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Organizational change management Term Paper

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Executive Summary

This is a diagnostic paper that seeks to explore organizational management of change with Vata Manufacturing Ltd as an example. Vata Ltd is a company that is involved in designing and marketing of footwear and it receives raw materials from other companies that it has entered into contract to supply materials.

The company was founded in 1988 as a marketer of second hand shoes from developed countries. It later grew to start manufacturing shoes for sale to the low and middle class economy groups. However all this period the company used manual ways in carrying out its operations as opposed to its competitors who had with time incorporated computer-based procedures and processes.

The management realized that the company was gradually losing its market share to the competitors. Therefore the company decided to institute technological changes in its operations with an aim of minimizing costs and having efficient processes. The company was to change its vision to focus on attaining quality as opposed to providing low prices, hence the company would secure the services of large suppliers who would offer large discounts.

Particularly because with manual operations the company could not be served by such companies and also organizational customers that the company served also preferred computer-based suppliers. However for the management to succeed in putting up the changes they consulted with the employees and other stakeholders whose support would be critical in attaining the technological changes.

A committee was set up to do an analysis on how the changes would be effectively implemented, as a result it came up with findings that continuous communication was imperative, the company was to redefine goals, a vision that explained the change and also which employees would be proud to be associated with.

Reward systems were to be initiated that would motivate the employees to individually and collectively pursue the changes to completion. The changes were initiated by setting up a budget that would cover the priority costs of implementation, though some costs like employee training costs were to be shared between the company and its employees on 50-50 basis. A software company, EPICOR was contracted to do the costing, implementation and training of the employees

Software was installed in the system that brought significant changes in the operations of the company. For instance the manufacturing department was able to monitor quality standards that had been defined by the research and development department who had determined customers’ requirements.

Order fulfillment periods were reduced by half and also there was reduction in cost of production. Profits also increased significantly up to 18% in the first year after incorporation of the computer-based processes. On the contrary there were also negative incomes associated with the technological changes such loss of employment, whereby employees whose services were rendered redundant were retrenched. Some plans also were not adhered to because the costs of implementation turned out to be more than was budgeted for.

The profit outcomes also missed the targets because there was reluctance that cropped up within the implementation process and also some of the funds to cover the costs were planned to come from sales made during the implementation. This was not possible because during the period business was interrupted due to the changes. In addition the company did not secure new suppliers that it had targeted because it never anticipated that such organizations would be tied in long-term supply contracts that they could not breach.

Breakdown in communication between the management and the employees was also a major cause for missing the targets. Particularly the management was avoiding committing to the employees that they would return the head of departments to their positions after they were able to run the systems.

Introduction

People generally have a negative attitude to change, particularly because change comes with adjustments in the current situation and discomfort. As a result change is normally associated with uncertainty in the future as people are not sure whether the changes, if instituted will bring more comfort or might lead to more costs.

In most cases past experiences form the main basis of resistance to change whereby previous changes caused the affected people to lose something. However, in the current competitive business environment change is so inevitable, therefore any organization that does not adapt to change risks being faced out of business. Change can occur due to pressure from different sources such as the workforce, competitors, customers and management (Palmer, Dunford, and Akin, 2008).

To examine how change is managed in an organization we identify Vata Manufactures Ltd as our example. This is a shoe manufacturing company based in Kenya within East- Africa. Most of materials used to produce the footwear products are supplied by contracted businesses, while the company’s customers are mostly situated in the East African region. This company was founded in 1988 and for a period of over ten years most of its operations were done manually.

Most of its target customers consisted of low and middle income class as its products were relatively low as compared to its competitors. The management of Vata Ltd had planned to overhaul their systems and hence introduce new technological operation systems in all departments of the company.

Generally most operations were performed manually such as sewing machines were not run by electricity, though they had computers in the finance department, whereby financial records were entered manually in the system (Church et al, 1996)

In the purchasing and supplies department, there were no automated systems, which meant that the company could not secure the services of large suppliers because the latter had automated reorder systems and electronic payment methods. Being that most operations were done manually, more people were employed which meant more costs.

Therefore the need for efficient operation systems and cost reduction pressured the management to think of instituting technological changes. In addition the company’s competitors were making relatively high profits as opposed to Vata Ltd which was facing the pinch of increased operational costs. Vata manufacturers had reached the decline stage of development life-cycle as profits and sales were declining and so it needed to reinvent itself in order to remain in business (Church et al, 1996)

Analysis of change strategy

Therefore a change implementation committee was formed to do an analysis of how the technologies could be incorporated in the company. The committee first sought the views of management and the workers on their vision about the company and their expectations on the company as far as performance in the industry is concerned. This was done to find out if the two groups saw the need for improvement so that there would be a shared vision in implementation.

