CHAPTER 4 - THE 4th BIG QUESTION: HOW CAN THIS BE ACHIEVED?

Objectives:

Discuss change in four different contexts.

Determine structured strategies in different levels.
Distinguish the benefits of integrating the balanced scorecard into
the implementation process of a company.

We discuss prescriptions for managing change. It must be emphasized that managing

change in real life situations requires sensitivity and judgement about unique situations.
So the prescriptions given are not meant to be definitive, they are frameworks to inspire
thinking.

This chapter is structured as follows:

1. Strategic change at the corporate level.

2. Strategic change at the business level.
3. Strategic change in different circumstances.
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Strategic Change at the Corporate Level

The role of the center is to ensure that each unit in a corporate portfolio gains the maximum
benefit from being parc of the portfolio. Managers should also be aware of the way that units
can be clustered within an overall framework co maximize the opportunities for synergy and
parenting. this is particularly important in post-merger or post-acquisition periods when
corporate centers endeavor to reconfigure their organizations. Is may being appropriate to
bring units together or separate chem. Changes ac the business level may have an impact on
the whole organization, with some businesses possibly funding ocher businesses, while other
businesses could be given preference for investment over others.

Prompt a discussion of the implications with respect to the disposal of companies, the
acquisition of companies, company mergers and new business start-ups. Careful
consideration will have to be given to the financing of corporate level change. For some
businesses may be sold co fund expansion or improvements in other businesses. If
additional investment is required, it is important to identify sources of funds and the
impact that chis will have on the financial structure of the organization. The long-term
consequences of key financial ratios and the trends in these ratios need to be
understood.

The strategic options chosen may require that the overall governance of the organization
is changed and that the role of the center and its relationship to individual business is
modified. It may be appropriate for individual business to cooperate. A key issue is to
identify the parenting relationship between the center and the individual businesses and
the opportunities for synergy across businesses.

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Strategic Change at the Business Level

Strategic change at the business level is the level where people become involved. The impact
of corporate restructuring has to be managed within the individual businesses, and the
ways that change is managed will be context-dependent. Expanding from a success is
quite different from turning round an organization in crisis. The challenge is different
when the proposed change requires a change in the way the organization’s members
understand their world.

It is important to estimate the impact that change has on customers because the nature
of that impact should be anticipated. Some impacts are desired and are expected to have
a positive impact on consumers, while ocher impacts may be trade-offs, which some
consumers may not like (it is important to realize that there may be some unanticipated
customer reactions).

A strategy that is counter to the culture of the unit will be difficult to implement. If a
change in strategic direction is necessary for long or short-term organization survival this
may be an appropriate route. Indeed, the very nature of the situation may be a driver for
change and may be used by organization leaders as a catalyst for change. The effective
communication of a crisis can be the lever, which facilitates change by challenging
peoples’ confidence in the existing certainties.

If we revisit the product/market resource portfolio matrix in Figure 4.l and the
organization paradigm and race of change required matrix we can consider the
implications of managing change under the conditions suggested by the nature of the
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change in the organization’s resource mix. Changes that are likely to be consistent with
the development of the present organizational paradigm are more likely to occur when
the organization is changing incrementally from a successful position.

PRODUCT/MARKET PORTFOLIO

Maintenance Development

Box E Box F
Maintenance Maintaining present Moving into new
resources to serve products and/or
present market markets with
Resource segments present resources
Portfolio
Box G Box H
Development Delivering present Delivering new
products products and/or
with new resources entering new markets
with new resources

Figure 4.1 Product-Market Resource Portfolio Matrix.

Strategic Change in different Circumstances

In the remainder of this chapter we discuss strategic change in four different

circumstances:

1. Managing change when the change is consistent with the present culture.
2. Managing change co accommodate different organization contexts.
3. Managing change when the change requires a culture change co maintain a
successful position.
4. Managing change in turnaround situations.

In healthy organizations changes will be grounded in present resources, but over time
the organization will learn and grow. It will acquire new assets and skills as current
products are produced in more effective ways and new products and markets are
developed (Box G and H type changes).

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The organization needs to manage change incrementally whilst understanding

the changes in its own situation and its environment.

➢ Its position in its cycle (Greiner, l972).

➢ The position of its products in their life cycle.

The way that environments affect organizations are outlined.

Demographic changes, such as the increased spending power of elderly people.

