Organizational change in the face of profitability drop in McDonalds Corporation - Essay Example

?MANAGING CHANGE of Managing Change Critically evaluate using appropriate change models, theories and practical interventions how you would successfully manage a ‘radical change’ within a complex organisation such as a sharp drop or slide in profitability as mentioned in Sern and Pung (2007). Introduction It is undisputable fact that change is inevitable and one of the most fundamental processes of any organization. Presently, than ever before, organizations face rapid change. Globalization and increased expectations of customers and employees, competition, technological advancements, and need to boost profitability is what have made change to be inevitable in organizations (Hayes, 2010, p. 11). Besides, more concern by stakeholders of organizations has prompted the management to adopt change strategies in order to convince the stakeholders that they are capable of achieving the organizational objectives (Dibella, 2007, p. 234). However, various studies have shown that despite the fact that change is inevitable and most companies management are planning and implementing change, the process of managing change is proving a great challenge. According to Isern and Pung (2007, p. 1), leaders rarely achieve their objectives when they have embarked on a major effort of change in their respective organizations. They note that there are factors that distinguish successful and unsuccessful efforts to change. They argue that a true transformation within an organization is characterized by integration of different change types (commercial, operational, and organizational), sustained effort that last for longer periods, and high ambitions. Isern and Pung further note that numerous surveys have shown that have difficulty achieving intended results. According to a 2006 online survey by McKinsey Quarterly only 38 percent of the executives across the globe who responded reported to have had a complete success on the transformations they instituted in their organizations. A tenth of those who responded acknowledged that their organizational transformation efforts were completely unsuccessful (Isern and Pung, 2007, p.1). It is in the light of this that this discussion will critically evaluate using appropriate models, theories and practical interventions how a manager can successfully manage a ‘radical change’ within a complex organization. The evaluation will focus on radical change in regard to aspects such as a sharp drop or slide in profitability. The discussion will assess organizational change in the face of profitability drop in McDonald’s Corporation. Change Model Managing radical change within an organization may not be an easy task as various surveys have shown. Radical change may be prompted by various circumstances such as enticing new customers, fighting competition, and sharp drop in profitability. Since managing change needs to be done appropriately in order to be successful, it is important that certain model or models be adopted. In this case, and in particular reference to managing change in the face of drop of McDonald’s profitability, Kotter’s 8- Step Change Model will be used. Kotter (1996, p. 26) states the first step in managing change is through creation of urgency. Change will be of help to the company if the company really wants it; therefore, there is need for development of sense of urgency. Burnes (2009, p.103) agrees with Kotter’s proposition of creation of urgency around a need by arguing that it is essential in motivating employees in the organization to get things moving. According to Kotter, creation of urgency entails the following; examining opportunities that can and should be exploited, identifying potential threats and developing scenarios of possible future happenings, giving of convincing and dynamic reasons so that people can talk and think about them, and requesting support of stakeholders, industry players, and customers so as to strengthen the argument about change. McDonald’s is experiencing slide in its effects after a constant bad publicity concerning the adverse health effects caused by eating junk food; for instance, the pre-tax profits declined by about 10 percent in the past three year worldwide (Coombes 2011, p. 532). As a result, the corporation management has to find a way of curbing the declining profits and bring the company back to the path of rising profitability. To achieve this, the company should create urgency for changes to facilitate increase of profits in the following years and communicated this to stakeholders and customers. The second step as proposed by Kotter is formation of powerful coalition (Kotte 1996, p. 41) explains that it is necessary for people to be convinced that change is indeed needed. Visible support from people within an organization and strong organization is vital in achieving this. For change to be successful it is important that a coalition is brought together, or a coalition of key people within the organization is formed who have different expertise, political importance, status, and job title (Weick and Quinn 1999, p. 364). Once the coalition is formed, it needs to work as a team in order to continue developing urgency and boosting momentum around the desire for change. Kotter notes that this steps involves the following; asking for emotional commitment from people, working on team building, and identification of true leaders and ensuring they are in the right mix within a given department (Kotter, 1996, p. 38). Step three is creation of a vision for change. To effect successful changes, various concepts should be linked to an overall vision that people can understand easily. Beitler (2006, p. 18) concurs that this is necessary in order to help every person within an organization to understand the essence of particular changes they are requested to effect. The logic of this step