Chapter 10 Managing Strategic Change

 

1.       Strategic Change

1.1       The nature of change

1.1.1    Change happens continually within organisations and their markets. Strategic development inevitably results in some change, which needs careful management. Change is either planned or unplanned.
(a)        Planned change (or proactive change) is deliberate and intended. The entity makes the change to move from an existing situation (or way of doing things) to a new situation.
(b)       Unplanned change (or reactive change) happens in response to developments, events and new circumstances that have arisen. The change is not intended in advance.
1.1.2    With planned change, the entity might see an opportunity to develop. Unplanned change is often seen as a reaction to a threat or an adverse event.
1.1.3    Change is either incremental or transformational.
(a)        Incremental change is a fairly small change. This type of change happens without the need for a major reorganisation or restructuring of the organization and its systems and procedures. The entity should be able to adapt easily to the change.
(b)       Transformational change is a big change. A transformational change requires a major reorganisation or a restructuring of the organisation and its systems and procedures. The change has a big impact on the entity, and also on the people working in it.
1.1.4    Transformational change requires change management skills from the managers who are responsible for introducing the change (the ‘change managers’).
1.1.5    Change is also either:
(a)        a ‘one-off’ event, so that the entity moves quickly from the old state of affairs to a new state of affairs, or
(b)       a continuing process of development and change over a long period of time.

1.2       Triggers for change

(a)       External triggers for change

1.2.1    External triggers for change are caused by changes in the environment. The PESTEL analysis of the external environment provides a useful framework for analyzing external reasons for change.
1.2.2    Political reasons for change
Changes in strategy might be caused by an unexpected political crisis – such as a civil war or major civil unrest – in a country that is either a major source of supply or a major export market.
1.2.3    Economic reasons for change
Unexpected developments in the economies of various countries might result in a change of strategy on foreign sales or expansion into foreign markets.
1.2.4    Social and cultural reasons for change
(a)        Changing public attitudes and opinions might persuade an entity to alter its strategy. For example, changing public attitudes to food safety following a ‘health scare’ about a food product might persuade a food manufacturer to change its strategy to the design and production of its products.
(b)       Changing public attitudes to retirement age might persuade an entity to change its retirement policy for employees, and its human resource plan.
1.2.5    Technological reasons for change
The significance of technological development has been mentioned earlier.
1.2.6    Ecological/environmental reasons for change
Change might be driven by ecological change, such as diminishing supplies of fresh water, diminishing supplies of energy or factors related to climate change. These changes might force a company to consider how its businesses will continue to survive in the future, and what changes will be needed to make the business sustainable.
1.2.7    Legal reasons for change
New laws on health and safety at work, laws against pollution and laws to protect the environment might have an impact on strategy and procedures.

(b)       Internal triggers for change

1.2.8    Change of senior management. When there is a new senior manager, such as a new chief executive officer or managing director, the new person in charge might want to introduce change because he has his own ideas about how things should be done.
1.2.9    Acquisitions and mergers. When there is a large acquisition or a merger, major changes will probably be required to integrate the two separate firms into a single entity.
1.2.10  Demergers and divestments. Similarly, when an entity is split up into two separate entities (a demerger) or when a large part of the entity is sold off (a divestment), changes in organisation, management and systems will be necessary.
1.2.11  Reorganisation, downsizing and rationalisation. Change might be necessary because the current organisation and systems are no longer appropriate and change is needed. This might happen when a loss-making entity needs to close down an operating division, or needs to reduce the size of its total workforce. Current operational systems might need to change because they are no longer appropriate and have become inefficient or ineffective.

1.3       Attitudes to change

1.3.1    Some employees might welcome change and support the changes. More often, however, employees fear change and resist change. Attitudes and culture may therefore act as blockages to change.

(a)       Several reasons for opposing change

1.3.2    Reasons related to the job:
(a)        Employees might believe that the change will put their job at risk, and make them redundant.
(b)       Employees might believe that their existing skills will no longer be required. This is why employees often resist major technological changes.
(c)        Employees might fear that their working conditions will change for the worse.
1.3.3    Personal reasons and fears
(a)        Employees might fear that the change will make them less important to their employer.
(b)       They might believe that the call for a change is a criticism of the way they have been working.
(c)        They might think that after the change, their work will be less interesting. They might be reluctant to learn new ways of working.
(d)       They might fear the unknown.
1.3.4    Social reasons
(a)        Employees might resist change because they believe it will break up their work group, and separate them from the people they enjoy working with.
(b)       They might think that after the change, they will be forced to work on their own more, and there will be less interaction with colleagues.
(c)        They might dislike the manager who is forcing through the change.
(d)       They might dislike the way that the change is being introduced, without consultation with the employees affected.