Government policy and legislation on interest rates and trade, etc.
Technical innovation through Internet use and genetic engineering, etc.
Sociological changes such as the redefinition of pornography and the increasing
dominance of one parent families

Healthy organizations adopt a philosophy of continuous improvement (sometimes

manifested through Local Quality Management systems). This can involve the updating
of products and process so that they are aligned to evolving customer needs. The
continuous development of a firm’s skills and its ability to absorb technical advances in
its area of expertise can allow it to lead and develop customer expectations of value in
products and services, thereby minimizing risks of competitive action. Companies can
also build relationships with their customers and suppliers so that they can be proactive
in defining the way their industry develops.

In continuous improvement projects the main players are usually first line managers,
maintained by middle managers acting as a key link to cop managers. In a healthy culture
there would be open communication throughout the organization. Indeed, the
empowerment of individuals and teams within organizations is one of the cornerstones
of a continuous. Organizations can also build teams with customers and suppliers. Let
the practice of cross-organization teams only works if team members believe that
customers and suppliers benefic through teamwork, and there is a shared belief in win–
win outcomes.

The ability to create successful teams depends on a number of factors:

✓ Team members must want to be part of the team.

✓ There must be a balance of appropriate abilities in the team.
✓ They must want the team co succeed.

It is clearly essential that the team should be appropriate for the task and that the task being
undertaken has the support of top management. In addition to having clear objectives, the
objectives should be agreed at the start of the project and should be regularly restated. The
team should have a leader who is concerned with the three key areas of teamwork.

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❖ The needs of the task.

❖ The needs of the team.
❖ The needs of the individual within the team

To do this the team leader should:

1. Ensure that all members understand the task and the plan.
2. Be responsible for leading the team in developing the project or cask plan that
accurately reflects the task.
3. Allocate tasks within the team.
4. Agree milestones and performance measures.
5. Ensure that the team maintains an effective work race and its task focus.
6. Encourage and discipline the team and individuals.
7. Encourage the building of team spirit.
8. Minimize tension and reconcile disagreements.
9. Receive information from the wider organization and its environment and
disseminate to the team.
10. Disseminate information from the team to the wider organization.
11. Check project outcomes with initial objectives.
12. Help the team evaluate its own performance against objectives.

Managing change to accommodate different organization

There are situations when organizations have to come to terms with operating
one way in one environment and another way in another environment. When healthy
organizations expand their market areas to different countries the structure set-up for
this must accommodate the impact that this will have on the organization.

Healthy organizations may also have to accommodate a step change when they
introduce new products to new markets when this requires the acquisition of new
resources.

PRINCIPLES:

Commitment: The organization is fully committed to developing people to achieve its

aims and objectives.

Planning: The organization is clear about its aims and objectives and what people need
to do to achieve them

Action: The organization develops its people effectively in order to improve its
performance.

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Evaluation: The organization understands the impact of their investment in people on

its performance.

INDICATORS:

1. The organization is committed to supporting the development of its people.

2. The people are encouraged to improve their own and other people’s
performance.
3. People believe their contribution is recognized.
4. The organization is committed to ensuring equality of opportunity (meritocracy).
5. The organization has a plan (strategy) that is understood by everyone.
6. The development of people is in line with the organization’s aims and objectives.
7. People understand how they contribute to achieving the organization’s aims and
objectives.
8. Managers are effective in supporting the development of people.
9. People learn and develop effectively.
10. The development of people improves the performance of the organization, teams
and individuals.
11. People understand the impact of the development of people on the performance
of the organization, teams and individuals.
12. The organization gets better at developing its people.

Kotter (l995) suggests that organization transformation be modelled using:

Eight-Step Framework:

1. Establishing a sense of Urgency: The first step in initiating a process for

change is to establish the need for change. Burns (2000) calls this the trigger for
change while Kotter (1995) refers to the creation of a sense of urgency. The next
step is to effectively communicate that need to chose who have to implement it.
In crises or potential crises this support must be obtained quickly.

2. Forming a powerful guiding coalition: One of the first tasks within many
change processes is the formation of a guiding coalition or project team. This
team will initially review and re-examine the implications of the change proposals
so that they become committed to the proposal and take it forward. Deciding on
the composition of the project team is clearly an important task for senior
management.

3. Creating Vision: Having established the need for change, it is important to

express that need in a form that can be understood by all. Measurable
performance indicators are important but people need co quickly have ‘a feel’ for

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what is required. A clear statement of where the organization is going is

essential.

4. Communication the Vision: Transformation is impossible unless employees

can be convinced that it is achievable. Employees may have to make sacrifices
and tolerate job losses amongst colleagues. Senior executives must show
commitment to change by what they do and be aware of the symbolic nature of
their actions.

