Everything you need to know about change management. Change management is the effective process of a business change such that executive leaders, managers, and frontline employees work in consonance to successfully implement the technology or organisational changes.
Every organisation in the recent time is facing the pressure for change may be due to globalisation, government initiatives, or any other reason in order to improve productivity, achieve better results.
The pace of change is increasing day-by-day and it is an art to develop the skill of living with the change and also managing the change.
Change management is not a singular concept; rather it includes a set of best practices and experiences, which are used to handle both internal as well as external changes.
Change management includes effective management of new methods and systems in an on-going organisation.
Change management can be defined as ‘the process of managing changes that occurs because of an event’.
Learn about:-
1. Meaning of Change Management 2. Essence of Change Management 3. Types 4. Importance 5. Steps 6. Strategies
7. Forces 8. Models 9. Tools 10. Change Management as a Key Management Competence 11. Change Management as the Form of Business Transformation.
Change Management: Meaning, Essence, Types, Importance, Steps, Strategies, Forces, Models and Other Details
Contents:
- Meaning of Change Management
- Essence of Change Management
- Types of Change Management
- Importance of Change Management
- Steps of Change Management
- Strategies of Change Management
- Forces of Change Management
- Models of Change Management
- Tools of Change Management
- Change Management as a Key Management Competence
- Change Management as the Form of Business Transformation
Change Management – Meaning
Change management is the effective process of a business change such that executive leaders, managers, and frontline employees work in consonance to successfully implement the technology or organisational changes. Every organisation in the recent time is facing the pressure for change may be due to globalisation, government initiatives, or any other reason in order to improve productivity, achieve better results. The pace of change is increasing day-by-day and it is an art to develop the skill of living with the change and also managing the change.
Change management is not a singular concept; rather it includes a set of best practices and experiences, which are used to handle both internal as well as external changes. Change management includes effective management of new methods and systems in an on-going organisation.
Change from an existing setup to a new environment has its own set of inherent problems and the problems become multifold when applied in a service institution. It is a continuous, often contradictory process, which brings difficult challenges as well as opportunities. Change is no longer a choice.
So, organisations cannot avoid change. Managers, leaders have to be aware of change and take active role in anticipating, planning, facilitating and implementing organisational change through effective change management strategies. Competencies in managing change can help them to be more effective in moving the organisation from the present towards the future.
Change management is not a stand-alone process for designing a business solution. It is the processes, tools and techniques for managing the people-side of change. It is not a process improvement method. Change management is a method for reducing and managing resistance to change when implementing process, technology or organisational change.
Change management is not a stand-alone technique for improving organisational performance. Change management is a necessary component for any organisational performance improvement process to succeed, including programs like Six Sigma, Business Process Re-engineering, Total Quality Management, Organisational Development, Restructuring, and continuous process improvement. Change management is about managing change to realise business results.
Change management can be defined as ‘the process of managing changes that occurs because of an event’.
Karen Kaiser Clark states ‘Life is change. Growth is optional. Choose wisely.’ Management when defined simply is nothing but making wise choices at the correct time.
Change Management includes the changes that lie within and are controlled by the organisation and those that come to terms with the changes occurring in the surrounding environment, i.e., the events originating outside the organisation and the response to them.
In the modern world, it is most important to utilise all kinds of resources economically and efficiently. None of the organisations can achieve its objectives without the optimum use of the resources. Organisation is a manmade system working through individuals for accomplishing objectives. The individuals along with the formal organisation, also form the informal organisational groups based on their personal and social relations. These informal groups affect directly the functioning of the organisation.
With the passage of time these groups get established and they feel more relaxed and comfortable with them. But when changes took place due to the internal or external variations, the individuals are not ready to change according to changes occurred. The change is also expected it is inevitable and unavoidable in every organisation. A change is regulated to maintain stability to some extent into the functioning of organisation. “An organisation which fails to change is sure to fail”.
For optimum utilisation of all the resources the manager has to monitor both internal and external environment and its impact on the organisation. The changed may be minor or major, is equally important from organisations point of view.
The frequency and nature of change differ from organisation to organisation depending on the degree of interaction of organisations with external environment.
Change Management – Essence
There are some established sub disciplines in Management Sciences, such as- Strategic Management, Personnel Management, Quality Management, Finance Management, management methods and techniques, and Change Management. Change means a transition from a current state to a future one, a different phenomenon, certain kind of distinctness.
It is perceived as a transition from one state of equilibrium to another one, from an outdated model to an adequate one. This model comprises a detailed list of obligations and restrictions, and accepting them is the major criterion of evaluating the success of the introduced change.
Therefore, change is the result of less or more formal and precise decision-making process, which combines the needs for adaptation to external conditions with the internal initiative. As change refers to transforming the nature of things or events, it includes two key components- process and essence.
Organizational change consists in moving from the old work methods to the new ones, and its main objective is to bring a positive result. Often at times, the transitory stage may be a difficult, or even a painful period.
Change involves any area of business operation, for example a work process, technology, an organizational structure or staff competences. Therefore, it can be stated that change manifests itself in transformations of the business components (subsystems), relations between them, and relations between the business and its environment.
Change is a procedure that is oriented towards creating a concept of the whole organization, towards recognizing and developing the requirements which make it possible to implement the change in practice.
The essence is to merge different types of organizational operation and functions, assuming improvement of their implementation. Change may apply to the particular areas of operation, competences, and determinants of success or management functions. The goals of change reflect why it is crucial for the business operation.
