Business - 3.10

A-level Business AQA Managing Change

causes for change (x5)

1. a need to replace and update current technology

2. number, nature and quality of human resources in a business e.g. skills, motivation etc.

3. issues about the organisational structure including lines of communication, management hierarchies etc.

4. growth vs retrenchment

5. objectives and vision of internal stakeholders

external change

changes in the external environment of a business or its competitive environment (must ensure the business can respond quickly to this)

incremental change

introducing many small, gradual changes in order to meet a goal e.g. improving quality = refining each component of a product

radical change

stepped change e.g. plan for the sudden automation of a production process as would be extremely disruptive to work practices

disruptive change

shift in the underlying forces of an industry or segment of an industry e.g. retailing or cameras on phones influencing market for cameras

managing change

the moving of individuals, teams and organisations from a current state to a future desired state (involves helping employees to understand, commit to and accept the need for change)

lewin’s force field analysis (x4)

1. identify and evaluate (score) the driving forces for change

2. do the same for restraining forces

3. chart and calculate the overall ranking

4. develop a strategy to strengthen driving forces or weaken restraining ones

driving forces

those seeking to promote change

restraining forces

those attempting to maintain current business operations

equilibrium

the balance between the driving and restraining forces (must be upset for change to occur)

value of change (x5)

1. maintain a competitive advantage

2. can take advantage of developing technologies

3. customers needs and wants constantly changing so must be prepared to meet their needs

4. change can lead to improved working conditions and greater job satisfaction

5. improve organisational structure (efficiency + productivity)

flexible organisations

to respond to change, businesses must be flexible so they can respond quickly

benefits of flexible organisations (x6)

1. respond quickly to market conditions

2. cut down costs, particularly labour ones

3. improved 24/7 customer service

4. subcontract and outsource non-core features

5. cut down business premise costs

6. improved motivation and productivity

restructuring

fundamental internal change to the organisational structure or systems of a business e.g. Ford

examples of restructuring (x4)

1. dismiss employees

2. eliminate whole departments

3. close retail or factory locations

4. outsource their manufacturing

advantages of restructuring (x4)

• operational costs can be reduced

• outsourcing can be less expensive

• layers of management can be removed which can help communication and decision-making

• new technologies may enable a competitive advantage

disadvantages of restructuring (x4)

• can lose highly skilled workers

• remaining staff may have to be retrained (costly)

• insecurity and morale issues for remaining staff

• employee responsibilities may change (temporary fall in production)

delayering

the removal of one or more levels of hierarchy within an organisation (producing a flatter organisational structure with managers having a wider span of control) e.g. Microsoft

advantages of delayering (x5)

• can redesign jobs so greater delegation, empowerment and motivation

• more authority is given lower down organisation

• improved communication as messages pass through fewer layers

• departmental rivalry is reduced

• reduced costs and fewer managers who tend to be on higher salaries

disadvantages of delayering (x5)

• not all organisations suit flatter structures as workers on the factory floor may not want more authority

• motivation and security issues with remaining staff

• period of disruption as employees learn their new roles

• wider span of control can reduce communication

• loss of ‘corporate knowledge’

flexible working contracts

give employees a choice over the actual times they are contracted to be at work e.g. Google

part-time working

employees are contracted to work less than full time hours

term time working

workers remain on full time contracts but can take time off during the school holidays

job sharing

two or more people share the responsibility of a job between them

flexitime

allows employees to choose, within certain time limits, when to start and finish work (as long as present at core times)

career breaks or sabbaticals

extended periods of leave, normally unpaid, from a few months to a few years

zero-hour contracts

individuals have no guarantee of a minimum number of working hours (only when required)

advantages of flexible working (x5)

• employees have greater freedom

• can reduce commuting time allowing for improved work-life balance for employees

• can improve morale and reduce absences

• reduction in overtime costs, late arrivals etc.

• reduces unnecessary costs of paying employees when not needed

disadvantages of flexible working (x3)

• administration of the scheme has significant costs

• when premises are open longer there may be increased overheads

• employees may not work at certain times which may not be suitable for all organisations

organic structures

flat or open structures typified by wide spans of control, decentralisation, low specialisation and formalisation, horizontal communication and loose departmental control e.g. Patagonia or Facebook

mechanistic structures

more traditional and highly inflexible structures typified by narrow spans of control, centralisation, high specialisation and formalisation as well as rigid departmentalisation e.g. McDonald’s

what does the structure a business chooses depend on? (x5)

1. industry → organic structures work best in a fluid, unpredictable business climate i.e. start ups

2. size of organisation (larger = mechanistic as clear lines of authority makes it simpler)

3. technology (mechanistic if tasks are routine etc.)