5. Empowering others to act on the vision: The system and culture of the
organization must be aligned to the vision outlined. The activities of the
organization must be compatible with the vision of the future aspired to.
Modelling value chains and culture webs before and after the change initiative
can allow people to focus on the requirements of the change process.

6. Planning for and creating short-term wins: Progress must be measured. This
is why the organization needs to set objectives and performance indicators.
Burns (2OOO) has identified two schools of change management theorists:

A. The advocates of planned change.

B. The advocates of emergent change.

The work of a number of writers, however, suggests that change can be managed in
ways that involve both planned and emergent dimensions. Quinn (l978) captured the
essence of this idea when he developed the concept of logical incrementalism. The
balanced scorecard provides a framework for translating a company’s strategic
objectives into a set of performance measures. This system seeks to align short-term
performance indicators within a long-term perspective. This avoids organizations having
incompatible long- and short-term objectives.

Kaplan and Horton (l992, l993, l996) developed the balanced scorecard and it revolves
around four separate but inter-linked management processes:

Financial: Shareholder interests are best accommodated within a financial perspective

(i.e. what are the financial expectations of corporate stakeholders and how should we
measure these?).

Customer: To succeed financially a company needs to create value for its customers (i.e.
what do our customers value and what would they like to see improved – can we measure
our progress on these issues?).

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Internal Business Process: Customer value can be enhanced by making internal

processes more effective and efficient (i.e. can we improve customer service through
more effective use of information technology – and can we measure how good we are at
doing it?).

Learning and Growth: Support for value-creating strategies requires ongoing support
(i.e. improving customer service through superior. Its integration is an ongoing process
that requires the company to monitor how effective it is at innovation, learning and
growth).

Performance measures have to be cascaded down the organization so that managers

can monitor their own implementation performance. This involves sub-units identifying
their own set of actionable performance indicators in line with the overall strategic
objectives of the company.

Figure 4.6 The Strategic Vision and the Balanced Scorecard.

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In summary, the benefits of integrating the balanced scorecard into the implementation
process enable a company to:

clarify its strategic objectives

structure its strategic objectives.
measure its progress towards achieving its strategic objectives.
communicate its strategy to its workforce.
align its corporate and individual employee objectives.
highlight the tensions and trade-offs required in meeting its strategic objectives.
focus on its critical management issues.
review performance co learn about and improve strategy.

7. Consolidating improvements and producing still more change: It is

important that successful changes in systems, practices and attitudes are
accompanied by the philosophy that catalyzed chose changes. This will improve
the probability of them becoming embedded in the organization culture itself. It is
also important that organizations develop cultures that can adapt to change.

8. Institutionalizing new approaches: It is important that successful changes in

systems, practices and attitudes are accompanied by the philosophy that
catalyzed those changes. This will improve the probability of them becoming
embedded in the organization culture itself. It is also important that organizations
develop cultures that can adapt to change. Attitudes to continuous improvement
must become embedded in the social norms of the organization.

Managing in change in Turnaround Situation

Slatter (l984) suggested that antidotes for decline should be mapped to specific causes
of decline. His research has indicated that firms in crisis can only be converted into
firms that make above average profits if strong product market positions can be
achieved.

Cause of decline

➢ Poor management inadequate financial control

➢ High cost structure poor marketing Competitive weakness.
➢ Big projects Expensive acquisitions Financial strategy

Antidote

❖ New management and restructuring Improved financial control and

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localized costing and performance measures.

❖ Cost reduction, product market reassessment Improved marketing Product
market reassessment Cost reduction Improved marketing Asset reduction Growth
by strategic acquisitions.
❖ Asset reduction Asset reduction New financial strategy.

We have discussed change in four different contexts:

✓ Managing change when the change is consistent with the present culture.
✓ Managing change to accommodate different organization contexts.
✓ Managing change when the change requires a culture change to maintain a
successful position.
✓ Managing change in turnaround situations.

Real life organizations, however, rarely conform to textbox prescriptions, so we would

urge you to cake the ideas above and use chem as a basis for reflecting on specific
organizational situations.

To know more information about Corporate Level Strategies

Please click the link: https://www.youtube.com/watch?v=kBjXOtNHc7c

To know more information about Kotters (8) Eight steps Leading Change
Please click the link: https://www.youtube.com/watch?v=1QWiMkXyTP4

To know more information about The Balanced Scorecard - Explanation

Please click the link: https://www.youtube.com/watch?v=O71daIs6x_M

Strategic Management and Business Analysis / David Williamson, Wyn Jenkins, Peter
Cooke and Keith Moreton

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