Organizational Change
The organizational change describes both the process and content of organizational transformation from one point in time to another. It is the continued renewal of the organization’s strategy, structure, capabilities, relationships, culture/behavior and direction to adapt to the complex, uncertain and dynamic external and internal forces. Change is necessary in order for an organization to thrive and even survive the changing internal and external environmental factors, and as such, organizational change is inseparable from strategy. Since it is a process, it is inevitable that it will take some time, but even most importantly, that critical steps in change management are not skipped, lest the potential of failure will be increased. The motivation or drivers for change can originate from within or without the firm. Internal change drivers derive from the firm’s need to organize its resources in order to gain the best competitive advantage. For instance, according to Ventris (2006), organizational growth requires structural transformation e.g. the shift from informal and direct control to a more formal and impersonal control. One critical aspect of internal change drivers is strategic management, which involve the continued development of strategies meant at ensuring the firm can meet its set objectives effectively and efficiently in the light of the light of the operational environment, available resources and other constraints.
Any organization must be aware of its weaknesses, strengths, opportunities and threats, and leverage its resources in order to counter the threats and/or capitalize on opportunities that present. Resource-based views of strategic management lay emphasis on the ability of firms to leverage their strategic resources to create unique and sustainable value for the customers. The process commences with the diagnosis of the change needs and approaches, which are heavily influenced by the organizational mission and vision. The mission/vision determines the scope of the strategic planning process while the specific strategies attempt to ensure external and internal environments are reconciled. Strategies may be categorized into corporate, competitive and functional strategies. Corporate strategic changes involve the overall scope and direction of an organization, including product portfolios, cross-business synergies, integration, and diversification decisions. On the other hand, competitive strategic changes involve the creation of unique and sustainable advantage relative to market competitors while functional changes are geared to ensuring the best possible resource utilization. Effectively, the most important factors driving internally initiated changes include managerial competency, stakeholders, resistance to change, financial and other resources.
Equally crucially, changes in the institutional and market environment drive change within the firm. In fact, firms have to use their resources in order to best adapt to the changes in the external environment lest they lose relevance and collapse. As the external environment inevitably change, the organization must also adapt to remain relevant. For many organizations, change is induced by failures (pushed by catastrophe or pulled by opportunities), but for more strategically agile firms, organizational change is routinized through programs, procedures, and other mechanisms. For instance, R&D departments ensure that an organization is continually innovating and changing to meet the needs of the market. This renders firms strategically proactive in transforming themselves from one state to the other, to ensure survival/success (By, 2005; Jacobs, van Witteloostuijn, & Christe-Zeyse, 2013). External factors include macroeconomic volatility, competitive, environmental changes, social and political developments, changes in the legal application framework (e.g. accounting/auditing requirements, taxation laws, health and safety standards). Other important external variables include technological changes i.e. both the core technologies required by the firm in its production activities as well as other general technological changes e.g. communication technology advancements.
Organizational Change Case Study
Having been in operations since 1897, General Motors (GM) designs, builds and markets vehicles across the world. Its products include trucks, cars, crossovers and associated parts. With a market capitalization of $51.18 billion and more than $154.23 billion in revenues between July 2014 and 2015, GM is among the largest companies in the world today, with a long and colorful history. In 2014, it posted in excess of $155,427 million and $5131 million in revenues and operating loss respectively, coupled with more than $3,770 million in net profits. The company, which employs in excess of 216,000 people and has operations across North America, Europe, Asia Pacific, South America and Africa, is famous for leading car brands such as Cadillac, Opel , d GMC, Buick, Vauxhall and Chevrolet. GM’s operations are divided into five separate business segments i.e. North America, International Operations, Europe, South America and General Motors Financial Company, Inc. Despite the difficult economic conditions following the 2008 financial crisis, the company sold upwards of 9,715,000 units in 2013, with North America comprising its largest market.
