Abstract
Change management is one of the topics in business, which have been accorded a wide range of coverage. This is mainly based on the fact that change management has been found to have a profound impact, with regard to the performance and future of any business organization around the world.
Although it has been described by a host of authors and business experts, change management can generally be defined as a systematic shift from the current status of a business organization or an individual to a more desirable state. Even though this term exists, it has turned out to be ambiguous to some people based on the aspects, which it encompasses (Goldsmith & Carter 2009). These aspects include but not limited to adaptation to change, control and implementation of change.
Introduction
This report gives an analysis of Whirlpool Corporation with regard to change management. It is divided into various segments to ensure that all aspects of change management, which relate to the firm, are addressed in a concise manner. For instance, the report will give a summary of the case, by featuring critical facts. Under this, the analysis will focus on specific change that was introduced by the company, together with factors, which triggered the adoption and implementation of the change.
Besides this, the report will feature relevant change management issues, which are faced by the company. Under case analysis, appropriate change management models and theories will be applied by referring to authentic literature like books and journal articles. This will help in understanding the manner in which change at Whirlpool Corporation is being implemented and received.
Home Appliance Industry
The industry emerged in the early 20th century with a few home appliances like refrigerators, washing machines and temperature controlled stoves among others. However, most of these appliances had an array of disadvantages as others like the refrigerator contained explosive substances. In addition, the Great Depression and World Wars experienced during the 20th century also affected the growth of the industry, as it picked up in early 1950s (Rivkin, Leonard & Hamel 2006).
Due to emerging technology, most home appliances became attractive, effective and cheaper as compared to earlier years. Through regulations, home appliances were designed based on energy saving principles. Additionally, they were environmental friendly through compliance of manufacturer with laid rules and regulations (Goldsmith & Carter 2009).
With regard to consumers, most of them had diverse tastes and preferences. However, some were influenced by residential constructors who fitted houses with home appliances, mostly obtained from companies with fair prices. Nevertheless, customers got involved in direct purchase of the products during replacement of worn-out appliances (Rivkin, Leonard & Hamel 2006).
During this time, most of them were influenced by their friends and media advertisements, with a few opting to get details online, even though the channel had not advanced as it is today. Customers were also interested in special features of particular appliances, say efficiency, energy saving, reliability and warranty among others.
The industry has also experienced change in the manner in which products reach their customers in various parts of the world. This is based on the fact that the industry has continuously responded to changes, which take place within the market. For example, specialty stores were common in 1960s, accounting for more than fifty percent of home appliances that were being sold in the United States. Mass merchants included Sears, Montgomery Ward and J.C. Penney (Rivkin, Leonard & Hamel 2006).
On the other hand, independent stores, became a diminishing channel as some of them became bankrupt, thus playing a less influential role in the market. It is also important to note that most stores adopted varying approaches in selling appliances. As a result, they offered different prices even though manufactures influenced retailers through incentives and sales promotions.
Like in any other industry, home appliance industry has witnessed competition since 1940s. Manufacturers resolved to any means possible to outdo each other in the market. Mergers and acquisitions were common for the purpose of gaining dominance in the market.
For instance, Whirlpool bought KitchenAid in 1986. As a result of this trend, 93% of home appliances were being manufactured by four companies in 1998. General Electric remained to be a major player in the market, serving up to twenty eight percent of the American market (Rivkin, Leonard & Hamel 2006).
Whirlpool Corporation
Whirlpool Corporation is a multinational manufacturer of major appliances, based in Michigan, United States. The company has approximated annual revenue of $18.4 billion, more than seventy thousand workers and more than seventy centers around the world, which are involved in manufacturing and research. It has been noted that Whirlpool Corporation markets its products in almost every country around the world (Whirlpool Corporation 2012).
The company was founded in the year 1911, and became the leading manufacturer of home appliances after surpassing Electrolux. Throughout its business history, Whirlpool Corporation has undergone tremendous transformation in order to fit in a competitive business world, which presents new challenges that have to be confronted.
Due to these demands in the market, Whirlpool Corporation adopted change management attitude, which has consistently propelled it to become one of the leading companies in the world today (PENSKE 2012). As it shall be seen in the following segments of this report, certain factors have contributed to this trend.
