CHAPTER 4

THE 4TH BIG QUESTION:

HOW CAN THIS BE ACHIEVED?
This chapter is structured as follows:

1. Strategic change at the corporate level.

2. Strategic change at the business level.
3. Strategic change in different circumstances.
STRATEGIC CHANGE AT THE CORPORATE LEVEL
The role of the center is to ensure that each unit in a corporate portfolio gains
the maximum benefit from being part of the portfolio. Managers should also
be aware of the way that units can be clustered within an overall framework co
maximize the opportunities for synergy and parenting. this is particularly
important in post-merger or post-acquisition periods when corporate centers
endeavor to reconfigure their organizations.

Prompt a discussion of the implications with respect to the disposal of companies,

the acquisition of companies, company mergers and new business start-ups.
Careful consideration will have to be given to the financing of corporate level
change. For some businesses may be sold co fund expansion or improvements in
other businesses.
The strategic options chosen may require that the overall governance of the
organization is changed and that the role of the center and its relationship to
individual business is modified. It may be appropriate for individual business to
cooperate.
STRATEGIC CHANGE AT THE BUSINESS LEVEL
Strategic change at the business level is the level where people become
involved. The impact of corporate restructuring has to be managed within the
individual businesses, and the ways that change is managed will be context-
dependent.

It is important to estimate the impact that change has on customers because

the nature of that impact should be anticipated. Some impacts are desired and
are expected to have a positive impact on consumers, while ocher impacts
may be trade-offs, which some consumers may not like
A strategy that is counter to the culture of the unit will be difficult to
implement. If a change in strategic direction is necessary for long or short-term
organization survival this may be an appropriate route. Indeed, the very nature
of the situation may be a driver for change and may be used by organization
leaders as a catalyst for change.

If we revisit the product/market resource portfolio matrix in Figure 4.l and the
organization paradigm and race of change required matrix we can consider the
implications of managing change under the conditions suggested by the nature
of the change in the organization’s resource mix.
PRODUCT/ MARKET PORTFOLIO
In the remainder of this chapter we discuss strategic change in four
different circumstances:

1. Managing change when the change is consistent with the present

culture.

2. Managing change co accommodate different organization contexts.

3. Managing change when the change requires a culture change co

maintain a successful position.

4. Managing change in turnaround situations.

In healthy organizations changes will be grounded in present resources, but
over time the organization will learn and grow. It will acquire new assets and
skills as current products are produced in more effective ways and new
products and markets are developed
The organization needs to manage change incrementally whilst
understanding the changes in its own situation and its
environment.

➢ Its position in its cycle (Greiner, l972).

➢ The position of its products in their life cycle.
The way that environments affect organizations are outlined.

➢Demographic changes, such as the increased spending power of

elderly people.

➢Government policy and legislation on interest rates and trade, etc.

➢Technical innovation through Internet use and genetic

engineering, etc.

➢Sociological changes such as the redefinition of pornography and

the increasing dominance of one parent families
Healthy organizations adopt a philosophy of continuous improvement
(sometimes manifested through Local Quality Management systems). This can
involve the updating of products and process so that they are aligned to
evolving customer needs.

In continuous improvement projects the main players are usually first line
managers, maintained by middle managers acting as a key link to cop
managers. In a healthy culture there would be open communication
throughout the organization. Indeed, the empowerment of individuals and
teams within organizations is one of the cornerstones of a continuous.
The ability to create successful teams depends on a number of
factors:

✓ Team members must want to be part of the team.

✓ There must be a balance of appropriate abilities in the team.
✓ They must want the team co succeed.
It is clearly essential that the team should be appropriate for the task
and that the task being undertaken has the support of top
management. In addition to having clear objectives, the objectives
should be agreed at the start of the project and should be regularly
restated. The team should have a leader who is concerned with the
three key areas of teamwork.

❖ The needs of the task.

❖ The needs of the team.
❖ The needs of the individual within the team
 TO DO THIS THE TEAM LEADER SHOULD:
1. Ensure that all members understand the task and the plan.

2. Be responsible for leading the team in developing the project or cask plan
that accurately reflects the task.

3. Allocate tasks within the team.

4. Agree milestones and performance measures.

5. Ensure that the team maintains an effective work race and its task focus.

6. Encourage and discipline the team and individuals.

 TO DO THIS THE TEAM LEADER SHOULD:
7. Encourage the building of team spirit.

8. Minimize tension and reconcile disagreements.

9. Receive information from the wider organization and its environment and
disseminate to the team.

10.Disseminate information from the team to the wider organization.

11.Check project outcomes with initial objectives.

12.Help the team evaluate its own performance against objectives.

MANAGING CHANGE TO ACCOMMODATE
DIFFERENT ORGANIZATION
There are situations when organizations have to come to terms with operating
one way in one environment and another way in another environment. When
healthy organizations expand their market areas to different countries the
structure set-up for this must accommodate the impact that this will have on
the organization.