 

2.      Managing Strategic Change

2.1       Guidelines for change management: change levers and management skills

2.1.1    A general guideline for managing strategic change is as follows:
(a)        When change is planned, managing the change involves deciding how to get from where we are to where we want to be, and recognising the changes that are necessary to get there.
(b)       The change process consists of planning the changes, implementing them and then maintaining the change, so that there is no ‘going back’ to former ways and methods of operating.
(c)        There are several requirements for successful change. These are often referred to as levers of change.

(a)       Levers of change

2.1.2    The following requirements are needed for successful implementation of change.
(a)        A clear understanding of the need for change, and what will be the desired result of the change.
(b)       The commitment of the entity’s leaders to the change.
(c)        Effective communication with everyone affected by the change. This should be two-way communication. Management should listen as well as explain.
(d)       Management should have the required qualities to implement change successfully. Leadership qualities for managing change are described later.
(e)        The organisation structure and relationships within the organisation should be adapted to meet the requirements of change.
(f)        Reward systems should be amended, so that rewards to managers and other employees are based on performance targets that are consistent with the requirements of the change.
(g)       Critical success factors and key performance indicators should be revised, so that they are consistent with the requirements of the change.
(h)       Employees should be given education in the purpose of change and training to meet the operational requirements of the change.

(b)       Skills for managing change

2.1.3    Rosabeth Moss Kanter suggested that a manager in a change-adapt entity should have the following skills.
(a)        Tuning in to the environment. Managers need to be aware of changes in the environment that will make change by the entity necessary or desirable. Kanter suggested that managers should create a network of ‘listening posts’ that they should use to monitor environmental change. She commented: ‘Pay special attention to customer complaints, which are often your best source of information about an operational weakness or unmet need. Also search out broader signs of change – a competitor doing something differently or a customer using your product or service in unexpected ways.’
(b)       Challenging the prevailing organisational wisdom. Change managers should be prepared to challenge the ’conventional wisdom’ and question accepted views about what is necessary or the way that things should be done.
(c)        Communicating a compelling aspiration. A change manager should have a clear idea of what he wants to achieve and should communicate this ‘vision’ to everyone he deals with. The manager must have personal conviction that the change is necessary. Without this sense of purpose, he will not be able to ‘sell’ the need for change to others.
(d)       Building coalitions. Managers cannot make change happen through personal effort alone. They need to win the support and co-operation of all the individuals with the knowledge, influence or resources to make change happen. Making change happen is therefore a process of building alliances and support.
(e)        Learning to persevere. Managers should continue with the process of change even though there are likely to be setbacks and ‘defeats’ on the way.
(f)        Making everyone a hero. The manager should give full credit to everyone who helps to introduce change successfully, and should make them feel that their efforts are fully appreciated. If possible, individuals who help to introduce changes successfully should be rewarded.

2.2       Lewin: force field analysis

2.2.1    Kurt Lewin was a social psychologist. He developed a theory, which he called force field analysis, to describe the forces that came into conflict over planned changes. He suggested that there are two opposing forces:
(a)        the driving forces that support the need for change, and
(b)       the restraining forces that oppose and resist the change.
2.2.2    Any of the following factors might be a driving force or a restraining force:
(a)        the people involved in the change, and what they want for themselves
(b)       the habits and customs of the individuals
(c)        their attitudes
(d)       the relationships between the people involved
(e)        organisation structures within the entity
(f)        vested interests
(g)       the entity’s policies
(h)       the resources available to make the change
(i)        regulations
(j)        events (happenings).
2.2.3    Lewin argued that each driving force or restraining force has a strength, which might be measured on a scale of 1 to 5. The strength of the total driving forces and the strength of the total restraining forces can therefore be measured.