Figure 1: General Motors and other US companies had high labor costs (Heritage, 2009)
The Detroit-based company has struggled to cope with stern competition from Japanese and European manufacturers over the past two decades, so much so that during the 2007/2008 global economic crisis, it was driven to the brink of insolvency. On 1 June 2009, the company filed for Chapter 11 Protection, setting off one of the biggest bankruptcies. To re-organize, a new entity, the New General Motors Company purchased the bankrupt company’s operational assets, and sold off some of its most valuable assets to help finance the reorganization. The company proposed selling off the Saab, Hummer, and Saturn brands, along with other assets (intellectual property and trademarks), and brand re-invention. Backed with close to $100 billion in loans from the federal government, and European governments, the New General Motors LLC emerged from bankruptcy into a fresh storm, resulting from decade-long failures to invest in product development and innovation. The most notable was the defective ignition switch that resulted in deaths. To compete in this industry, GM’s re-invention is focusing on fuel-efficient, hybrid and generally green designs, around which the new brand is built. The company is also intensifying its operations in the emerging markets.
Figure 2: GM’s re-organization
Figure 3: GM’s competition
The change at GM and the automobile industry is consistent with the definition of organizational change ventured in this paper. The paper defines organizational change as the continued renewal of the organization’s strategy, structure, capabilities, relationships, culture/behavior and direction to adapt to the complex, uncertain and dynamic external and internal forces. To begin with, GM built its success on large fuel guzzlers and low oil prices, but as oil prices increased, consumer preferences for energy-efficient vehicles from Japanese competitors meant that GM’s future was doomed. Still, GM failed to implement relevant changes in the past few decades, including a failure to invest enough in R&D. This led to the 2009 crash, and the rapid re-organization. The new GM adopted a new structure, brand identity, shed four products/brands, changed strategy, invested in developing new capabilities and relationships with suppliers and other partners, and even most importantly diversified into the emerging markets. This is organizational change, and GM’s success in the future is dependent on the continued transformation to adapt to the changes in the market.
SWOT Analysis
There are multiple strategic factors apparent in GM’s SWOT analysis, which explain its 2009 collapse, its re-organization and strategic direction that it is currently taking. To begin, the high oil prices have worked in favor of smaller, energy efficient cars by competitors such as Toyota, Honda and Nissan. While GM lost out on the mass market, it could not perform in the luxury market segment because it is dominated by European manufacturers such as Rolls Royce, BMW, Mercedes Benz and Ferrari.
Further, GM’s dependency on North American and European markets also exposed it, because these markets were worst hit by the global economic crisis, besides the increasingly stringent regulatory environments that have had the effect of reducing profit margins and sales. Effectively, in order to mitigate against these factors, firstly, GM is investing in energy efficient and hybrid/green vehicle designs. Competition now includes product features and quality, research and development, reliability, pricing, fuel economy, safety, financial options and customer service. By investing in R&D, diversifying markets away from North America and Europe, and concentrating on profitable products, GM would just about manage to counter Japanese and European competitors, in the short term at least.
This is also a study of the benefits and drawbacks of SWOT analysis as a management tool. To begin with, a SWOT Analysis is easy to conduct. It dies not demand considerable technical understanding of the business and the tool, which means that even the smallest firms without expert managements can use it. Further, this tool focuses on the most important strategic factors affecting factors affecting the organization, as well as the available resources that the firm can use to transform itself to best adapt to the strategic challenges and opportunities. For instance, while it shows that GM faces tightening regulations, it also indicates that it has heavily invested in R&D and eco vehicles, which should enable it to survive. However, a SWOT analysis fails to set priorities, which makes it difficult to reach informed decisions. For instance, it does not show Nissan’s revenues and whether the hybrid car sales would be enough to ensure the company is profitable.
Role of Change Agents
An estimated 80% of all change initiatives culminate in failure, largely because of fundamental failures in the approach adopted by firms. The reasons for the failure of change initiatives are many and varied. They include resistance by a segment of key stakeholders, inadequate and ineffective communication, a hierarchical model of change implementation that ignores inherent diversity, poor conflict management and inappropriate organizational cultures. In some successful organizations, managements have a clear sense of direction, which was however, either too vague or complicated to be any meaningful. This speaks to the complexity of the change process, and even most sadly, most organizations only change when they are either pulled by opportunity or pushed by failure. Change is likely to occur and be successful in an organization if certain conditions exist. These include vision, purpose, clear strategy and leadership.
