Change Flashcards
(25 cards)
Major causes of change include :
- Developments in technology – New products and processes.
- Market changes – New competitors, new markets, globalisation, the expansion of the EU.
- Consumer tastes – Environmentally friendly policies, greater information about products being available, more efficient methods of purchasing (such as the internet).
- Legislation – Taxation of pollution, government aid or subsidies, safety standards, employment law.
- Changes in the workforce – Age and makeup of the workforce, increasing part time working, increased flexible working.
- Changes in the economy – The trade cycle (boom, recession, slump and recovery), inflation, interest rates, unemployment,
balance of payments.
Explain Change
Businesses today have to operate in rapidly changing markets and conditions. They can no longer rely on a constant stream of customers, the same production process or the same product over a long period of time.
To be successful, businesses have to try and anticipate change rather than always reacting to it.
Businesses must be:
* proactive rather than reactive
* flexible and responsive.
Internal causes of change
- Changes in management style – New leaders may wish to implement new strategies which lead to a change in the culture of a business, e.g. move from an autocratic style to laissez-faire, leading to a new way of working.
- Change in business ownership – New owners often look for efficiencies and cost-cutting, to improve profitability. New
management may wish to introduce a new ethos within the business, a new way of working. Mergers/takeover may bring about a change in corporate culture. - Change in business size – Businesses can grow organically, carefully building on product ranges, investing in new technologies, developing distribution channels.
- Introduction of new technology – New technology can affect both the pattern of consumer demand and methods of production, e.g. online shopping has caused the failure of some large and established high-street retailers.
External causes of change
- Introduction of new technology –
Developments in new technology will force businesses to change. Methods of production are constantly changing and the introduction of robotic technology in the car industry is deemed to be essential if quality and output are to be improved. - Labour market – The minimum wage, the living wage, greater employment protection, increased maternity pay, etc. have all pushed
up costs. Immigration policy has increased supply of migrant workers, keeping wages of unskilled employees lower than they would have been without the high levels of labour mobility. - Changes in economic conditions – The cyclical nature of the UK economy naturally causes businesses to react to economic circumstances. Exchange rate fluctuations cause businesses to seek new markets or change to new suppliers as their profit margins become squeezed.
- Competition – Existing competitors can change their strategy, or new competitors can enter the market place. Businesses must adapt if they are to remain competitive.
- Changes in consumer tastes – Tastes can change abruptly, completely altering demand patterns. Changing consumer tastes can create opportunities for businesses as well as presenting challenges.
- New legislation – Governments can change legislation, both to limit business activity and alternatively to free up activity.
Types of change
- Anticipated and within business control, such as the introduction of new production technology.
- Unanticipated but within business control, such as a sudden increase in demand, requiring expansion.
- Anticipated but outside business control, such as a change in the pattern of demand due to a demographic shift.
- Unanticipated and outside business control, such as the collapse of a key supplier.
Effects of change
- Shorter product life cycles – With a shorter life cycle, products must pay a return immediately; there is little incentive for long term investment. Returns can be improved by seeking new markets for products.
- Diminished brand loyalty – New entrants into the market find it easier to grab market share; existing businesses have to fight
harder to maintain sales. Marketing costs are increased to maintain brands and to introduce new products. - New products need to be developed because goods are seen as more disposable and consumers are constantly looking for better quality products.
- Changes in production methods are required – With new products needed continually, spending on new ideas, improving existing products and investing in improved productivity and quality must be funded. As a consequence, capital goods are likely to become out of date much faster.
- Retraining the workforce – A skills
mismatch has led to the retraining of managers and ‘shop floor workers’. - Flexible workforce – In order to respond quickly and effectively to change, many businesses today have a much more flexible workforce to allow them to remain
competitive. - The need to comply with constantly changing legislation has the effect of raising costs for businesses.
Resistance to change
- Employee Resistance:
* to preserve the existing routine
* to protect pay and employment
* to avoid threat to security and status
* to maintain group membership. - Lack of finance:
* the need to invest in more research and development
* the need for more capital investment
* the need to extend the product
portfolio
* the cost of training staff. - Lack of management expertise can cause:
* a fear of new markets and conditions
* an inability to adjust to new situations
* concerns about the future profitability of the firm
* lack of firm leadership. - Supplier Resistance:
* reluctance to adapt to changes made by their customers, e.g. manufacturers who change to a JIT system may find that some of their suppliers resist having to supply components ‘as and when’ the manufacturer requires due to
the costs that this imposes on them. - Owner Resistance:
* owners may fear that change will
increase risk
* shareholders may need convincing that operating in new markets will not damage their dividends, especially as implementing change may be costly
* management will need to justify their plans to convince shareholders that sacrifice now will lead to better profit in the future.
Implementing change
Preparing for change is not the same as implementing the required changes. To help solve the problem of implementation, management theorists have presented a range of approaches for implementing change.
- John Storey offered four optional methods of implementing change.
Storey’s Four Methods of Implementing Change - Negotiated Total Package
Management and employees negotiate on how a major change in the way a business functions
will be implemented. Therefore, the change implemented will be based on agreement between management and employees in all locations from which the business operates. Trade unions will be very much involved and increased rewards and improved conditions are likely to be offered to the workforce. This is more likely to result in a coordinated process of change which is understood, and accepted, by all stakeholders. This is likely to be the most effective method of undertaking a process of change but requires a good deal of preparation and expenditure. In reality, this may not always be possible in a highly competitive and difficult business environment
Storey’s Four Methods of Implementing Change - Negotiated Piecemeal Initiatives
Management and employees will consult and agree on various changes as they become necessary – for example, new shift patterns or productivity agreements. There is no overall agreement or coordinated process that is in place for the negotiated total package. This method may be easier to implement than a total package of change but can result in difficulties because of a lack of a complete system change. For example, a productivity agreement negotiated in one location but not in others could cause resentment and conflict.