2.2.4

Example 1

The example below concerns a public sector organization that is introducing performance review. The following steps should be applied for the force field analysis. 1.        Define the problem in terms of the current situation and the desired future state. 2.        List the forces supporting and opposing the desired change and assess both the strength and the importance of each one. 3.        Draw the force field diagram. 4.        Decide how to strength or weaken the more important factors as appropriate and agree with those concerned. Weakening might be achieved by persuasion, participation, coercion or bargaining, while strengthening might be achieved by a marketing or education campaign, including the use of personal advocacy. 5.        Identify the resources needed. 6.        Make an action plan including event timing, milestones and responsibilities.

2.3       Lewin: unfreeze, change, re-freeze

2.3.1    Lewin also suggested an approach to introducing planned transformational change, which is sometimes called ‘prescriptive planned change theory’.
2.3.2    He suggested that a planned process for change should begin with:
(a)        identifying the cause of the problems, and the reasons why change is needed, and
(b)       identifying the opportunities of making improvements through transformational change.
2.3.3    The change process then needs to go through three stages:
(a)        unfreeze
(b)       movement (change)
(c)        re-freeze.

(a)       Unfreeze

2.3.4    The process of ‘unfreezing’ is persuading employees that change is necessary. Individuals will not want to change anything if they think that the current situation is acceptable. Employees should therefore be encouraged to recognise what is wrong with the current system or current situation and management should encourage employees to feel dissatisfaction. Employees should be ‘unfrozen’ out of their acceptance of the current situation.
2.3.5    However, this is not enough. It is also necessary to offer employees an attractive alternative for the future that can be reached by changing the current situation.
2.3.6    Management must therefore have a clear vision about what changes they want to make, and they should encourage employees to want these changes to happen.
2.3.7    Management must therefore discuss the problems with the employees affected, and communicate their ideas.
2.3.8    Unfreezing is therefore the process not only of making employees dissatisfied with the current situation, but also persuading them about the nature of the changes that should be made.

(b)       Movement (Change)

2.3.9    To introduce change successfully, the support for change must be strong enough to overcome the opposition. This is consistent with Lewin’s force field analysis.
2.3.10  Management should be given sufficient resources to implement the changes. (Having sufficient resources to make a change can be a driving force for change.)
2.3.11  The change managers should try to involve the employees affected and get them to participate in making the changes. Participation in making changes helps to reduce the resistance to change.

(c)       Re-freeze

2.3.12  Lewin argued that even if change is implemented, there is a risk that employees will go back to their old ways of doing things, and the benefits of the change might be lost.
2.3.13  It is therefore essential that once change has happened, employees should be encouraged to carry on with the new way of doing things.
2.3.14  One way of doing this might be to reward employees for performance based on the desired behaviour and results.
2.3.15  The process of getting employees to carry on with the new system is called refreezing.

2.4       Change agent

2.4.1    When a transformational change is implemented, there has to be a ‘change agent’ who drives the change and is responsible for its successful implementation. Often the change agent is an outside consultant. This individual must have certain skills.
(a)       He must explain the reasons for the change, and provide employees with reliable information. This will help to reduce the risk of false rumours spreading.
(b)       As far as possible, he should involve the individuals affected, and get them to participate in making the changes. When individuals are involved in the change process, they are less likely to resist it.
(c)        He should maintain communications with employees at all time, monitoring the progress of the change and providing information to others about the progress.
(d)       Where appropriate, he should provide training to the employees affected.
(e)        He should emphasise the benefits of the change to the individuals affected.
2.4.2    A consultant is often used because:
(a)        An outside consultant is perceived to be independent and fair.
(b)       The consultant will have experience in managing the change process.
(c)        The consultant will have experience of many organisations and should be able to advise on which changes are desirable.
(d)       Large-scale changes can easily go wrong. Management will want all the help and advice available.

2.5       The 7S approach

2.5.1    The 7S Framework was first published in 1981 and was subsequently adopted by the consultancy firm McKinsey. It is therefore sometimes known as the McKinsey 7S model. It is a model for the successful implementation of strategic change.
2.5.2    The 7S model consists of seven factors that contribute to the effectiveness of an entity. It is based on the view that in order to introduce strategic change, managers must take into consideration all seven of the following factors (the 7Ss).
2.5.3    These seven factors consist of three ‘hard’ factors and four ‘soft’ factors.

