Introduction
Change management is a make or break situation managers face in their strategic decisions. An organization has a number of stakeholders with varied interests. These interests must be taken care of in any proposed changes. Failure to cater for the interests of stakeholders may lead to resistance and undesirable behaviors thus hindering the success of the firm. CEC International Holdings Limited (CEC) is expanding the business by opening the retail business section, ‘759 STORE.’ The plan is a fundamental change in the company since the company initially dealt with electronics manufacturing. This paper attempts to design a change framework that the management of CEC International Holdings Limited (CEC) can apply to implement the change successfully. It also uses the Force Field analysis to identify and assess the extent of each element. In addition, the paper explores the potential reaction of both employees and shareholders to the management’s plan to introduce the retail business section in the company. It also proposes a model of organization design that can help the company in implementing the change process.
Part 1: Change Framework and Force Field Analysis
The change framework for this case will involve a three-step process that starts with the definition of the problem up to the development of a comprehensive change strategy. The framework is based on the Force field analysis outlined by Kurt Lewin.
i. Definition of the problem and the change objective
For any change process to be successful, the problem it seeks to solve must be identified and explained(Russell and Russell, 2006). The problem can be an actual problem or an area of potential improvement. In this case, the introduction of the retail business section in the company seeks to diversify revenue sources as well as improving the profitability of the company. Diversification reduces the overall business risk thus maximizing shareholders’ wealth. In this case, the company's management identified a gap in servicing the needs of people living in the extensive neighborhoods. It uses the Japan’s consumption model in living districts. The model indicates that retails stores operating in areas with vast population are successful. The management of the company should, therefore, explain to the other stakeholders that the introduction of the ‘759 STORE’ is an opportunity to improve the company’s profitability. Once the stakeholders understand the need and the objective for the introduction of the ‘759 STORE,’ the management will be able to reduce resistance to the process. This will assist in the successful implementation of the change. Shareholders and employees would like an idea that will improve CEC International Holdings Limited’s profit as this translates to better returns and salaries.
ii. Identifying driving and restraining forces
A number of factors drive the introduction of the new retail stores. There are also a number of forces against the proposal. Successful implementation of the project involves the identification of these opposite forces and designing appropriate strategies to deal with them(Daft and Marcic, 2010, p. 277). The force field analysis assists in the identification of these forces.
The retail business seeks to improve the profitability of the company hence the stakeholders are a major force behind this process. Shareholders are a driving force so long as the management can prove to them that the project will enhance the profitability of the company. In addition, the competition within the electronics manufacturing sector makes diversification a driving force to this project. The need to meet the needs of the consumers is also a driving force for this project. The stores will operate a supermarket style business that ensures consumers have a variety of products. The company also aims at achieving extensive distribution through opening as many branches as possible. The third phase of the project aims at increasing the number of stores to 90.
Employees may be a restraining force to this project. The introduction of the ‘759 STORE’ causes an increase in the number of employees in the company. Some employees may perceive this as a threat to salary increases as well as opportunities for development. Existing employees may think that the company may not be able to offer the same amount of rewards if the number increases(Slocum and Hellriegel, 2010). In addition, the change will lead to some operational changes that employees may not be comfortable with. Some employees may have to undertake additional training to become suitable for the new positions(Slocum and Hellriegel, 2010). Shareholders may also become a restraining force especially if the project does not promise better returns. In this case, the project increases the company’s total revenues, contributing about 14.8% of the total Group’s revenue. It also increases the Group’s gross margin because the gross margin of the retail business is higher than that of the group. However, the fact that the retail business made an operating loss of HK$2,301,000 may not go well with the company’s shareholders. Shareholders will not allow the company to spend their funds on unprofitable projects.
iii. Change strategy
The change strategy involves reinforcing the driving forces and freezing the restraining forces(Partridge, 2007). The shareholders will be worried of the completion of the third phase of the project since the retail business made an operating loss of HK $2,301,000. Shareholders may want the company to stop pursuing the project to avoid future losses. This will be a major force because the interest of shareholders is to maximize their returns and to invest in projects that are making losses does not complement this objective. Furthermore, the project carries a risk since there are uncertainties about its success or failure. It is not certain that the new stores will improve the profitability of the company. Factors such as unexpected entry of a competitor in the market, economic downturn, among other factors, may lead to losses thus affecting the project’s viability. In this case, the strategy will involve justifying the viability of the project to the shareholders. The management can explain that the project will need time to recover its initial cost and start making profits. This requires a detailed account of the expected sales revenues and profits when the project is finally completed. The management can also emphasize the need satisfy customers’ needs by providing a variety of brands.
Freezing restraining forces is the most important part of implementing the change. Employees have their concerns about their job securities and suitability for the new operations(Mullins, 2011). Addressing these concerns will help the management in carrying out the project. There should be a communication from the top management that the project will not have any casualties in terms of employee dismissals. In addition, the management should explain to the employees the need for this project by outlining the associated benefits. The benefits should include those accruing specifically to the employees. Linking the project to the success of the company can help the management explain the significance of the project. The management should also establish programs to train employees to enhance their suitability to handle the project. These programs will reduce employee resistance thus enabling the company to implement the ‘759 STORE’ project.