Even most importantly, change agents must provide a clear and relevant vision for the future, around which organizational members can galvanize their support. A vision often transcends, short-term plans, and instead attempts to clarify the overall direction that the organization wishes to adopt. The vision serves to ensure that the transformation does not dissolve into vague, confusing and incompatible projects. In addition, Kotter (2007) finds that the change vision is often under communicated, and thus change agents are required to ensure that all organizational members have the right information about the proposed changes and their role in achieving the set goals. They effectively ensure that informal channels of communication are used to supplement formal communication, achieving greater effectiveness and engagement. Further, in order for visions to succeed, change agents must actively eliminate obstacles e.g. by emboldening employees to try new approaches and empowering different parties to take bold measures. They lead in combatting resistance. Effectively, change agents provide the requisite leadership, vision, strategy and purpose (By, 2005; Reynolds & Holwell, 2010).
Problem-centric & Dialogic Approaches to Change
A problem-centric model is founded on logical empiricism/positivism, by which a change agent employs objective and perceptual measures to justify proposed changes. On the other hand, a dialogic model is a social construction approach, which focuses on both collaborative and technical components of an organization, stressing the decision-making process as against the outcomes of the same.
The problem-centric approach requires that change agents objectively analyze reality and its component parts to reach a conclusion about the causality relationships between entities e.g. technology and structure. Organizations are essentially open entities comprising strategy, structure, and other aspects that can be treated as separate natural units amenable to being modified, related and grouped. By unpacking the different aspects of an organization, it is possible to understand its complexity, and it is equally possible to address different aspects of the firm individually and collectively to achieve a desired outcome.
On the other hand, the dialogic approach is founded on the need to appreciate the collective complexity of organizational relationships as against reducing them into separate entities. It begins by communication to ensure clear understanding and development of common grounds, which are then leveraged to drive changes. While the technical component facilitates data collection, the social aspect of the approach ensures that such data is disseminated effectively to organizational members and sharing of tacit knowledge. Collaboration is a process, which includes genuine sharing of opinions and creation of solutions to the organizational problems. Rather than debate, the dialogic approach requires the appreciation of different viewpoints, the relationship among different parts, learning by inquiry and disclosure, as well as creating shared meanings.
The dialogic approach is far superior to the problem-centric approach in initiating and implementing changes. To begin with, it is fallacious to think that an organization can stripped down to its component parts, which can then be addressed separately. No single organization is similar to the other, because of the complex organizational cultures, structure, human and financial capital, historical factors, management, and other factors. Equally, these factors are just as important to the manner in which component parts of an organization works, and thus reducing parts of the organization may lose these aspects, rendering the process inherently erroneous. Further, the emphasis on data ignores the possibility of the data can lack objectivity and reliability, and, therefore, lead to wrong conclusions.
In solving GM’s lack of competitiveness and decades-long failure, GM needed to apply technical managerial/accounting principles e.g. value chain analysis, Porter’s Five Forces (technical aspects) to determine its sources of strategic value and feasible strategic direction. To this end, decisions such as the sale of Saab and Hummer divisions, coupled with the development of energy efficient vehicles and expansion into China would have been reached, based on solid facts (market intelligence and analysis, etc.).
Figure 4: GM's stakeholders
However, once the change agents reached the decisions and vision for change, GM faces problems from all its stakeholders. Current and retired employees for instance were opposed to layoffs and bankruptcy proceedings since they could lose their employment retirement benefits in an economy that was in recession. This is where the social aspect of the dialogic model comes into play. Applying change management models such as the Force Field model, Lewin’s model and Kotter’s eight-step model, which provide opportunities for stakeholder engagement consensus-building, GM’s management would, and did in fact strike deals with the US, Canadian and European governments (to provide it with loans), employees, and suppliers to allow for the radical re-organization, which has been successful.
Many change management theories emphasize the fact that change is a process, which requires the collaboration of key stakeholders, and thus this will be impossible if the social component of change is ignored (Jabri, 2012; Kegan & Lahey, 2001; Kotter, 2007). The dialogic approach provides for consultation, communication and engagement of different stakeholders to ensure a shared vision and meaning of change, which should in turn reduce resistance and increase the possibility of success.
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