Change Management Report - Institute Of Management Sciences, Pakistan

Change Manageme nt

Change Management Report Submitted by:

Mian Zulfiqar Ali Shah Shamsullah Shahzad Rizwan Amir Nasir Yousufzai Ikramullah

Submitted to:

Sir

Qazi

Waheed-uz-

Zaman Management instructor

course

June 03, 2009

Date of submission:

By the students of MBA 1st Semester Group ‘c’

Preface With the name of ALLAH, the most merciful. As we know that the companies have today involved in globalization, the environment affecting the companies is huge. For certain purposes the uncertainty has increased, thus causing different situations for the companies to deal with. The need for change comes here. From a local shop to a multi-billion revenue generator company, the change is equally welcome. The report that we have made can show some of the ways, how to manage the change. The change management is all about managing the change in a way so as not to offend the parties involved. The report we made shows what types of changes are there, some problems that arise during the course of changing, the best ways of changing & how to cope with the resistances. This report can

surely help you getting the idea of change and change management in a better way.

Acknowledgements It was a gratifying experience for all of us, the group members. We have been working on this report over the period of a month, from the collection of data, to verification of data, to study it together, to get the extractions etc. Among our group members we thank Rizwan for providing the data & Zulfiqar for shaping it in report form. Also specially thanks to Sir Qazi Waheed for giving us the guidelines whenever we needed.

“There is at least one point in the history of any company when you have to change dramatically to rise to the next performance level. Miss the moment and you start to decline.” Andy Grove

CEO Intel

Table of contents • Introduction To Change Management

•

Overview Of The Change Management

• Model Of Planned Organizational Change  Forces For Change

• Steps For Effective Organizational Change  Assess the need for change  Initiate change

 Implement change  Evaluate the change

• Types Of Planned Change  Technology Changes  New-Product Changes  Structural Changes  Culture/People Changes

Introduction To Change Management Modern companies are in a state of cultural change. From working more or less alone to solving specific tasks, we are now required to work in an interdependent way. Teamwork is vital. The work way we do is also changing. Most tasks, even everyday task, need to be solved as if it were a project. These changes require that we alter what we expect from the people we work with. We have to change the values we live by. Values like awareness, teamwork, tolerance, responsibility and information are paramount – just as flexibility and change readiness. We need a new way to handle our jobs, we need to work project oriented. This poses a problem to many companies as they realize that there is a big difference in working project oriented to solve specific tasks vs. working project oriented all the time project. Our daily lives are becoming project oriented. (1 )

Overview What is Change Management?

Change management is a structured approach to transitioning individuals, teams, and organizations from a current state to a desired future state. The current definition of Change Management includes both organizational change management processes and individual change management models, which together are used to manage the people side of change. (2 )

Why use Change Management? Change Management is proactive technical support focused on preventing incidents and problems by effective planning. Some of the benefits are: • Consistent planning for change • Consistent planning in case of failure of change • Communication with appropriate parties before change occurs • Approval received from appropriate parties before change occurs • Reduction in incidents and problems caused by unplanned change • Time spent on preparation and prevention rather than fire fighting and downtime. (3)

Model Of Change

Planned

Organizational

Change can be managed. By observing external trends, patterns and needs, managers use planned change to help the organization to adapt to external problems and opportunities. When organizations are caught flat footed, failing to anticipate or respond to new needs, management is at fault. Four events make up the change sequence: • Internal and external forces for change exist • Organization managers monitor these forces and become aware of a need for change; and • The perceived need triggers the initiation for change, which • Is then implemented. How each of these activities is handled depends upon the organization and managers’ styles.

Forces For Change Forces for organizational change exist both in the external environment and within the organization.

Environmental Forces External forces originate in all environmental sectors, including customers, competitors, technology, economic forces, and the international arena.

Internal Forces Internal forces for change arise from internal activities and decisions. If top managers select a goal of rapid company growth, internal actions will have to be changed to meet that growth.