Storey’s Four Methods of Implementing Change - Imposed Piecemeal Initiatives
Managers plan and implement changes, such as a move to flexitime or the development of quality circles, in order to solve particular problems. This saves time and the structure of change is in the hands of management who understand the overall objectives of the business. However, the imposition of change can be met with resistance from employees
who may resent the lack of consultation. Each piecemeal change may also be aimed at a
different objective, whereas a total package is more likely to be working towards one overall objective.
Storey’s Four Methods of Implementing Change - Imposed Total Package
Senior management plan and introduce a major change all at once without consultation with employees. This sort of change might occur when negotiated change has failed or because of rapidly changing external factors
that need responding to quickly. Of course, this sort of change is likely to be resisted by middle managers and employees and its success depends on the skills of the senior managers in being able to establish new systems whilst
minimising disruption.
Managing change effectively
One of the most difficult tasks of leadership is encouraging and managing organisational change. To prepare for change and to be
in a position to react effectively to change, managers need to put in place a number of key strategies:
* Employee preparation – The first stage in effective change management is preparing employees for change. This may involve reskilling to enable employees to carry out new tasks effectively. Such training will make a workforce more flexible and adaptable, enabling them to meet the demands of change. There may be need for recruitment so that the business has employees with new skills or managers who can force the pace of change.
* Increased research and development expenditure – This is used both in preparation for change, and as a reaction to
change. This type of spending develops new products, new methods of production and new technologies.
* Additional capital investment – Change can create the need for investment in new technology and new equipment. Change is often an expensive undertaking. For
example, relocation can be very costly. If a business does not have access to sufficient finance, it is very unlikely that it will be able
to implement effective change.
LEWIN’S THREE STEP PROCESS OF CHANGE
He was concerned with ensuring that the change continued into
the future and that employees did not slip back into old methods of working
- Unfreezing
- Change or transition
- Refreeze
Lewin’s unfreezing
- Involves creating a motivation for change and creating a realisation amongst employees that change is necessary. They therefore have to ‘unfreeze’ from current approaches to work and be prepared to adapt to a new method of working.
- Employees have to be shown that change is necessary and then managers need to create a situation in which employees desire the change.
Lewin’s Change or Transition
- Lewin described the period of transition as a potentially difficult time as employees are now moving toward a new way of doing things.
- They are learning about the changes and need to be given time to understand and adapt to these changes.
- Support from management and supervisors is important in making the transition period work. Support can come in the form of training, education, and learning from mistakes rather than being criticised for them.
- Allowing employees to develop their own solutions and maintaining clear communication of the objectives and benefits of the change are also important in
maintaining the transition.
Lewin’s Refreezing
- Establishing stability once the changes have been made. Employees have now accepted the change, and the new methods of working have become the new norm and they are comfortable with their routines.
- This refreezing clearly implies employees must not be forced into continual change but allowed time to adapt.
- New methods need to become completely ingrained before further change occurs, otherwise any gains may be lost
Management responses to change
Under pressure from competitors, higher costs and changing economic conditions, many businesses in the UK have developed company wide change programmes. When faced with changing circumstances it is very important that businesses respond quickly and flexibly. In doing so, they will need to take into account:
*Marketing Strategy - changes to product portfolio, image shift - ex. expansion/reduction, global/environmentally friendly
*Financial Strategy - dif sources of finance, more capital investment - ex. higher interest rates makes sources less attractive may sell shares instead/increase innovation
*HR Strategy - training, flexible working patterns, culture - ex. flexibility, shift work, kaizen
*Operations Management Strategy - quality, production process, location, increased R+D - ex. quality management, JIT, contruct new facilities
Define corporate culture
‘The way we do things around here’ – Corporate culture relates to the values, attitudes and beliefs of those within an organisation. The culture of an organisation influences how the employees think and act.
Culture can be seen in:
- the business norms (what is regarded as acceptable behaviour)
- symbols, such as the way people address each other
- rituals, such as leaving at 5.00 p.m. precisely
- the physical layout of the premises, such as open plan
- the language used in a business specific way, such as Asda referring to their employees as ‘colleagues’ and McDonald’s calling their employees ‘crew members’.
Culture matters because it affects:
- motivation and enthusiasm of employees
- emphasis on customer service
- openness to innovation and change
- focus on improvement
- focus on efficiency
4 types of culture
- Power culture – One person at the centre giving orders, encouraging sticking to rules.
- Role culture – Respect for seniority.
- Task culture – Team-working is common in order to get the job done.
- Person culture – Everyone is committed to play their own part in ensuring goals are reached.
Advantages of a strong corporate culture:
√ provides a sense of identity for employees – they feel part of the business
√ motivates employees in their jobs, which may lead to increased productivity and commitment to their job, which reduces staff turnover
√ helps to reinforce the values of the organisation and senior management
√ acts as a control device for management, which can help when setting company strategy
√ enables a consistent image/quality of service to be presented to the public/customers worldwide
√ helps achieve objectives more easily – motivated, happy employees can be key to growth
√ customers identify with corporate culture and this fosters loyalty, e.g. ethical factors.
Criticisms of corporate culture:
X research has shown that strong culture businesses seem almost as likely to perform poorly as their weak-culture rivals
X cultural practices in businesses are interpreted in different ways by employees, which may not always be those intended by management.
