Business Management

1. Business Management Part 4 – Management and Change

2. Students learn about – Management and change • Responding to internal and external influences • Managing change effectively • Identifying the need for change • Business information systems • Setting achievable goals • Resistance to change • Management consultants Source http://4equalsides.com/wp-content/uploads/2011/08/2328879637_c0d2e376ff.jpg

3. Organisational change • Change is any alteration in the business and work environment. For example: • Change in consumer tastes. • Change in production methods. • Change in markets or products sold. • Change in how employees perform tasks. • Change to the way things are perceived. • The ability to manage, embrace and adapt to change will determine a business’s competitive advantage and survival. • Organisational change is the adoption of a business’s new idea or behaviour in response to internal or external influences. • Successful managers are proactive rater than reactive. Proactive – anticipate and adjust to changing circumstances. Reactive – swept along or caught unprepared. • The crucial management issue is how to manage change. It needs to be: • Productive - used to renew and strengthen the business. • Constructive – occur at a pace at which it can be absorbed and integrated into the business. • Thoroughly evaluated to assess their overall impact. Source: http://4equalsides.com/wp-content/uploads/2011/08/2328879637_c0d2e376ff.jpg Define change. Complete snapshot ‘Billabong rides the wave’ Questions 1-3 page 291

4. Responding to internal and external influences • Changes can be major (transformational) and minor (incremental). • Transformational change results in a complete restructure throughout the whole organisation. A transformed business will have: • A different (usually flatter) organisational structure. • New work systems and procedures. • A changed employee structure. • Greater use of technology. • An altered corporate culture. • Incremental change results in minor changes usually involving only a few employees. For example: • Change from using a fax to email when sending information to customers. Activity Distinguish between transformational change and incremental change. Identify three minor changes and three major changes that have occurred in your school over the last few years.

5. Activity – major and minor changes • Consider the following situations and determine whether the change required would be major or minor. Give reasons for your answer. • A sales representative complains that he is unable to access the latest prices on some products quickly enough because price changes are mailed to his office. • A distinct decline in the quality of manufactured items from the heavy metal section has been traced back to the high turnover of staff in this section over the past nine months. • The development of new technology in the paper manufacturing industry will require the chief executive officer and the board to completely reassess their present manufacturing operations. • The responsibilities of several key staff in the accounting department will need to change as a result of the new computerised accounting system.

6. Impact of change on organisational structure • Businesses need to undergo structural change, changes in the business’s structure, that is, the organisational chart. • Recently the main structural changes in Australian businesses included: • Outsourcing – the contracting of some operational operations to outside suppliers. Many businesses rearranged their workforce to employ minimum full-time staff and use many from outside the business on contract, casual or part-time. • Flatter organisational structures – middle-management positions abolished, greater levels of accountability and responsibility for frontline staff. • Work teams – allow businesses to be more flexible and more responsive. They motivate employees to be creative, develop a broader view of goals and contribute. • These changes aim to streamline business operations, improve efficiency and empower employees to make their own decisions. Activity Construct a mind map to summarise the business’s three main structural responses to the change in the environment. See page 297

7. Impact of change on business culture • Changes within the external and internal environments should be reflected in the business culture. • If the business culture fits the external environment managers and employees have the attitude they need to compete successfully. For example: • Telstra – Changed from having a monopoly on telecommunications within Australia to increasing competition due to deregulation of the telecommunications industry and the privatisation of Telstra. The new external environment required a new way of thinking.

8. Impact of change on human resource management • Adjustments to the human resource management function are necessary to improve the effectiveness of changes in other business divisions such as organisational structure and technology. • The main changes are: • Recruitment and selection are altered to reflect the need for individuals who possess the knowledge and skills required to handle changing circumstances. • To be made redundant appropriate termination procedures must be put in place. • Existing employees need training in teamwork, problem solving, decision making and change management. • New performance appraisal and reward systems are required. • Autonomous and empowered employees require changed roles and communication methods. • Flexible working arrangements are required to attract and maintain skilled employees. • Bases of power shift from seniority and authority to collaboration and contribution. • A clear vision of the business direction and benefits to employees needs to be developed and clearly communicated. Activity Outline what human resource management change businesses have undertaken in response to environmental changes.