Steps For Effective Organizational Change The four steps for organizational change process are as follows:

 Assess the need for change  Initiate change  Implement change  Evaluate the change

Evaluate the change Compare prechange performance with postchange performance Assess the need Recognize that there is a problem Identify the source of the problem

Initiate change Decide what organizations ideal future state would be

Implement change Introduce the change

Assessing the need for the change The external and internal forces translate into a perceived need for change within the organization. Managers sense a need for change when there is a performance gap—a disparity between existing and desired performance levels. The performance gap may occur because current procedures are not up to standard or because a new idea or technology could improve current performance. Managers in every company must be alert to problems and opportunities, because the perceived need for change is what sets the stage for subsequent action that creates a new product or technology. Big problems are easy to spot. Sensitive monitoring systems are needed to detect gradual changes that can fool managers into thinking their company is doing changes slowly, because managers may fail to trigger an organizational response.

Initiating change

After the need for change is perceived, the next part of the change process is initiating change, a truly critical aspect of change management. This is where the ideas are developed.

Search Search is the process of learning about current developments inside or outside the organization that can be used to meet the perceived need for change. Search typically uncovers existing knowledge that can be applied or adopted within the organization. Managers talk to friends and colleagues, read professional reports, or hire consultants to learn about ideas used elsewhere.

Creativity Creativity is the development of novel solutions to the perceived problems. Creative individuals develop idea that can be adopted by the organization. Each of us has the capacity to be creative. Creative people are often known for originality, open-mindedness, curiosity, a focused approach to problem solving, persistence, a relaxed and playful attitude, and receptive to new ideas. Creativity can be designed into organizations. Companies or departments within companies can be organized to be creative and initiate changes.

Idea Champions And New-Venture Teams If creative conditions are successful, new ideas will be generated that must be carried forward for acceptance and implementation. This is where idea champions come in. The formal definition of the idea champion is a person who sees the need for and champions productive change within the organization. Personal energy and effort are required to successfully promote a new idea. Often a new idea is rejected by the management. Champions are passionately committed to a new product or idea despite rejection by others.

Implementing Change

Creative culture, idea champions and new-venture teams are ways to facilitate the initiation of new ideas. The other step to be managed in the change process is implementation. A new, idea will not benefit the organization until it is in place and being fully utilized. One frustration for managers is that employees often seem to resist change for no apparent reason. To effectively manage the implementation process, managers should be aware of the reason for employee resistance and be prepared to use. Techniques for obtaining employee cooperation are:

Resistance To Change Idea champion often discover that other employees are unenthusiastic about their new idea. Members of a new-venture group may be surprised when managers in the regular organization do not support or approve their innovations. Several reasons for employee resistance are:

Self-Interest. Employees typically resist a change they believe will take away something of value. A proposed change in job design, structure, or technology may lead to a perceived loss of power, prestige, pay, or many company benefits. The fear of personal loss is perhaps the biggest obstacle to organizational change.

Lack Of Understanding And Trust. Employees often do not understand the intended purpose of a change or distrust the intentions behind it. If the previous working relationships with an idea champion have been negative, resistance may occur.

Uncertainty. Uncertainty is the lack of information about future events. It represents a fear of the unknown. Uncertainty is especially threatening for employees who have a low tolerance for a change and fear the novel and unusual.

Different Assessment And Goals. Another reason for resistance to change is that people who will be affected by innovation may asses the situation differently from an idea champion or new-venture group. Managers in different departments pursue different goals and an innovation may detract from performance and goal achievement for some departments. The reasons for resistance are legitimate in the eyes of employees affected by the changes. The best procedure for managers is not to ignore resistance but to diagnose the reasons and design strategies to gain acceptance by users. The strategies for overcoming resistance to change typically involve two approaches: the analysis of resistance through the force field technique and the use of selective implementation tactics to overcome resistance.

Force Field Analysis It’s the process of determining which forces drive and which resist a proposed change. To implement a change, management should analyze the change forces. By selectively removing forces that restrain change, the driving forces will be strong enough to enable implementation. As restraining forces are reduced or removed, behavior will shift to incorporate the desired changes.

Implementation Tactics The other approach to managing implementation is to adopt specific tactics to overcome employee resistance. The following five tactics have proven successful:

Communication and Education. Communication and education are used when solid information about the change is needed by users and others who may resist implementation. Education is especially important when the change involves new technical knowledge or users are unfamiliar with the idea.