There are two general goals of organizational change:
i. To maximize adaptation possibilities in relation to the environment,
ii. To transform the behaviour models and the systems of values of the organization’s members towards integration.
The second goal emphasizes the human factor, which, in the final analysis, is the most susceptible to influence of change. As a result, following the transformations regarding the manner of conduct and behaviour of personnel, it is possible to implement change efficiently. Transformation of the organizational structure is a complex process, which concerns all areas of operation, and is aimed at improving the general efficiency of operation.
The planned change can be defined as intended designing and implementing of a structural innovation, a new policy or a new goal, or a change in philosophy, climate or operation style of an organization.
Modernizing the organization means a systematic drive for redesigning its operation, which results in adapting to the environmental changes, and predicaments which precedes these changes. Businesses and their organizational units respond differently to unexpected changes possibly leading to unfavourable events.
Some people withdraw, and others, in turn, find the change suitable enough to recover their strength. In a business undergoing a change process, it is a matter of overriding importance to make employees flexible by widely promoting the vision and strategy of change, and by minimizing the effects of disorganization.
Due to changes in their awareness, employees adapt quicker to changing situations while simultaneously maintaining productivity levels. Effectiveness of the implemented change depends on appropriate management and planning, and is based on a flexible, easily adapted structure.
What follows from making employees flexible is the business’s skill to react swiftly to change and a positive attitude to Change Management. Thus, Human Resources Management seems to be the core element of Change Management.
Change Management – 4 Main Types
According to Henry Mintberg – In an organisation there are periods of continuity in which established strategies remain unchanged and there are periods of change.
These changes may be of four types:
1. Incremental change
2. Piecemeal change
3. Transformational change
4. Flux change.
1. Incremental Changes:
These changes take place frequently and in a gradual manner. These changes are logical and involve little deviation from the past, for example – upgradation of existing technology, expansion of existing market etc.
2. Piecemeal Changes:
It is simply a change only in some strategies while others remain unchanged. For example – marketing strategy of an organisation is being changed because of growing competition without affecting other functional strategies.
3. Transformational Changes:
This type of the change take place rarely. But the nature of these changes is major and involves significant departure from the past e.g. adopting a new technology, diversification of organisation, operations etc.
4. Flux Changes:
When the strategies of organisation are changed without any clear direction it is known as period of flux. For example some new products are added to existing product line just for broadening.
According to David Nadler and Michael Tushman a management professor, organisational changes may be of 4 types:
1. Anticipatory changes
2. Reactive changes
3. Incremental changes
4. Strategic changes
1. Anticipating Changes:
These changes are systematically planned by managers and are made with an intention to take advantage of the situation which are expected to arise. The manager continuously monitors the situation and whenever he expects change, he attempts to make a change in organisation as to get maximum benefits.
2. Reactive Changes:
Such changes are generally made for survival of the organisation. These changes are forced on the organisation by unexpected environment pressure. In simple words if there is a change in external environment, reactive changes are made in organisation, to cope with this changing environment. Reactive changes some times are also made to exploit new opportunities as provided by changing environment.
3. Incremental Changes:
These changes are made with an intention to maintain functioning of organisation on its selected / chosen path or way. For example, an organisation has many sub-systems. These systems may be adjusted from time to time so as to secure smooth functioning of the organisation. Such type of adjustments are known as incremental changes.
4. Strategic Changes:
This type of changes is more basic in nature and has great influence on the overall functioning of organisation. It can alter, overall shape, size nature or direction of the organisation, for example Change in technology, changes in location of plant or diversification of organisational operations etc.
Change Management – Importance
‘Managing change’ refers to making of changes in a planned and managed or systematic fashion where the aim is to implement new methods and systems in an on-going organisation in a more effective manner. The content or subject matter of change management consists chiefly of the models, methods and techniques, tools, skills and other forms of knowledge that go into making up any practice.
The subject matter of change management is drawn from psychology, sociology, business administration, economics, industrial engineering, systems engineering, and the study of human and organisational behaviour.
The rate of organisational change has not slowed in recent years, and may even be increasing. The rapid and continual innovation in technology is driving changes to organisational systems and processes. Witness the startling growth of the Internet, which is enabling much faster and easier access to knowledge; add to this the increased expectations of employees as they move more freely between organisations. And, of course, globalisation has seen the tearing down of previous international market barriers. It is no wonder that relentless change has become a fact of organisational life.
While management design and implement strategies that deliver improvement in performance, they often neglect one key area for success -‘Managing the change’. Change management is important because understanding this change and its effect on the organisation and its people minimises disruptive aspects and enhances positive opportunities in the change process. These opportunities can include containing costs, realigning resources and respond more quickly to customer demands.
In spite of the importance and permanence of change, most change initiatives fail to deliver the expected organisational benefits. This failure occurs for a number of reasons.
One might recognise one or more of these in an organisation which are as follows:
1. Absence of a change champion or one who is too junior in the organisation
2. Poor executive sponsorship or senior management support
3. Poor project management skills
4. Hope rested on a one-dimensional solution
5. Political infighting and tough wars
6. Poorly defined organisational objectives
7. Changing the team through diverting to other projects
Failed change initiatives leave burned out employees, making the next change objective even more difficult to accomplish. It should come as no surprise that the fear of managing change and its impact is a leading cause of anxiety in managers.
Change management helps people to deal with change.
Three key benefits are:
1. Change management can help people to recognise how powerful the human dynamics are in any change effort, how they dramatically affect the final result and how management can use that knowledge to attain the best possible outcome.
