Change is inevitable

Question

Provide a critical analysis of an organisational change which you have directly experienced. You may select one element or aspect of the change for a particular discussion. You will be expected to use the main concepts of the relevant parts of the literature on managing change, to diagnose, account for, and explain the change. Consider what lessons can be learnt from that initiative on the strengths and weaknesses of programmatic approaches to change.

Introduction

Everyone says change is difficult. It is difficult to conceive because one must inevitably deal with people issues and uncertain future. The more so to implement because consequences can be difficult to predict, harder to track and therefore can create a dynamic all of their own. Is this really so? Is it not true that we are living in an era though which dramatic changes of productivity, technology, brand, image and reputation are common place? Thus reaffirming the words of Heraclitus the Greek philosopher who said “Change is the only constant thing in life” Change is inevitable but often it’s easier said than implemented because every change faces resistance in some form and carries with it certain consequences. A classic example would be my experience working in MARG Ltd, one of India’s biggest infrastructure company today. I was given the role of a “Business Analyst” in 2007 immediately after I graduated engineering. It was my first job, my first real life business experience. I was a part of the company for 2 years. The following parts of my essay consist of all the changes the organization went through in the areas of structure, culture and technology. However considering the requirements of the essay a detailed analysis is written on structural change which is an internal change model. The first part identifies the problem due to monumental growth of the organization in terms of financial support received and the subsequent increase in huge human capital required to carry out the projects. The second part consists of the literature review pertaining to the structural change the organization witnessed followed by a brief critical analysis of the entire scenario. The conclusion consists of the mistakes made and lessons learnt followed by a personal reflection on the dynamics of change management.

In April 2007 MARG Ltd consisted of 400 employees. By October 2007, the organization grew to 3250 employees with multiple branches exploding in 7 different cities throughout India. That is nearly 9 times its growth in human capital. This happened due to an investment of USD 12.6 million received from deutsche bank for a total land asset of 12400 acres including 2 potential Special Economic Zones and a port infrastructure development. Being a company with only 2 verticals namely Real Estate Residential and Real Estate Commercial, it diversified into 6 verticals consisting of (a) Real Estate Residential, (b) Real Estate Commercial, (c) Port Development, (d) Industrial Clusters, (e) Special Economic Zones and (f) Power generation with about 500 employees in each vertical. Now each vertical had more employees than the entire company had in April. The earlier organizational structure was a traditional functional structure. This structure can be illustrated by the company’s activities grouped into departments such as personnel, Marketing, Finance, Sales, Legal and Civil Operations. All the functional departments excluding finance which had a CFO as its business head had 1 CEO reporting directly to the Chairman, 2 Vice presidents (1 for Real Estate residential and 1 for Real estate commercial) reporting to the CEO and the rest of the team reporting to the VP’s. This was a simple structure which had its advantages during that phase of the organization. A complete coordination was achieved as the entire operations of the company were achieved through the CEO overseen by the chairman. This structure allowed for the development of employee expertise in all areas, it provided career paths for professional staff involved and finally there was an effective utilization of personnel across various departments (Carnall, C. 1990). However this structure created pressure on the organization for its further growth in the aspect of geographical dispersion, project diversification and increase in human capital. Hence there was a structural change needed in the form of a matrix structure. The chairman decided on this structure as it offered equal importance on the market and the functional focus to the organizational work. Also most academics have believed that such structure is favourable for large construction, aerospace and computer software companies (Hardy, C. 1994). This favours organization which deals with more than one complex project and where there is a need to coordinate and develop project and various specialist activities. As the demand for various specialist inputs is variable over the completion time lines of the project, this structural change seemed to be the best possible solution which not only promoted the effective deployment on a project when needed but also offered the adaptability over time so that resources can be easily switched between projects. The advantages of a structural change of this nature were (a) it identified the project management structures, (b) provided accountability for the project, (c) allowed development of cohesive and effective teams of specialists working towards the objectives of a key project, (d) provided for the professional and career development of specialist staff, (e) and most importantly they provided for the flexible use of specialist staff (Carnall, C. 1990).