Participation. Participation involves users and potential resisters in designing the change. This approach is time consuming, but it pays off because users understand and become committed to the change.

Negotiation. Negotiation is more formal means of achieving cooperation. Negotiation uses formal bargaining to win acceptance and approval of a desired change.

Coercion. Coercion means that managers use formal power to force employees to change. Resisters are told to accept the change or lose rewards or even their jobs. Coercion is necessary in crisis situation when a rapid response is urgent.

Top Management Support. The visible support of top management also helps overcome resistance to change. Top management support symbolizes to all employees that the change is important for the organization.

Evaluating The Change The last step in the change process is to evaluate how successful the change effort has been in improving organizational performance. Using measures such as changes in market share, profits, or the ability of manages to meet their goals, managers compare how well an organization is performing after the change with how well it was performing before. Managers also can use benchmarking, comparing their performance on specific dimensions with the performance of high-performing organizations to decide how successful the change effort has been.

Types Of Planned Change Now that we have explored how the initiation and implementation of change can be carried out, let us look at the different types of change that take place in organizations. The types of organization changes are strategy, technology, products, structure, and culture/ people. Organizations may innovate in one or more areas, depending on internal and external forces or change. In the rapidly changing toy industry, a manufacturer has to introduce new products frequently. In a mature, competitive industry, production technology changes are adopted to improve efficiency.

Structure

Technolog y

Strategy

Products

Culture/ People

In the diagram, the arrows connecting the types of change show that a change in one part may affect other parts of the organization: a new product may require changes in technology, and a new technology may require new people skills or a new structure.

Technology Changes A technology change is related to the organization’s production process—how the organization does its work. Technology changes are designed to make the production of a product or service more efficient. How can managers encourage technology change? The general rule is that technology change is bottom up. The bottom-up approach means that ideas initiated at lower organization levels and channeled upward for approval. Lower level technical experts act as idea champions—they invent and champion technological changes. Employees at lower levels understand the technology and have the expertise needed to propose changes. Managers can facilitate the bottom-up approach by designing creative departments. A loose, flexible, decentralized structure provides employees with the freedom and opportunity to initiate continuous improvements. A rigid, centralized, standardized structure stifles technology innovation. Anything managers do to involve the grass roots of the organization—the people who are experts in their parts of the production process— will increase technology change.

New-Product Changes A product change is a change in the organization’s product or service output. New-product innovations have major implications for an organization, because they often are an outcome of a new strategy and may define a new market. The introduction of a new product is difficult, because it not only involves a new technology but also must meet customers’ needs. Companies that develop new products usually have the following characteristics:  People in marketing have a good understanding of customer needs  Technical specialists are aware of recent technological developments and make effective use of new technology  Members from key departments—research, manufacturing, marketing—cooperate in the development of new product. These findings mean that the ideas for new products typically originate at the lower levels of the organization just as they do for technology changes. One approach to new product innovation is called the horizontal linkage model. In this model people from research, manufacturing and marketing departments meet frequently in teams and task forces to share ideas and solve problems. Research people inform marketing of new technical developments to learn whether they will be good to customers. Marketing people pass customer complaints to research to use in the design of new products. Manufacturing informs other departments whether a product idea can be manufactured within costs limits.

This teamwork required for the horizontal linkage model is a major component of using rapid innovation to beat the competition with speed.

Structural Changes A structural change is a change in the way in which the organization is designed and managed. Structural changes involve the hierarchy of authority, goals, structural characteristics, administrative procedures, and management systems. Almost any change in how the organization is managed falls under the category of structural change. Successful structural change is accomplished through a top-down approach, which is distinct from technology change (bottom up) and new products (horizontal). Structural change is top down because the expertise for administrative improvements originates at the middle and upper levels of the organization. The champions for structural change are middle and top managers. Lower-level technical specialists have little interest or expertise in administrative procedures. If organization structure causes negative consequences for lower-level employees, complaints and dissatisfaction alert managers to a problem. Employee dissatisfaction is an internal force for change. The need for change is perceived by higher managers, who then take the initiative to propose and implement it. The top-down process does not mean that coercion is the best implementation tactic. Implementation tactics include education, participation, and negotiation with employees. Top-down change means that initiation of the idea occurs at upper levels and is implemented downward. It does not mean that lower-level employees are not educated about the change or allowed to participate in it.

