Change Management and Organisational Impacts

Table of Contents

I. Current Management Challanges

II. Managing Changes
1. New Challages for Managers
2. What does Change Management Include ?
3. How to Persuade ?
4. Why a Powerful Leader is Required
4.1 Leaders in Change Situations
4.2 Which Requirements Should a Leader Meet ?
4.3 Crises Communication

III. Critial Literature Recognition

List of Sources

I. Current Management Challenges

“One of the most common business phenomena is also one of the most perplexing: When successful companies face big changes in their environment they often fail to respond effectively.”^[1] If the business environment changes (i.e. belonging to new products, strategies or technologies) successful companies are unable to match with and go bad. Sales revenues erode, the best employees leave the company and its overall value declines.^[2]

That means for managers to take care that the company for which they are responsible is fit for the future and future challenges. As the organisation of companies depend on their business environment in most cases, the management has to introduce changes inside the organisation to make sure that it meets the new conditions.

II. Managing Changes

1. New Challenges for Managers

According to Doppler and Lauterburg the new responsibilities for business managers are:

Leading through organisational changes

Creation of an intact social working environment

Reduction of hierarchical barriers

Creation of performance through synergie

More flexible working hours and working organisation

Organisation of learning and knowledge development

Keep woman into key positions

Management of crises

Workforce dismissal

Bearing up under aims conflicts

Navigation and supervision through communication

Planning for future depending on complex scenaries

Integration through vision and strategy^[3]

2. What does Change Management Include ?

Changes do not happen only because of talking about change. Change means to develop at least people and their habits. As seen in the introduction change is necessary for keeping the chance for companies doing business in the future. That is the challenge for change management: Cope with the future and create the future of the company. Success without change management is not imaginable under these conditions.^[4]

Not only power causes changes in an organisation. Staff thinking and opinions do not change at once only by an order. So change has to be accepted by the concerned people.^[5] In consequence the management has to persuade the workforce that they should follow the changes.

3. How to Persuade ?

It is the most critical part of a change process to convince people and make shure that they follow the organisational framework. Otherwise only a new framework exists without a real change in the working manner, habits and thinking.

Following ways are shown up how a change process should be created for being successful.

First it is important to be aware that people must have confidence in the leader and its plan for change. From there the leader (or the group of leaders – the management) has to consider that the employees should not be in a kind of defensiveness.^[6]

It is a basic human habit that changes are unwelcome.^[7] Employees, too, tend to keep the current situation and keep working like in past. So the leader has to sensitize for the position of the firm. He (or she if the leader is a woman) has to show up the problems that the company has or will have in near future if nothing happens and motivate the people for becoming familiar with these problems.^[8] In most cases the majority of employees are willing to follow changes, only a minority is unwilling. Therefore the management has to fight against the unwilligness of (at least a part of the workforce) and solve conflicts. The management has to agree with the staff about the parts in the organisation that are affected of change and about the way of change. Mostly this will be a kind of compromise. However, should the situation be worse it could happen that no compromise is possible to keep the whole business unit.^[9]

Different initial situations require different ways of acting. That’s why different sorts of managers are needed for change. If a manager not only controls the company but interacts with the staff he can be a real leader. As Goleman mentions “different situations call for different types of leadership”^[10]. As internal conflicts have to been solved and the enterprise still has to keep its business, especially in situations of change a successful leader is required.

4. Why a Powerful Leader is Required

As cause of troubles several fields of problems can be identified:

- Downsizing: Employees worry about the future and keeping their own job.
- Financial results are below the plan: If the financial expectations of the company itself or its environment are not met it suffers crises. As a result market value declines.
- Poor staff morale: In such a situation it is really difficult to work effectively, because a lousy morale hits the effictiveness of work, treatment of customers and at least profitability.
- Corporate lawsuits: Lawsuits can show up to the public internal affairs of the company, what is in the case of bad things very uncomfortable.
- Discrimination: Discrimination can likewise lead to crises.
- Mistake in technology: As customers are hidden it can lead to future sales problems.
- Quality problems: This may also end up in unsatiesfied customers or in recalling a product or killing a brand.
- Changes in leadership: This can cause misunderstandings and trouble in the management and/or workforce.
- Loss of a major customer account: It creates not only a loss in sales and profit but also a bad image and may end up in additional customer losses.
- Government probes/fines: They can bring negative attention for the corporation.
- Natural catastrophes: The customers or the ability of the company to produce could be harmed.
- Takeover target: A planned takeover causes trouble within the workforce and can end in strike or lower moral.
- Negative media coverage: A negative story about an enterprise can seriously damage its image.^[11]