After freezing the restraining forces, the management will continue with the plan to implement the third phase of the project. The management will be guaranteed of continued and adequate financing of the project if it addresses the concerns of the shareholders. Employee resistance will also be minimized hence the project is expected to be successful. According to Kurt Lewin, freezing the restraining forces is more important than reinforcing the driving forces.
The change process does not stop on completion of the project. The management must ensure the project meets its intended objectives hence post-completion strategy is critical(Burton, DeSanctis and Obel, 2006). After opening the required number of stores, it is important for the company to improve the operations of the stores and enhance their profitability. Therefore, should be on other aspects of the stores’ operations rather than opening more branches. The retail business cannot be profitable if its capital expenditure is more than the optimal level. The company needs to spend more on operations such as advertising and measures to improve operational efficiency. Lewin argues that after completing the project, the management should unfreeze the restraining forces in order to prevent further changes(Burton, DeSanctis and Obel, 2006). In this case, the management should explain to the shareholders that further capital expenditures on opening new stores is not justified and that it should concentrate on improving the existing stores. In addition, training programs for employees should now focus on maintaining the standards of the existing stores rather than acquiring skills for running new stores.
An examination of the project’s progress indicates that shareholders may be the strongest restraining force. The project is in its third phase of its implementation hence it is likely that employees are already adapted to the changes. In addition, expansion does not have a significant impact on the existing employees since it is unlikely that the company will retrench employees. Shareholders will be concerned that the retail business had an operating loss despite increasing the total revenue and gross margin. It will take much effort for the management to convince the shareholders and guarantee continued funding of the remaining phase of the project.
Part 2: Research to evaluate the reaction of stakeholders
Identification and analysis of stakeholders is important in managing the change process. Stakeholders’ analysis involves identification of the parties affected or influencing the project, their interests and powers in the organization. After identifying the stakeholders, the management should study their influences or power and their interests in the project(Cummings and Worley, 2005). The stakeholders are then mapped on a Power/Interest Grid. The grid sub-divides the stakeholders into four categories. The first group is composed of stakeholders with low power and low interest in the project. These stakeholders do not have a significant impact on the implementation of the project. The project manager does not have to put much effort on this type of stakeholders, just monitoring them is adequate. Those with low power and high interest have a less significant impact on the progress of the project. The management team only needs to keep them informed about the project. The third group consists of stakeholders with a high power but low interest in the project. They have a significant impact on the project if their interests are not catered for hence the management has to keep them satisfied in order to avoid resistance(Daft and Marcic, 2010). The final group is made of stakeholders with high power and high interest in the project. They have the most significant effect of the project hence the management must manage them closely. They must be involved in the project(Cummings and Worley, 2005).
Identifying where the company’s shareholders fall would enable the company to predict their reactions. Apart from identifying their interests in the project and powers, the managements should study the shareholders to get more information about them. The areas of study include their financial interest in the outcome of the project, their most motivating factor, the information they want and the best way of communicating to them. Other aspects are the opinion of the shareholders on the performance of the management, opinion leaders among the shareholders, among other aspects(Carnall, 2007).
If the '759 STORE' has a significant effect on the shareholders, they prefer getting involved in the project from its inception. The shareholders provide capital to CEC International Holdings Limited and would be concerned with the profitability of the ‘759 STORE’ project. They can support the project if they are involved in every aspect. The management can determine their reaction to the project from the power/interest grid. The shareholders would react negatively if they were not involved in the project. The reaction could be worse following the revelation that the retail business made an operating loss of HK$2,301,000. However, if they were engaged from the beginning of the project, the shareholders will not react negatively to the operating loss the retail business section made. The reaction will be positive so long as they get the required information in a timely manner. In managing the reaction of shareholders, the management of CEC International Holdings Limited can use the influence of the board of directors. The directors represent the shareholders in the management of the company hence they have a significant impact on the opinion of the shareholders.
In addition, if shareholders perceive the management of the company as efficient, their reaction to the project will be positive. The belief that the managers have been working hard and putting the interests of shareholders first will ensure a positive reaction from the shareholders. Where shareholders believe that the managers are not acting in the shareholders’ best interest, they are most likely to react negatively to the project. The negative reaction would be aggravated by the fact that the project reported an operating loss. The shareholders would easily stop the implementation of the project.
Reaction of employees
Employees are directly involved and affected by the change process hence understanding their expected reaction is critical to the successful implementation of a change process(Burke, Lake and Paine, 2009). Understanding the reaction of employees also involves a detailed stakeholder analysis. Employees’ position in the power/interest grid depends on their level of management in the company. Departmental heads will had a high power and high interest in the job making them a critical group of shareholders in the change process.