Hard factors	Explanation
Strategy	This consists of the formally stated goals and objectives of the entity, and a plan for allocating the entity’s resources to activities in order to achieve those goals.
Structure	This is the formal organisation structure of the entity. It is concerned with the division of responsibilities and the allocation of authority for the achievement of the strategic goals.
Systems	These are the systems that operate within the organisation, including manufacturing systems, procedures and information systems.
Soft factors
Staff	These are the people who work for the organisation, and their attributes – numbers, motivation, loyalty, pay rates, working conditions, career advancement, and so on.
Skills	These are the skills of key personnel. What can they do well, and what do they do badly?
Style	Style refers to the cultural characteristics of the entity and the people who work in it, and also the leadership style of its managers.
Shares values	These are the guiding beliefs about the purpose of the entity and why it exists, shared by the individuals who work in it. These might be, for example: ‘providing customer service and satisfaction’, or ‘making profits’, or ‘providing a service to the community’.

2.5.4    The hard factors are so-called because they are relatively easy to define: strategy can be recorded in a strategic plan, structure on an organisation chart and systems in a procedures manual.
2.5.5    The soft factors are harder to identify and define. Of course there are elements of these factors that are relatively easy to define (such as wage rates) but there are factors that are more difficult to pin down (such as staff motivation and loyalty).
2.5.6    All seven factors are inter-related. The 7S model is therefore often depicted as a molecule with seven atoms (balls) all joined to each other by molecular bonds (= the ‘managerial molecule’).

2.5.7

Example 2

A company recognises that it has a weakness in its after-sales service to customers. It therefore decides to establish a new customer services department, in order to improve customer goodwill. (= Change in Strategy). It will need to recruit staff and organise them into customer service teams (= Change in Structure). The entity might recruit new staff who will have the confidence to use their initiative in dealing with individual customers (= Change in Staff) The staff will need suitable training in customer service skills (= Change in Skills). Senior management will need to promote an awareness of the need for better quality throughout the organisation (= Change in Shared values). New procedures need to be developed for guiding employees in how to handle customer complaints and queries (= Change in Systems). Although there will be procedures for handling standard problems, management and supervisors might need to learn to ‘empower’ their employees and allow them to use their initiative in dealing with unusual cases (= Change in Style).

 

3.      Strategic Leadership

3.1       Five approaches to strategic leadership

3.1.1    JS&W identify five approaches to strategic leadership:
(a)        Strategy
(b)       Human assets
(c)        Expertise
(d)       Control
(e)        Change
3.1.2    The strategy approach
The leader taking the strategy approach focuses on strategic analysis and formulation of strategy. Other managers take responsibility for routine operations and for the management of change.
3.1.3    The human assets approach
The development of the organization’s people is the main activity of leaders who take the human assets approach: other managers take responsibility for strategic management. Such leaders are concerned to recruit the right people and to develop an appropriate culture. Their approach to change management is to recruit people to whom the responsibility can be devolved.
3.1.4    The expertise approach
It focuses on some form of technical expertise as a source of competitive advantage and concentrates on building expertise through systems and procedures. This focus also forms the basis of change management. Other mangers also concentrate on their areas of expertise.
3.1.5    The control approach
The control approach is also known as the ‘box’ approach. The strategic leader following this approach concentrates on setting procedures and control measures and monitoring performance so as to achieve uniform, predictable performance. Other managers are expected to use this approach and change management is based on careful control.
3.1.6    The change approach
The leader using the change approach focuses on continual change and expends much effort on communication and motivation. Other managers are expected to act largely as change agents.

 

3.2       Charismatic and transactional leadership

3.2.1    The five approaches outlined above may be fitted into a general model of leadership that recognizes two general types: charismatic and transactional.
3.2.2    Charismatic leaders energise people and build a vision of the future. Change management is a natural part of what they do. This approach is also known as transformational leadership and we referred to it in this way in our earlier discussion.
3.2.3    Transactional leaders focus on systems and controls and generally seek improvement rather than change. This approach is also called instrumental leadership.
3.2.4    Under this analysis, we may say that the control approach is a form of transactional leadership, while other four approaches fall into the charismatic category.

3.3       Middle management

3.3.1    Strategic leaders pursuing change may see their middle management as implementers at best and possibly as potential blockers. Their commitment to change is important and they have significant roles to play in change management.
(a)        Implementation and control where change is introduced in a top-down way.
(b)       Translation of the overall change strategy into forms suited to specific local contexts: this may require reinterpretation and adjustment of strategic factors such as relationships with suppliers and customers.
(c)        Provision of advice to higher management on requirements for change and potential obstacles.