Healthy organizations may also have to accommodate a step change when

they introduce new products to new markets when this requires the
acquisition of new resources.
COMMITMENT
The organization is fully
committed to developing
people to achieve its aims and
objectives.
ACTION
The organization develops
its people effectively in
order to improve its
performance.
PLANNING
The organization is clear
about its aims and
objectives and what people
need to do to achieve them
EVALUATION
The organization
understands the impact of
their investment in people
on its performance.
 INDICATORS:
1. The organization is committed to supporting the development of its people.

2. The people are encouraged to improve their own and other people’s performance.

3. People believe their contribution is recognized.

4. The organization is committed to ensuring equality of opportunity (meritocracy).

5. The organization has a plan (strategy) that is understood by everyone.

6. The development of people is in line with the organization’s aims and objectives.
 INDICATORS:
7. People understand how they contribute to achieving the organization’s aims and objectives.

8. Managers are effective in supporting the development of people.

9. People learn and develop effectively.

10.The development of people improves the performance of the organization, teams and
individuals.

11.People understand the impact of the development of people on the performance of the
organization, teams and individuals.

12.The organization gets better at developing its people.

 KOTTER (L995) SUGGESTS THAT ORGANIZATION
TRANSFORMATION BE MODELLED USING:
EIGHT-STEP FRAMEWORK

1. Establishing a sense of Urgency: The first step in initiating a process for change
is to establish the need for change.

2. Forming a powerful guiding coalition: One of the first tasks within many
change processes is the formation of a guiding coalition or project team.

3. Creating Vision: Having established the need for change, it is important to

express that need in a form that can be understood by all.
 KOTTER (L995) SUGGESTS THAT ORGANIZATION
TRANSFORMATION BE MODELLED USING:
EIGHT-STEP FRAMEWORK

4. Communication the Vision: Transformation is impossible unless employees

can be convinced that it is achievable. Employees may have to make sacrifices and
tolerate job losses amongst colleagues.

5. Empowering others to act on the vision: The system and culture of the
organization must be aligned to the vision outlined. The activities of the
organization must be compatible with the vision of the future aspired to.

6. Planning for and creating short-term wins: Progress must be measured. This
is why the organization needs to set objectives and performance indicators.
The work of a number of writers, however, suggests that change can be
managed in ways that involve both planned and emergent dimensions. Quinn
(l978) captured the essence of this idea when he developed the concept of
logical incrementalism. The balanced scorecard provides a framework for
translating a company’s strategic objectives into a set of performance
measures.
KAPLAN AND HORTON (L992, L993, L996) DEVELOPED THE BALANCED
SCORECARD AND IT REVOLVES AROUND FOUR SEPARATE BUT INTER-LINKED
MANAGEMENT PROCESSES:
CUSTOMER
FINANCIAL To succeed financially a
Shareholder interests are best company needs to create
accommodated within a value for its customers
financial perspective

INTERNAL BUSINESS LEARNING AND

PROCESS GROWTH
Customer value can be enhanced Support for value-creating
by making internal processes strategies requires ongoing
more effective and efficient support
Performance measures have to
be cascaded down the
organization so that managers
can monitor their own
implementation performance.
This involves sub-units identifying
their own set of actionable
performance indicators in line
with the overall strategic
objectives of the company.
IN SUMMARY, THE BENEFITS OF INTEGRATING THE BALANCED
SCORECARD INTO THE IMPLEMENTATION PROCESS ENABLE A
COMPANY TO:

➢clarify its strategic objectives

➢structure its strategic objectives.
➢measure its progress towards achieving its strategic objectives.
➢communicate its strategy to its workforce.
➢align its corporate and individual employee objectives.
➢highlight the tensions and trade-offs required in meeting its
strategic objectives.
➢focus on its critical management issues.
➢review performance co learn about and improve strategy.
 KOTTER (L995) SUGGESTS THAT ORGANIZATION
TRANSFORMATION BE MODELLED USING:
EIGHT-STEP FRAMEWORK

7. Consolidating improvements and producing still more change: It is

important that successful changes in systems, practices and attitudes are
accompanied by the philosophy that catalyzed chose changes.

8. Institutionalizing new approaches: It is important that successful changes in

systems, practices and attitudes are accompanied by the philosophy that
catalyzed those changes.
 MANAGING IN CHANGE IN TURNAROUND SITUATION

Slatter (l984) suggested that antidotes for decline should be mapped to specific
causes of decline. His research has indicated that firms in crisis can only be
converted into firms that make above average profits if strong product market
positions can be achieved.
CAUSE OF DECLINE
➢ Poor management inadequate financial control
➢ High cost structure poor marketing Competitive weakness.
➢ Big projects Expensive acquisitions Financial strategy

ANTIDOTE
❖ New management and restructuring Improved financial control and
localized costing and performance measures.

❖ Cost reduction, product market reassessment Improved marketing Product

market reassessment Cost reduction Improved marketing Asset reduction
Growth by strategic acquisitions.

❖ Asset reduction Asset reduction New financial strategy.