Management of Change In Sustaining and Growing Business - Research Paper Example

Management of Change Introduction: Organizations operate in a dynamic environment that is subject to innovations and change. Rising globalization of free trade have made the market place even more complex and dynamic. The fact also remains that organizations are influenced by both external and internal factors. Taking the above factors into consideration, a business or any type of organization needs to change as and when necessary, in order to survive and grow. But what is important here is that managers who run the organization should never take the process of change lightly. It is often a complex process compounded by the fact that people employees are often resistant to change. Due to this, the concept of organization change management has come under serious study by experts from diverse fields such as sociology and anthropology. As a result, many observations, theories, and models on managing change have evolved over the years. This paper is a review of change management process in a practical setting. The organization that will be studied is the Ithmaar Bank headquartered in Bahrain. Apart from a practical review, the basic theories on change management and other relevant literature will also be reviewed here. Ithmaar Bank: The Bank is a multinational financial institution headquartered in the Kingdom of Bahrain and is also a stakeholder/owner of other companies. The change process was initiated for better service and productivity so that it benefits its shareholders and customers alike. The mission statement as envisaged by its CEO is as follows: “while being an exemplary corporate citizen and employer” the bank seeks to “deliver superior returns to our shareholders” and “to provide excellent service and value to our multilateral, governmental, corporate, financial, institutional and high net-worth clients through a wide-range of Islamic financial services” (Ithmaar Bank: Vision, mission and Values). The organizational changes implemented were rewarded with the recognition of the Bank’s chairman as ‘Islamic Banker of the Year by the World Islamic Banking Conference in 2008. One area of necessary change in order to achieve the mission statement was in the customer service section. This paper will deal with the changes in that section of the Bank’s private banking department situated in its headquarters in Bahrain. Organizational change can be minor or major depending on the objectives of change. In the case of the former, managing it is not very complex. But in case the change is major, certain precautions and concepts as will be mentioned in this paper later will have to be taken. According to Buchanan and Badham, even major changes can be classified into marginal or critical change. Marginal changes will be big, but will be done in a more relaxed and incremental way. A change in vision can be an example of such change, and is incorporated over a period of time. There will only be low or practically no requirement of coercion. But a critical change is required in situations where the organization is in imminent danger of collapsing. In such cases, the change will be drastic with use of coercion, politics, and pressure (Dawson 17). Change (both major and minor ones) can also take place with regard to the whole organization or within departments. But what should be understood in this context is that there has to be some reason for change to take place. There are several reasons, internal, external, or both, for change to be implemented. The company may be merging with or acquired by another organization. There could be a major change in the mission statement, or the company is planning into new areas of business. It can also happen due to factors like change in statutes or the presence of new players in the market. Change can take place when the way things are usually done is changed or when HR policies are modified. It can also be, as mentioned earlier, for reasons of survival. In the case of the Bank, the main area of change, as mentioned earlier was for the improvement of customer service. Hence the change was marginal and big. In other words, the change process was implemented in a gradual, phased manner. The main areas of change needed were improved customer courtesy, less waiting period, new products and services, better IT infrastructure, and a more efficient and aggressive marketing team. Resistance to change: One of the most important roadblocks for smooth change is the resistance of people towards it. Kroon, referring to Gelatt, states that there are primarily four types (reasons) of resistance (Kroon 515). They are future phobia, paradigm paralysis, infomania, and reverse paranoia. Future phobia occurs due to uncertainty of what will happen once the changes are implemented. For example, employees may fear that they may lose their job or that new responsibilities may be set which they cannot cope. Paralysis in paradigm is a situation where the people concerned cannot think differently. In other words, they feel to see the need to change even if it is obvious. Infomania is when the managers rely too much on facts and information without really observing the broad picture of the environment. For example, they fail to see the current trends in the market. Reverse paranoia in managers occur when they feel that the change process is not their responsibility. In other words, the managers wait for someone to bring about the change required without taking any action, initiative, or responsibility. Conflicting goals of management and workers, cynicism about the change, and conflict with personal and cultural values are other reasons for resistance. For example, a value where liquor is seen as evil may create resistance if the employer decides to move into that area of business. As expected, there was visible resistance to change. For example, the director of Private Banking had what is referred above as paradigm paralysis. He did not feel the need to change in the sense that the Bank was already doing well in many respects. He could not think in terms of becoming the best in business. Future phobia also was present as expected especially among the marketing and front office staff. But what is creditable was that there were no other forms of resistance. Talking to staff members revealed that they wanted to be part of the best