3.6 Managing Change

Question 1

How is Organisational Change defined?

Answer 1

A process in which a large company or organisation changes its working methods or aims, for example in order to develop and deal with new situations or markets

Question 2

How is Transformational Leadership defined?

Answer 2

Where new leadership such as a new CEO brings about change with the purpose of improving business performance

Question 3

What are the Potential Causes of Change in a Business?

Answer 3

• Changes to organisational size
• Poor business performance
• New ownership
• Transformational leadership
• The market and other external factors (PESTLE)

Question 4

How can Changes in Organisational Size affect Competitiveness?

Answer 4

There are significant advantage to growth in the form of EoS, brand recognition and financial security

Question 5

How can Changes in Organisational Size affect Productivity?

Answer 5

• Firms are certainly more productive as they grow in size
• However, in order to capitalise on size a business will have to alter the scale and methods of production
• For some organisation this may require investment in automated production facilities and the loss of a highly skilled small workforce

Question 6

How can Changes in Organisational Size affect Financial Performance?

Answer 6

• With growth comes the need to invest
• This investment could come from the reinvestment of profits, but more often than not, a firm will need to finance growth through borrowing
• A highly geared business is a risky business
• Nevertheless, growth will often bring with it increased profit in real term and this is likely to please shareholders

Question 7

How can Changes in Organisational Size affect Stakeholders?

Answer 7

• Growth brings with it new opportunities for employees through bonuses and promotion prospects
• It may also be necessary to recruit new employees and this is another important change to manage, individual workers might be concerned that they will no longer work with ‘friends’, or may be moved to a job that they dislike
• As a firm grows there is danger of losing connections with its customer base
• Larger organisation sometimes find it more difficult to offer a personal service
• Trying to maintain a personal service has been focus of many high street banks
• The expansion of business can also create pressures for local communities

Question 8

Why does a Business Organisational Size change?

Answer 8

• The size of an organisation will naturally change as it seeks to grow
• growth is a key corporate objective as it allows a firm to satisfy shareholders and create security for its stakeholders
• One of the most significant drivers of change as a business grows is the need to restructure and adopt policies and processes to manage expansion
• Sometimes a business will look to grow externally by merger or takeover
• This can bring a very sudden change to all aspects of the business
• How an organisation manages growth can be difference between success and failure
• Most businesses are unable to operate as thy once did where they were a small business, which can be lost as companies grow

Question 9

How can Poor Business Performance lead to Business Change?

Answer 9

• This poor performance of an organisation will invariably bring with it a period of change as the company strives to regain customers, sales , profit or reputation
• Often the change after a period of poor performance will happen quickly as the business leaders try to ‘turn the tide’ and improve the fortunes of the company before failure and possible closure
• For this reason, change will often be very quick and may focus on corporate strategy
• Sometimes when a large business has a period of poor performance, a change of higher management or the CEO is made
• New leadership usually bring significant change as the new boss attempts to assert themselves and strike a new course for the business

Question 10

How can Poor Business Performance affect Competitiveness?

Answer 10

Poor performance will often go hand in hand with a loss of competitiveness

Question 11

How can Poor Business Performance affect Productivity ?

Answer 11

With poor performance comes a fall in sales, productivity and profitability

• A fall in production will leave the business with a low rate of capacity utilisation
• the key question is hoe will the firm manage its excess capacity and the threat of rising unit costs?
• Business must take account of changes in their human resource planning
• This could mean employing a more flexible workforce that could be changed quickly to meet the needs of the business for example , employing part-time workers, introducing job sharing.
• It might also mean employing workers in low-cost countries, such as in call centres abroad

Question 12

How can Poor Business Performance affect Financial Performance?

Answer 12

• A firm going through a period of poor performance is likely to be subject to liquidity problems
• A reduction is sales will result in a reduction in cash flow and this might lead to cost cutting
• In times of financial difficulty it is important for a business to find ways of being leaner and more efficicent

Question 13

How can Poor Business Performance affect Stakeholders?

