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Managing Change and Transformation (MCT)
Prepared & Submitted by:
Group-13 | WMP 2011-14
Aashish Goyal (WMP7001) Gaurav Pal (WMP7020) Girijesh Srivastava (WMP7021) Saifullah Khan (WMP7052)
Indian Institute of Management, Lucknow Noida Campus 2012
whereas restructurings can take place also if a firm is not facing a deep crisis. A turnaround is successful when the firm is able to reverse the performance crisis. since they regard a large number of companies. Successful corporate turnarounds depend upon the replacement of the current top management and actions to be taken simultaneously at three different levels. with no sectoral. there is a need for continuously updating. strategic. Thus. . This paper will focus on a particular kind of corporate restructurings. and Asda within the ambit of framework understood in the class. to enable it to recover from the decline by changing the very nature of the organization is called organization transformation. Successful turnarounds seem to imply a renewal of the organization’s shared basic assumptions. whereas restructurings can take place also if a firm is not facing a deep crisis.e. These are corporate changes which take place when a firm undergoes a survival-threatening performance decline. restructuring and developing the organizations to enable them to meet the demands of changing environment and keep generating the value for the stakeholders to keep its relevance in the industry. end the threat to its survival and achieve sustained profitability. Introduction: In the ever changing and dynamic environment. financial and organizational. Cultural renewal appears to be crucial. Turnarounds are corporate changes which take place when a firm undergoes a survival-threatening performance decline. i. but a slight decline or is simply looking for new business opportunities. corporate crisis and restructuring seem to have now gathered greater attention among both practitioners and academics. dimensional or geographical distinguishing marks. as well as complex and uncertain.Objective: The objective of this report is to understand the turnaround and transformation done in the organizations SIL Ltd. but a slight decline or is simply looking for new business opportunities. turnarounds. These phenomena appear to be relevant and generalized.e. i. The task of reshaping the organization. the firm’s culture. If the company fails to proactively keep pace with the business environment its performance starts declining and may face threat of its survival. Report will cover the challenges faced by the management in overcoming and diagnosing the health of the companies. Report will cover the solutions which worked in transforming the companies from loss making and sick organization to flourishing profit making one and how same techniques and framework can be used in the different industry/company within the same context.
it was the biggest and most successful retail companies in UK offering food and non-food products at lower cost catering to regular lower end customers and housewives.e.It was estimated that Asda overpaid for the acquisitions and the financing of the stores was done thorugh borrowings from bank wich led company going into debt. . Asda had its beginnings in 1920 and by early 80s. Issues plaguing Asda during 1980-1991: Change in strategy. An organization may remain for a prolonged period in a state of unsatisfactory performance without sliding to crisis situation or sickness due to various factors. Unsatisfactory Level performance 2. profit making ways through turnaround while sick companies can turn back through revitalization and enlightened transformation however both pose great challenge to the transformational leadership.e.This led to loss of free flow of communication and minimal co-ordination between different departments of the organization. Crisis situation Companies can come back to normalcy i. in 1931. Prior to this. new business and building new stores while lower managers managed day-to-day activities.Asda ventured into acquiring new stores to increase the store count. Asda’s organizational culture had become more bureaucratic and hierarchical since mid 80s. Hardman tried to follow suit John Fletcher strategy of upscaling the asda stores by refurbishing and changing the layouts which led to cost increase. Asda lost its focus in mid 80s when new CEO. Asda had been the industry’s price leader and pursued down-market and price conscious customer. Other thing which differentiated Asda from competitors were its huge stores located at out of the town locations. In early 90s. Asda also ventured into other businesses which were not related to its primary food sales business.one of the biggest and most successful retail companies in UK.Turnaround and Transformation: The state of the organization in decline and recovery phases can be described through following phases: 1. John Fletcher focused on selling high priced value added products to improve on margins which led to Asda losing its position as the lowest price grocer. These businesses caused several problems for Asda as they were not exactly complementary to each other and Asda didn’t had right manpower and management to overlook these businesses. There was little communication between top and lower management and top management was least bothered what problems Asda was facing at operational level. This is was the case with AsDa. Asda’s management structure had become out rightly hierarchical in nature with top management concentrating on nonoperational activities i. Many good managers left the company due to these issues.
8. 4. Management layer was removed both from corporate structure as well as from store operations and trading.5 years. Which departments to focus (Logistics. How to keep intact key people and restructuring organization to restore the low morale of the employees. Bringing back the culture by breaking down hierarchies and encouraging meritocracy. This exercise led to evaluation of both intellectual and analytical ability of the managers and helped management plug the weaknesses. This effort led to closing newly opened stores and discontinue investment in non-core business.Finance.stores.By 1991. Following are the steps Norman took to address issues: Financial Crisis: Norman with the help of finance Director lead an effort to stop the outflow of all unnecessary expenditures and instituted mechanism to raise cash. 9. External consultants were hired to do the financial analysis of the company and find right ways to invest. Investment done for growth has not been realized and company was having 1 Billion pound debt with sales slowing and operating margins declining leaving company very little resources to service the debt. 3. 7. This led all the department heads directly reporting to Chief executive and leading to more transparency and accountability. The company’s pursuit for upscale market had failed to bring new customers and company had lost its traditional market as well. 5. 2. Change in Management Structure: Norman initiated program to reduce the management layer to reduce the bureaucracy and hierarchy. This effort led to 80 Million pound cash in 1992 and Asda was able to write-off all its debt of 700 Million pound to zero in 2. Turnaround and Transformation done by Norman: Following were the issues at hand for Norman: 1. Asda was in financial trouble. External Psychologist was hired to evaluate top management talent vis a vis competition. 6.trading) and in what order? What should be done with other business(not primary business) Which all new people to be brought at what level? What all help is needed (inside or outside the organization)? What needs to be communicated to shareholders and employees. Change the strategy and course of action for organization to move forward Improve the financial situation by cutting cost and improving efficiency. Strategic Direction: .