4.      The Organizational Context of Change

4.1       Introduction

4.1.1    The approach to managing change should depend on the circumstances, or the context in which the change should be made. The approach should differ according to the context in which the change has to take place.
4.1.2    There are two models that can be used for making such an analysis or diagnosis:
(a)        Balogun and Hope Hailey’s contextual features model
(b)       the cultural web

 

4.2       Balogun and Hope Hailey: contextual features model

4.2.1    Creating lasting change in an organisation can be a difficult and complex process. In order to introduce strategic change successfully, there has to be a clear plan of action. In addition, the entity must have the capacity to achieve the desired end result.
4.2.2    Julia Balogun and Veronica Hope Hailey have suggested a model for change. The management of organisational change can be seen as a process with the following steps.

(a)       The nature of the change and the end result of the change (Steps 1 – 3)

4.2.3    The nature of the change might be gradual, or the change might be introduced suddenly, all in one go. Change can therefore be described as either:
(a)        gradual or incremental, or
(b)       a ‘big bang’: this is change that happens all at once and quickly.
4.2.4    The desired end result of the change might be either:
(a)        a transformation: this is a fundamental change in the organisation, or
(b)       a realignment (重新組合) : this type of change is less fundamental than a transformation, but is still a major change.
4.2.5    Transformational change calls for a change in aspects of the culture of the entity, and so is more difficult to introduce successfully. A realignment does not require any cultural change, and so is more easily accepted by the individuals affected.
4.2.6    The nature and extent of the change can therefore be defined by a combination of two issues:
(a)        Whether the change will be gradual or a ‘big bang’ and
(b)       Whether the nature of the change will be transformational or a realignment.
4.2.7    Balogun and Hope-Hailey were therefore able to identify four categories of change.

4.2.8    Realignment, whether introduced incrementally or all at once, does not alter the fundamental beliefs and culture of the organisation. Realignment is therefore usually much easier to achieve successfully than transformation. It might be either:
(a)        incremental, and introduced gradually (‘adaptation’), or
(b)       introduced all at once (a ‘reconstruction’).

4.2.9

Four categories of change

(a)       Adaption – is a change where the existing model is retained, and the change only incurs incrementally. (b)       Reconstruction – requires a significant, and rapid, change in the operations and process of an organization often in response to crisis such as a long-term decline in performance. However, it does not involve any major change to the business model. (c)       Evolution – is an incremental process that leads to a new business model. Evolutionary change often arises as a result of business analysis, leading to a planned change. It can take long time to accomplish. (d)       Revolution – is rapid and wide ranging response to extreme pressures for change. It is likely to require a fundamental shift in the business model, and in the way a company operates. It is the most difficult type of change to accomplish successfully.

(b)       Analysing the context within which the change will occur (steps 4 and 5)

4.2.10  Balogun and Hope-Hailey suggested that the following features can be used to assess the context, and identify the crucial features of the change situation:

Features	Explanation
Time scale	How quickly is the change needed? Will the change be incremental or ‘big bang’?
Scope of change	How extensive is the change? Is it a transformation or a realignment?
Preservation (保留)	What resources and characteristics of the organisation need to be preserved? What do we want to keep maintained, unaffected by the change?
Diversity	Are the employees affected by the change a homogeneous group of similar people with similar views and culture, or are there diverse groups who will be affected?
Capability	What is the capability of the entity’s management and employees for implementing the change? Do they have the capability to make the change?
Capacity	What resources are available for making the change? What resources – money, staff time – can be invested in making the change work?
Readiness	How ready for change are the employees who will be affected by it? Are they aware of the need for change? Do they agree with the proposed change? Are they motivated to make the change?
Power	What power do the managers responsible for the change have? Do they have the power to make the change? Or does someone else have power over the ability of the entity to make the change?