4. management style

5. employee skills (organic requires versatility)

knowledge management

the process of capturing, developing, sharing and effectively using organisational knowledge

uses of knowledge management (x2)

• allows predictions, associations and predictive decisions as found in connections, conversations, experienced based intuition and ability to compare (personality)

• providing insight, guidance, experience and know-how for the purpose of decision making and effective action

information management

the provision of the right information to the right people at the right time (processed and factual data easily expressed in written form)

e.g. big data and data mining

benefits of knowledge and information management (x7)

1. sustainable competitive advantage as can exploit it

2. sharing of information between employees means knowledge doesn’t leave with employees

3. substantial savings as more easily brought ‘up to speed’ with valuable knowledge

4. lead to greater innovation

5. help a ‘global team’ of management coordinate and share knowledge and ideas (avoid managerial diseconomies)

6. decrease in labour turnover and increase in productivity

7. helps to ensure faster and more accurate decision making as utilises skills of all employees

barriers to change (x6)

1. lack of clear objectives or sense of mission and purpose

2. inappropriate and insufficient resources to assist change

3. inappropriately trained staff with non-relevant experience

4. resistance to change in relation to impact on employees

5. nature of organisaton

6. external factors such as competitors’ actions

Kotter + Schlesigner’s reasons for resistance to change (x4)

1. parochial self-interest = a desire not to lose something of value in terms of implications of change

2. misunderstanding and lack of trust

3. different assessments as employees don’t think it makes sense

4. low tolerance of change as fear not able to develop new skills

education and communication to overcome barriers to change

one to one discussions, presentations or group reports etc.

especially relevant if resistance based upon a lack of understanding and change requires resistors help

participation and involvement to overcome barriers to change

especially important if initiators for change don’t have all knowledge, skills and information so can use other employees (making them more committed and ‘buy in’ to change)

facilitation and support to overcome barriers to change

providing practical and emotional support to employees who have difficulty dealing with change including training in new skills or offering mentoring and counselling services

negotiation and agreement to overcome barriers to change

giving resistors incentives to either adapt or leave e.g. higher wages for no industrial action etc.

manipulation and cooperation to overcome barriers to change

co-opting an individual or a leader to become involved for their cooperation and influence on other employees (not fully informed)

explicit and implicit coercion to overcome barriers to change

suggest it may result in a loss of their jobs, being transferred or a loss of promotion prospects

organisational culture

the behaviour of people within an organisation and the meaning that they attach to those behaviours (based on values of founders, senior managers and core people who direct the organisation)

culture

organisation’s vision, values, norms, systems, symbols, language, assumptions, beliefs and habits

culture of Google (x5)

• teamwork and creativity central to the design (to boost productivity and satisfaction)

• staff treated as friends with access to various facilities e.g. gyms, hair salons etc.

• 20% of time spent on external projects

• on-sight solar panels to meet energy needs sustainably

• free food to meet all dietary preferences/needs

culture of Innocent (x4)

• family atmosphere and strong culture to motivate employees based on entrepreneurial traits

• lots of trust (viewed as a motivator)

• engaged workforce

• receive feedback constantly

how is culture demonstrated within a business (x6)

1. aims

2. behaviours of senior staff (+ in response to risk)

3. recruitment and training procedures

4. the way visitors and guests are looked after

5. degree of delegation

6. speed of decision

importance of organisational culture (x5)

1. creates distinctions between one organisation and another, differentiating

2. provides a sense of identity for employees and members

3. helps to generate commitment to something larger than self-interest

4. helps to hold organisations together by providing appropriate standards for what to do/say

5. guides and shapes the attitudes and behaviours of employees by defining rules etc.

task culture (+ examples)

project teams complete set tasks e.g. innovative businesses like Google

‘getting the task done’ so often when environment is rapidly changing and product life cycle is short

involves team working which ensures skills of individuals are exploited fully

role culture (+ examples)

clearly delegated authorities with a highly defined structure e.g. schools or the NHS

controlled by procedures and role descriptions (so coordination is from the top)

value predictability and consistency so difficult to adjust to change

power culture (+ examples)

control radiate from the centre with power concentrated with few individuals e.g. family business or Virgin (Richard Branson = charismatic leader)

decisions made quickly but success depends upon skills of those ‘at the top’

performance judged upon results so can be accompanied by low morale or high labour turnover

person culture (+ examples)

people (with similar training, background and expertise) believe themselves to be superior to the business e.g. firm of architects

exists when individuals dictate the firm’s policies and strategies to gain personal benefits

difficult to manage as strong sense of how they want to work (but bring own expertise)

reasons for changing organisational structure (x4)