Answer 13

• Poor performance brings uncertainty and this can have a negative impact on motivation within the workforce
• A firm can find itself manage low morale and giving reassurances
• Nevertheless, poor performance sometimes signals redundancies and this can be an extremely difficult process to manage
• All corporations are answerable to their shareholders and a poor performing company is likely to lose value on the stock markets

Question 14

How does Technology change Business?

Answer 14

• The introduction of new technology can affect a business in many ways
• Advances in even more powerful computer components
• Telecommunications and the power of handheld devices change not only how businesses communicate with their customers and suppliers, but also the pace of innovation and business processes

Question 15

How does Social factors change Business?

Answer 15

• Businesses must be prepared for changes in the tastes of consumers e.g. include the increasing demand for environmentally friendly products, the desire for greater knowledge and products or the need for more convenient methods of shopping , such as purchasing via the internet
• Population changes will also affect the age and make-up of the workforce
• The ageing of the population in the UK in the early part of the twenty-first century is likely to result in changing recruitment policies for businesses
• A falling population is also likely to change how a business plans its human resources

Question 16

How does the Law change Business?

Answer 16

• Government legislation can force changes in business activity,
• Taxation of pollution for instance, would affect the production methods of many firms.
• Safety standards, such as EU regulations, the minimum wage or the governance of zero hour contracts are likely to determine how businesses operate

Question 17

How does Economics change Business?

Answer 17

• It is argued that economies go through periods of boom and slump, recession and recovery
• This is known as the business cycle
• Income, spending, saving, investment and economic variables, such as unemployment and inflation, are all likely to be different at different stages in the cycle
• Business have to deal with these economic factors e.g. the financial crisis of 2008 many firms had to find ways of becoming leaner and more efficient in order to survive

Question 18

How does Change to the Market and other External Factors (PESTLE) affect Competitiveness?

Answer 18

• This impact on competitiveness of PESTLE factors is very much determined by how quickly a business is able to respond to these changing forces
• For example, if a business is the first to innovate or adopt a new technology, responds fastest to consumer needs or embeds policies that adhere to new legislation, it might be able to gain an advantage over its competitors

Question 19

Hoe does Change to the Market and other External Factors (PESTLE) affect Productivity?

Answer 19

• New technology can feed into the production processes of a business
• Whether that be a manufacturer or service provider, new technology brings with it the opportunity to increase scale, productivity and efficiency.
• As the economy goes through periods of boom and slump, businesses will be required to adapt to changing demands for their products and services
• As productivity rises and falls a business must change to cope with different levels of capacity utilisation
• These can require fast expansion or the need to rationalise

Question 20

How does Change to the Market and other External Factors (PESTLE) affect Financial Performance?

Answer 20

• In most instances any change in these external forces means an increase in costs for a business
• From simply having to adapt its packaging to meet new consumer legislation or the complete revamp of its product line to introduce new technology, these changes are not going to be cheap
• However, it is likely what the costs will have to be absorbed by the whole industry and not just one firm

Question 21

How does Change to the Market and other External Factors (PESTLE) affect Stakeholders?

Answer 21

• The impact of change as a result of business having to respond to external influences is likely to be felt by all stakeholders
• Any impact of rising costs though legal implications is likely to be passed on to consumers
• New technology may require retaining or, in a worse case scenario. could lead to parts of the workforce becoming redundant

Question 22

How can Ownership Change?

Answer 22

• The change in ownership of a business may come fro internal growth, the transition from a private limited company to a public limited company and flotation of a firm’s shares on the stock market
• With the flotation of a business on the stock market comes the opportunity to raise fresh capital for further investment and expansion, again fuelling more change ahead
• A change in ownership may also become necessary as a business goes through the process of a merger or acquisitions which can bring very sudden change to a company

Question 23

How can Changes in Ownership affect Competitiveness?

Answer 23

• the impact on competitiveness will very much be determined by how the companies integrate and complement one another
• However, significant economies of scale may come from two firms merging

Question 24

How can Changes in Ownership affect Productivity?

Answer 24

• Productivity may eventually rise as a result of a merger, but in the short term it is likely that business operations will be disrupted as the two firms work out how to get along and integrate all aspects of the business

Question 25

How can Changes in Ownership affect Financial Performance?