SIL Ltd. communication. customer service etc.stood by those values.demonstrate them in day-to-day operations and be ambassador for the company. Norman and team decided to go back to roots and traditional way of doing business and catering to worker and wage earning class instead of focusing on upscale market. Issues plaguing SIL Ltd: . Vision and Mission statements were conceptualized and communicated to inside and outside the company and each point in the mission statement had the purpose. Writing and Communicating Asda Values Companies values which it stood for were laid down and communicated to everyone so that people can feel part of one family. Scooters India was established in 1972 as a public sector enterprise employing over 3200 people. Managers were encouraged to talk to top management team for any issues or blockages so that things can move faster. To foster the openness and reduce the hierarchical structure. Culture: Key part of Asda’s transformation was the development of new culture. Continuous Improvement methods and spreading best practices: Asda introduced a number of practices and operating methods aimed at fostering good communication and continuous improvement. Management team also laid emphasis on having more open and communicative environment by implementing open office plan where management can sit with subordinates and communication can be fast. They took active involvement in what was happening through-out the company and management of execution had shifted to decentralized structure. Company also introduced feedback mechanisms. Hierarchical and bureaucratic structures were paid way to meritocracy and competition.Norman clearly laid down the 3 year recovery plan leading to fundamental changes the way company worked and operated. Feedbacks were sought both from employees as well as from customers to understand morale. action oriented and reception to changes and innovation in stores. shareholders buy-in however they had clear direction where company wanted to head and how. It required employees. suggestions. It also developed means to move best practices across all stores ensuring stores outperformed its competitors. Focus was laid on more ‘handson’. open debates were encouraged within the top management teams to help generate new ideas. It was very clear strategy and communicated across to all stakeholders. Weak financial resources and weak margins also dictated Norman to follow this strategy.
clear floor space and layout. Trade Unions and Politics: Situation was very volatile with each group looking for supremacy. Sahay went about upkeep and maintenance of the existing machines.Poor performance from the start of the inception: In 1989-90. Following are the steps Sahay took to improve the above condition: Sahay motivated the demotivated and disillusioned employees and restored the faith in them that the turnaround is possible. They laid lot of stress on customer complaints and ensured proper testing was done before delivery the manufactured .He instituted the program to increase the production by using the facility for production of 3-wheeler. Low production and Inefficiencies: Staff members were caught doing unruly behavior during office time. Sahay found the demand-supply gap and worked out the measure to find the working capital by filling that gap. Employees were direction less and uncertainty about future were some factors leading low morale of the employees. Facilities which can be used for production purposes were lying idle.2125 million. Outdated Technology: Company was using inefficient technology worn out plant and machinery. Main challenge was to bring all the groups on the same table and reconciliation. Demotivated Employees: Most of the employees were demotivated due to continuous loss to the margins and market share.This increased the efficiency and productivity on the shop floor. Sahay communicated the harsh reality of closing down of factory if production is not restored. There was no penetration and not enough marketing done to make the company’s product visible. There was gap in terms of policy making by management and communicating it to workers.He brought the warring groups to common table to understand their issues and finding genuine ways to resolve the conflicts. Lack of Working Capital: Company had stretched the credit limits from banks beyond the permissible limits and had defaulted on all its commitments. People were made to realize the harsh reality of company being closed if production and efficiency are not restored. the company had a net accumulated loss of Rs. Marketing Challenges: Marketing the company manufactured scooters and 3 wheelers into other regions was another challenge at managements’ hand.He also orchestrated the program to upkeep the machinery. Sahay seeked the approval of STA to market and sell scooters in other states as well. processes and machine usage. Bureaucracy and Lack of Transparency: The manner in which operation activities were done were not clearly communicated to staff. They incorporated business process engineering methodology wherein they improved shop lay-out. clearing shop floors.
Causes of Organization Decline: Poor management Inadequate financial control High cost structure Acquisitions Bureaucracy and Hierarchical structure Cultural Limitations Elements of Corporate Turnaround: Change in top management Initial credibility building Initial control Cost reduction Asset Liquidisation Cost Savings Revenue Generation Better Internal co-ordination Managing Organisational Change: . Company managed to achieve ISO 9001 certification due to persuasion from Sahay. Both the above examples fall into second category where health of the company were restored when they became sick.product to customer. Broad Management Lessons: The task of Managing Transformation: The task of keeping an organization excellent has two aspects: one the preventive aspect and other curative aspect.
organization is in a state of equilibrium i.there were fraction of people who were against the change in implementing new strategy however it was necessary for the organizational growth.e.one pushing it for change and other opposing change. . in a state of balance between two different set of forces. For eg: in case of Asda . Driving force for the change is the number of people benefitting from change.As we have seen in above examples.
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