Anticipating the change
Like many other companies around the world, Whirlpool Corporation experienced the need for change management even though there were hitches, which hampered these efforts. In 1998, the executive committee of the firm launched “Brand-Focused Value Creation,” which was aimed at shifting the company’s attention to the needs of customers.
In essence, the company was headed towards delivering better solutions to its customers and increasing their loyalty to products, thus benefiting shareholders. However, this was not an easy task as the organization had to face an array of challenges (Whirlpool Corporation 2012).
Forces against change
It is important to note that by the time the executive committee of the firm unveiled the “Brand-Focused Value Creation” strategy, similar change efforts had failed twice in 1987 and 1990. According to Dave Whitwam, the company had resisted being converted into branded organizations in 1987 before resisting the “Dominant Consumer Franchise” initiative in 1990. These efforts targeted customers as the management believed that customers found it hard to penetrate the organization (David Whitwam 2012).
This was based on the fact that Whirlpool Corporation had concentrated on operations since it was an engineering-oriented company without paying attention to the need for marketing its products in a competitive business world.
Although there was resistance with regard to customer needs and brands, Whirlpool Corporation experienced immense growth through globalization, quality improvement and cost reduction. However, in understanding this change management issues at Whirlpool Corporation, it is equally important to consider the business environment so as to identify some of the forces within the marketed which compelled Whirlpool to initiate change strategies.
Forces for change
As the Chief Executive Officer of Whirlpool, David Whitwam believed that there was need for the company to implement change management in order to thrive in the market (David Whitwam 2012). The following are some of the factors which contributed to this move:
Globalization
Whitwam noted that domestic competition, which existed and the entry of Electrolux were enough reasons to implement change at Whirlpool. The market was basically being dominated by Whirlpool, General Electric, Maytag and White Consolidated, which had been acquired by Electrolux (100 Years at a Glance 2012).
As the chief strategist of the company, Whitwam was convinced that the industry was getting global, whether the players shifted their operations to a global scale or not. As a result, Whirlpool’s leadership consolidated efforts to redefine the company’s globalization ideas. Whirlpool adopted the “Reaching Worldwide to Bring Excellence Home,” a strategy that was to augment the presence of Whirlpool in major markets around the world.
To enhance its presence in all markets around the world, Whirlpool kicked off by acquiring Philips in 1991, making it the largest manufacturer of home appliances in the United States and the second largest in the world. It further expanded to Asia, Europe and had a good relationship with Brazil (100 Years at a Glance 2012).
y 1998, Whirlpool operated forty-four facilities in thirteen countries around the world. Although the company registered this major success, it also had a share of losses. It experienced stiff resistance in Europe, experienced a failed joint venture with a Chinese firm and incurred huge losses in Asia and Latin America.
Whirlpool’s globalization strategy was not easy even in manufacturing. Due to existing differences in manufacturing practices and performance, products from different facilities around the world had variations (Goldsmith & Carter 2009). As a result, the company spent most of its time and resources establishing a global operating platform. The company however remained aware of its competitors. It analyzed its competitors’ products as a way comparing the cost of production.
As mentioned before, whirlpool produced a wide range of brands as a way of meeting the global market needs. In particular, four major brands were manufactured, which were: the Flagship, KitchenAid, Roper and Kenmore (Rivkin, Leonard & Hamel 2006). To achieve this, it partnered with several distributing channels.
For example, independent appliance channels specialized in Whirlpool and KitchenAid brands. Other channels included Sears, Lowe and Costco. However, Sears was given the highest priority among all the distributing channels.
To achieve this target, the company required effective support functions. Its organization remained intact with a marketing team at all corporate headquarters. The company experienced a low turnover in the human resource department, with manageable costs in promotion, and research and development.
The need of identifying and nurturing the values and culture was also paramount as Whirlpool scaled to higher levels of performance in the entire industry (Goldsmith & Carter 2009). This was led by Nancy Snyder, who was serving as the director for organization and leadership change. The process was mainly done through workshops and trainings by managers, emphasizing four core values: respect, integrity, teamwork, and customer insight.
Value creation was highly emphasized as the company took the path of brand. As a way of executing this, the executive committee launched the “Dominant Consumer Franchise,” whose main objective was to win the confidence of final consumers in choosing Whirlpool products. Through case studies, market surveys, and ethnographic studies, the company was able to develop customized products, which fitted the needs of different customers around the world.