• if there is a new leader who wants to do things differently

• if society’s values change e.g. ethical/environmental policies

• if performance of the business is deteriorating

• if there are new owners with different objectives (= culture clash w. mergers and takeovers)

problems of changing organisational culture (x3)

• change may be challenging and existing employees may resist

• beliefs may be deeply held so may instead cause questions on how they view their job

• may involve extensive training and education which may need heavy investment

strategic implementation

creating a framework for carrying out the strategy agreed at both corporate and functional levels by assigning responsibilities and operational targets (about 70% of strategic plans are never implemented)

method of strategic implementation (x4)

1. identify the mission and goals of the organisation

2. use a SWOT analysis before the strategies are put together to analyse internal and external environment

3. formulate strategies

4. implement strategies and evaluate results

external factors affecting strategy (x2)

1. changes in the external environment may affect strategic plans and their implementation e.g. economic cycle

2. changes in the firms competitive environment may affect implementation as competitor’s actions may change chance of success

internal factors affecting strategy (x8)

1. leadership styles need to be in support of strategy so actions align

2. organisational structure and culture

3. communication can overcome resistance

4. timing

5. adequate resources

6. network analysis for planning

7. monitoring to review progress and ensure accountability of meeting targets etc.

8. reviewing and evaluating for alternatives

value of leaders (x3)

• likely to be involved in setting, communicating and implementing the strategy

• if leaders do not invest time, it is unlikely to be successful

• need to help employees understand how the company could benefit from change

value of communication (x3)

• usually developed by senior leaders and managers so reason and benefits for change must be communicated to get employees ‘on board’

• essential to overcoming resistance

• must reach every level of the organisation

importance of organisatonal structure (x3)

• determined by culture, size of business, leadership and management, type of product and market

• structure must fully reflect the organisation’s mission, objective and strategy (e.g. increasing sales requires expansion)

• broken up into functional plans so a clear organisatonal structure with clear functional responsibility would assist strategy

value of network analysis (x2)

• involves planning the different elements, working out the order and identifying the key activities to ensure efficiency

• can understand where resources need to be allocated for different tasks to be completed in a set time

nodes

circles representing the beginning and end of an activity split into:

1. left hand side = number of node

2. top segment is earliest start time

3. lower segment is latest finish time

activities

events or tasks that consume time and are shown as lines or arrows that link the nodes (a letter or description is above)

duration

length of time that it takes to complete an activity and shown beneath the line representing the activity

EST

depends on the completion of the previous activity and always starts as 0 for activity 1

work forward from left to right by adding the duration of activities on the path leading to the node

if more than one path, highest total is taken

LFT

work backwards from right to left as the final node must equal the EST

deduct the duration of the activity when going backwards

if multiple, take the lowest possible value

method of creating a network (x5)

1. draw a node to represent the start of the network

2. identify any activities that don’t have any prerequisites (don’t rely on the completion of another activity) and draw lines from left to right

3. identify the activity line by placing a letter and the duration

4. move on to the first activity

5. carry on until complete

critical path

sequence of activities that cannot be delayed without delaying overall completion

those activities where the ESTs and LFTs are the same

non-critical activities can be delayed without delaying the completion time

total float

the amount of time that non-critical activities can be delayed without delaying the completion of the project as a whole

float calculation

LFT - EST - duration

benefits of network analysis (x8)

1. allows a business to improve efficiency of resources

2. helps the business know when activities are scheduled, assisting resource planning and stock ordering

3. can use CPA to divert resources from non-critical activities to critical ones

4. can help monitor and review project

5. forces managers to undertake planning

6. can identify impacts of delays

7. can be used alongside lean production

8. helps reduce risk and cost of complex projects

problems of network analysis (x7)

1. managers may be inflexible and rigidly stick to timing in CPA, missing opportunities to reduce overall time

2. any delay can have serious consequences if employed contractors etc. as can’t wait

3. complex activities may be difficult to represent accurately

4. based on time estimates that may not be accurate

5. doesn’t guarantee success

6. resources may not actually be as flexible as management hope

7. too many activities may make it too complicated

strategic planning process

the study of a range of choices available to the business in order to gain a competitive advantage over their competitors

why can strategic planning be high risk?