All these points will lead to the necessarity of change to better the situation of the firm. However, business organisations tend to be inert. Sull calls the tendency of an organisation to follow established patterns of behaviour “active inertia”. “Stuck in the modes of thinking and working that brought success in the past, market leaders simply accelerate all their tried-and-true-activities”.^[12] It is out of question that it’s the management’s duty to implement a new strategy and new ideas.

Otherwise the danger of failure is extremely high. If the organisation keeps to work on the basis of yesterday’s success receipts, the “dynamic of failure” brings failure instead of the wealth like in the past. This process is marked by particular four things, that happen:

- Strategic frames become blinders
- Processes harden into routines
- Relationships become shakles
- Values harden into dogmas

As a summary could be questioned: How can a leader get the turnaround ?

Doppler and Lauterburg mention that creating a concept for change is important, but only a small part of the whole process. Much harder and critical is the way of conversion into real live.

Which parts belong to the process is shown in the figure below:

illustration not visible in this excerpt

source: Doppler, Lauterburg (1994) Page 130

4.1 Leaders in Change Situations

Kotter says from his own experience, that only a minor of turnarounds really are very successful.^[13] What makes the difference between failure and success ? A company has to avoid active inertia. It is the duty of the management to find a solution if the old formulas for success will not work any more. Often Business Consultants tend to recommand to change the whole way of doing business. These revolutions, however, most times fail in the case of traditional companies that were successful over decades. People will be left disoriented and disenfranchised, cut off from the past but unprepared to enter the future.
Kotter hence recommandes another way of change: The change should not overcome the whole organisation like a shock. In most cases there is no need to leave the whole history behind and create something completely new. The change should take cosideration for what is working well. The key question is what hinders the corporation to perform better? This requires a difficult balance act.^[14]

4.2 Which Requirements Should the Leader Meet ?

A leader has to have a number of specific characteristics. Like Goleman found, beside the intellectual abilities and technical skills emotional intelligence plays an icreasingly important role. Emozional skill are especially in cases of change extremely important to solve crises.

Emotional intelligence, however, is not just one single part of a person’s character. Several single abilities belong to emotional intelligence and create it all together:

First a leader should be self-aware. That means to have a deep understanding of one’s emotions, strengths, weakness, needs and drives. People who are self-aware are honest to themselves and with others. It extends to a person’s understanding of his or her values and goals.

The second part is self-regulation. People who handle self-regulation successful have the same feelings, wants and needs like others. But they find ways to control their moods and emotional impulses and channel them in useful ways. Self-controled managers are able to create an environment of trust and fairness.

The next part of emotional intelligence is motivation. Motivation in this case means to be driven to achieve beyond expectations, not the motivation by external factors like salary or status. The motivated workers are likely to set objectives that are realistically to fulfill – but not too easy. In this way motivation translates into strong leadership.

Of all parts that belong to emotional intelligence empathy is the most easily recognized. For a leader, however, it does not mean to try to please everybody. Rather, it means thoughtfully considering employee’s feelings in the decision process. [Empathy is particularly important today as a component of leadership for at least three reasons: the increasing teamwork, the rapid pace of globalization and the growing need to retain talent.

