Background of the Organisation
Organisational change comes about because of a company’s need to stay relevant and competitive in its respective industry. Change occurs when an organisation realises that its structures, principles and strategies are no longer as efficient as they should be. Following, is a case study of an organisation going through the process of change to ensure its survival.
Suppose ABC Ltd is an organisation in the telecommunication industry. It operates in Asia, specifically India. This industry has two key players only: ABC Ltd and XYZ Ltd. ABC Ltd was the first to venture into the industry in the early 90’s. At this time, mobile phones were uncommon in this area and remained a preserve of the rich and the upper middle-income earners.
In light of this, the company formulated its strategies in a way that targeted the high-end market only. Its target customers, therefore, ranged from upper middle-income earners to high-income earners. While still a monopoly, this strategy continued to work efficiently with the company reporting growth in profits and experiencing a period of stability.
In the late 90’s, XYZ Ltd decided to try its luck in the market. This is in light of the high returns and the vast opportunities that the industry offered. It, however, adopted a different strategy. XYZ Ltd recognised the fact that a large percentage of the population consisted of low-income earners.
Its aim was, therefore, to capitalise on its competitors weaknesses. It set out to ensure that even the very poor people enjoy calling services. It tailored its products to suit everyone irrespective of their incomes. However, this strategy was short-term. Once the company had attained the desired market segment and achieved customer loyalty, it would raise its prices by a small margin (Millmore, 2007).
Consequently, ABC’s profits started falling and after a while, it started reporting losses. Its market share was also on the decline. Its management quickly recognised the need for change. It had to look for new ways to overturn the losses and win back its customers’ loyalty.
In short, the problem was that of making losses and reduced customer loyalty. The strategy was to charge lower price compared to the competitor for its services. This would win back its customers and consequently lead to profits. This change would require a large financial outlay (Heuser, 2010).
The Change Process
Assuming ABC Ltd’s management decide to draw from Greiner’s six-phase change process, its change process would be as follows. Greiner identified the first stage as pressure and arousal. This meant that for the change process to begin, top management needed to be subjected to either internal or external pressure to change (Armstrong and Kotler, 2011).
In our case, the company’s management was facing external pressure from XYZ Ltd as their competitor. The internal pressure came from the fact that they faced the task of explaining to the owners why the company was making losses.
The second stage was intervention and re-orientation. This stage required management to work with an expert. The expert could be an outsider or a person working for the company. The catch was that, this expert had to report to the highest level of management. It was feared that management would simply ignore the problem if an expert were not involved. ABC Ltd therefore required a marketing and sales expert.
The third stage called for recognition and diagnosis. It would involve the top management and the marketing and sales expert working with the low-level employees. They would carry out tasks in fact finding and problem solving. The importance of this stage would be to identify the various problems faced.
In this case, the problems were reduced market share and the company was reporting losses. The fourth stage was invention and commitment. It would also require top management to work with both the expert and low-level managers. It would entail coming up with solutions to the problems identified.
For this company the solution would be to cut on costs as it was making losses and its new strategies required a large financial outlay. It could do this by doing away with wasteful activities and taking away, some of the unnecessary benefits it provided for its employees. The importance of using the shared approach here was to avoid resistance later and simplify the implementation process (Carnal, 2007).
The fifth stage was experimentation and search. Here the solutions made in the previous phase would be subjected to a series of test runs in some parts of the organisation. The last stage would be reinforcement and acceptance, which would entail introducing the changes on a large-scale basis throughout the organisation. This being the implementation stage, the company is bound to encounter some difficulties, which will be discussed below (Kaplan and Cooper, 2009).
Pitfalls in the Implementation Stage
There are potential pitfalls that the organisation needs to consider during the implementation stage. Resistance to change is one of the key limitations. Resistance to change may be caused by a number of reasons.
Primarily, resistance may be due to the lack of understanding on the part of employees. Employees may not understand why management sees change as necessary. The workers may also not understand the consequences of the changes introduced. Secondly, the employees may view the change as a threat to their job security. Self-interest on the part of employees is also a very big contributor to change resistance.
Employees tend to resist change if the goals that the change aims to achieve are not in line with their personal goals. Lastly, failure of the management to make known their plans to the employees may lead to resistance, as most employees prefer stability rather than surprise. Another pitfall apart from resistance to change is that, once the change is implemented, there is always a chance that it may not bring about the changes that management desired (Kouvelis et al. 2006).
Advantages of the Change Process
Like any other process, the change process has its own advantages. Its success all depends on how management handled the change process. If the change process is handled effectively, then it yields vast benefits to the organisation. In the case of ABC Ltd, the advantages it would enjoy include change generally has been known to lead to increased profits. In ABC Ltd, effective change would see them turn over a new leaf which would see them report profits rather than losses (Green, 2009).
Secondly, if ABC Ltd were to draw from Greiner’s six-phase model, which advocates for the shared approach, there would be increased employee involvement Hayes, J. (2010). This would give the employees an opportunity to voice fresh ideas. In short, change can be a great source of motivation for the employees. Effective change would also see ABC Ltd experience a growth in its market share especially since it competitor, XYZ Ltd is only planning on using their strategy on a short term basis(Green, 2009)..
Change also gives the organisation an opportunity to grow this is necessary, as it would ensure that ABC Ltd survives in the face of stiff competition. Another advantage is that change allows for the development of both the employees and management (Green, 2009).
Change keeps everyone in the organisation on their toes, as they have to keep coming up with new strategies to ensure their survival. In light of the development of employees and managers, change consequently leads to increased creativity and dynamicity in an organisation (Campbell, 1998).
Disadvantages of the Change Process
Limitations brought about by the change process are normally pegged on lack of proper handling of the process by management. This is not always true, as some disadvantages cannot be avoided. A major disadvantage of change is that, more often than not, it leads to resistance. In the case of ABC Ltd, the risk is higher as they are looking for ways to cut costs (Carnal, 2007). Therefore, assuming they do this by taking away some of the benefits given to employees, management may end up facing resistance from all sides.
Change may also leave the organisation in a worse off place than before. With the need for ABC Ltd to change, comes along the need for a large financial outlay. For a company that has been reporting losses, this becomes very hard. They have to look for other ways of raising the money, as the revenues they get cannot even cover the costs of production. Change is inevitable; it ensures a company’s survival in the dynamic environment (Carnal, 2007).
Reference List
Armstrong, G. & Kotler, P. (2011) Marketing: An Introduction. New York, USA: Pearson Prentice Hall.
Campbell, D. (1998) Organizations and Business Environment. Oxford: Legoprint.
Carnal, C. (2007) Managing Change in Organizations. Essex: Pearson Education.
Green, M. (2009) Making Sense Of Change Management: A Complete Guide to the Models, Tools and Techniques of Organizational Change. New York: Wiley.
Hayes, J. (2010) The Theory and Practice of Change Management. Harvard: Harvard Business Review.
Heuser, B. (2010) The Evolution of Strategy: Thinking War from Antiquity to the Present. Cambridge: Cambridge University Press.
Kaplan, R. S., & Cooper, R. (2009) Cost and Effect: Using Integrated Cost Systems to Drive Profitability and Performance. London: Harvard Business School Press.
Kouvelis, P. et al. (2006) Supply Chain Management Research, Production, and Operations Management. Review, Trends, and Opportunities. In: Production and Operations Management, 15.3: 449–469.
Millmore, M. (2007) Strategic Human Resource Management: Contemporary Issues. Essex: Pearson Education.