Answer 25

Acquisitions can be very expensive, and should the venture fail it can lead to huge losses being incurred by the buyer - However, acquisitions are good for share prices and the announcement of an acquisition or merger can increase demand for the company's stock

Question 26

How can Changes in Ownership affect Stakeholders?

Answer 26

- With a merger or acquisition comes the danger of a clash between two corporate culture - One of the most famous merger failures occurred in 1998 when Daimler and Chrysler attempted to merge - The merger was quoted as being like 'trying to mix oil and water' - The occurrence of a merger will always lead to restructuring of the two companies (or at least one of them) and may also lead to redundancies

Question 27

What are the Change and Effects of Transformational Leadership?

Answer 27

- Occasionally change occurs as a result of a change in management or leadership - When a new CEO takes the helm of a business it is often because the previous CEO has retired, stepped down or has been replaced due to poor performance - In these circumstances the new CEO will being in their own ideas and changes to the company - This transformational leadership might be in the form of a new vision or strategic direction for the business - If the new CEO has been brought in following a challenging period of performance, they might have been chosen as a catalyst for change to bring and fresh ideas

Question 28

How is Management of Change defined?

Answer 28

The process of organising and introducing new methods of working with a business

Question 29

What is Managing Change?

Answer 29

- Change Management is the process of organising and introducing new methods of working a business - These changes can be driven from with the business or as a result of responding to the external environment - the management of change in business is becoming increasingly important - Under pressure from competitors, higher costs and tougher economic conditions, many firms in the UK have development company-wide change programmes - Some firms have made only minor changes to their business operations and remained successful - Some company still retains many of their original production methods and design feature that they have had for years arguing that these 'original' features that attract consumers - However, many businesses need to change to stay successful in business

Question 30

What factor help manage successful business change within a Organisation?

Answer 30

- Organisation Culture - Size of the Organisation - Speed of Change - Managing Resistance to Change

Question 31

How will Organisation Culture help manage successful business change?

Answer 31

- Organisational culture in its simplest form can be described as 'the way things are done around here'. - this is a simplistic view of extremely powerful phenomena that play a significant role in the success of a business - Customs and practices are embedded in systems that reflect the norms and values may give stability, but it also presents problems of rigidity when a business needs to change - While a strong culture may give a company a competitive advantage, it can also be its downfall for example, changes in the digital market moved quickly and some competitors had organisational culture that responded at a faster pace than Kodak to meet market demand. - This led for the previously dominant Kodak to them filing for bankruptcy in 2012 - One of the most significant drivers for organisational change is external growth as a result of a M&A - In such cases two organisational culture will come together and their compatibility will often be the key factor that leads to success or failure

Question 32

How will the Size of the Organisation help manage successful business change?

Answer 32

- the size of a business may significantly affect its ability to manage successful change - it is a fair generalisation that the larger the organisation the less adaptable - This might simply be because there is more change to manage and on a larger scale, but also because decision making takes longer in firms with a longer chain of command and subdivision - In contrast, smaller businesses are far more flexible because decisions can be taken quickly and implemented without the involvement of a large number of stakeholders - As companies expand it is also necessary for them to change the way decisions are made e.g. MNCs or regional businesses may be required to adapt their approach to suit the local context - Where is it necessary for a business to move from a centralised decision- making approach to a decentralised strategy, change management may be more difficult to implement - Culture is a key factor in any change process, However, it is also true that in large organisations it is easier for sub-cultures develop. - Multiple culture are more difficult to manage through nay change than simple ones

Question 33

How will the Speed of the Change help manage change?

Answer 33

- Size is just one factor that can determine the pace of change in a business. Other factors also play their part e.g. in some contexts change can take its time and happen organically - The development of new products, technology and processes can then evolve in the knowledge that the business is in a safe position e.g. Apple have been the forefront of innovation in the personal computing market through continual change at a steady, but regular pace. - By contrast, other organisations have to go through change very rapidly such as the Fashion Industry that is forever involved in product development and innovation - Similarly crisis can also lead to very fast change e.g. after the financial crash many organisations had to change very quickly to rationalise and improve efficiency in order to survive

Question 34

Where may resistance come from for a business when going through change?