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However every choice carries with it certain consequences and uncertainties. The consequences on the negative side which were later realized was that there was difficulty of handling such a matrix structure in terms of reconciling the need for flexibility with the need for project coordination and control. Now this reconciliation required good working relationships between project and functional management which did not exist. This is because about 90% of the employees were fresh entrants. They did not know the people they were working with. Most of them were fresh graduates and never had any previous work experience in infrastructure. Some of the experienced employees who joined recently were not from the industry. Also the biggest issue was that the employees who have been present since the start of the organization felt threatened with the implementation of the new structure as this does not give them the accessibility they had before with their Chairman. The people who had reported to their respective bosses had now had to report to somebody else. For example the CEO’s had to report to the newly appointed Executive Directors, Vice presidents had to report to business heads who in turn had to report to the CEO’s. The entire working relationships and comfort zones of various employees were disrupted by the new structural change. Though people understood the need for such a change and that it was required for the benefit of the organization considering its monumental growth, people feared the loss of power and control thus giving rise to insecurities and conflicts.

Based on the literature review the 3 main problems identified in the organization with such a structural change were the struggle between;

  1. Centralization vs. Decentralization: Being a company with functional structure, the process was a centralized one where the coordination was more straightforward with decisions being made by the chairman at clearly recognized points within the organizational structure. Also the senior management were in a comfortable position with established policies that they are used for many years. It suited the chairman for he had control over all the day to day activities, most decision making and a convenient resource allocation. In this model the centralization of power and control of procedures was focused on the chairman ( Brooke, T. 1987). But however in order to go to the next level of growth and meet the market demand, it was necessary for the organization to be decentralized. With 6 verticals and a man power of 3250 this seemed to be the sensible choice. With as many as 27 projects spread over 6 verticals, delegation was the key factor in meeting objectives. Delegation can reduce the amount of stress and overload experienced by the senior management. When senior management is overloaded, the exercise of control is diminished. With delegation it was possible for the senior management and the chairman to move away from day to day activities and focus on long term planning and creating a vision. Also it helps the bottom line management in providing opportunities to make decisions and attain personal satisfaction by matching their personal goals with that of the organization. It assists the management development in widening the on job skills of managers and prepares number of people who are capable of undertaking senior positions in the future. It also provides flexibility, with the establishment of sub units it helps in improved controls and performance measurements and accountability can be identified (Bartlett, C. 1991).
  2. Control vs. Commitment: This aspect is important for the overall effectiveness of the organization. MARG had a control model where work was divided into specialized tasks. Performance expectations were defined as ‘standards’ that define the minimum acceptable performance. No attempt was made to establish maximum or potential performance. With the matrix structure, it was necessary to bring the commitment model. But that meant changing the attitude and expectations of the employees. In this model, job profiles were redesigned to be broader and teams rather than individuals and the each business unit was held accountable for performance. This also involved that people rely on shared goals for coordination; influence was based on expertise and information and not on position anymore. Performance expectations were set relatively high. Continuous improvement was expected and monitored. At the same time lot of motivational programs were incorporated as a part of the business management. The organizational structure was designed to be flatter to enhance performance and commitment (Walton. 1987). This gave birth to reward policies, open door policies and performance management systems. This also seemed to enhance employee management relations.
  3. Change vs. Stability: It’s a common notion that in a changing world every organization must change to survive and prosper. However while this happens its also mandatory to deploy people to produce goods and services to the market as usual, even if we are demanding extra effort from them as they experience change. This is where it is essential that a balance is maintained between change and stability (Chandler. 1962). This often refers to the transition phase between when the change is implemented and the consequences arrive. The transition phase is normally uncertain in a number of areas. Every employee might react differently to changes. The response is not the same always. MARG experienced similar difficulties. Even though awareness for change was established and people understood the need for change, the existing employees couldn’t handle a shift in their normal routine and they had give up on their control and power. To bring about a structural change and yet retain the harmony and employee satisfaction seemed to be a challenge for the company.
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Even though the problem was identified and the corrective measures were taken to overcome them. There was a hurdle in problem solving and it was the blocks in the minds of the employees. These can be categorized as follows;

(a) Perceptual Blocks: This involves the employees stereotyping. They saw what they expected to see. They only saw the new structural change as a threat and not as an opportunity to increase their performance or making use of the opportunities to go up the corporate ladder. There were tendencies to delimit the problem area too closely thus defining it narrowly. Thus they never faced the real problem which was their motivation and commitment. Also there were difficulties in using all the sensory inputs (Adams. 1987). The employees felt that they were overloaded with information on changing structures and the reason for it. With fresh job descriptions and new recruitment there were lot of things happening in the organization and the employees couldn’t use all the information for their benefit.

