Change Management

Business Environment

Factors and forces that impact the business’s ability to build and operate profitably.

Businesses do not operate independently, and are interdependent on each other.

There are many influences that have an impact in how a business is run, and to achieve long term success a business owner must be aware of what’s changing in the business environment it operates in and be able to respond in a timely manner.

Has three parts, each with different levels of control and influence over each part of the environment:

• Internal

• Operating (external)

• Macro (external)

Internal Environment

Business owner has the greatest level of control over.

This includes:

• Business culture (values and beliefs, policy and procedures, accepted guidelines for behaviour)

• Employees

• Leadership styles

A positive internal culture gives employees a sense of belonging and a shared view of business direction → greater job satisfaction and loyalty.

How it drives change:

• Expanding globally gives access to larger pool of skilled/knowledgeable employees → Diverse workforce provides ideas/info about different countries and cultures they are working within/targeting, increasing competitiveness.

• Australian laws affect composition of workplace (Equal Employment Opportunity), diversifying workplace and ensuring it is free from discrimination/harassment → Diversifying workforce may lead to conflict (affecting productivity) unless managed.

• Change of leadership (often occurs during mergers and acquisitions) may alter business direction, and usually followed by change in employees (some leave, new brought in) → If leader is efficient in motivating/encouraging employees, productivity increases. Can bring new ideas, increasing competitiveness.

Operating Environment

The stakeholders that deal with the business directly on a regular basis. Business must negotiate and work with them to achieve goals. Strong relationships benefit both.

Stakeholders (including community, customers, competition, and suppliers) can influence the internal environment of business, and the business has some control over stakeholders.

How it drives change:

• Number of competitors in environment constantly changing. Expanding into global market = more competitors → Need to reconsider positioning and continuously innovate to stay ahead.

• Global market offers more suppliers who can offer raw materials at cheaper price, more variety, or better quality than limited suppliers in Aus → Allows business to improve products/processes to gain competitive advantage or increase profit margins.

• Expanding globally reaches more customers, but may have different needs and wants → May need to change product to suit target market.

Macro Environment

The big picture. External environment influences business but business has little control over it.

Influences include:

• Political

• Legal (laws, regulations, gov policies)

• Technology (new, changing)

• Social and cultural trends

• Economics (spending rates, interest rates, inflation)

Business must keep up with what is occurring in other countries, as may affect business in Aus. Can minimise impact of changes out of their control through planning, preparation, and risk management.

How it drives change:

• Operating on global scale means working with many legal systems with differences in liability laws and packaging/labelling standards. These are also constantly changing as more cases are taken to court → Need to keep up with legal issues and assure abiding by new laws.

• Global economy is interconnected → when issue occurs in one country/region it has trading effects with others.

Diverse Workforce

One that is made up of individuals with a wide range of characteristics (race, ethnicity, gender, age, religion, ability) and experiences.

• More Ideas - Due to different experiences/characteristic, can work together to contribute more creative ideas → Leads to BUSINESS GROWTH, as better ideas can improve sales revenues, customer satisfaction/loyalty, and overall profitability.

• Global Presence - Can help with expansion due to:

  • Able to communicate effectively (bilingual) with different parts of the world,

  • Knowledge of cultural protocols assists in creating positive relationships,

  • Knowledge of cultural needs of customers in other countries.

• Public Image:

  • Communities becoming more culturally diverse, business able to interact with wide variety of potential customers from across the globe, → gives competitive advantage as positive interactions by catering for specific cultural needs increases public perception of business.

  • Potential employees want to know staff is treated fairly, so drawn to diverse business as evidently no discrimination → business becomes employer of choice and can hire the best of the best.

Managing Diversity

Diversity must be managed or conflict and reduced productivity may occur.

Initiatives need to be taken to enable coexistence and thriving:

• Recruitment practices: remove bias with:

  • Diverse interview panel to ensure no prejudice

  • Selection criteria based only on experience, qualifications, etc

• Inclusive policies and practices that do not favour or discriminate (e.g. leave practices inclusive of different religious holidays or alternative time off)

• Diversity training: help understand/respect differences and reduce cultural bias, leading to better collaboration between employees.