Answer 34

- Workforce - Owner - Customers and Suppliers - Stakeholders

Question 35

How can a Business manage Resistance to Change from the workforce?

Answer 35

- Business are likely to face a certain amount of resistance to change form parts of the workforce for a number or reasons: - Fear of the unknown. people often feel safe with familiar work practices conditions and relationships - Employees and managers may fear that they will be unable to carry out new tasks, may be made redundant or may face a fall in earnings - Individual workers might be concerned that they will no longer work with their preferred colleagues or may be moved to a job that they dislike If change is to be carried out effectively, they business must make certain that these fears are taken into account. Only if employees feel they can cope with change will the business be able to adjust to new situations be forced out of business

Question 36

How can a Business manage Resistance to Change from the Owners?

Answer 36

- Owners of businesses may also be resistant to change for similar reasons. - they might fear operating in unknown markets and conditions - They might not want the cost of any changes - they may also fear that they might not be able to adjust to new situations and be forced out of business

Question 37

How can a Business manage Resistance to Change from the Customers and Suppliers?

Answer 37

- These too may resist change - They may be unwilling to change their own practices when they business they are dealing with changes - For example, a company may reorganise its sales force and decide that it will no longer visit clients that give it less that £5000 worth of orders per year - Instead, it will develop a website and telesales operation to deal with small customers, - Inevitably, the company will lose some customers who are not prepared to place order in the new way

Question 38

How can a Business manage resistance of change from Stakeholders in general?

Answer 38

- Generally speaking therefore, stakeholders in a business may resist change for any of the following reasons - Disagreement with the reasons for or necessity to change - Fear of the impact - Lack of understaing - Disagreement with the process involved in delivering the change - Lack of involvement - General inertia - satisfaction with the current situation/ way of working - John Kotter a Professor at Harvard Business School proposed in Leading Change , a process which creates a sense of urgency - getting people to actually see and feel the need for change - Stakeholders must understand the need for change through effective communication if anger and fear are to be overcome and the management of change has any chance of succeeding

Question 39

What is a way of analysing change management in an exam?

Answer 39

- Need to be approached with care in any examination because it can incorporate all aspects and functions of a business - It is therefore worth examining change and the management of change in a systematic way: - What are the driving forces behind the change? Are these internal or external? - What is the likely impact of the change? - What factors might determine its success? - What are the key steps the business must take to ensure the change is successful? This will often come from the context of the business you are analysing

Question 40

How is Business Continuity Plan defined?

Answer 40

Shows how a business will operate after a serious incident and how it expects to return to normal in the quickest time possible.

Question 41

How is Risk Assessment defined?

Answer 41

Identifying and evaluating the potential risks that may be involved in an activity that a business proposes to undertake, ensuring compliance with health and safety legislation.

Question 42

How is Risk Mitigation Plans defined?

Answer 42

Identify, assess and prioritise risks, and plan responses to deal with the impact of these risks on the operation of the business.

Question 43

How is Scenario Planning defined?

Answer 43

A strategic planning method designed to explore uncertainties, learn how to protect the business from their worst consequences and prepare how to exploit any opportunities that might present themselves.

Question 44

How is Succession Planning defined?

Answer 44

Identifying and developing people who have the potential to occupy key roles in a business in the future.

Question 45

What is Scenario Planning?

Answer 45

- Many business undertake scenario planning in an effort to deal with unforeseen events - Scenario is not about trying to predict future events - It is a strategic planning method designed to explore uncertainties,, work out how to protect the business from their worst consequences and prepare how to exploit any opportunities that may present themselves

Question 46

What can Scenario planning help you do?

Answer 46

- clarify some of the future uncertainties in business identify risk and opportunities and prepare for their eventuality - teach managers how events may transpire, develop and affect the business - understand the causes and effects of change in business and how to manage

Question 47

What are some of the important steps in Scenario Planning?