Culture/People Changes A culture/people change refers to a change in employees’ values, norms, attitudes, beliefs, and behavior. Changes in culture and people pertain to how employees think; these are changes are in mindset rather than technology, structure, or products. People change pertains to just a few employees, such as when a handful of middle managers is sent to a training course to improve their leadership skills. Training is the most frequently used tool for changing the organization’s mindset. A company may offer training programs to large blocks of employees on subjects such as teamwork, listening skills, quality circles, and participative management. Another major approach to changing people and culture is organizational development.

Organizational Development Organizational development (OD) is the application of behavioral science knowledge to improve an organization’s health and effectiveness through its ability to cope with environmental changes, improve internal relationships, and increase problemsolving capabilities. Organizational development improves working relationships among employees. The following are three types of current problems that OD can help managers address. Mergers/Acquisitions. Culture differences should be evaluated during the acquisition process, and OD experts can be used to smooth the integration of two firms. Organizational Decline/Revitalization. OD techniques can contribute greatly to cultural revitalization by managing conflicts, fostering commitment, and facilitating communication. Conflict Management. Conflict can occur at any time and place within a healthy organization. Organizational development efforts can help solve these kinds of conflicts.

OD Activities.

A number of OD activities have emerged in recent years. Some of the most popular and effective are as follows. Team-Building Activities. Team building enhances the cohesiveness and success of organizational groups and teams. Survey-Feedback Activities. Survey feedback begins with a questionnaire distributed to employees. Employees are engaged in problem solving based on the data received from questionnaire. Intergroup Activities. These activities include retreats and workshops to improve the effectiveness of groups or departments that must work together. Process-Consultation Activities. Organizational development consultants help managers understand the human processes within their organization and how to manage them. Symbolic Leadership Activities. This approach helps managers to use the techniques for cultural change, including public statements, ceremonies, and slogans.

OD steps.

The theory underlying organizational development proposes three distinct steps for achieving behavioral and attitudinal change: (1) unfreezing, (2) changing, and (3) refreezing. In the first step, unfreezing, the diagnostic stage of organizational development in which participants are made aware of problems in order to increase their willingness to change their behavior. Diagnosis is done by change agent. This diagnosis helps determine the extent of organizational problems and help unfreeze managers. The second step, changing, a step in the intervention stage of organizational development in which individuals experiment with new workplace behavior. There the change agent implements a specific plan for training managers and employees. Refreezing, a step in the reinforcement stage of organizational development in which individuals acquire a desired new skill or attitude and are rewarded for it by the organization. (4 ) 1

An example of …

Pakistan Telecommunication Company Limited

Pakistan Limited

Telecommunication

Company

As recently as in July 2006, privatization process took place in Pakistan’s largest telecommunication company PTCL. The company still is the largest but the growth that this company has shown is by far larger than in some years before. PTCL has partially been privatized, 26% of the PTCL shares are now with a Dubai based company Etisalat. Etisalat though not has as significant shares yet it is controlling the management of the PTCL. Under its management, PTCL is going efficient and well enough to remain at the top.

Privatization of the PTCL PTCL has been on the verge of privatization since 1991 and there has been many efforts undertaken for its privatization, but it was made official in July 2006. There is still the government as the major shareholder but the management vests with Etisalat. The privatization has been beneficial to the company as a whole, but the individuals involved are still shaky about their jobs. The company some period before and after the privatization has been the aim of constant resistance. From the employees to the people indirectly associated with the company; all were somewhat against it being privatized. The government was strongly criticized for it. The protests were at all time high when the proposed time of privatization was

near; although it was delayed due the protests but never laid down.

How the PTCL could have managed to avoid resistance? The change always comes with a resistance package and history has witnessed many companies that bowed before these resistances. The PTCL is one of the first companies of Pakistan that was privatized so the resistance was obvious. There was a strong resistance by the employees as well as by the social groups and some of the political parties. Now comes the question in concern that how the resistance could be avoided? It took so long for the government to privatize PTCL yet there was no as such plan to avoid the inevitable. The privatization that caused change could be planned properly. No single methodology fits every company, but there is a set of practices, tools, and techniques that can be adapted to a variety of situations. What follows is a “Top 10” list of guiding principles for change management, some of steps that the company can take: 1. 2. 3. 4.