Leadership Traits

Skilled Communicator - process of exchanging info for understanding and overcoming barriers such as language and cultural differences.

• Foster long term relationships with suppliers so that business can get best prices for raw materials and delivered on time.

• Obtain more info from global customers for better understanding of cultural nuances, leading to greater customer satisfaction

Socially Aware - involves recognizing social and ethical norms, understanding cultural differences and languages in a global environment to accurately interpreting the emotions of global consumer and diverse workforce

• Do not offend, instead establish trust and long lasting business relationships.

• Ability to understand customer needs, leading to greater satisfaction and increased sales.

Skilled Decision Maker - select course of action among alternative possibilities, taking into account different political, legal, social, and economic constraints.

• Ability to make correct, quick decisions resulting in better utilisation of the resources and maintaining a competitiveness in continuously changing global business environment.

Future Thinker - Ability to identify and predict opportunities beyond present time and home country trends.

• Identify opportunities before competitors to maintain competitiveness in constantly changing global business environment, with changing consumer trends within different countries.

Self-Discipline - to have control and motivate yourself to stay on track and achieve goals.

• Assists in achieving goals within deadlines across border when more difficult to communicate and different time zones.

Responsible - hold themselves accountable for their actions and actions of those within their control to achieve set goals.

• Achieve deadlines and act on and overcome barriers presented.

• Be responsible in ensuring you know what is required to not offend others, and take accountability for actions if you do.

Motivator - ability to encourage team members towards organisational goals.

• Understand what different incentives and reasons motivate people based on cultural differences.

Leadership Styles

Based around decision making and relationships.

Style of leadership can change depending on the task or level of relationship with employees, but may also change in a global context to comply with social norms to develop a relationship and build trust, showing cultural sensitivity.

Conflicts can arise, especially when going through a merger or acquisition, when two different cultures and their social norms are very different. E.g. used to contributing opinions and having input on decision making, then shut out as autocratic leaders make decisions on their behalf, leading to conflict and loss of productivity.

Leadership styles include:

• Autocratic leader

• Participative leader

• Situational leader

Autocratic Leader

Has total control over all decision making, dominating team members, with communication only going from top to bottom.

Used when:

• Activity is task orientated

• Little margin of error

Decisions can be made quickly, which may be essential in a constantly changing business environment, or in dangerous work conditions such as building and construction.

Countries with higher power distance and strict hierarchal traditions often use autocratic leadership styles, as there is an expectation to be told what to do and not question authority (Greece, Russia, France, Germany)

Australian participative leader will need to adopt a more autocratic leadership style when dealing with team members from these cultures.

Participative Leader

Involves the group in decision making, consulting team members and encouraging participation.

Used with:

• Highly skilled/trained employees

• Creative and professional teams

• Strategic alliances (e.g. Joint Ventures)

Decisions take longer, but team members feel valued and have higher levels of job satisfaction.

Countries with low power distance and non-hierarchic traditions often use this style. There is an expectation to be autonomous and act on initiative (Sweden, Australia).

Situational Leader

Adjusts style based on the tasks and people within the team, changing based on behaviour and skill level.

Factors that may affect situational leadership styles:

• Culture (group norms)

• Leader (trust developed, experience level)

• Organisation (structure - hierarchal or flat)

• Task (difficulty and urgency)

• Subordinates (employee level and skill)

Situational leaders more required in cross-cultural organisations, as are willing to adapt their style depending on which country they are operating in:

• Workers more knowledgeable in customer needs/wants within own country.

• Management more knowledgeable regarding laws and business etiquette in their own countries.

• New or older business relationships being developed or maintained.

• Type of relationship, e.g. Offshoring - knowledge but task orientated to your specification.

By ensuring all team members feel comfortable within their social norms, it is more likely the team will stay productive and on task towards common goals.