Above all, costs and quality were well checked in augmenting operational excellence (Rivkin, Leonard & Hamel 2006). Task forces were established, which addressed employee pride, customer passion and shareholder performance.
The findings of the task forces were synthesized as a way of understanding the kind of change that was relevant to Whirlpool Corporation. It was found out that Whirlpool needed to produce innovative branded solutions in order to win the loyalty of its customers and command price premiums within the market.
Change Process
In order to spark change at Whirlpool, the executive committee initiated efforts, which had not been witnessed in the company’s history. The backbone of this was to emphasize on innovation throughout its operations and everywhere around the world. Gladiator GarageWorks was one of the innovative ideas (Rivkin, Leonard & Hamel 2006). Others included Personal Valet and Inspired Chef. Since its introduction in 1998, the shift to adopt innovative operations picked slowly as managers assimilated it into their operations.
Nevertheless, some managers confessed that they did not understand the Brand-Focused Value Creation strategy that had been proposed by the executive committee. The principle behind the strategy was to promote customer loyalty even though it wasn’t clear how innovative operations would be incorporated on a global scale.
Snyder and Whitwam found no conviction in some innovation ideas, which were being practiced by several companies. Some of these included the “great man” theory of innovation or the “skunkworks” theory. The challenge was therefore how to embed innovation in the organization as a change strategy.
Starting the change Process
As the vice president of innovations, Snyder was tasked with rolling out an innovation platform. This was launched simultaneously in three of Whirlpool’s largest markets: North America, Europe and Latin America. Training of managers and other individuals was crucial in ensuring that they understood the meaning of innovation and its projected impact in the future operations of the company. However, most people expressed uncertainty in the strategy.
Innovation trainees were referred to as “I-Teams,” and were divided into three groups (Rivkin, Leonard & Hamel 2006). The first I-Team took nine months before employees resumed their jobs, the second took an extra three months training while the last I-Team was converted into I-Consultants in order to teach the rest of the workforce about innovation. The innovation was also introduced to two hundred Whirlpool leaders who converged in Washington, D.C. in 2000 for an annual strategy conference.
This gave the senior management a taste of the role of I-Teams in implementing change in the company. Other change strategies were adopted as Whitwam used senior leaders of the company to form I-Boards, whose main function was to support I-Teams in every region. Their support was to include setting of goals, allocation of duties and reviewing of innovation ideas (Rivkin, Leonard & Hamel 2006).
This approach seemed to work as I-Team geared towards their task. Methodologies were adopted, to help the company management in detaching from conventions of the industry, generate new business ideas and transform ideas into opportunities. They emphasized the fact that consumers acquired appliances for functional and not emotional reasons.
Resource Allocation
As Whirlpool geared towards change management, it was clear in the minds of leaders that resources were needed in order to drive the company’s innovative agenda. As a result, the company allocated a total of $400 million to capital investment in 2001. This was shared to regional facilities where each received 10% of the allocation, which was to fund innovation-related capital investments. The amount was raised to 20% in 2002 (Rivkin, Leonard & Hamel 2006).
Knowledge management
There was need to track innovation efforts and disseminate knowledge to other regions from I-Teams. This was initially done using I-Pipe software, which had been adopted from Strategos.
The software showed the progress of innovation, by identifying the number of projects in four different stages, which included business concept, prototype, experiment and scale-up (Rivkin, Leonard & Hamel 2006). The information was available to all innovation leaders through the internet and also to other employees of the company via the firm’s intranet.
This was followed by the introduction of the Innovation E-Space, a suite that allowed online visitors to go through a tutorial on innovation, learn how to formulate an idea, interact with innovation mentors and share ideas with other employees through interaction. These efforts were aimed at managing knowledge at Whirlpool Corporation. The company hired a knowledge manager and ensured that every regional branch had a knowledge leader.
Other change efforts
Besides innovation, Whirlpool considered other efforts in supporting the Brand-Focused Value Creation strategy. For instance, labels on product families were adjusted to carry customer activities as opposed to product lines. These activities included food preparation, food preservation, and fabric care, as the efforts emphasized the Whirlpool brand.