2. A change management strategy can act as a map for guiding action.
3. Change management ideas and tactics can help the management to develop the relationship needed to maximise the effectiveness of a change.
Change Management – 7 Main Steps: Identification of Need for Change, Determination of Elements to be Charged and a Few Other Steps
The following steps should be followed to successfully implement a change:
Step # 1. Identification of Need for Change:
The management should carefully analyse the external and internal forces demanding change in the organisation. The information regarding change comes from the external environment and internal control systems. After this, it is essential to lay down the objectives of change. This will help in determining the time, pace and quantum of change. The clear- cut statements of objectives of change will also facilitate in planning strategies of change.
Step # 2. Determination of Elements to be Charged:
After identification of objectives of change, it is necessary to determine the elements which are required to be changed. Change may be required in the following elements – structure, technology and people. Structural changes relate to job design, departmentation, span of control, mechanisms for integration, etc. Changes in production techniques, plant and machinery, etc. constitute technological changes. Changes in organisational members are facilitated through changes in their attitudes, behaviour, interactions, informal groupings, etc.
Step # 3. Planning of Change:
Planning stage involves finding answers to questions such as – when to bring about change, who will be affected by change, how to introduce change and who will introduce change. The timing of introducing change must be favourable to the organisation, otherwise the whole exercise will become futile. Situation will be favourable when resources for change are available and the employees are receptive to change.
The strategies of change may involve communication of change, persuasion, coercion, etc. It is also of utmost importance to prepare change agents, i.e., individuals who are designated for bringing a change in the organisation.
Step # 4. Force-Field Analysis:
At this stage, the managers should identify the two types of forces – (i) driving forces which favour change and (ii) retraining forces which oppose change and want ‘status quo’ to be maintained. The strength of these forces should also be judged if the change is to be introduced effectively.
The implications of force-field analysis are as follows:
(a) When driving forces are stronger than restraining forces, the management should push the driving forces and overpower restraining forces to implement the change.
(b) When restraining forces are stronger than driving forces, the management will have to work hard to weaken restraining forces and strengthen driving forces to implement the change. This may take a longer time than under the preceding case.
Step # 5. Soliciting Workers’ Participation:
The management should discuss the proposed change with the subordinates because people who have an opportunity to participate planning for change will have some feeling of commanding their own destiny and not of being pushed around like so many pawns on a chess board. Participation will give the people involved a feeling of importance. They are likely to be more committed to the change if they are convinced about the rationale of change.
Step # 6. Implementation of Change:
There should be effective two-way communication in the organisation. Management should make every effort to let people know about organisational change. Internal announcements may be made through the medium of conferences and meetings, the company’s newspapers and bulletins.
These should include as much information as can be released. Managers at various levels should also pass on necessary information to their subordinates. Feedback should be encouraged to know the reactions of the subordinates. The subordinates should be given opportunity to ask questions and satisfy themselves about the proposed change.
In order to successfully implement the change, subordinates must be indoctrinated in new relationships, taught new skills, helped to change attitudes, given the information they need to understand where they fit into the picture and how they will be expected to operate under the new set-up. The educational process can be aided by training classes, meetings and conferences.
During the implementation stage, the management should provide effective leadership to the workers. Those who cooperate in introducing the change must be encouraged through incentives. Those who resist change might be persuaded or even punished to make them accept the change.
The management can also use groups dynamics for the introduction of change. A group can be effective in changing the attitudes and behaviour of its members particularly when it is attractive to the members and they have a strong sense of belonging to the group.
Step # 7. Appraisal:
Follow up action is also called for to see that change is taking place as planned. This will help in identifying and solving problems faced by change agents in the implementation of change. The feedback information from each and every department affected by the change efforts must be constantly monitored if the change is to be introduced effectively.
Change Management – 5 Main Strategies: Transformational, Rational-Empirical, Power-Coercive, Action-Centred and Environmental-Adaptive
There are different strategies and procedures that are used to categorise the change environment. The relevance of different change strategies is that they build upon different assumptions about human motivation and hence willingness to engage in change at a particular point of time. These strategies are not intended to be mutually exclusive. Rather they may each be appropriate at a different stage of a particular change process. Once the environment is identified, an effective implementation plan can be composed.
Five differing views are presented below:
1. Normative-Re-Educative Strategy:
This approach believes that changing the norms, attitudes and values of individuals will lead to changes in their behaviours. It is based upon core beliefs, values and attitudes. So change will occur as individuals change their attitudes and this leads them to want to behave differently. People are social beings and will adhere to cultural norms and values. Change is based on redefining and reinterpreting existing norms and values, and developing commitments to new ones.
2. Rational-Empirical Strategy:
This strategy is based on persuasion, and assumes that individuals are rational and as such they will follow their own self-interest once this is made clear to them. The benefits of a change therefore need to be highlighted and sold to the individuals as being of personal benefit to them. People are rational and will follow their self-interest once it is revealed to them. Change is based on the communication of information and the proffering of incentives.
This strategy is based on the application of power, with the belief that most people are compliant to those who have greater power. A potential issue with this process is that once the power is removed, individuals may revert to previous behaviours. People are basically compliant and will generally do what they are told or can be made to do. Change is based on the exercise of authority and the imposition of sanctions.
This focuses on the actions which include problem solving, looking at problems and focusing on remedial actions.
5. Environmental – Adaptive Strategy:
People oppose loss and disruption but they adapt readily to new circumstances. Change is based on building a new organisation and gradually transferring people from the old one to the new one.