The last component of emeotional intelligence is social skill. Together with empathy it concers the ability to manage relationships with others. Social skill is friendliness with a purpose: moving people in the direction you desire, whether that’s agreement on a new communication strategy or introducing new computer software. Socially skilled people tend to have a wide circle of acquaintances, and they have a knack for finding common ground with people of all kinds – a knack for building rapport. Such people have a network in place when the time for action comes.^[15]

Why is emotional intelligence such important ? Most companies early or later face problems or crises that have to been solved. For the bigger problems a good crises management is essential.^[16] An incredible important part of crises management is crises communication. On one hand it is the key to gaining people’s involvement, on the other hand it is a basic element of all change activities. A successful communicator has a key to the hard of the employees. That’s why emotional intelligence is such important – for the ability of crises communication.

4.3 Crises Communication

“A crises can be well controlled with the help of communication. It can influence people’s thoughts about the given crises that hurts the business.”^[17] Furthermore professional communication by a convincing leader guides to a positive feeling of the staff, discourage speculations and helps fully to understand the needs of change and way to solve a crises situation.^[18]

III. Critical Literature Recognition

In my opinion it is out of question that companies have to change their organisation due to the way of business, technology and more, if they want to pass. As new technical developments allow creation of new products or services, only an enterprise that is able to change its business model and adapt it to new conditions can survive in long-term . But as organisations and people tend to be inertia it is a hard job for the management to implement changes. For performing well a special type of leader is essentially – his (her) emotional intelligence is the key factor for success.

As shown above one of the most essential parts of change management is communication. Without a professional communication the danger of failure is very high.

However from my own experience I would like to state that every change causes big trouble in a company, especially in Western Europe. That’s because of the people’s experience is that every change will cause job cutting. So the employees worry about their own future. Like literatures states, communication is essantaly, however in a number of cases were firms fail with implementing changes this fear may be the cause for failure. So I would like to add that honesty is another critical quality for leaders. As an present example see what happens in the AEG establishment in Nuremberg.

List of Sources:

Dalheimer Veronika, Krainz Ewald, Oswald Margit (editors): Change Management auf Biegen und Brechen?, Gabler (Verlag), Wiesbaden 1998

Doppler Klaus, Lauterburg, Christoph: Change Management, Campus, Frankfurt/Main and New York 1994

Gattermeyer Wolfgang, Al-Ani Ayad: Change Management und Unternehenserfolg, Gabler, Wiesbaden 2000

Farkas Ferenc (editor): Current Issues in Change Management: Challanges and Organisational Responses, Pécs 2005

Goleman Daniel: What Makes a Leader, in: Harvard Business Review November-December 1998

Sull Donald N.: Why good companies go bad, in: Harvard Business Review July-August 1999

Kotter John P.: Why Transformation Efforts fail, in: Harvard Business Review March-April 1995

[...]

^[1] See Sull in: Harvard Business Review (1999), page 42

^[2] Compare Sull in: Harvard Business Review (1999), page 42

^[3] Compare: Doppler, Lauterburg (1994), page 27

^[4] Compare Gattermeyer, Al-Ani (2000), page 7f.

^[5] Compare Gattermeyer, Al-Ani (2000), page 8

^[6] Compare Doppler, Lauterburg (1994), page 80

^[7] Comapre Gattermeyer, Al-Ani (2000), page 7

^[8] Compare Doppler, Lauterburg (1994), page 81

^[9] Compare Dalheimer, Krainz, Oswald ( 1998), page 91

^[10] See Goleman (1998) in: Harvard Business Review, page 94

^[11] Compare: Várnai, Fojtik in: Currenst Issues in Change Management: Challenges and Organisational Responses (2005), page 146f.

^[12] See Sull in: Harvard Business Review (1999), page 42

^[13] Compare Kotter in: Harvard Business Review 1995), page 59

^[14] Compare Sull in: Harvard Business Review (1999), page 50f.

^[15] Compare Goleman in: Harvard Business Review (1998), page 95ff.

^[16] Compare Várnai, Fojtik in: Current Issues in Change Management: Challenges and Organisational Responses (2005), page 145

^[17] See Várnai, Fojtik in: Current Issues in Change Management: Challenges and Organisational Responses (2005), page 151

^[18] Compare Várnai, Fojtk in: Current Issues in Change Management: Challenges and Organisational Responses (2005), page 152