(b) Emotional Blocks: This involves fear of taking risk, incapacity to tolerate ambiguity and employee’s preference to judging rather than generating ideas (Olsen. 1986). The existing employees were afraid to take risks and execute the expected tasks for they feared redundancy and felt insecure that if they failed somebody else in the company would take their place and felt loss of appreciation also as a possible outcome. The matrix structure was put in place quickly and it carried with it certain complexities. The available data was overloading and employees felt it was misleading, full of opinions and had different values. In trying to analyze the available data, they missed out on promising opportunities and self development. Finally they were constantly judging the ideas and solutions put forward by the new members and the new bosses. This lead to early rejection of ideas in their minds resulting in organizational objectives not being met.

(c) Cognitive Blocks: This aspect doesn’t deal with the employees but is associated with the inadequacies of the management. This comprises of incorrect use of language, inflexible use of strategies and lack of correct information (Janis. 1989). Since the top management were from different backgrounds and industries they were using incorrect languages which portrayed a completely different picture for an infrastructure company. Most senior professional come from a comfortable and set environment which had established process, systems and protocols. Also most of them come from traditional companies. Hence there tendencies to stick to what they know and were stuck with their earlier methodologies. This did not suit the current of MARG as it was still in its transition phase and in early phase of establishing fresh policies and process.

In spite of the challenges faced, continued focus resulted in establishing a firm matrix structure with all the employees aligned to the objectives of the organization. There were numerous mistakes made but it also lessons were learnt. This section outlines all the mistakes made, the lessons learnt and finally identifies a change model MARG followed in academic language. The time gap between which the change was planned and executed was very quick. Though its understandable that it was need within a quick span of time it shook the organization by its roots with resistance from all sides. One of the major mistakes was that the chairman being used to getting himself involved in the day to day activities continued to do that even with the new matrix structure and this resulted in the displeasure of CEO’s, Executive directors and VP’s. This affected their decision making as they would have to wait for the chairman to make every decision. Employees developed their own negative perceptions of structural change and criticized every plan and ideas without thinking about its benefits. MARG followed a clinical approach earlier where the set limited employees and the comfortable environment made it efficient for success through a psychological contract between the employees and the chairman (Bell. 1995). Employee’s security was established through personal relationships. However with the new structure it was necessary to adopt a linear approach. In this approach change was implemented as a linear process where the managers were expected to identify organizational adaptations ahead and the new systems developed would propel the organization towards static equilibrium thus resulting in stability (Stacey. 1996). The problems as mentioned earlier were solved in 3 stages. First step was unfreezing. Creating awareness among employees for the need of change and the benefits it would bring not only to the organization but also to the employees. Then comes the step moving. Here new ideas are tested and existing process is revamped. This is followed by refreezing where new behaviours, skills and attitudes are stabilized and commitment to change is achieved (Lewin. 1997). The last step was done in 4 stages. First was the conceptualizing process then the motivation process, the commitment process and finally the implementation and evaluation phase (Kotter. 1988). As a result the organization was able to produce the following after a series of trial and error method; (a) established a sense of urgency for change. (b) Created a guiding coalition. (c) Developed a vision and strategy. (d) Communicated the changed vision. (e) Empowered employees for broad based action. (f) Generated short term wins. (g) Anchored new changes in future (Kotter 1996). All this was possible by working through the blocks and with a series of trial and error method the expected result was obtained. Though the price for such a change was key employees and CEO’s resigning, with the objectives being met it was a lesson learnt for future transformational change. In the current market scenario it is mandatory for such rapid and monumental changes to handle the increasing demand. As Argryis (2004) said “If the rate of change outside the organization is faster than the rate of change inside, the end result is nigh”. Hence such rapid monumental changes are needed and every change will always carry with it certain uncertainties and challenges. But that’s the only way for organizational development.

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Bibliography

  • Adams, J.L. (1987) Conceptual Blockbusting, pp 18 – pp 43, Penguin Publications
  • Argryis, C. (2004) Double Loop learning and organizational change, pp 104, Wiley Publications
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