according to Kotter is that when people perceive for themselves what they are trying to achieve then the change directives given make additional sense (Kotter, 1996, p. 41). The vision that needs to be created by McDonald’s in the face of drop in profitability is towards increasing sales hence increasing profitability. One of the solutions and ideas suggested is the need to expand the business to other parts of the world; the management should thus work towards achieving this vision. The fourth step of managing change is communication of vision. After creating a vision, it is critical that the vision be communicated powerfully and frequently within the organization so that it become embedded in everything that the organization and its employees do. Kotter says that effective communication of vision entails addressing people’s anxieties and concerns honestly and openly, leading by example, applying vision to all operations aspects, and often talking about the change vision (Kotter, 1996, p. 44). The fifth step as stipulated by Kotter is removing obstacles; this step demands that change structure should be put in place and barriers on this structure be checked continually. Cameron and Quinn (2006, p. 82) underscore the need for removing obstacles since it empowers people to execute vision effectively and thus moving change forward. In the case of McDonald’s, there was several obstacles particularly bad publicity regarding adverse effects of junk food to the population. In responding to this obstacle, the management of the company needs to introduce changes in some of its outlets across the world; for example, the sale of fresh fruits hence reducing pressure on health issues raised in relation to the company (Coombes, 2011, p. 533). The sixth step in Kotter’s change model is creation of short-term wins. At the core of this step is rewards and motivation of people within the organization. Kotter (1996, p. 48) advises that the company’s employees should be given a taste of victory earlier on the process of change; the staff should be made to see the results and the rewards and motivation should be in order as well. This will go a long way in encouraging employees and minimizing resistance to the change process (Kotter, 1995, p. 24). This step also calls for creation and monitoring of short and long term targets and rewards should be incorporated at various stages along the process. The seventh step is building on the change; since change is a continuous process, it is crucial that organization build on each improvement made going forward. Kotter (1996, p. 50) explains that each success in the change process should provide an opportunity to identify what had gone wrong and what needs to be improved on. It is no doubt that McDonald’s had been experiencing profit growth for over the years but in recent years there has been slump in profits. After identifying what went wrong, the company needs to embark on change process that will end slide in profit by making expansion across the world and introducing new products that address some of the health issues raised in various quotas. The last step in Kotter’s change model is the anchoring of the changes in corporate culture. It is not enough to make changes, the change should be made to stick for a long time and come part of organizational culture (Schein, 2005, p. 13). It is because of this reason that Kotter recommends that there should be constant efforts to ensure that change is visible in each of the organizational aspects; this is essential in giving that particular change a permanent place in the culture of the organization. To achieve this, the following should be done; the change values and ideals should be included when training and hiring staff, plans should be created for replacing key leaders as change move forward ensuring that legacy is not lost, members of the change coalition should be recognized publicly, and the progress of change should be mentioned at every possible instances (Kotter, 1996, p. 67-68). Change Theories Change management is indeed a necessary tool in management of modern businesses which operate in very challenging environments. As such, theories of change management have become prevalent and their applications are evident in most organizations. There are several change management theories but this discussion will focus on only two theories that have apparent relevance to successful management of radical change in within McDonald’s in the face of sharp slide profitability. These theories are Business Process Reengineering (BPR) and Total Quality Management (TQM). BPR as a theory of change management focuses on the processes within an organization that get things done. According to Hughes (2010, p. 311), BPR theory argues that for organization to be more efficient, better processes should be implemented. Therefore, the processes need to be streamlined to ensure that the organization’s very efficient to meet customers’ expectations and organizational goals and objectives. However, the theory is criticized of failing to take into account the importance of people in achieving organizational goals (Aiken and Keller, 2006, p. 6). Therefore, this theory can only be used in regard to the processes of McDonald’s. Considering the fact that the profitability of the company is sliding, the processes need to be streamlined in order to meet the customers’ expectation. The speed, comfort, and quality of products and services offered to the customers at the corporation’s outlet should satisfy meet or exceed the customers’ expectation. Once these aspects have been implemented, there is high likelihood that the outlets will get more customers which will result to rise in revenues, hence profits. Total Quality Management is the second change management theory that can be used in curbing decline of profits of a given company. Hayes (2010, p. 58) describes TQM as a change management theory that