 

(c)        The design choices for making change (steps 6 and 7)

4.2.11  When the organisational context of the change has been analysed, management can move on to consider the ‘design for change’, and how the change should be introduced. Management can consider whether the context might be improved by providing training for staff, a restructuring of the organisation, or recruiting new staff with the skills required to make the change.
4.2.12  Balogun and Hope have suggested that there are six key aspects of making the design choices for change:

Aspects	Explanation
Change path	What type of change is required: transformation or realignment, and incremental or ‘big bang’?
Change start point	How is the change initiated: top-down (imposed by senior management) or bottom-up (as a result of employee initiatives)
Change style	What management style will be used for implementing the change?
Change targets	What are the targets to focus on for achieving change? Are changes in the outputs from the process needed? Are changes in attitudes and culture needed?
Change levers	What measures must be taken to implement the change to achieve the change targets?
Change roles	Who has the responsibility for managing and implementing the change?

4.2.13

Example 3

A government department wishing to introduce significant changes into the operations of the department. Its design for the change might be as follows: Aspects Explanation Change path Incremental, transformational change Change start point Top-down, to be imposed by senior management Change style Directive rather than collaborative. Management will impose the changes they want. Change targets Change targets might be specified in terms of changes in the outputs of the department, and changes in attitudes and culture. Change levers The measures for implementing the change should be specified. Change roles Senior management assisted by external management consultants will be responsible for implementing the change.

 

4.2.14  Balogun and Hope-Hailey suggested that in order to design an appropriate change process, the change agents/managers responsible for the change need to analyse how ready the organisation is for change and how great is its capacity for making change. The change agent therefore needs:
(a)        an ability to analyse the change context and to judge the key contextual features of the change (as described earlier)
(b)       to design an appropriate approach to making the change
(c)        an ability to take action to implement the change
(d)       an ability to handle complex issues and to be sensitive about the impact of change on the individuals affected
(e)        have good skills at influencing other people
(f)        have an awareness of the possible impact on the design choices they make of their own personal preferences for change.
4.2.15  Key success factors for change are:
(a)        a compelling vision for action and desired change
(b)       leadership who are committed to the change
(c)        rigorous project management, where the implementation of change is organized as a project (with detailed plans, milestones for achievement, project managers, and so on)
(d)       securing the support of everyone affected (the ‘stakeholders’)
(e)        effective communication
(f)        infrastructure realignment, such as making sure that sufficient staff with the necessary skills are in place for making the change, that sufficient IT resources and HR policies are in place, that budgets for the change are provided, and so on).

(d)       Making the change and monitoring the change (steps 8 and 9)

4.2.16  Balogun and Hope Hailey have suggested three levels of interaction or communication that are required by change agents with the individuals affected by change. They linked these three levels of interaction to Lewin’s unfreeze, move refreeze model for change, and also to another model for change, a transition curve suggested by Adams, Hayes and Hopson.

4.2.17  Their ideas are set out in the following table.

Question 1 Introduction Retail pharmacies supply branded medicinal products, such as headache and cold remedies, as well as medicines prescribed by doctors. Customers expect both types of product to be immediately available and so this demands efficient purchasing and stock control in each pharmacy. The retail pharmacy industry is increasingly concentrated in a small number of nationwide pharmacy chains, although independent pharmacies continue to survive. The pharmacy chains are increasingly encouraging their customers to order medicinal products online and the doctors are being encouraged to electronically send their prescriptions to the pharmacy so that they can be prepared ready for the patient to collect. Pharmacy Systems International (PSI) Pharmacy Systems International (PSI) is a privately owned software company which has successfully developed and sold a specialised software package meeting the specific needs of retail pharmacies. PSI’s stated objective is to be a ‘highly skilled professional company providing quality software services to the retail pharmacy industry’. Over the last three years PSI has experienced gradual growth in turnover, profitability and market share (see Figure 1). Figure 1: PSI Financial information   2007 2006 2005 Turnover ($000) 11,700 10,760 10,350 Profits ($000) (pre-tax) 975 945 875 Estimated market share 26% 24% 23% Number of employees 120 117 115 PSI has three directors, each of whom has a significant ownership stake in the business. The chief executive is a natural entrepreneur with a past record of identifying opportunities and taking the necessary risks to exploit them. In the last three years he has curbed his natural enthusiasm for growth as PSI has consolidated its position in the market place. However, he now feels the time is right to expand the business to a size and profitability that makes PSI an attractive acquisition target and enables the directors to realise their investment in the company. He has a natural ally in the sales and marketing director and both feel that PSI needs to find new national and international markets to fuel its growth. The software development director, however, does not share the chief executive’s enthusiasm for this expansion. The chief executive has proposed that growth can best be achieved by developing a generic software package which can be used by the wider, general retail industry. His plan is for the company to take the current software package and take out any specific references to the pharmaceutical industry. This generic package could then be extended and configured for other retail sectors. The pharmaceutical package would be retained but it would be perceived and marketed as a specialised implementation of the new generic package. This proposed change in strategic direction is strongly resisted by the software development director. He and his team of software developers are under constant pressure to meet the demands of the existing retail pharmacy customers. On-line ordering of medicinal products and electronic despatch of prescriptions are just two examples of the constant pressure PSI is under from their retail customers to continuously update its software package to enable the pharmacies to implement technical innovations that improve customer service. Ideally, the software development director would like to acquire further resources to develop a more standardized software package for their current customers. He is particularly annoyed by PSI’s salesmen continually committing the company to producing a customised software solution for each customer and promising delivery dates that the software delivery team struggle to meet. Frequently, the software contains faults that require expensive and timeconsuming maintenance. Consequently, PSI is being increasingly criticised by customers. A recent user group conference expressed considerable dissatisfaction with the quality of the PSI package and doubted the company’s ability to meet the published deadline for a new release of the software. Required: (a)     The proposal to develop and sell a software package for the retail industry represents a major change in strategy for PSI. Analyse the nature, scope and type of this proposed strategic change for PSI. (10 marks) (b)     The success of any attempt at managing change will be dependent on the context in which that change takes place. Identify and analyse, using an appropriate model, the internal contextual features that could influence the success or failure of the chief executive’s proposed strategic change for PSI.                                                                                                              (15 marks) (ACCA P3 Business Analysis June 2008 Q4)

