- poor quality items or frequent mistakes = reduced loyalty and demand
How can transformational leadership affect a business
(positively)?
- motivate employees to make changes = decrease resistance
- new strategies and aims
- improved roles within the firm
- improved quality = benefit stakeholders and shareholders
How can transformational leadership affect a business (negatively)?
- Increased resistance
- unsuccessful = increased costs and possible failure
- Managers not agreeing = disputes
what external factors can lead to (cause) change in a business?
- Political, Economic, Social , Technological , Legal , Environmental
- The market = buyer / supplier power
- Competition = barriers to entry / rivalry
3 ways the business can deal with external forces causing change ?
- scenario planning, continuity planning , succession planning
- change its objectives
- market research to anticipate change
- ## try to act quickly to mitigate issues
What key factors determine the businesses reaction to change ?
- size of organisation
- organisational culture
- Speed /Time of change
- How resistance is managed
How does the size of an organisation effect the reaction to change?
- large firms have poorer communication = can mean its harder to explain changes to employees
- harder to motivate if they dont understand
- small firms may lack the finance, skills or recourses needed for effective change
How does the culture of an organisation effect the reaction to change?
- Open cultures will see it as a way to improve
- closed / resistant ones wont agree
- subcultures in large firms may have different reactions to the change
- the cultures involved in mergers / takeovers may not be compatible
How does Speed /Time of change effect the reaction?
- can be incremental = gradual and involving lots of small changes over time to minimise disruption
- disruptive change = forces a quick response, possibly at a time when the business is not financially prepared
How can resistance be managed?
- raise awareness
- involve key stakeholders
- listen to concerns
- bargain
- manipulate
Define the term scenario planning
scenario planning = considering specific events that may be in the future and plan how they can operate if it occurred
- planning for: natural disasters , It failure , loss of employees
What are the 4 ways a firm can mitigate risks ?
- risk acceptance = not creating a plan
- risk avoidance = simply avoiding
- risk limitation = reduce the impact it can have
- Risk transference = transferring to a third party
Define continuity planning
continuity planning = much more general than scenario planning, aiming to mitigate risks and keep the firm working by providing a recovery plan in order to resume business
- business determines the minimum possible output and the resources needed that they can to keep the business running
Define succession planning
Succession planning = one employee taking on the role or responsibility of another once they have left the role
- training this employee for the role to prepare them (Job rotation)
- can make transition smoother with less disruption
Disadvantages of scenario planning
- time consuming and expensive
- specialist are often needed