The committees also sought the services of technological experts who would do an analysis of the costs involved in implementing the changes. Lastly the committee was to find out issues concerning training, timing and timelines, areas of resistance and strategies to obtain support from both management and the employees. In addition evaluation measures were to be determined and clearly explained Yergler, 2011).

The committee came up with findings which included: The major changes were to be implemented during the low seasons so that there would be less interruptions in operation, necessary business partners were to be informed so that they could make adjustments if need be, training of both the management and the employees was important, the priority costs were to be covered with the company’s finances, employee training costs were to be shared between the company and the employees on a 50-50 basis and the remaining costs were to be met by the amounts generated in the future as the company’s finances could not cover all the budget at once.

Reward schemes to be developed as incentives to motivate the workforce to adopt the changes and help in effective implementation. The management’s active involvement was as important as it was the driving force that would provide impetus to the employees to ensure consistency in implementation and completion (Yergler, 2011).

The strategy of change was to be implemented in four faces: modifying and anticipating the future, defining what line of business the company would be in and its core competencies, structurally changing or reengineering the operations of the company and lastly changing the company’s processes.

In the first level the company was supposed to modify and anticipate the future, whereby it was clear that companies that could be efficient in their operations would survive competition, the future market would need customized products and organizations would need to specialize in a given line.

Therefore the company decided to focus on producing official and athlete’s shoes, particularly because many companies and schools were coming up and there was growing demand for official wear. At the same time achievement in athletics as a country had motivated many youths to venture in to the sport for income purposes therefore creating a lucrative market (Dewes, 1998).

The second level was determining the company’s core competencies, whereby the company found out that most of its sales consisted of official wear and athletics shoes. In addition, the company was to concentrate on designing and marketing and leave the production of raw materials to suppliers. The third level was incorporation of technology in the various departments of the organization. Vata manufacturing Ltd contracted EPICOR Software Company to install various technologies in the different departments.

In production department manufacturing production software was installed, which had comprehensive solution portfolio that automated the process of manufacturing to enable efficiency in scheduling materials, executing production and monitoring to ensure that expectations are met.

In finance department, a financial management module was put in place that could prepare automatic financial records such as profit and loss accounts, produce vendor and customer diaries, create automatic invoices and electronically relay important financial results to business managers (Dewes, 1998).

Vata ltd also obtained Ross enterprise quality control software that ensured that customers’ quality specifications could be determined, materials ordered that fit the specifications. This would help the research and development department and the marketing department in that customers’ requirement would be measured and monitored so that the company was able to provide offerings that were beyond customers’ expectations.

In the purchasing department e-procuring software were installed such that e-tendering and e-sourcing was possible. Lastly the marketing department created a website of the company, where the company’s products were advertised as well as job opportunities and all other dealings were posted. All these required hardware such as computers, cables as well as restructuring of some buildings to fit in the design (Dewes, 1998).

In the human resource department, training of the management as well as the other work force was done to equip them with skills so that they would be able to operate the improved systems.

However some departments that had complicated operations, which were key to the company’s success such as the manufacturing process, new employees were employed to help the current employees catch up with the new processes. These mostly were head of these departments. The fourth level of implementation was to monitor the effects and progressively keep changing the processes.

One of the targets as far as the change was concerned was to ensure that the key departments had attained 25% usage of technology in their operations by the end of the year. As a result the implementation committee was restructured, whereby each department was to form its own implementation committee. After which those departmental committees would each choose two members to join the main implementation committee (Dewes, 1998).

There were some changes that were adopted to avert resistance: first clear outline, whereby changes in policies and guidelines as well as structures that were to be made were explained to the employees. Therefore each employee knew every change that would affect his position this promoted openness.

Particularly because staff always feel insecure when there is any change that is to be implemented, hence they will resist for fear of the unknown. Commitment was another strategy, whereby implementation of the changes required that each member of the organization to be committed. Hence meetings were first held with the affected parties to ensure there was a shared vision and benefits of the change to everyone were clearly outlined (Denison, 2001).

Thirdly there was advocacy, communication channels were opened so that opinions of any member who was affected by the changes could be expressed. In addition the management acted on any feedback with agency and honesty.

For instance when employees in the manufacturing department were against management’s decision to replace their head of departments, it was explained to them that this was necessary to ensure that that the changes intended were effectively implemented. Also they were promised that the head would resume his post once he had mastered the processes and could effectively execute it.