On the other hand, efforts to improve cost and quality in manufacturing operations were intensified. As a result, the firm continuously registered gains in total cost productivity (Rivkin, Leonard & Hamel 2006). The price of Whirlpool products was also checked as a way of winning customers.
Although the company had gained tremendously by the year 2001, David Whitwam saw it as the start of an unfinished journey. During that short span, Whirlpool had experienced growth and transformation like never before since Whitwam joined the company.
Most frontline employees were full of energy as several change management strategies were implemented by the executive committee (Rivkin, Leonard & Hamel 2006). The CEO was therefore concerned with the company’s middle management in the event of an economic recession since it was the most vulnerable phase of management.
Brand Focus
Even though there were several innovative efforts at Whirlpool during late 1990s, it was just among the efforts, which the company had to implement in order to achieve the “Brand-Focused Value Creation” strategy. The sole purpose of this strategy was to develop unmatched levels of customer loyalty within the market.
Nevertheless, it is worth noting that innovation was a critical enabler of the strategy as supported by Whitwam, when he served as the company’s CEO (David Whitwam 2012). Besides innovation, the company equally focused on the ability to establish deep insights about consumers, proper partnering with channel distributors and effective production of home appliances by improving quality levels around the world.
Diagnosis
While Whirlpool was seen to be doing well in terms of change management through I-Teams, there was great concern among senior leaders. Led by the CEO, David Whitwam and the innovation vice president Nancy Snyder, they felt that there was a disconnection between the teams’ efforts and Whirlpool’s existing brands.
For instance, Andrew Batson, the innovation vice president in North America noted that most I-Teams were working on things, which were considered to be outside the box like, garage organizers and exercise equipment. Additionally, the organization of most I-Teams was outside the brand structure (Rivkin, Leonard & Hamel 2006).
Based on the challenge pinpointed above, the company’s management had to roll out efforts to harmonize innovation with its brands. For instance, the “migration path” was adopted in order to identify target customers together with desired benefits. These were crucial in determining customer loyalty, regarding Whirlpool’s appliances in the market (Rivkin, Leonard & Hamel 2006).
The managers were also tasked with reflecting on what the company was going to offer in the future, regarding its brands, thus setting a progress pace for every attribute that was in consideration. The last aspect of the migration path was breaking the progress into discrete innovations, which were necessary for the company to achieve its intended change management.
As a result of the “migration path” efforts, innovation at Whirlpool was owned by brand management teams unlike previously when it was under individual I-Teams. These management teams comprised of I-Team alumni and other experts who had been trained through Strategos methodologies (Rivkin, Leonard & Hamel 2006). Additionally, the company changed the nature of innovation projects to focus on existing business as opposed to concentrating on the company’s opportunities.
Internal and External Alignment
Embedment Efforts
In the understanding of change management at Whirlpool Corporation, it is important to underscore the role played by Nancy Snyder in orchestrating the firm’s efforts to embed a capacity for innovation. As it shall be seen, these efforts were considered by Snyder as workable in her tough path of accomplishing the mission.
Vision, goals, and rewards and recognition
The backbone of embedment efforts was its vision dubbed, “innovation from everywhere and everyone.” In order to realize this, Snyder observed three layers of goal, which were: business-result goals, embedment goals and individual capability goals. Importantly, there was need to develop measurement and reporting systems whose function was to track the progress towards the above mentioned goals.
Through the proposed tracking system, it was realized that progress towards business-results goals was complex to determine. This was based on the fact that the concept of innovation had infused itself more deeply in the organization, making it difficult to establish the scope of innovation impact to the organization.
On the other hand, it was easier to track progress towards embedment goals. As noted by Snyder and her monitoring team, this was made possible because of the availability of embedment indicators like individual efforts, number of I-Consultants and I-Mentors and the frequency of I-Board meetings among others (Rivkin, Leonard & Hamel 2006).
Lastly, the intranet was essential in measuring progress towards individual capability goals. The track-team carried out random surveys on Whirlpool employees quarterly. In general, the respondents described their experience in the innovation process, which had been initiated by the company’s management in 1990s. They also reported on monthly time allocated to innovation and whether the innovation process had changed their job description.