Change Management – 2 Main Forces: External and Internal Forces
Forces of change can be classified in two categories namely:
1. External forces and
2. Internal forces.
1. External Forces:
There are a number of external forces which may bring changes, in the organisation and which may directly or indirectly affect the functioning of an organisation. The organisation has hardly any control on these factors.
The external forces are as under:
i. Socio-cultural forces – These forces mainly include changing socio-culture values, norms like education, population, literacy, traditions, customs, rate of urbanisation, leisure etc.
ii. Economic forces – Economic forces are complex and dominant for example economic condition of the country, market condition, demand for the product, competition, price determination, buying capacity of the customer, cost and benefit position, distribution of income, cost index, quality and availability of various resources and their distribution in various sectors of the economy.
iii. Political and legal forces – Organisations have to function under the guidance of political and legal forces. These forces include political system, ideology of ruling and major opposition party, political stability, morality and values, various legislations for business and industries, various govt. policies towards labour, capital investment, foreign trade, licenses etc.
iv. Technological forces – Technological forces may bring major changes in organisation. They include new techniques of production, procedure, innovative ideas of production process and in product, research and development, transfer of technology, rate of obsolescence etc.
v. Work environment forces – The work environment forces may also necessitate changes in organisation. These forces include customer’s loyalty, suppliers’ regularity, community attitude and recognition by society etc.
2. Internal Forces:
The internal forces include the following:
i. Top management, its philosophy and corporate policy.
ii. Retirement, promotion, resignation and transfer which are the key elements of the organisation.
iii. Changes in the perception, attitude, feeling, beliefs and expectations of employees of an organisation.
iv. Change in work schedule, allocation of duties, job contents, duty hours and composition of work group etc.
v. Change in internal environment of the organisation.
The above mentioned forces may either be the effect of the change in external environment or may be induced by management.
Change Management – 5 Important Models: Nadler’s 12 Action Steps, Kanter, Stein, and Jick’s 10 Commandments, Kotter’s Eight-Step Model and a Few Other Models
There are numerous models that help an organization to cope with change effectively and efficiently. Such models make sure that the changes do not hamper the smooth working of the organization. These models are known as planned change management models.
1. Nadler’s 12 Action Steps:
The 12 action-steps, proposed by Nadler in 1998, help in the reorganization of a plant, unit, department or an entire organization.
These action steps are as follows:
i. Getting Support of Key Power Groups – Refers to encouraging the influential groups and individuals to implement change in an organization.
ii. Getting Leaders to Model Change Behavior – Refers to selecting few well-performing individuals who can set an example for others by exhibiting the desirable change in their behavior.
iii. Using Symbols and Languages – Refers to using some types of signs that provide distinguished identity to organizations and their employees. These signs can be in the form of logos, slogans, and songs that evoke emotional responses from employees and increase their level of commitment.
iv. Defining Areas of Stability – Refers to identify certain areas that should not get affected by change. For example, any type of change should not affect the core values of an organization.
v. Surfacing Dissatisfaction with the Present Conditions – Refers to bringing the points of dissatisfaction to the fore, so that they can be identified and changed in a desired manner.
vi. Promoting Participation of Employees in Change – Indicates that a change cannot be properly implemented until the employees of the organization participate in it.
vii. Rewarding Behavior that Supports Change – Refers to rewarding the employees, who help in establishing change successfully.
viii. Disengaging from the Old – Refers to dissociating from old values and behaviors to give way to change.
ix. Developing and Communicating Image of the Future – Refers to building the future image of the organization with the help of desired change. In addition, employees should be made aware of future plans of the organization.
x. Using Multiple Leverage Points – Refers to identifying the areas in the organization where the opportunity for change lies. After identifying such areas, the change can be implemented.
xi. Developing Transition Management Arrangements – Refers to the need to maintain a mechanism that can help in the smooth implementation of change.
xii. Creating Feedback – Helps the employees to identify, acknowledge, and deal with a problem faced during change implementation.
2. Kanter, Stein, and Jick’s 10 Commandments:
Kanter, Stein, and Jick gave 10 commandments that help in implementing and managing change in an organization.
These commandments are as follows:
i. Analyze the need for change
ii. Create a shared vision
iii. Separate from the past
iv. Create a sense of urgency
v. Support a strong leader role
vi. Line up political sponsorship
vii. Formulate an implementation plan
viii. Develop enabling structures
ix. Communicate and involve people
x. Reinforce and institutionalize change
3. Kotter’s Eight-Step Model:
Kotter suggested a change management model, which consists of eight steps that should be taken for the successful implementation of change within an organization.
The steps are explained in the following points:
i. Establishing the Need for Urgency – Implies that the management should perform market analysis, determine problems and opportunities, and use techniques to establish the need for change
ii. Ensuring a Powerful Change Group – Refers to the presence of a powerful group that induces change in an organization
iii. Developing a Vision – Refers to the process of visualization that helps employees to focus on change
iv. Communicating the Vision – Refers to the process of making people understand about the changed vision of the organization
v. Empowering Staff – Refers to ensuring that employees have sufficient resources and skills to implement change
vi. Ensuring Short-Term Wins – Refers to motivate people for their small successes while implementing change
vii. Consolidating Gains – Refers to implementing organizational policies and processes that instill change and reward the people who engage positively with the change
viii. Embedding the Change in the Culture – Refers to incorporating the change in the culture of the organization to help employees in adopting change
4. Lewin’s Three Step Model:
According to Lewin, the process of managing change includes three steps. These steps ensure the successful implementation of change in an organization.