Answer 47

1 - Identify possible trends and issues --> scanning internal and external environment - using PESTLE analysis 2 - Build possible scenarios --> imagine a range of possible scenarios that might affect operations 3 - Plan response --> identifying the impact the scenarios will have on the business and developing plans to deal with them 4 - Identify the most likely scenarios --> priorities the most likely and thoroughly plan for each 5 - Capitalise on Scenarios --> implementing the planned response when scenarios appear - not all scenarios end with a negative outcome

Question 48

What is a Risk Assessment?

Answer 48

- After a business has identified possible scenarios it might face in the future it might use a risk assessment - Involves examining what might cause harm to people and identify the precaution that might be take to protect them from harm - One of the main purposes of risk assessment is to help comply with health and safety legislation - However the use of risk assessment might be extended to assess risk on the business in general --> therefore helpful with scenario planning

Question 49

What are some possible scenarios a business may have to plan for?

Answer 49

- Natural Disasters - IT system failure - Loss of Key Staff

Question 50

What are some examples of Risk Mitigating Plans?

Answer 50

- set up in a location that is not vulnerable to flooding, earthquakes, bush fires and other natural disasters - take out adequate insurance policies to cover losses resulting from disasters - ensure that data strewed on computers is as secure as possible and that back-up systems are adequate - organise back-up power, such as a generator, to ensure that vital machinery an other equipment can still be used in the event of a power interruption - ensure that there are adequate communication channels are set up to deal with crises - produce a business continuity plan to deal with crises

Question 51

What is a Business Continuity Plan?

Answer 51

- whwen an incident occurs, a business will want to minimise disruption, after safeguarding human life, on of the most important priorities is to get the business 'up and running' again - Some firms produce business continuity plans, these show how a business will operate after a serious incident and how it expects to return to normal in the quickest time possible, there are four stages: 1 - Carry out a business impact analysis 2 - Formulate Recovery Stategies 3 - Plan development 4 - Testing and Training`

Question 52

What goes into the Carry out a Business Impact Analysis section of a Business Continuity Plan?

Answer 52

- identifies those functions and processes that are essential to the running of the business - This involves gathering information so that appropriate recovery strategies can be designed - -This process also involves identifying the financial consequences of such incidents, like loss of revenue, customer defections etc.

Question 53

What goes into the Formulate Recovery Strategies section of a Business Continuity Plan?

Answer 53

- these are actions to restore the business to a minimum acceptable level after an incident - This will involve identify the resources needed such has people, facilities, equipment, utilities, IT and material to aid recover - Some examples may include: maintaining higher stock levels, shifting production form one plant to another, setting up agreements with another business to share resources and support each other should either part encounter a serious disruption

Question 54

What goes into the Plan Development Section of a Business Continuity Plan?

Answer 54

- this involves developing a detailed plan to ensure that the recover strategies are carried out in an organised way - A business is likely to appoint recovery teams, develop relocation plans, and document recovery strategies and procedures so that key staff are aware of what is expected of them

Question 55

What goes into the Testing and Training Section of a Business Continuity Plan?

Answer 55

- Once the recovery plan has gained approval it is necessary to design testing exercises and train staff in their roles during the execution of the recovery plan - The recovery teams will be the main focus of such training - After testing and training it maybe necessary to update the business continuity plan to take into account any discoveries made during this process - Finally it may be necessary to review and update the plan on a regular basis to take into account any changes that have occurred in the business, such as key personal, vital equipment or premises

Question 56

What is a Succession Planning?

Answer 56

- Part of risk mitigation involves identifying and developing current employees who have the potential to occupy key roles in the future - Succession Planning is an important process because it will help a business deal with the problems of losing key staff members while helping develop the staff needed to fill the post when the business expands - Failing to do so could lead to a business promoting a person who is not equipped to do the job or recruiting an unknown outsider at a far greater risk and expense

Question 57

What are some key steps involved in a succession planning process?

Answer 57

- Identify the characteristic a successor should possess - Decide how the successor will be found - Undertake a rigorous selection process - Make the decision - Communicate the decision - Implement a training and preparation plan