9. Impact of change on operations management • Businesses seek ways to speed up production time, shorten production development, streamline distribution and serve customers. • Main operations management changes: • Businesses refitted and reorganised to take advantage of improvements in technology. • Changes in the production process including flexible manufacturing – production by computer controlled machines that can adapt to various versions of the same operation. Plants can then be smaller, more specialised and closer to important markets. • Emphasis on quality assurance – procedures like quality control and quality assurance to ensure products satisfy consumers. • Human relations are being improved for employees so they can balance their workloads, simplify materials handling, change operations sequences and train employees.

10. Managing change effectively • Change is the most daunting challenge confronting managers and the most promising opportunity. It is also inevitable. • See Snapshot – The challenge of change – Microforte Technologies page 299 • To manage change effectively: • Change needs to be as productive as possible. • It needs to be a process for revitalising and strengthening the business. • Managers can adopt a number of low and high risk strategies to manage change effectively. • Low risk strategies focus on keeping employees informed about why changes are needed and involving them in the change process. Strategies rely on communication, involvement, support and negotiation. • Two low risk strategies are: • Identifying the need for change. • Setting achievable goals. Source: http://www.principalspage.com/theblog/wp-content/uploads//2010/10/clip_image0011.jpg

11. Low risk strategy - Identifying the need for change • A holistic approach is required – look at the whole picture. • Anticipate factors so the business can take advantage of opportunities. • Share the visions with employees so they understand the need for change. • Access to accurate, up-to-date information is required. • Business information systems: Businesses need to be able to collect, organise, process and retrieve information quickly. • Data (unprocessed facts and figures like sales figures) need to be quickly and efficiently gathered, stored, combined and analysed. • This information (processed data deliberately selected and organised to be useful to to an individual manager) becomes the raw material for decision making. • A business information system (BIS) or management information system (MIS) gathers data, organises and summarises and converts to practical information managers use for decision making. • Managers plan for the future, implement plans and evaluate results against past performance.

12. Low risk strategy – setting achievable goals • A vision statement states the purpose of the business • Specific company goals that are measurable are usually set on a yearly basis. Goals need to be attainable and realistic. Unachievable goals cause cynicism among employees and damage relationships between employees and supervisors. • The vision statement and business goals are reassessed if changes in the external business environment are detected that have an impact on business activities.

13. High risk strategies - manipulation • Considered high risk because their failure may generate negative outcomes. • If used intelligently and wisely result in lowered resistance to change. • Two high risk strategies are: • Manipulation – the skilful or devious exertion of influence over someone to get them to do what you want. For example if introducing new technology staff are informed of exciting new training and promotional opportunities but not told it will result in a number of forced redundancies.

14. High risk strategies - threat • Threat – the use of power to force change resistors to conform. • Threats can be direct or indirect and involve loss of promotion, transfer, overtime or ultimately termination. • For example in 2006 Qantas flight engineers were given an ultimatum by senior management that job losses would occur if current work practices and manning levels were not changed. This threat resulted in prolonged industrial action causing disruption through numerous flight delays. • People can be compliant but also resentful resulting in increased resistance, industrial sabotage, grievance complaints, compensation and industrial disputes. Activity Exercise 9.3 Page 303 Distinguish between a low-risk strategy and a high-risk strategy for managing change. Source http://4.bp.blogspot.com/-4xPo0nrO3HE/TbnrTkY6dFI/AAAAAAAABFY/bid_yUyBpG4/s1600/qantas-logo.jpg

15. Common reasons for resistance to change Source http://www.kaushik.net/avinash/wp-content/uploads/2006/12/change.jpg • Management – make hasty decisions that are poorly timed or unclear or can be indecisive and put off making a decision creating uncertainty. • Fear of job loss – fearful of changes that threaten job security or require new work routines. Resist new processes because they could result in forced redundancies and loss of power. • Disruption to routine – employees may resist change because they are worried about adapting to new procedures that threaten established work routines. • Time – enough time needs to be provided to allow people to think about change, accept it and then implement it. • Fear of the unknown – change can create feelings of lack of control, fear of the unknown and uncertainty about the future leading to anxiety. • Inertia – refers to an unenthusiastic response to proposed change possibly because it requires moving outside and away from your comfort zone. • Cost – businesses need to weigh up the costs and benefits of change. The financial cost of implementation can be high.