Following points briefly explain the three steps of Lewin’s change management model:
i. Unfreezing:
Refers to recognizing the necessity for change; identifying the old values, behavior, or organizational structure; and dissociating from them consciously. In this step, the organization is quite stable. Unfreezing involves casting aside existing value systems, managerial behaviors, or organizational structure so that new ones can be learnt.
It creates the need for change that can be brought about by performing the following three actions:
a. Increase the strength of forces that lead to change
b. Decrease the strength of forces that resist change
c. Change a resisting force into one supporting the change
ii. Changing:
Means that the organization replaces the old values, behavior or organizational structure with the new ones. It is very important to forget the old structure to establish and implement a new paradigm. This is the action- oriented step, where the planned change process is implemented.
iii. Refreezing:
Indicates the last step that gives rise to a new social system to make change permanent by including it in all formal policies and procedures.
5. Action Research Model:
Action research model helps in generating and attaining knowledge used by managers to define the desired objective of an organization. The managers formulate the action-research model that helps them in selecting the change action based on the desired future state of the organization and systematic collection of data.
There are various techniques and practices of action research, which help the managers to unfreeze an organization, move it to the new desired position by undergoing change, and refreeze it again so that the benefits of the change are retained.
These steps can be explained as follows:
i. Diagnosing the Organization:
Refers to the first step in action research that requires managers to identify the existence of a problem and acknowledge the fact that some type of change is needed. The need for change arises because of the gap between desired and actual performance. Diagnosing the organization can be a complex process.
Managers have to carefully collect information about the organization to diagnose the problem correctly and get the employees’ commitment to the change process. At this stage, it is important for managers to collect information from people at all levels in the organization as well as outsiders.
ii. Determining the Desired Position:
Refers to identifying the organization’s desired position and planning alternative courses of action to attain that position. In such a case, the organization’s strategy and structure needs to be built, in accordance with the desired state.
iii. Implementing Action:
Refers to the third step that further involve three steps, which are as follows:
a. Recognize possible barricades to change that the managers might come across during the change process.
b. Decide who will be responsible for actually making and managing changes. The choices are to employ external or internal change agents.
c. Decide which specific change strategy will most effectively unfreeze, change, and refreeze the organization.
There are two categories of changes, which are as follows:
(1) Top-down Change – Refers to the change that is implemented by managers at the top management level in the organization
(2) Bottom-up Change – Refers to the change that is implemented at the employee level and tends to rise till it reaches entire organization
iv. Evaluating the Action:
Refers to measure the degree to which the changes have accomplished the objectives. Afterwards, the management decides whether or not more change is needed to achieve the objectives.
v. Institutionalizing the Action Research:
Refers to incorporating change in the policies, procedures, rules, and regulations of the organization so as to make the employees habitual of the implemented changes.
Change Management – Tools for Facilitating Change in Business
There are many methods and techniques which aim is to improve the business management process. Efficient change introduction, in terms of developing the organization of the future, requires applying the modern tools for operationalizing change.
The major tools include the following:
1. Spin off,
2. Lean management,
3. Outsourcing,
4. Reengineering.
Tool # 1. Spin Off:
A tool known as spin off means improving the organizational form of the business by simplifying its internal structure through disintegration (“spinning off”) and removing the redundant structural elements.
In order to do this, certain entities of the organizational units are singled out from the business organizational structure, and business entities of various independence levels are established on their basis. The areas of the business operation, which are not directly connected with its core activity are separated in the first place.
Tool # 2. Lean Management:
Lean Management, or so-called slimming the organization down, is one of the numerous methods and techniques for improving the business management process. Its role is to reduce costs systematically, improve quality and to care about the customer. It constitutes an inventive method of modern business management, particularly in the restructuring process.
The term “Lean Management” was coined by three scientists: J.P. Womack, D.T. Jones and D. Roos from the Massachusetts Institute of Technology in Boston, however S. Toyoda, K. Toyoda and T. Ohno are considered the authors of the method.
In their famous study “The Second Automobile Revolution” published in 1991, they examined the reasons for the emergence of the new concept, and the effects of its implementation in Japanese businesses.
Furthermore, the achieved results were compared with the European and American organizations. Having analyzed the specific businesses, the Japanese company Toyota Motor Corporation with its Toyota Production System was deemed outstanding.
When scrutinizing the production process in this company, the authors noticed that the reduced expenses in this department were at the same time accompanied by the increased production.
Therefore, the system was acknowledged as the first lean production system and named as “Lean Management”.
According to J. Penc, the essence of Lean Management (“slimmed management”) is to “slim” the business by eliminating any unnecessary processes, simplifying the organizational structure and improving any design, production and service mechanisms.
In turn, J. Lichtarski defines the method as follows- “Business management in line with Lean Management concept is a gradual and constant (endless) process of streamlining the entire organization and its relations with the environment. The concept may be freely translated and interpreted as business slimming, slenderizing or reducing”.
Lean Management constitutes a method where, first and foremost, any waste should be avoided, especially if connected with an activity which requires labour expenditure and which does not bring profits adequate to the incurred costs.
Tool # 3. Outsourcing:
The word “outsourcing” consists of two English words – outside – external and recourse – resources, stock, and means. Therefore, outsourcing means transferring a function which was up to now performed by the employees of a given business, to an external company, that is to so-called service provider (outsourcer), who does not have any direct relations with our business, but specializes in a particular area.
Thus, outsourcing means using external resources, contracting the businesses’ own core processes out to third-parties, as these processes will be carried out more effectively than they would be by using the businesses’ own means. Considerable freedom of choice of how to perform a particular function plays a vital role in this definition of outsourcing.