in business and were willing to accept the change once their fear of the future was removed. The main fear was whether they will be transferred, de-promoted, or terminated. This fear was much stronger in the under performers at that point of time. There were also some fears of using complex banking software among the older members of the staff. The process of how the resistance was tackled after explaining change models and theories in the coming sections. Resistance was apparent through low turnout in training programs or visible lack of enthusiasm among those who attended. The whole scenario about resistance was understood over a period of one moth through the efforts of the change agent and his team. Kurt Lewin’s three step model: Any organization that has impending large scale changes with regard to organizational culture, structure, and behaviour should follow a three step process for smooth transformation from old to new. “This is often cited as Lewin’s key contribution to organizational change” (Burke, Lake & Paine 233). The relatively simple concept (in principle) needs an unfreezing, moving or transition, and refreezing of attitudes as behaviours. Employees are attuned to the working atmosphere of their former employers and hence need an unfreezing of attitudes so that they are receptive to change. The next step is to move or transform the employees to the new behaviour and culture that is required in the present situation. Once this is achieved, the next logical step is to freeze the newly learnt factors into their minds. Kotter’s eight step change model: This is another universally accepted model of change conceived by John Kotter, who teaches leadership at Harvard Business School. The first step in the process is to create what Kotter refers to establishing a ‘sense of urgency’ for change within the new organization: “establishing a sense of urgency is crucial to gaining needed cooperation. With complacency high, transformations usually go nowhere because few people are even interested in working on the change problem” (Ott 41). Once this is done, Kotter then explains the next seven steps usually, done in sequence one by one. Management in any setting needs teamwork and this is applicable in managing change as well. So a team that supports and facilitates a smooth change has to be built. This team need not be an official one, but can be comprised of influential (formal and informal) employees to whom others respect and will listen to. There is also the concept of bringing in change agents to make the process more effective. Once a team is in place, steps to form a ‘compelling vision’ among team members have to be created. This vision will then be transferred to others by the members of the team gradually. Kotter calls this process transference of vision. The next step is to identify and remove specific obstacles that stand in the way of change. In a cultural setting, the obstacles will primarily be man-made by other influential employees who are resistant to change. Resistance to change is actually not an objection in the real sense, but a fear or uncertainly about the future. Once the people who become obstacles have been identified, steps can be taken by talking to them individually and making them understand the need to change in the new setting. If they are not cooperative even after repeated efforts, bold steps to remove them (firing, transferring) from the scene should be done. Achievement of targets is always exhilarating for any person. But a long-term target may result in people losing interest in the change process. Challenging, but achievable short term targets should be set and steps taken to see that they are met. A very important factor (next step) is to see that the momentum of change however small is not let up. If momentum is lost, the whole process may need to be re-started. Any change that is now present in the organization should now be firmly anchored into the culture of the new organization. This is something similar to re-freezing as conceived by Lewin as his third and final step in the change process. ADKAR: ADKAR is an acronym for awareness, desire, knowledge, ability, and reinforcement. It appears quite similar to Kotter’s model since it advocates a planned and step by step approach to change and is quite self explanatory. Awareness has to be there in the minds of the management regarding the need for change and this has to be transferred to the employees as well. Once this is accomplished, the next step of creating the desire for change is quite easy. After this, the required knowledge regarding the change has to be acquired. As Hiatt points out, “knowledge includes information about bahaviors, processes, tools, systems, skills, job roles and techniques that are needed to implement a change” (Hiatt 2). Reinforcement refers to internal and external factors that strengthens and sustains the change process and the new scenario after the change. External factors may include recognition and rewards while internal ones include reinforcement of personal values, self-satisfaction etc. Chinn and Benne approach to change: This model is a part of the ‘General Strategies for Effecting Changes in Human Systems’ formulated by Robert Chin and Kenneth Benn during the late 1960s. The model is more of separate strategies rather than a series of steps as put forward by other theorists. In case the change is reasonable and enough benefits can be provided to employees, it is better to use the empirical-rational approach. This is based on the assumption that people are rational when it comes to self-interest. It can be likened to the carrot side of the carrot and stick approach. The most influential employees can be converted first and then use them to influence other employees. Another approach is the normative-reeducative model. According to Nikols, “successful change is based on redefining and reinterpreting existing norms and values, and developing commitments to new ones” (Nickols 3). This approach is primarily aimed at changing corporate and organizational culture. The third approach is referred to as power-coercive. As the name suggests, the use of power, and if necessary, coercion will have to be used for bringing about change. This might be required when massive changes are required or in instances where the company is liable to shut down. It may also be necessary in times of mergers