Having this level of change management, it was imperative for the company to adjust systems of reward and recognition to promote progress along these strategies (Rivkin, Leonard & Hamel 2006). As a result, compensation packages for senior leaders reflected the achievements realized through innovation-related goals. Other bonuses were pegged on economic value, which had been realized and customer loyalty targets.
Nonetheless, the management was quick to notice the inefficiency of monetary incentives as compared to monetary ones. As a result, other options were considered, which included involvement in the dynamic team, job mobility, running of new businesses and visibility with senior leaders of the company.
Leadership accountability and development
For effective change management, it was made clear to the company leaders that they were responsible for innovation and its embedment as a capability. Individual managers were made accountable for certain tasks like defining innovation success while the executive leadership was accountable for the entire embedment process within the corporation.
Importantly, accountability also reached other employees of the company through discussions, which were led by company leaders. Through these discussions, employees were encouraged to focus on long-term priorities, tolerate mistakes and new ideas, and mobility of employees (Rivkin, Leonard & Hamel 2006). Notably, this proved difficult to several employees, including those who seemed to be committed to embedment innovation.
Change management impact
As of 2004, the company had registered tremendous steps with regard to its innovative strategy. It had two hundred and fifty seven innovation projects around the world, tapped into its I-Pipe system. The company revenue had also increased, even as the leadership projected better results (Rivkin, Leonard & Hamel 2006).
Some of the projects were however shelved, and were to be considered in future to bear fruits at the most appropriate time. It was evident that throughout its change management history, the company realized both gains and losses, which remained a source of motivation for future leaders when planning about change management.
Recommendations
As mentioned above, change management at Whirlpool had its pros and cons. These laid a platform for future consideration, especially when there is need to shift the manner in which company operations are carried out. In developing new businesses within a company, like the Inspired Chef, which failed at Whirlpool, it is important to understand the underlying challenges (Goldsmith & Carter 2009).
Of great significance is the fact that the business has to compete for attention with established businesses in the market. Besides this understanding, it is important to involve the entire organization in any form of change management being anticipated by the management. This allows holistic involvement of senior leaders, managers and all other employees in the firm. As a result, efforts get tuned towards the realization of a common goal.
Proper communication of the vision to implement change management is equally important in preparing all stakeholders. This should be done through all possible means at the management’s disposal. Additionally, change management drivers should teach appropriate behaviors to the rest of the company (Goldsmith & Carter 2009).
In other words, senior leaders have to lead by example in order to realize profitable change management impact. It is also important to eliminate impediments to change. The management needs to ensure that there are no structures or systems, which undermine the process of change, by empowering risk-takers without necessarily being limited by traditional and industry conventions.
In order to drive change, it is important to appreciate the efforts made by every member of the organization. Through recognition and rewards, employees get motivated to be part of the change-process for a common goal (Goldsmith & Carter 2009). Above all, no change-vision can be successful by being fitted into an organization.
Systems have to be changed progressively, through development of relevant knowledge to propel the vision to its maturity. Above all, Whirlpool and other organizations have to aim at incorporating change into organizational culture to create a link between the success of a company and its new behaviors.
Conclusion
From the above case analysis of Whirlpool Corporation, it suffices to mention that the change management, which was initiated by David Whitwam, played a significant role in propelling the company to a leading manufacturer of home appliances around the world. Importantly, the path to change management was not smooth all through; the company management had to confront a wide range of challenges.
For instance, it faced stiff resistance in Europe, experienced a failed joint venture with a Chinese firm and registered enormous losses in Latin America and Asia. Although the company was committed towards “Brand-Focused Value Creation” through several strategies, innovation played a major role in winning the loyalty of customers within the market. Lastly, it is important to acknowledge Whirlpool’s management, led by David Whitwam as it played a crucial role in the entire change management process.
References
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Goldsmith, M & Carter, L 2009, Best Practices in Talent Management: How the World’s Leading Corporations Manage, Develop, and Retain Top Talent, John Wiley & Sons, New Jersey.
PENSKE. 2012. Web.
Rivkin, J, Leonard, D & Hamel, G 2006, ‘Change at Whirlpool Corporation’, Harvard Business Review, vol. 9 no. 705, pp. 1-39.
Whirlpool Corporation. 2012. Web.