It distinguishes between outsourcing and other relations among contractors, where a contractor is instructed by a contracting party how a task is to be performed. In the outsourcing model, the contracting party expects the specified results of providing a given service, but the carrying out of the whole process lies in the contractor’s hands.
Initially, outsourcing was used in all non-core business activities, such as renovations or keeping the offices clean. Nowadays, it is believed that the business should contract out everything that can be done cheaper, better and faster by someone else. It was Henry Ford who, first remarked in 1923, on this fact- “If there is something we can’t do more efficiently, cheaper and better than our competition, there is no sense in doing it and we should employ someone to do the better work for us”.
Thanks to this, the business may focus its resources and financial means on these core activities in which it gains the competitive advantage. The essence of outsourcing as a method of the organizational business restructuring is singling out certain operations from its structure.
Offshoring should be remarked on at this stage, which consists of outsourcing the selected business processes with the transferring of processes done offshore, while maintaining the same customer group. In most cases this involves the production, service or ordering process, and its main goal, as in the case of outsourcing, is to reduce the costs of business operation.
The process of singling out may be caused by the decision on making an investment in another country, or by contracting out a given process to an international contractor.
In general, outsourcing aims at increasing the effectiveness and efficiency of the business operation. This overall purpose comprises various partial goals, of mainly strategic character. The high-level strategic goal of outsourcing is that the parent company should focus on its core activity which decides on its competitive position and prospects for growth.
This allows for greater freedom when choosing partners and determining conditions of cooperation with them, and thus, gaining access to know-how, which is impossible to be achieved by the business itself.
Reduction of the number of operational problems resulting from outsourcing enables the management of the parent company to focus on strategic problems. In addition, outsourcing should improve the acquisition of the market goals, e.g., improving the market position of the parent company, increasing its scale of operation, diversifying or concentrating market operations.
This should lead to more successful achievement of economic goals: increasing revenues, reducing costs, and, following this: improvement of economic results and limiting the economic risk of the conducted operation. Outsourcing results in reducing the organizational structure of the parent company, which entails simplifying the organizational structures and procedures, and thus, improving management.
In order to take advantage of outsourcing, a number of necessary conditions must be met. The key premise is to accept the decision of the founding body and the management of the parent company on outsourcing the particular tasks.
Tool # 4. Reengineering:
The essence of the Management methods constitutes the fact that they constantly evolve – they emerge, and subsequently develop. However, as they emerge, they encounter a skeptical approach from management method specialists. At present, reengineering, or to be more precise, the Business Process Reengineering method (BPR), is in such a situation.
Reengineering may be defined as “a method of profound transformations of overall business processes in order to optimize the main determinants of effectiveness, that is- the quality, cost, completion date and customer care, thanks to applying and using the modern knowledge and management methods from the fields of Economics, IT and Psychology”.
Another definition is presented by L. Niezurawski- “Reengineering is a method of radical designing and modernizing of business management processes in order to attain vital economic effects and much better customer care”.
W.M. Grudzewski and I.K. Hejduk, the authors of the book entitled “Design Methods of Management” System”, define reengineering in the following way- “the fundamental rethink from anew, and radical redesign of business processes which leads to achieving dramatic (critical) improvements – according to the skeptical, contemporary measures of performance (such as- cost, quality, service and speed)”.
Change Management – As a Key Management Competence
In businesses oriented towards continuous development, change management is a fundamental competence. Change management may have originated in the humanistic system of values, which implies a man is versatile and creative. Such an approach to making transformations is not idealistic. This philosophy assumes that a human mind is the most effective instrument which allows the business to stand up to reality.
Thus, it is employees who are able to absorb the dynamic complexity, because it is only them who are able to find solutions by looking ahead, shifting the problems’ boundaries, investing in themselves, and by formulating a policy. Therefore, they should have a free hand and be willing to take on responsibility.
They may acquire these qualifications as a result of creating efficient teams or by having the incentive in the form of delegating responsibility, through creativity and the ability to learn continuously, as well as having easy access to information on the strategy and possible achievements.
At this stage, certain vital issues come to mind, such as: humanization of work, joint participation in management, searching for remedies. Change management is an attempt to solve these immensely complex issues, heading towards reaching such a state, in which the business will be able to react promptly to changeable reality.
In the nearest future, the competitive ability of the business will be much less dependent on the implementation of new technologies, methods or remarkable innovations, than – along with the total customer focus – on personal commitment of employees.
An employee will only then become the most important business asset if – while applying the management methods based on partnership the dynamics of their development and their own responsibility is being supported.
Presently the employee should not content themselves only with performing tasks which are entrusted to them, but they should endeavour to contribute something new to their job, something that is an added value, he should try to make decisions independently solve problems or take on responsibility for the results.
Achieving success requires from the organization to learn to recognize and develop its strategic intellectual resources. Thanks to this, the business assumes characteristics of the organization oriented towards self-development.
Businesses are interested in learning innovative work methods and independently implementing them into practice. This may be closer illustrated by the statement of S. Covey, the founder of the world Leadership Centers- “People possess great talents, abilities, intelligence and creativity.
If there is a unanimity as to the common vision and the common mission, you start to direct your own consciousness towards these people. Individual goals will merge with the business mission, and once they overlap, a high synergy effect will arise. Thanks to this, people become courageous enough to disclose their hidden talents, abilities and creativity”.
In order to achieve these goals, it is necessary, first of all, to change the management style. The old organizational form needs to be removed.