Address the “human side” systematically Start at the top Involve every layer Make the formal case

5. 6. 7. 8. 9. 10.

Create ownership Communicate the message Assess the cultural landscape Address culture explicitly Prepare for the unexpected Speak to the individual

1. Address the “human side” systematically. Any significant transformation creates “people issues.” New leaders will be asked to step up, jobs will be changed, new skills and capabilities must be developed, and employees will be uncertain and resistant. Dealing with these issues on a reactive, case-by-case basis puts speed, morale, and results at risk. A formal approach for managing change — beginning with the leadership team and then engaging key stakeholders and leaders — should be developed early, and adapted often as change moves through the organization. This demands as much data collection and analysis, planning, and implementation discipline as does a redesign of strategy, systems, or processes. The change-management approach should be fully integrated into program design and decision making, both informing and enabling strategic direction. It should be based on a realistic assessment of the organization’s history, readiness, and capacity to change. 2. Start at the top. Because change is inherently unsettling for people at all levels of an organization, when it is on the horizon, all eyes will turn to the CEO and the leadership team for strength, support, and direction (govt. in case of PTCL). The leaders themselves must embrace the new approaches first, both to challenge and to motivate the rest of the institution. They must speak with one voice and model the desired behaviors. The executive team also needs to understand that, although its public face may be one of unity, it, too, is composed of individuals who are going through stressful times and need to be supported. Executive teams that work well together are best positioned for success. They are aligned and committed to the direction of change, understand the culture and behaviors the changes intend to introduce, and can model those changes themselves. 3. Involve every layer. As transformation programs progress from defining strategy and setting targets to design and implementation, they affect different levels of the organization. Change efforts must

include plans for identifying leaders throughout the company and pushing responsibility for design and implementation down, so that change “cascades” through the organization. At each layer of the organization, the leaders who are identified and trained must be aligned to the company’s vision, equipped to execute their specific mission, and motivated to make change happen. 4. Make the formal case. Individuals are inherently rational and will question to what extent change is needed, whether the company is headed in the right direction, and whether they want to commit personally to making change happen. They will look to the leadership for answers. The articulation of a formal case for change and the creation of a written vision statement are invaluable opportunities to create or compel leadership-team alignment. Three steps should be followed in developing the case: First, confront reality and articulate a convincing need for change. Second, demonstrate faith that the company has a viable future and the leadership to get there. Finally, provide a road map to guide behavior and decision making. Leaders must then customize this message for various internal audiences, describing the pending change in terms that matter to the individuals. 5. Create ownership. Leaders of large change programs must overperform during the transformation and be the zealots who create a critical mass among the work force in favor of change. This requires more than mere buy-in or passive agreement that the direction of change is acceptable. It demands ownership by leaders willing to accept responsibility for making change happen in all of the areas they influence or control. Ownership is often best created by involving people in identifying problems and crafting solutions. It is reinforced by incentives and rewards. These can be tangible (for example, financial compensation) or psychological (for example, camaraderie and a sense of shared destiny). 6. Communicate the message. Too often, change leaders make the mistake of believing that others understand the issues, feel the need to change, and see the new direction as clearly as they do. The best change programs reinforce core messages through regular, timely advice that is both inspirational and practicable. Communications flow in from the bottom and out from the top, and are targeted to provide employees the right information at the right time and to solicit their input and feedback. Often this will require overcommunication through multiple, redundant channels.

