3.10 Managing strategic change

Question 1

Causes and pressures for change - INTERNAL & EXTERNAL

Answer 1

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

Question 2

Causes & pressures for change - INCREMNTAL

Answer 2

Changes occurs over a period of time in incremental, small stages

Usually involves little resistance

Arises as strategy develops

Question 3

Causes & Pressures for change - DISRUPTIVE

Answer 3

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

Question 4

Lewin’s Force Field Analysis Model

Answer 4

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

Question 5

Lewin’s Force Field Analysis - Forces driving change

Answer 5

INTERNAL FORCES INCLUDE:
- need for higher profits
- poor efficiency
- lack of innovation
- need to change culture & leadership

EXTERNAL FORCES INCLUDE:
- customer demand
- competition
- ethics

Question 6

Lewin’s Force Field Analysis - Resistance to change

Answer 6

Forces include:
- Self interest –> individuals concerned about implications for them
- Misunderstanding –> communication problems
- Low tolerance of change –> sense of insecurity

Question 7

Flexible organisations - ORGANIC V MECHANISTIC STRUCTURES

Answer 7

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

Question 8

Flexible Organisations - DELAYERING (pros & cons)

Answer 8

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

Question 9

Flexible Organisations - FLEXIBLE EMPLOYMENT CONTRACTS (pros & cons)

Answer 9

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

Question 10

Flexible organisations - RESTRUCTURING

Answer 10

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)

Question 11

Kotter & Schlesinger’s 4 reasons for resistance to change

Answer 11

1) Self-interest
2) Low tolerance for change & Inertia
3) Different assessment of the situation
4) Misinformation & misunderstanding

Question 12

K & S Resistance to change - SELF INTEREST

Answer 12

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

Question 13

K & S Resistance to change - LOW TOLERANCE & INERTIA

Answer 13

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

Question 14

K & S Resistance to change - DIFFERENT ASSESSMENT OF SITUATION

Answer 14

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

Question 15

K & S Resistance to change - MISINFORMATION & MISUNDERSTANDING

Answer 15

People don’t understand why change is needed –> perhaps because they are misinformed about the position of the business

No compelling reason for change

Question 16

Kotter and Schlesinger’s 6 ways to overcome resistance to change

Answer 16

1) Education & communication
2) Participation & involvement
3) Facilitation & support
4) Manipulation & Co-option
5) Negotiation & Bargaining
6) Explicit & Implicit coercion

Question 17

K & S Overcoming resistance to change - EDUCATION + COMMUNICATION

Answer 17

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

Question 18

K & S Overcoming resistance to change - PARTICIPATION & INVOLVMENT

Answer 18

Involvement is an effective way of bringing everyone ‘on board’

Effective participation often leads to commitment

Question 19

K & S Overcoming resistance to change - FACILITATION & SUPPORT

Answer 19

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

Question 20

K & S Overcoming resistance to change - MANIPULATION & CO-OPTION

Answer 20

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

Question 21

K & S Overcoming resistance to change - NEGOTIATION & BARGAINING

Answer 21

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

Question 22

K & S Overcoming resistance to change - EXPLICIT & IMPLICIT COERCION

Answer 22

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

Question 23

Handy’s Models of Organisational Culture - POWER CULTURE

Answer 23

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

Question 24

Handy’s Models of Organisational Culture - ROLE CULTURE

Answer 24

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

Question 25

Handy's Models of Organisational Culture - TASK CULTURE

Answer 25

Teams are formed to solve particular problems Power derives from expertise as long as a team requires expertise

Question 26

Handy's Models of Organisational Culture - PERSON CULTURE

Answer 26

Individuals are given their own parts of the business to make decisions on and to control Power lies in each group of individuals

Question 27

Hofstede's National Cultures

Answer 27

1) Individualism v Collectivism 2) Power distance 3) Masculinity v Femininity 4) Uncertainty Avoidance 5) Long-term orientation 6) Indulgence v Restraint

Question 28

Hofstede's National Cultures - INDIVIDUALISM V COLLECTIVISM

Answer 28

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

Question 29

Hofstede's National Cultures - POWER DISTANCE

Answer 29

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

Question 30

Hofstede's National Cultures - MASCULINITY V FEMININITY

Answer 30

Considers the differences in decision-making Masculine = hard-edged, fact-based & aggressive style decisions Feminine = greater degree of consultation & intuitive analysis

Question 31

Hofstede's National Cultures - UNCERTAINTY AVOIDANCE

Answer 31

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

Question 32

Hofstede's National Cultures - LONG-TERM ORIENTATION

Answer 32

Businesses that take a much longer-term perspective which is likely to encourage more long-term thinking

Question 33

Hofstede's National Cultures - INDULGENCE V RESTRAINT

Answer 33

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

Question 34

Reasons for changing organisational culture

Answer 34

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

Question 35

Problems of changing organisational culture

Answer 35

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

Question 36

Value of communications in strategic implementation

Answer 36

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

Question 37

Importance of organisational structure in strategic implementation - FUNCTIONAL STRUCTURE (pros & cons)

Answer 37

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

Question 38

Importance of organisational structure in strategic implementation - PRODUCT STRUCTURE (pros & cons)

Answer 38

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

Question 39

Importance of organisational structure in strategic implementation - REGIONAL STRUCTURE (pros & cons)

Answer 39

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

Question 40

Importance of organisational structure in strategic implementation - MATRIX STRUCTURE (pros & cons)

Answer 40

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

Question 41

Critical path analysis

Answer 41

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

Question 42

Critical Path analysis - Float time and critical path

Answer 42

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

Question 43

Difficulties with strategic decision making & implementing strategy

Answer 43

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

Question 44

Planned v Emergent strategy

Answer 44

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

Question 45

Reasons for strategic drift

Answer 45

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

Question 46

Possible effect of divorce between ownership & control

Answer 46

Occurs when owners of the business don't control the day-to-day decisions being made

Question 47

Corporate Governance

Answer 47

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

Question 48

Value of strategic planning - PROS v CONS

Answer 48

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

Question 49

Value of a contingency plan

Answer 49

Occurs when a business plans for possible but unlikely events