Financial Costs (Organisation)

Many changes require finance, including cost for:

• Training

• New machinery and software

• Research and development

Organisations may lack funds to implement these changes which are necessary to stay ahead of competitors.

Lack of finance may be due to:

• fall in market demand

• rise in competition

• unpredictable market

Business must:

• ensure correct planning processes have occurred to increase the likelihood of a return on the investment.

• they implement correct budgeting to ensure you have the funds to see the change project through from beginning to end.

• Prepare in advance for contingencies.

Management inertia (leadership)

When management does not recognise the need to change, or does not embrace change.

Strong leadership is required to direct change management processes, and need to be flexible and show others within the organisation that change is for the better.

Management may resist change if:

• They do not have the skills to lead individuals through change

• Do not understand where they fall in the new organisation or what roles they are required to carry out.

• Traditional organisations structure when communication is top down may not be aware of reasons for change

Cultural Incompatibility in Mergers/Acquisitions (Organisation)

Change occurs when organisations merge together or when one takes over the other.

Resistance results from:

• Unequal power or size.

• Hostile acquisitions that may not have been in the best interests of the smaller organisation.

• Clash of cultures when from different countries with large cultural differences.

• Range of different policies, procedures, protocols, etc.

Staff Attitudes (People)

Reasons individuals may resist change:

1. Fear of the unknown - occurs mostly when change is implemented without warning, possibly causing people to push back due to fear.

2. Mistrust - if manager is new and not yet earned trust of the employees.

3. Loss of job security/control - often occurs when companies announce restructuring or downsizing, causing fear that they will lose job or be moved into other position without their input,

4. Individual attitudes to change - some people may enjoy opportunity to learn and grow, while others prefer set routine, making them more likely to resist.

Lewin Forcefield Analysis

A strategic tool used to assess the factors that drive and resist change within an organisation.

Purpose - to determine if the change is a feasible option in order to make better choices and whether/how to implement that change - so that an organisation can plan effectively to increase the chances of success.

Intent (how it achieves purpose) - helps identify the forces for and against change in an organisation, and highlights resistors to change that may be minimised to ensure success.

Driving Forces	Present or Desired State	Restraining Forces
more ethical ( /10) → make business more relevant ( /10) → customer wants product ( /10) →	upgrade factory with new equipment Create new software product	← R&D costs ( /10) ← staff need to be trained ( /10) ← will require updates ( /10)
Total: ( /30)		Total: ( /30)

EVALUATE: Recommend if change should be implemented based on whether or not driving forces are higher than restraining. If change still needs to be made or restraining forces are very high, identify how business can reduce restraining forces.

Kotter’s 8 Steps

Purpose - used as a guide to implement change successfully.

Intent - takes into account resistors so that actions can be taken to minimise.

1) Create a Sense of Urgency

Convince employees and stakeholders why change is necessary (explain that expansion is vital to access larger markets and remain competitive). People are more likely to get on board if they know the reason behind the change.

• Communicate potential threat and its negative impact

• Show statistic of declining sales

• Show data of competitors

2) Form a Coalition

Select a group of leaders from across the organisation to show visible support and convince others the change will be beneficial.

3) Create a Vision

Link ideas and solution into an overall plan/vision. Should be clear and easily understood by all.

• Identify core values in change

• Develop mission statement

• Create strategy for execution

4) Enlist Volunteer Army to Communicate Vision

Implement day to day communication, reinforcing reasons for change, and informing people of steps occurring to ensure the success of the change.

5) Remove Obstacles
Identify obstacles and make steps to remove them as quickly as possible.

• Reward those who support/implement change early on

• Identify those resistant to change and create solutions to resolve it

• Assess layout of organisation and ensure vision is aligned with the organisations levels, and vice versa

6) Generate Short Term Wins

Set short term goals and celebrate each step as it is achieved, good for motivation.