and acquisitions. It should also be noted that employees are accept power as necessary for work and may willingly accept this approach in some instances. Other approaches: The top-down approach is somewhat similar to using power and coercion. The change begins from the top and is directed towards the bottom after that. A collaborative approach is where the change is implemented in cooperation with all people concerned. A laissez-faire approach is where the employees feel the need to change by creating an atmosphere for change. There is no force or collaboration here. McKenna in his book, ‘Business psychology and organizational behavior’, also proposed the following techniques for people centered change. They include “sensitivity training, survey feedback, process consultation, team building, grid development, management by objectives, and conflict management” (McKenna 511). Change agent: The importance of change management has been given so much importance that the concept of an agent or consultant is bringing about effective change is now common within organizations. According to director, Achieving Competitive Excellence of a multinational corporation (Carrier), a change agent should have the ability to alter "human capability or organizational systems to achieve a higher degree of output or self-actualization" (Bausserman). In other words, a change agent is a person who has the multidimensional capacity to bring about the changes within an organization in such way to implement the change management strategies proposed by the management. But, a change agent should be ready to face all and probably more challenges faced by a HR manager in an organization. One big challenge that such an agent or consultant can face is to balance the problem of fidelity towards the employees and the management. According to Paton and McCalman, “the change agent has to be aware of the potential of resistance from other areas, has to be aware that they may be viewed as ‘on the other side’ of the immediate client organization, and has to be aware of the impact that both factors may have on the change process” (Paton & McCalman 244). The employees may view the agent as being on the side of the management and treat the person with suspicion. In other words, apart from facing the challenges of being a consultant, a change agent has to have the qualities that are required of an HR consultant as well. A change agent can be an outside consultant or an employee (usually at management level) of the organization proposing the change. In either instance, the person has to maintain a balance between resistance to change, employer employee conflicts, and implementation of organizational objectives. The change process in Ithmaar Bank: The mission statement of the CEO was adopted as the compelling vision for bringing about organizational change in the Bank. This was done as per step one in Kotter’s model. The Board appointed the CEO of the Bank as change agent for the process of improving customer service in the private banking sector. He was to be assisted by the HR director and head of the IT department. The latter was included since the change involved new IT systems and the person could allay fears of non-IT savvy employees. The first process was to study and once again become familiar (in the case of the HR manager) about managing effective change. The team spent about two weeks studying literature as mentioned above. They become familiar with the change models and theories and decided to use important elements from all. It was decided to literally take Kotter’s eight step model and incorporate other elements from other models. For example, once the resistance scenario was understood, the change team identified those who resisted and targeted them for trying out the change models. There was fifteen marketing staff that was found to apprehensive of the future due to their current performance levels. Three of them were quite senior and influential in the marketing department. As per step two of Kotter’s model, the above three were later inducted into the team for their ability to influence others. Two senior managers and ten clerical staff were apprehensive of the new IT technology. Five front office staff was worried about improving customer relationships. This was understood by talking directly with all employees and as McKenna above had said through a survey feedback. All the employees were initially made aware of the need to change. Using the ADKAR model, the change team successfully put across the awareness and need to change over several sessions. It should be noted that the three employees inducted into the team (mentioned above) was done at this stage. At the end, everyone agreed about both these factors except for the director of private banking and the change team could transfer a compelling vision (mission statement) as suggested in step three of Kotter’s model. The change team had to recommend termination or transfer of the man to the board of directors. This was in tune with removal of obstacles as mentioned step five of Kotter’s model. A power-coercion approach (Chin and Benne model), but did not have the desired effect. He was later transferred and the director of marketing was promoted to fill in the vacancy. The IT manager put in several hours with the employees who were apprehensive about computers. He explained to them that the new systems will be integrated into the current one in such a way that no major learning or unlearning was required. Anyone familiar with the current system could easily understand the new one with just two or three days of training. With regard to the marketing staff, they were assured that their jobs would be safe at any rate. Extensive training sessions were planned after which everyone will be evaluated for a period of six months. Those found wanting will only be transferred and not terminated. The only drawback was that their total compensation could be reduced because they will not able to receive performance based incentives. The empirical-rational approach worked here because most of the resistors were concerned with the job and not the remuneration. The assurances about job security also helped to remove further obstacles (resistance) as envisaged in step five of Kotter’s model. They agreed to cooperate. The next step was implementation of achievable targets and performance measurement (Step six in Kotter’s model). This was done through fixing monthly business targets for the marketing staff and customer feedback for the front office staff. All employees were assured that none would be terminated, but only transferred in case they fall short of standards after six months. The performance measurement policy was accepted again due to the existence of empirical-rational belief among the employees. Initial and periodic training was provided to marketing staff and a three day training session was provided to those related to IT. Moreover, the change team continued to interact with and monitor with all the employees affected by the change. This was in line with the concept of increasing knowledge and ability concept in ADKAR. Moreover, the team also took care to congratulate and praise employees who showed good progress. They also took the trouble to encourage the slower ones so that their morale did not fall. They also assured that the Bank will be recognized internationally as a top financial institution in the region once the entire change process was competed. In other words, the team provided positive reinforcements as mentioned in the model. It also was done so that the momentum of change should not be lost as stated by Kotter in step seven. After a period of seven months from announcement of the change the process was deemed to be complete. The result was as follows. Five personnel from the marketing department were transferred to other departments of their choice if possible. Otherwise, they were transferred to a suitable department. Other staff members were given the choice to market the products. Two people made the change and the rest of the vacancies were filled by fresh recruits. None of the customer relations staff was transferred as all of them was able to increase productivity and quality of service. The IT department personnel were able to incorporate the new software without much problem. Overall, it was a collaborative approach especially since the coercive attempt on the director of private banking did not prove effective. It was never a laissez-faire approach or a top-down approach. It will be relevant at this stage to incorporate the views of some of the employees and the members of the change team about the whole process/ The change agent (CEO) was of the opinion that the whole process went quite smoothly. He explained that the resistance shown by the employees was expected. The methods used in the process was decided upon by the whole team and approved by the Board. It was constantly monitored and changed if it was found wanting. He was also disappointed that the attitude of the Private Banking director could not be changed. The induction of three resisting employees was a good move and they were able to contribute a lot to the change process. The IT manager had the least of the problems as his primary responsibility was to convince employees about the compatibility of the new software with the existing one. In other areas, he only assisted other members of the team. The HR manager found the process to be challenging, but was extremely satisfied by the outcome. This was primarily because it was her first attempt at planned change management. Mr. A, one of the employees inducted into the team said that he was extremely apprehensive of the change. His performance before the implementation was not very satisfactory and had resisted most strongly to the change. But once the vision was transferred, he was willing to take it up as a challenge. He was pleasantly surprised when made part of the team and consequently used his influence to good effect. Mr. A did not perform to standards after six months and was part of the employees who were transferred. He says that he has no regrets even though his total compensation was lower than before. For him, a job was more important. The employees who resisted because of apprehension about IT agreed that the new software did not cause them any problems. They praised the IT manager for his efforts in assuring them and later for the training they received. The most pleased among the lot were employees of customer service. They were extremely happy by the way customers responded to the improved quality of service. Mr B, who was a teller, did not initially feel the need for change. She admits that her attitude changed only after customer began responding positively to her after training. There were more smiling faces all around and the atmosphere now has become more friendly, efficient, and relaxed. Conclusion: Organizational change is a challenging process and things could go wrong unless it is done in a planned and phased manner. Ithmaar Bank saw the need to change in order to achieve their mission. The CEO and his team members were able to make the change by using well established and accepted models of change. Even thought they relied more on Kotter’s mode, elements from other models and approaches were also used. Within a period of six to seven months they were able to bring in the change by successfully tackling resistance. They were also successful in transferring the vision, bring in urgency, create awareness, provide the knowledge, and sustain the change. The management (reportedly) over a period of time has brought about a well-managed change in all areas of banking. This is proof that management of change based on well established principles can be effective. The results have been there to see since the CEO of Ithmaar Bank has been chosen for the prestigious Banker of the Year award for 2008. Works cited Bausserman, Grant. “Commencement address”. 30 July 2009 < http://utc.ngs.edu/html/NGS-Commencement-Oct2008.pdf> Burke, W, Lake, DG & Paine, JW. Organization Change: A Comprehensive Reader. Illustrated Edition: John Wiley and Sons, 2008. Dawson, Patrick. Understanding organizational change. SAGE, 2003. Hiatt, Jeffrey M. ADKAR: A Model for Change in Business, Government, and Our Community. Colorado: Prosci, 2006. Ithmaar Bank: Vision, mission and Values. 29 July 2009 Kroon, J. General management. 2nd Edition : Pearson South Africa, 1995. McKenna, Eugene F. Business psychology and organisational behaviour. 3rd ed. Psychology Press, 2000.   Nickols, Fred. “Four change management strategies”. 2003. 29 Jul 2009 Ott, E. Stanley. Transform Your Church with Ministry Teams. Grand Rapids: Wm. B. 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