1. Why does the effective management of change represent a critical core competence that all organizations and leaders must master?
As such, it is important for organizational changes to be managed effectively. This ensures that such changes won’t cause disruptions in the organization’s operations (EML, 2012). Whatever the nature of the change – be it a business process change or a restructure of the organization – it is important for the transition to be effectively managed to ensure that the organization will benefit from the change and not suffer during the adjustment period.
Not only is change a natural occurrence in business, it is also part of an organization’s business strategy, as change would enable the organization to accommodate and profit from external developments. In this regard, effective change management skills would be necessary to enable the organization to cope with the increasing changes in the corporate world, examples of which include legislative, strategic, and technological changes. These would also enable the organization to gain a competitive edge. Moreover, effective change management skills would be necessary in the organization’s effort to empower its human resource where an increased level of responsibility and accountability is encouraged through the various ranks of employees. A company that does not allow change is bound to fail. It is only by accommodating and managing change effectively that an organization can continue to thrive.
2. GM and Chrysler have gone through a great deal of organizational change. What is the impact on all of the targets of change in those organizations?
The organizational changes undergone by GM and Chrysler have saved the companies from the possibility of a bankruptcy and enabled them to regain success in their respective markets.
In Chrysler, a change in their organizational culture led to overhead cost savings amounting to millions of dollars, increased stock prices, and increased profits. It also enabled the company to come out with new and competitive lines of cars every year (Fox, n.d.). This change entailed the involvement of people, that is, it enabled customers, suppliers, mechanics, and assembly line workers to provide their input on the car designs, which resulted in the alignment of the manufactured cars with the customers’ wants and needs. It was also ensured that all of the departments agreed on the company’s core objectives, which prevented expensive last-minute changes to the initial plans. In addition, Chrysler worked with Honda, made sure that they learned from their achievements and mistakes, and ensured that Chrysler dealerships provided customers with quality service.
In GM, a cultural change was also implemented where GM changed from a laboratory that primarily provided support to its existing production system to a laboratory that focused on business innovation (Hong & Szurgyi, 2006). This new culture required a strong leadership commitment to the development of new methods for addressing the environmental challenges brought about by the changes in the marketplace. This entailed forming alliance partnerships with other car manufacturers, initiating research programs with the main suppliers, partnering with universities for research, and developing new production metrics. As a result, GM was able to regain its status and position in the marketplace.
3. In regards to Circuit City not responding to the pressures of change. Can you recall what their response was to decreasing sales that ultimately led to their liquidation?
Circuit City’s response was to lay off 3,400 of its best paid and most knowledgeable workers (English & Spencer, 2008). They did this as a way to increase their profits. They replaced these employees with cheaper labor. However, this led to poor customer service, which discouraged customers from making purchases at their stores and which also led to customer complaints. About a year later, they laid off more of their employees and just like the first ones they laid off, they didn’t provide these employees with severance pay and health coverage (Hamilton, 2008). However, they paid around $7 million in compensation to the company’s CEO. As a result, not only did they lose top quality staff, which led to poor customer service, they were also faced with a lot of complaints and litigations, which added further to their financial burdens.
References
EML. (2012). The importance of effective change management. Retrieved from http://www.employeemanagement.co.uk/blog/2011/10/the-importance-of-effective-
change-management/English, S. & Spencer, N. (2008, November 4). Circuit City to close stores, lay off thousands in US. Retrieved from http://www.wsws.org/articles/2008/nov2008/circ-n04.shtml
Fox, D. (n.d.). Organizational development. Retrieved from http://edweb.sdsu.edu/people/ arossett/pie/Interventions/od_1.htm
Hamilton, A. (2008, November 11). Why Circuit City busted, while Best Buy boomed. Time Magazine. Retrieved from http://www.time.com/time/business/article/0,8599,1858079,00.html
Hong, T. & Szurgyi, A. A. (2006, November 21). Organizational design and effectiveness. Retrieved from http://thomas18.com/pdf/ Organizational%20Design%20and%20Effectiveness.pdf