concentrates on people within the organization, and their importance to it and the processes therein. The theory’s main focus is to ensure that people within the organization are satisfied and motivated so as to facilitate improvements within the organization that are aimed at enhancing the quality of products and services offered to customers (Beitler, 2006, p. 103). The theory emphasises on a number of principles such as continuous improvement, employee involvement, decision- making, training, organizational culture, and customer focus among others (Dibella, 2007, p. 239). The theory of TQM will be critical in addressing the slide in profitability of McDonald’s as it will facilitate proper management of procedures and initiatives which are aimed at attaining quality products and services delivery hence boosting revenues and profitability. By using TQM, change intended at curbing profit decline at McDonald’s will be managed in the following ways; employees should be given regular training on how to deliver quality products and services to customers. Two, decision making for the corporation should be made on the basis of performance and feedback from customers and staff. Three, the company should continuously work towards improvement of products and services. Four, employees involvement should be emphasized where they are encouraged to be more proactive in identification and addressing of quality problems that may arise. Five, quality improvements in the company should aim at improving satisfaction of customers. Lastly, the company’s culture should be such that it aims at development of employees’ ability to work together towards quality improvement. Practical Interventions According to Burnes (2009, p. 72)), interventions in regard to change management are defined as all the programmatic activities that have been planned with the aim of bringing organizational changes. The changes are intended to make sure that there is an improvement in the organizational functioning. Interventions can be an initiative of the management of the organization or external consultant (Weick and Quinn, 1999, p. 381). The following interventions will be appropriate in managing radical change in response to McDonald’s decline of profit. The first intervention will be to direct the employees of the company to perform their tasks in a manner that enhance the quality of products and services of the company. Secondly, the work processes in the organization need to be changed to facilitate self- direction and self- organization. Thirdly, the structure of the organization should be modified to accommodate connections, information, and diversity. Fourthly, coalition should be formed to support the organization of the company towards attaining the set objectives. Lastly, there is need for the company to examine and describe patterns that are likely to impact on the company’s present and future performance. Conclusion In conclusion, it is evidently clear that change is inevitable in any organization. As noted, without proper management, the change process may be unsuccessful hence impacting negatively on the organization. Change management models, theories, and practical interventions should therefore be used to guide the process towards success. It should be noted that theories, models, and interventions do not necessarily provide the exact solution to issues in the change management but just act as a guide towards managing change; various models, theories and interventions should be examined first before being applied in a given organizational situation. In addition, it is important keep the following principles in mind while planning and implementing change in an organization; first, each person that within the organization has certain need(s) that have to be met. Also, fears among people may arise especially on the effects that the proposed change may have on the employees; therefore, it is important that these fears be dealt with appropriately. Besides, different people within the organization have different expectations. It is for this reason that these expectations need to be managed and be managed in a realistic manner. In addition, it is a fact that different people have different reaction to change, real or perceived. It is important that when planning and implementing change this factor be considered. Finally, the process of change may sometime involve loss where people and even the organization may experience some form of loss; this aspect must be kept in mind during change management process. Reference List Aiken, C, & Keller, S, 2006, The CEO’s Role in Leading Transformation, Available: https://www.mckinseyquarterly.com/Organization/Change_Management/Driving_radical_change_2046 (Accessed: 11 January, 2011). Beitler, M 2006, Strategic Organizational Change, 2nd ed., Practitioners Press International. Burnes, B 2009, Managing Change, 5th ed., Harlow: FT Prentice Hall. Cameron, K and Quinn, R 2006, Diagnosing and Changing Organizational Culture, John Wiley & Sons. Coombes, R 2011, McDonald’s Profits Drop, BMJ. Dibella, A 2007, Critical Perception of Organizational Change, Journal of Change Management, Vol. 7, Issue 3, Routledge, p.231-242. Hayes, J 2010, The Theory and Practice of Change Management, 3rd ed., Basingstoke: Palgrave Hughes, M 2010, Managing Change: A Critical Perspective, 2nd ed., London: CIPD. Journal of Change Management. Isern, J., & Pung, C, 2007, Driving Radical Change, Available: https://www.mckinseyquarterly.com/Organization/Change_Management/Driving_radical_change_2046 (Accessed: 11 January, 2012). Kotter, J, 1995, Leading Change: Why Transformation Efforts Fail, Harvard Business Review, p. 59 – 67. Kotter, J 1996, Leading Change, Harvard Business Review Press. Schein, E 2005, Organizational Culture and Leadership, 3rd ed., Jossey-Bass. Weick, K and Quinn, R 1999, Organisational Development and Change, Annual Review of Psychology, 50, pp. 361-86 Read More