4.3       Using the cultural web to analyse the context of change

4.3.1    Johnson and Scholes’ cultural web can also be used to analyse the organizational context of change. Significant change, particularly transformational change, requires some change to the culture of the organisation.
4.3.2    It is important to recognise that unless the need to change culture is recognised, the organisation and its employees will continue to be driven by the existing culture instead of the desired new ways of operating.
4.3.3    The cultural web can be used to analyse which aspects of the current culture need to be changed (and by how much) and which aspects of culture should be preserved and retained. Analysing the cultural web can help the managers responsible for the change to consider the following questions:
(a)        To what extent does the existing corporate culture support the changes that need to be made? And to what extent does the existing culture act as a hindrance or obstacle to the desired change?
(b)       To what extent does the existing corporate culture need to be changed so that the desired organisational change can be introduced successfully?
(c)        To what extent does the existing corporate culture need to be preserved because it supports essential competencies of the entity that need to be maintained?
4.3.4    Six aspects of the cultural web can be studied, so that the desired change can be seen in the context of the current organisational culture and what needs to change.

Aspects	Explanation
Symbols	Are the outward symbols of culture – such as logos, offices, cars, titles, language, terminology and uniforms – helpful for making the change? Or are they a barrier to change?   Does the language used by various groups of employees assist with making the change? Or does the language used by some groups exclude other groups from involvement?
Power structure	The individuals who believe in the vision for change need to be the most ‘powerful’ people within the corporate culture. Is this actually the case at the moment? Who holds the power over change? Is this the right person or group? Does the current power structure help or hinder change?
Organizational structure	It is likely to reflect power and show important roles and relationships. The organisation structure is an expression of the behaviour that is expected from each person working within it. Is the current organisation structure appropriate for the change that is needed?
Control systems	All systems within the entity need to contribute to making the change and achieving the strategic vision. This includes communication, information and performance management systems. Are these systems appropriate? Are they efficient and do they promote the desired change?
Routines and rituals (慣例)	Do the existing routines and rituals that are widely used help or hinder the entity in achieving the vision for change?
Stories	They are used by members of the organisation to tell people what is important in the organisation Are the stories that are used to communicate the culture of the entity appropriate for explaining the current strategy and vision? Do the stories represent the ‘reality’ that management wants to achieve?

 

4.3.5

Example 4

A company might have an established ritual whereby work groups meet regularly every Monday morning to discuss progress made during the previous week and plans for the current week. These work group meetings start at 8.30 and go on for about one hour. It might be that in planning to introduce major changes to operations within the company, this ritual of Monday morning meetings would hinder the change, by using up the time of individuals who now need to be somewhere else and doing other things on Monday mornings. A change in culture is therefore needed, and employees need to be persuaded of the need to change the Monday morning ritual.