16. Resistance to change • At the same time as managers are undertaking, driving change for the best of reasons, there are restraining forces working against the change. • For most people personal change like exercising more is: • Achieved only with considerable effort • Often emotionally stressful Source: Chapman and Devenish Business Studies in Action – Preliminary Course Page 304

17. Driving and resisting forces • Businesses must deal with trying to balance the force driving change with the forces resisting change. • Driving forces are forces that initiate, encourage and support change. • Restraining forces are those that work against the change, creating resistance. • It is important employees are not neglected and communication channels are adequate when reporting progress. Activity Distinguish between driving and resisting forces.

18. Strategies for reducing resistance to change Activity Examine the diagram below. Select the two strategies you think are the most important. Justify your selection. • Resistance to change is common among managers and employees. • Regardless of where or how a change originated the workplace culture created by the manager and his or her leadership abilities can affect employee acceptance.

19. Two strategies for overcoming resistance to change • Creating a culture of change (encouraging teamwork) • This requires a degree of risk taking by participants which requires a supportive business culture. • One method to assist in this process is the use of change agents such as a member of management, an employee or an outside consultant – a change agent is a person or group of people who act as catalysts, assuming responsibility for managing the change process. • Effective teams have open communication channels, develop a strong sense of identity and offer a supportive environment. • Great teams mean reduced staff turnover and absenteeism, change is readily accommodated and productivity rises. Source - http://www.betadaily.com/wp-content/uploads/2010/02/team-building.jpg

20. Two strategies for overcoming resistance to change • Providing positive leadership (sharing the vision) • A managers treatment of employees determines their acceptance or resistance to change. • Managers who concentrate on the needs of their employees are the most effective, building high performance teams that attain their objectives. Less affective managers focus on tasks and meeting deadlines, the characteristics of a manager rather than a leader. • Other qualities of successful leaders: • Market and promote change to achieve cooperation and acceptance. • Resolve conflicts when change is implemented. • Keep an open mind, seek new ideas and freely share information. • Cultivate a sense of stability while adding more change. • Show confidence in people, share credit and recognition. • Build and communicate a clear vision. Source-http://ourteamrocks.com/wp-content/uploads/2010/06/leadership.jpgce

21. Activity – Overcoming resistance to change. • Select a major change in your life, such as moving house, changing schools or starting a new casual job and complete the following: • State the reasons you liked or disliked the change. Share with other group members. • Identify the reasons that were common among the group. • Interpret what this tells you about the best strategy a manager could use to help overcome resistance to change.

22. Management consultants • A management consultant is someone who has specialised knowledge and skills within an area of business. • It is best to hire members of the Institute of Management as they have recognised standards of character, experience and education. • They provide businesses with: • A wide range of business experiences. • Specialised knowledge and skills. • An objective, external, viewpoint. • Access to the latest research. • Awareness of industry best practices (Business practices that are regarded as the best or the highest standard in the industry). • Their main role is to help business improve their performance by investigating existing business problems and developing plans for improvement. • They can provide change management advice. Change management is a methodical approach to dealing with change, both from the perspective of a business and on the individual level. • They provide strategies to smoothly manage the introduction of business changes by: • Undertaking change readiness reviews. • Creating a supportive business culture. • Actively involving all stakeholders in the change process. • Gaining and recognising early achievements. Activity - Use the Institute of Management Consultants website to outline the: Role of the IMC Purpose of the certified Management Consultancy (CMC) delegation.