outcomes tend to be unknown as often involve a company moving into new areas which require additional resources, procedures and retraining

strategic implementation

the stage in the corporate planning process when the agreed strategy is put into effect, creating a framework of action plans and targets at a functional level

why is strategic implementation difficult?

research tends to show that the people who are charged with the implementation strategies have often been left out of the planning stages meaning they may not be well informed of rationale or links to overall objectives

planned strategy

the strategy that the organisation hopes or intends to implement and is described in detail in the organisation’s strategic plan

what do planned strategies tend to involve

strategic analysis, choice and implementation BUT only appropriate if the internal and external environment is stable and predictable

benefits of planned strategies (x5)

1. provide a structured means of analysis and thinking about complex strategic thinking

2. it can encourage a longer term view

3. used as a means of control by reviewing progress

4. useful means of coordination, involving people

5. can be communicated effectively as fixed and known

emergent strategy

a business is constantly learning and adapting strategies to the environment they face. It is unplanned and emerges in responses to internal and external changes that were not envisaged when the original planned strategy was formulated

why is emergent strategy helpful (x2)

1. fast paced and constantly changing business environment means don’t have to waste time formulating plans for 2-5 years ahead

2. allows the business to be more flexible (noting internal and external environment)

realised strategy

the part of the planned strategy that the business achieves over time and actually happens in practice, including the emergent strategy responding to change

unrealised strategy

the part of the planned strategy that needs to be abandoned and forgotten due to events developing in unexpected ways

strategic drift

the company responds too slowly to change in its external and competitive environment, leading to its eventual demise as it continues with a strategy which may have served it well in the past but is no longer suited to current circumstances e.g. Nokia, Blockbuster etc.

reasons for strategic drift (x6)

1. organisational culture restricts the ability of the firm to change at a necessary rate

2. leaders continue to persist with obsolete or largely redundant policies

3. a company simply reacts to changes in the environment rather than being proactive

4. the strategic plan may not be reviewed regularly to check if it is well aligned to what is happening in the external environment

5. the organisation is not keeping pace with changes in technology

6. competitive actions

phases of strategic drift

phase 1 of strategic drift

the firm makes incremental changes that are part of its planned strategy to change in line with external changes so remains ahead of the market and they develop or retain a competitive environment

phase 2 of strategic drift

rate of change in the external environment speeds up, but the firms approach of gradual incremental change means strategic drift begins and the firms starts to get left behind

phase 3 of strategic drift

leaders recognise the decline in the business performance and that there is a gap between what the market expects and what the business it provides

leaders try to respond by doing what they have always done, resulting in flux, and then strategies may change but disagreement about appropriateness

phase 4 of strategic drift

the business either falls completely and the firm closes or, if it survives, it undergoes transformational change to align its strategies with the market, and so begins to operate successfully again

transformational nature of overcoming strategic drift

includes a change in the underlying strategy and processes that an organisation has used in the past

occurs across the whole organisation and takes place over time as it addresses ALL the causes of strategic drift

evaluating strategic performance (x4)

• evaluation and review of strategy will involve regular performance measurements against planned targets using KPIs

• involves ongoing monitoring and reviewing of internal and external issues that may affect it

• continual corrective actions need to be made to ensure that the strategy is appropriate to current conditions

• should guard against strategic drift by identifying issues and allowing time to then adapt

stages of strategic planning (x5)

1. defining the mission and objectives

2. SWOT analysis

3. decides on choices available, with broad corporate plans emerging which an be interpreted into meaningful functional plans and targets

4. strategic implementation

5. control and evaluation to determine success in its implementation, and if it requires changing includes defining goals, analysing market conditions, formulating strategies, implementing plans, and evaluating outcomes

value of strategic planning (x4)

1. an organisation can improve business outcomes and avoid taking on unanticipated risks

2. provides direction and ensures everyone knows where it is heading, and how it intends to get there

3. leaders have a solid understanding of organisation and how the environment is changing

4. valuable learning tool to ensure managers are well informed and make decisions about required strategy quickly and appropriately

contingency planning

planning for the unexpected, reducing the risks and costs of unexpected events on the organisation as it may threaten the well-being or survival of the firm

examples where contingency plans are necessary (x8)

1. physical destruction from natural disasters

2. environmental disasters e.g. BP oil spillage

3. impact on foot and mouth disease on farming industry

4. major customers withdrawing custom or going into liquidation

5. pressure group activists or unwelcome media attention

6. workers going on strike

7. competitions launching a new product

8. severe recession or changes in exchange rates

crisis management

responds to a sudden event that poses a significant threat which normally involves damage limitation strategies and places heavy emphasis on PR and media relationships