Some businesses organize for their employees special programs concerning Change Management. Their main objective is to improve the ability to forecast changes so as not to fall into a rut when making decisions. Asea Brown Boveri (ABB), a Swedish-Swiss electronic company, has undertaken actions towards reorganization, which were aimed at facilitating division line, and, as a result, a better concentration on customer and market needs.
The new approach to organization will contribute to strengthening the operational advantage of the matrix structure, as well as will making it possible to react even faster to the market events. Often a simple restructuring in not sufficient to transform the branches of the business operation in order to strengthen its market position. Therefore, it is necessary to thoroughly restructure the organization. However, one must be courageous and believe that fortune favours the bold.
An introduction of changes is a process which requires looking from a wide perspective not only at internal processes taking place within the organization, but also at situations happening in the external environment.
Each attempt to introduce change in the business is a specific test of strength. According to the Force-Field theory by K. Lewin, each behaviour is a result of balance between the driving and restraining forces. This situation is illustrated in Fig. 2.1.
In most cases, the drive for change occurs because of two reasons- firstly, people and their reluctance to change their fixed attitudes or behaviors; secondly, leaving people on their own in such a situation they tend to go back to the patterns and behaviors they were used to. The change management process should take into account the change of the business structure, which entails changing the way of operation of all its areas.
Change implementation in the business should facilitate solving of the existing and future problems. The change should result in strengthening of the organization and moving it to the higher level of operation. By way of example, four ways of introducing change in the business may be distinguished, which are presented in Fig. 2.2.
Eliminating problems by transformation is the major determinant of the direction and scope of modification in the business. It is essential to leave the traditional method of problem solving and to look for a potentially better solution than the one existing at present.
A manager of the future should- be able to associate facts quickly, be flexible in handling information, be persistent, diligent and persuasive. Each transformation of the organization involves high energy levels as there is always a state of inertia within the system which should be overcome.
No change is being implemented spontaneously, there must be a force that drives it or initiates its implementation. Power may be such force as it may influence others towards a direction of the desired change. Power, the prime mover, exists at all business levels, therefore understanding it is the foundation of the change process.
However, before any change is implemented, current methods and behaviour patterns must be abandoned. In order to act effectively, the change in behaviour should be well justified and preserved, otherwise the organization and its employees, who are in the state of permanent transformation, will fail to achieve anything. It is vital that there is enough time for the new behaviour to stabilize.
From a strategic point of view, mission and strategy should complement and harmonize with each other. Each of the above mentioned elements represents the reality which should be created by an entrepreneur.
When merged with each other, they transform the desire to improve the world into the efficient tool of change management, into the instrument which merges the entrepreneur’s vision with the current abilities and competences by proposing a vision in a way which makes it easy to present it to other people.
Organizational entrepreneurship, which is directed towards implementing changes, will not emerge as long as the management is not ready to challenge the existing methods of achieving success.
The revival process constitutes a collection of suggested projects which aim at eliminating barriers to: revival, experimenting, developing strategic foresight, building the learning organization, restructuring key competences and at informing people of new possibilities in a way that allows the organization to reach critical mass.
Change management is a key competence of a manager. The list of necessary qualifications of the present managers is constantly growing. The most popular characteristics regarded as the fundamental qualities of a manger are as follows: innovative character, spirit of enterprise, analytical brain, management skills, ability to stay calm in a critical situation, and the ability to develop a flexible model of work by creating a “listening environment”.
A good manager is also able to analyse the environment and to understand the processes which occur therein. The change manager should combine various skills, become a leader, a strategy-maker, a coordinator, a promoter of innovation and the driving force behind entrepreneurship.
Projects with thorough changes, which are conceived from concepts developed at the top of the business hierarchy, must be directed downwards – towards the foundation of the organization. For this reason, one of the change requirements is employees’ participation as early as at the stage of planning changes and then their practical implementation.
It is hard to obtain the employees’ consent to the proposed changes and to make them vote for implementing a far-reaching transformation in the organization. It is advisable that at the initial stage, the projects of vital changes are managed by the managers of higher level, who are committed to the case.
It is quite easy to make the following declarations in the general business strategy, e.g.,: “We have to become a profitable business”, “Our target is to be a top player in the industry”, etc. It frequently happens that within the first few months of the duration of the change program, the management’s level of energy falters when faced with the results the change may bring.
In this event, it is necessary to analyse the reasons for employees’ resistance to change. The present approach to the perception of the social resistance origins from structuralizing the social system on which the plans and actions of the business development depend.
No matter how the introduction of change is hindered, the management must resume their efforts and obtain agreement on at least three fundamental issues, that is: on the sense of introducing the change (“Why do we have to go through this”?), on the scope and scale of transformations (“Which processes are we going to reorganize?” or “To what extent will the business operation change?”), and on responsibility for the change management (“Who will be responsible for the change project and its results?”).
It is a good practice to make the effort and try to answer these questions at the moment of initiating the change program. Managers often have the ability and the possibility to act, deluding themselves that their endeavors are commonly accepted.
Competition among the managers is increasingly fierce, which is crucial for the process of change implementation. However, this process requires not only the best managers, but also the acknowledged experts.
Managers undertake actions which aim at attaining the planned goals. They may be described within four specific management functions, i.e.- planning, organizing, leading and controlling”. The continuous strive for high quality management at different business levels makes it possible to gain experience in the field of management techniques and to make them more effective.
Obligations and actions which fall within a job description, and are performed by the employees, who are at the same time members of the organization, are rapidly changing; this phenomenon is often called a “new labor”. It regards, to a lesser extent, the learnt by heart and repeated actions, but, to a greater extent, solving problems.