7. Assess the cultural landscape. Successful change programs pick up speed and intensity as they cascade down, making it critically important that leaders understand and account for culture and behaviors at each level of the organization. Companies often make the mistake of assessing culture either too late or not at all. Thorough cultural diagnostics can assess organizational readiness to change, bring major problems to the surface, identify conflicts, and define factors that can recognize and influence sources of leadership and resistance. These diagnostics identify the core values, beliefs, behaviors, and perceptions that must be taken into account for successful change to occur. They serve as the common baseline for designing essential change elements, such as the new corporate vision, and building the infrastructure and programs needed to drive change. 8. Address culture explicitly. Once the culture is understood, it should be addressed as thoroughly as any other area in a change program. Leaders should be explicit about the culture and underlying behaviors that will best support the new way of doing business, and find opportunities to model and reward those behaviors. This requires developing a baseline, defining an explicit end-state or desired culture, and devising detailed plans to make the transition. Company culture is an amalgam of shared history, explicit values and beliefs, and common attitudes and behaviors. Change programs can involve creating a culture (in new companies or those built through multiple acquisitions), combining cultures (in mergers or acquisitions of large companies), or reinforcing cultures (in, say, long-established consumer goods or manufacturing companies). Understanding that all companies have a cultural center — the locus of thought, activity, influence, or personal identification — is often an effective way to jump-start culture change. 9. Prepare for the unexpected. No change program goes completely according to plan. People react in unexpected ways; areas of anticipated resistance fall away; and the external environment shifts. Effectively managing change requires continual reassessment of its impact and the organization’s willingness and ability to adopt the next wave of transformation. Fed by real data from the field and supported by information and solid decision-making processes, change leaders can then make the adjustments necessary to maintain momentum and drive results. 10. Speak to the individual. Change is both an institutional journey and a very personal one. People spend many hours each week at work; many think of their colleagues as a second family. Individuals (or teams

of individuals) need to know how their work will change, what is expected of them during and after the change program, how they will be measured, and what success or failure will mean for them and those around them. Team leaders should be as honest and explicit as possible. People will react to what they see and hear around them, and need to be involved in the change process. Highly visible rewards, such as promotion, recognition, and bonuses, should be provided as dramatic reinforcement for embracing change. Sanction or removal of people standing in the way of change will reinforce the institution’s commitment. (5) Most leaders contemplating change know that people matter. It is all too tempting, however, to dwell on the plans and processes, which don’t talk back and don’t respond emotionally, rather than face up to the more difficult and more critical human issues. But mastering the “soft” side of change management needn’t be a mystery. Above are some of the points that PTCL might not had taken into consideration otherwise the level of resistance would be surely low. The communication factor was found in less magnitude, between the employees and the administration. The incentives given to the employees were not enough to make them feel heard. The job cuts were far beyond the limits and still the employees are in fear of losing the jobs. But the brighter side shows that more customers and subscribers are heading towards the company, thus making it profitable.

Executive Summary Change is inevitable in organizations. The trend today is toward the learning organization, which embraces continuous learning and change. Managers should think of change as having four elements—the forces for change, the perceived need for change, the initiation of change, and the implementation of change. Forces for change can originate either within or outside the firm, and managers are responsible for monitoring events that may require a planned organizational response. Techniques for initiating changes include designing the organization for creativity, encouraging change agents, and establishing new-venture

teams. The final step is implementation. Force field analysis is one technique for diagnosing restraining forces, which often can be removed. Managers also should draw on the implementation tactics of communication, participation, negotiation, coercion, or top management support. Also discussed are specific types of changes. Technology changes are accomplished through a bottom-up approach that utilizes experts close to the technology. Successful new-product introduction requires horizontal linkage among marketing, research and development, manufacturing, and perhaps other departments. Structural changes tend to be initiated in a top-down fashion, because upper managers are the administrative experts and champion these ideas for approval and implementation. Culture/people change pertains to the skills, behaviors, and attitudes of employees. Organizational development is an important approach to changes in people’s mind-set and corporate culture. The OD process entails three steps— unfreezing (diagnosis of the problem), the actual change (intervention), and refreezing (reinforcement of new attitudes and behaviors). (6)

References

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6.

Baekdal, Thomas, (2006). Change Management Handbook. Technology and immediacy of information (on-line) available http://www.wikipedia.com Becta (2003) Available http://www.becta.org.uk/tsas. Daft, Richard L, (1997). Management. Florida: Dryden Press. Jones, John & Aguirre, DeAnne. (2004). 10 Principles of Change Management: Tools and techniques to help companies transform quickly. Daft, Richard L, (1997). Management. Florida: Dryden Press.