7) Build/Sustain Acceleration/Change

Analyse what is going right/wrong, gradually set more ambitious goals, come up with fresh ideas, check you are reaching the vision, keep improving.

8) Anchor Changes into Company Culture

Time and changes in leadership/staff can evaporate impact of change quickly, so change should become part of the organisation’s norm, and should be celebrated as a whole organisation.

Strategic Planning

An organisational management activity that is used to map out future direction to focus energy and resources toward a common vision.

It is a document that has all of the following components:

• Mission and objectives

• Environmental scan

• Strategic formulation

• Strategic implementation

• Evaluation and control

Purpose - Provide roadmap or plan on business growth over the next 3-5 years.

Intent:

• Inform stakeholders of the business when resources are required, ensuring all levels of management are working to the same timeline and strategies.

• Ensure key decision makers of the business are working towards achieving the overall mission

• Ensure allocation of resources are available when required.

Mission and Objectives

Mission Statement:

Short, concise statement outlining business’ future.

• Creates business’ direction, answering questions of what company will look like in five or more years.

Objectives:

Measurable results showing achievement towards mission.

• Positioning

• Growth, e.g. market share

• Business scale

Environmental Scan

Process of examining internal and external factors which influence the business’ operations and decision making.

Includes 3 components.

1) SWOT Analysis

Framework used to assist in decision making by aligning the business capabilities to realistic goals. Consists of these features:

• Internal analysis

  • Strengths (positive) - what/where we are doing well

  • Weaknesses (negative) - what needs to improve

• External analysis

  • Opportunities (positive) - emerging trends, markets to expand into, etc

  • Threats (negative) - competition, market trends we are unprepared for, possible economic or political issues, etc

2) Porters Five Forces Analysis

Management tool used to assess and evaluate the competitive strength and position of a business within a market.

Based in concept that there are 5 forces that determine the competitive intensity and attractiveness of a market.

• Threat of New Entrants - assess barriers to entering new market that make threat low or high.

• Threat of Substitution - level of differentiation between competitors, with similar products existing in the market meaning customers may switch to alternative, making it high threat.

• Bargaining Power of Suppliers - assessing how easy it is for suppliers to drive up prices, if only few suppliers they have more bargaining power.

• Bargaining Power of Customers - assessment of how easy it is for buyers to drive prices down, with fewer customers making marker unattractive due to reliance on them.

• Competitive Rivalry - the number and capability of competitors on the market, will have low power if many competitors offering equally attractive products.

3) Pestle Analysis

Tool to analyse and monitor the external macro-environmental factors that have an impact on the business and industry.

• Political - stability, relationships

• Economic - activity and indicators

• Social - cultural factors and trends

• Technological - availability, use

• Ethics - impact on environment/people

• Legal - laws, patents, and public liability

Strategy Formulation

Decision on a suitable method to achieve the mission and objectives.

Based on the environmental scan they select a strategy that matches its strengths and takes advantage of any opportunities withing the industry to retain a competitive edge while addressing weaknesses and threats.

• Competitive advantage of Aus products, obtained through product uniqueness in quality

• Use of strategic alliance as a method of global expansion - select appropriate strategic alliance based on amount of funds, ownership control, time frame, investment risk.

Strategy Implementation

Process of actions to implement a strategic plan to achieve the mission and objectives.

• Allocation of resources at the right time in the right quantities, e.g. budgets, procedures, staffing, etc.

• Business must ensure communication of strategy and reasoning behind it to stakeholders and those implementing the strategy if they were not the ones to formulate it.

• Change management models such as Kotter 8 steps can be used to implement the new strategy.

Evaluation and Control

Evaluation

The process of analysing the success of the activities in meeting the set objectives.

• Evaluation is completed throughout the strategic plan on a regular basis

• If objective has not been achieved, the business will need to make adjustments

Control

The actions implemented based on the achievement of an objective.

Strategies may need to be modified due to constantly changing internal and external factors. If not meeting objectives business will need to:

• determine reasons for this

• find alternative actions to be put in place