Selection of an adequate manager, responsible for the change process in the business or in its part is a critical determinant of success of the whole undertaking. Efficient change management in the business requires specific management skills and competences.
First of all, such managerial qualities are desirable, which allow for resolving conflicts and influencing the employees’ behavior during the change implementation.
The basic characteristics should include:
i. Ability to communicate with all the staff,
ii. Reliability and respect among employees,
iii. Accepting, understanding and identifying oneself with the set direction of changes,
iv. Ability to understand problems and reasons for them,
v. Ability to think analytically,
vi. High position in the business hierarchy.
Change Management – As the Form of Business Transformation
The world which surrounds us marches inexorably on, developing everything it encounters. This process results in the emergence of new solutions and the development of the existing ones. Forming of new culture and behavioral patterns, or labor and social standards constitutes a side effect.
Furthermore, change of the character of the contemporary organization leads to the emergence of new forms of running the business, which have to conform fully to the current requirements.
Modified organizational forms have a various formal scope and become less and less formalized. All these things require the businesses to adapt to changes.
Businesses of the future should focus on:
i. Team work,
ii. Continuous learning,
iii. Business management through projects,
iv. Effective communication and cooperation,
v. Partnership with customers, suppliers and competitors,
vi. Innovation.
Challenges with which the businesses of tomorrow are confronted, exceed today’s knowledge and experience of managers. Preparing the organization for challenge-he future requires a revolution in the way of managing it. These changes need to have so vast a range, similar to that of the industrial revolution which brought about the development of the modern industry.
Nowadays the businesses face a serious challenge of meeting new trends in economic processes, in which the following will prevail:
i. Employees with broad knowledge will constitute the business’s assets,
ii. Educated employees will be the majority of staff,
iii. Large, branched businesses (corporations) will set-up around alliances, joint ventures, and minority interests, know-how contracts, instead of around production lines or service lines.
The primary goal of managers of our time is to prepare the businesses to operate in the 21st century.
Therefore, the changes is all areas of operation (resources, functional subsystems) should be carried out, taking into account three main factors:
1. Employees’ education should be oriented towards:
i. Creating the ability to use information,
ii. Fostering creativity and the need for change,
iii. Developing competences and team cooperation,
iv. Strong need for achievement,
v. High self-esteem.
2. Management style should facilitate:
i. Independence of employees,
ii. Granting more rights to employees and enabling them to make independent decisions.
3. Organizational solutions should support the greater flexibility of business operation by means of:
i. Remodeling of traditional structures,
ii. Creating dynamic networks of corporate relations inside and outside the business (applying the Project Management method),
iii. Breaking the business into “mini-businesses”, which cooperate with each other on commercial basis.
A new form of work, i.e., learning, is becoming prominent in the organizations of the future. Until recently, it was thought that education or supplementary education may only take place in lecture halls. Currently, the learning process is becoming fundamental to every productive action.
If a learning organization renders its information accessible and continuously trains its employees, not only to broaden their knowledge, but also their practical skills, it develops their talents and, at the same time, promotes the ability to adapt to the changing reality and to be flexible towards it.
“The gist of the learning organization is to change the way of thinking from perceiving oneself as an individual who is independent from the external world, to seeing oneself as an individual who is inextricably linked with this world, from perceiving errors as made by other people or caused by other situations, to seeing the way one’s own behaviour causes problems faced by the others. The learning organization is a place where people constantly discover how they contribute to creation of the world that surrounds them”.
In order to ensure the continuity of operation and the possibility of further development, the business must provide an adequate training system to all key employees. It should be stressed at this stage that the businesses should not send their employees away to participate in a few days’ trainings, but they should teach them systematically in their place of work, keeping up with the market dynamics and competition.
Nowadays, such system is known as coaching or mentoring, and it consist of providing a service by better educated colleagues, superiors or hired consultants.
The outcomes of numerous organizations prove that the business potential lies in the continuous education of leaders and managers. This constitutes quite a contrary point of view to the one that measures the strength of business management in terms of academic titles, directors’ posts and graduate students with a degree in Management.
Without prejudice to these documents, it should be stated that this is only a half of the equation which defines the learning organization. Every adequate and thought-out action of the business presents the opportunity to maintain the continuity of development and education of its less-experienced employees.
Unfortunately, it happens very often in practice that the specific character of a team’s work does not allow for devoting time to train those who will take over the helm in the future.
Education within the learning business should have a multifaceted and interdisciplinary dimension. In defiance of unquestionable benefits of thorough education in a technical or management major, it enables an experienced person to exploit only half of their abilities, as well as failing to prepare them to perform complex tasks, with which they are presented nowadays.
Modern education concepts do not have much in common with the former knowledge acquisition. Education oriented towards the customer, ventures and coaching will be one of the major forms of qualifications in the future.
The most important issues which need to be dealt with are as follows- the qualifications of the information society, forming the learning organization in terms of the educational purposes, developing multimedia networks and quality standards, as well as the effective transformation of the business qualifications into competitive advantages.
The pace of change, and the resulting aging of knowledge, are particularly significant. Therefore, in the modern organization, which gains its competitive advantage on the basis of the ability to constantly transform itself, the importance of Knowledge Management becomes crucial, primary in relation to other competences.
“Using percentages, it could be said that human capital is exploited by 10-15% on the average. This value is definitely too small in relation to 70-80% of capital not actually working”. Thus, this capital needs to be developed, invested in and perfected. As its value outdates fast with every business incurring high costs – the opportunity cost.