The reaction of employees to change is influenced by their individual emotions and cognitions. The management must therefore carry out research in order to understand employees’ cognitions and emotions. The focus of this research should be on a number of aspects of emotions and cognitions. These include attitudes, emotional intelligence, communication processes, and irrational thoughts, among other aspects.
The management should study and research on the attitude of employees towards change. When employees of a company have a positive attitude towards change, their resistance to organizational change is limited(Burke, Lake and Paine, 2009). Cynical attitudes are associated with resistance towards change. The attitude of employees can be determined through their reactions to previous change programs as well as surveys. In some cases, educational levels influence the attitude of employees towards particular issues. The management expects a positive reaction to the project if the employees have a positive attitude towards change.
Another area of research on employees is emotional intelligence. This involves the ability to respect and understand ideas and opinions of others. High emotional intelligence leads to a positive reaction towards change. This is because high emotional intelligence reduces the feeling of job insecurity, increases adaptability and improves the ability to work in a team(Burke, Lake and Paine, 2009). The management can get this information by studying the relationship between employees in the company.
Employees’ perceptions of the effects of the proposed change also influence the level of their resistance to organizational change. Some employees have irrational thoughts about the effects of a given change process as well as how the management perceives them. CEC International Holdings Limited should expect resistance from employees of its workers have irrational thoughts. Irrational thoughts could be eliminated through effective communication. If the company effectively communicates to its employees on the planned change, its effects on what it expects from the employees, the level of resistance will be low.
The research on the above aspects does not need to be accrued out on all employees. The company should use the power/interest grid to identify the most influential employees in this project. Such employees may be head of departments, officials of employee unions, among other opinion leaders. If top employees and officials of employee unions have unfavourable aspects of emotions and cognitions, the company should expect resistance to the project.
Part 3: Model of organization design
Organization design influences the ability of an organization to respond to changes in the external environment(Miner, 2007). It refers to the way in which the organization combines differentiation and integration of its operations. Differentiation involves sub diving the organization into different units with each unit performing a specific task. Integration involves linking the different functional units in order to attain harmony in working towards achieving overall organization goals(Miner, 2007).
In order to enhance organizational change, the company should adopt an organic structure. The organic structure is characterized by little job specialization. Limited specialization increases employees’ adaptation to change hence they can easily undertake different roles. In addition, organic structures have few layers of management thus enhancing decision making. Decision making in organic organizations is faster since there are a few layers of management to be consulted before reaching a decision. Quick decision making is important during organization change as it allows the company to respond promptly to changes in its environment(Hayes, 2007). In addition, the organic structure has a decentralized decision-making approach. This means that operational decisions can be made by the functional heads or operating managers without necessarily consulting the top management(Hayes, 2007). The structure also has limited direct supervision. Limited supervision is essential in enhancing employee innovation as workers are free to take initiative actions. Innovation fastens the process of organization change. The company should have an organic structure during the change process.
After examining the nature of CEC International Holdings Limited’s project, I recommend a regional organization structure in completing the project and running the stores thereafter. The company should subdivide its operations into different geographical areas depending on the location of their stores. Each region should have a regional manager who will be responsible for running the stores in the respective regions. Where the stores are very large, the company can have a manager for each store and consider each store as a region. The regional structure will enhance the ability of the company to respond to changes in consumer needs. This is because the regional managers have the power to make decisions on matters relating to their regions and do not have to consult the top management in such decisions. Quick decision making will improve the company’s response to clients’ needs.
In addition, the regional structure ensures better customer satisfaction. The needs of consumers may vary from one location to another(Jones and George, 2011). Therefore, each regional manager understands best the needs of customers in particular regions. The top managers of the company are not close to the customers hence they do not understand their needs.
The company operates the ‘759 STORE’ under a policy of high flow volume and increasing the variety for customer selection. The increase in stock volumes can only be served best if the company adopts a regional or geographical structure. In this structure, each region will order products. It will reduce extensive recording that would be required if the products were ordered centrally and then distributed to the different stores. In addition, ordering centrally may lead to shortages as it takes time for the goods to be distributed to the regions.
Summary and Conclusion
CEC International Holdings Limited should undertake a force field analysis to identify the forces for and against the project. The major forces have been identified as employees and shareholders. The company should then use the Kurt Lewin’s model of freezing the restraining forces. In this case, the management should engage the shareholders in the process and explain the justification for the project. This will reduce the resistance of shareholders to this project. It should also address the concerns of employees regarding their job security by assuring them that jobs are secure despite the changes. A stakeholder analysis would enable the company to predict the reaction of employees and shareholders to the project. The interest/power grid will assist the company in identifying the most influential stakeholders in the project. Understanding shareholders would involve determining the financial interest they have in the outcome of the project, among other aspects. The company should expect a positive reaction if shareholders are engaged in the process. Studying the emotions and cognitions of employees will help in predicting the reaction of employees. The company should adopt an organic structure to implement the change and a regional structure in running the stores. This structure will enhance decision making and improve customer satisfaction.
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