The fifth strategy was acknowledgement, whereby any success made on evaluation of the progress and results, the contributors would be acknowledged. In fact the increase in profit achieved as a result of reduction in costs was to be shared between the company and its workforce. As a result the employees were dedicated in achieving efficiency because they knew that its success would translate in to increased income (Denison, 2001).

Lastly, the management used flexibility strategy, whereby adjustments were made on the laid down plan when unforeseen contingencies occurred. For instance, within the second month of implementation, some employees had not opened bank accounts through which they were to receive their salaries; hence the company had to pay them manually so that they could not miss their remunerations.

To build momentum for change every member was to put across the changes that they wanted to see in the organization. All these opinions were curved by the committee to show how technology would help in realizing those changes. After which a new organizational vision was drafted which said ‘quality is a right for those who value it’.

This meant that every stakeholder was entitled to quality as long as he appreciated it. Therefore, the employees were entitled to quality remuneration if they had quality results and employers were to get quality service from employees if they paid quality. The customer would also appreciate quality by giving quality purchase price (Denison, 2001).

Outcomes and their evaluation

One of the positive results that were realized in the purchasing and supplies department was minimization of delays in meeting customer orders together with related costs. Quality standards were maintained as a result better customer satisfaction was achieved being that Vata Ltd mostly serves organizational customers who value quality.

By using inventory control software, the company was able to better manage finished goods and materials that would otherwise have expired. By using manufacturing software the company recorded an improvement in inventory savings by 11% as well as reduction in order fulfillment time by 50% all in the first year after implementation of the changes.

Through the company website the company realized an increased interaction with both customers and suppliers, management analysis of operations was improved as well as decision making due to the detailed and information available provided by the financial management system (Davidson, 2011).

In addition pre-transaction costs were reduced as a result on-line processes which did not need one to meet physically with the other party as well as reduced paperwork. Research was also significantly boosted as the system could accurately measure customer specifications and hence help in predicting future trends in the market.

Another positive outcome was improved employee motivation as most of the processes were made efficient and also the employees received improved earnings as a result of reduced costs. By incorporating computer-based technology, the company was able to secure the services of large suppliers who offered large discounts, hence enabled the company to increase profits.

There were also negative outcomes whereby some employees had to be retrenched as their positions were deemed redundant with the introduction of technology. In addition those employees who could not master the operations after training were also dismissed. The company had to do away with customers who had not incorporated technology in their operations through which they interacted with Vata Ltd (Davidson, 2011).

All the departments except two met the target of having implemented technology in their operations by 25% within the first year of inauguration. The two could not be completed as costs incurred exceeded the amounts budgeted for. Hence human resource and sales department were left behind to be done in the second phase.

The company also did not honor their promise of servicing half of the employee training costs as they only funded 20% of the costs. This is a bad practice in implementing change because it will affect the trust the employees have on management.

Furthermore no explanation was given yet employees complied with the orders for fear of being retrenched. However there was an overall positive improvement in the company’s operations which improved the company’s profits by 18% in the first year. This was below the target of 20% improvement in profits which can be explained by reluctance of the workforce in ensuring continuity (Palmer, Dunford, and Akin, 2008).

When the organization was unable to honor their promise of subsidizing training costs by 50%, the employees became disillusioned for a while. Particularly because they thought that the changes were not achievable. This resulted in a breakdown in communication between them and the management.

The company also did not secure at least two major customers in the market within the first two years as was planned. Particularly because these customers sign long-term contracts with their suppliers, hence they were still tied to honor previous contracts of their suppliers. However there are prospects that the company will be supplying to one of the largest athletes training camp from next year (Palmer, Dunford, and Akin, 2008).

References

Church, A. H., Siegal, W., Javitch, M., Waclawski, J. and Burke, W. W. (1996) “Managing organizational change: what you don’t know might hurt you”, Career Development International, 1(2), pp.25 – 30.

Davidson, A. (2011) “Innovating by “doing both”: Cisco manages contradictions that drive growth and profit”, Strategy & Leadership, 39(1), pp.11 – 15.

Denison, D. R. (2001) Managing organizational change in transition economies Mahwah, NJ: Lawrence Elrbaum Associates Inc.

Dewes, D. (1998). Managing organizational change. Cambridge, MA: Malcolm Wiener Center for Social Policy, John F. Kennedy School of Government, Harvard University

Leban, B. and Stone, R. (2007). Managing Organizational Change. John Wiley and Sons.

Palmer, I., Dunford, R. and Akin, G. (2008). Managing Organizational Change: A Multiple Perspectives Approach. New York, NY: McGraw-Hill Higher Education

Yergler, J. D. (2011) “Beyond Strategy: The Leader’s Role in Successful Implementation”, Leadership & Organization Development Journal, 32(1), pp.102 – 104.

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