Midwest Corporation - Research Paper Example

?Table of Contents Executive summary 2 4 Literature sources 8 4 1 Leading Change 9 4 2 Exploring corporate strategy 10 4 3 Economic for today 10 4.1.4 Organizational change 10 4.1.5 Human resource management 11 4.1.6 Organizational behavior 11 4.1.7 Management 11 4.1.8 Organizational culture 12 5.1 Leading Change 13 5.2 Corporate strategy 13 5.3 Economic for today 14 5.4 Organizational change 14 5.5 Human resource management 14 5.6 Organizational behavior 15 5.7 Management 15 5.8 Organizational culture 16 6.1 Managing Organizational Behavior 16 6.2 Culture 18 6.3 Systems – Leadership and Communication 20 1. Executive summary Midwest Corporation (Midwest) is a mining company that is based in Western Australia and majors in iron ore projects development. In 2008, the company was fully acquired by Sinosteel, a giant iron ore trader based in China. As a result, Midwest Corporation was renamed into ‘’Sinosteel Midwest Corporation’’ (SMC) and became a subsidiary of Sinosteel. In order to meet the new business situation, the company had to implement many changes. This paper investigates the change that has taken place in SMC since the acquisition. The research provides company’s profile and its history as a basis for further investigation on the influence of the acquisition and a new parent Sinosteel Corporation (Sinosteel) on the Midwest Corporations. The purpose of this study was to research and critically examine the change process in SMC, analyze the impact of the change on employees and on the company as a whole. Some critical review and recommendations are based on the leadership knowledge. The methodology of the study implies a review of related academic journals that helped to examine the company’s changing process. A questionnaire was filled in by SMC employees to provide the researcher with a clear picture of how in particular the change was implemented. A list of key questions will be made for interviewing a SMC decision-making executives was based on the data collected from the questionnaires and conceptual framework from the journals. 2. Introduction and Objectives The purpose of the study was to review and critically analyze the changing process that took place in Sinosteel Midwest Corporation. Before the acquisition the company was operated by its founder and several major shareholders, as top executives and broad members. Most of these executives (i.e. broad members) left the company having sold their shares to Sinosteel, the company’s current owner. The major objectives of the company were changed too. Previously, the main goal of Midwest was looking for strategic investors (business partners) to finance the company’s iron ore projects development. Midwest was then supposed to use its revenue from selling iron ore to pay back to the investors. To change the situation, Sinosteel, as one of the biggest Chinese iron ore traders, does have an ability to finance the project development and, at the same time, provides a big demand for SMC’s iron ore. Since financing is not a problem anymore, SMC’s core business has changed to work more efficiently on the development of iron ore projects. A serial of change from business strategy to organizational structure have been made to meet the new situation and new requirement. Therefore, this study has explored how the SMC’s management team designed its new strategy and new structure for them to correspond to the new conditions the company works in after the acquisition. The research also examines how the change implementing process was leaded by a new Chinese Managing Director and whether the company’s leadership was effective enough as to implement the changes successfully. The impact of the change on both SMC employees and the company in general has been reviewed. Finally, the study provides some recommendations on how such changes can be implemented more effectively and what lessons other businesses can learn from SMC’s experience? 3 Organizational Context – Sinosteel Midwest Corporation Midwest Corporation used to be an Australian ASX listed mining company that owned several iron ore projects in Koolanooka and Blue Hills region in Western Australia. At that Midwest had 49 employees and a few contractors. Because of the huge costs of mining exploration and infrastructure building, the company’s strategy was in developing iron ore projects with the help of strategic investor’s money. The revenue received from selling iron ore was then used to pay back to the investors. Midwest had an Exploration Department in charge of project developing and a Business Support Department that included financial and human resource functions to support the projects. In 2005, Midwest with Sinosteel founded a joint venture called Sinosteel Ocean Capital Pty Ltd. Chinese iron ore trader Sinosteel financed and helped Midwest to develop Midwest’s mines through the joint venture. Midwest promised to share the future revenue and give Sinosteel priority of purchase its iron ore as a return for the investment. Sinosteel is a major iron ore trader in China with annual income USD 24 billion (Sinosteel Corporation, 2008); it has been working in Western Australia’s mining sector since 1987 by co-founding Channar Joint Venture with Rio Tinto. During the last 20 years, Sinosteel has exported more than 160 million tones of iron ore from WA to China. In 2008, a Midwest’s rival, Murchison Metals Limited (Murchison), announced an overtake bid for Midwest. Sinosteel acknowledges that Murchison has a Japanese and Korean background. Japan and Korea are also major buyers of Australian iron ore; they have same hunger for this resource as China does. It became obvious that if Murchison controlled Midwest it would satisfy the demand from Japan and Korea. To defend its interest, Sinosteel also announced a bid to takeover Midwest to compete with Murchison. In September 2008, Sinosteel successfully took control of 99% of Midwest’s shares and renamed the company to Sinosteel Midwest Corporation (SMC). The acquisition essentially changed Midwest. Sinosteel, the new owner, supplied sufficient financial and technical support to develop and implement the mining projects. Therefore, the number one task for SMC became to produce iron ore as much as possible. SMC’s new aim became ‘to be a world class exporter of iron ore from one of the largest land holdings in the Mid West resources region’. The structure of the company was changed accordingly, as to support the new mission and objectives. SMC’s current structure. New board of directors together with SMC’s senior management team has implemented change to meet the company’s new situation and achieve the new aim. A senior manager from Sinosteel head office was appointed as SMC’s Managing Director. This is the position of a final decision maker in company’s operations on a daily basis. Under the Managing Director, Chief Operating Officer, Julian Mizera, actually runs the company together with a senior management team. SMC strengthened its Exploration Department by dividing it into 3 parts, each of which has received a more specific focus. The Operation Department works on the immediate term tasks (what should be done today to maximize production, cash flow and profitability). The Project Department is focused on the medium term goals (what should be planned today to ensure the success tomorrow). The new Exploration Department deals with the long term goals and projects (what should the company be focused on in order to drive future value). Due to the increasing number of linkages and interfaces between SMC and its parent, Sinosteel, a role of General Manager Sinosteel Liaison has been created.  This change reflects the critical importance of ensuring effective cooperation with Sinosteel, as well as allows SMC to operate effectively towards its growth ambitions. 4 Methodology and Research Design 4.1 Literature sources A review of relevant to the situation literature was conducted in order to critically examine the key question of the study. 4.1.1 Leading Change Kotter, in his book Leading Change (1996), gave out eight stages that are considered necessary of a successful implementation of organizational change. These stages are: Establishing a greater sense of urgency Creating the guiding coalition Developing vision and strategy Communicating the change Empowering others to act Creating short-term wins Consolidating gains and producing even more change Institutionalizing changes in the culture This framework was used to analyze the change implementation process that took part at SMC. 4.1.2 Exploring corporate strategy Johnson, Scholes and Whittington (2005) explored a variety of strategy development process in their book. Their concepts have been used to review SMC’s strategy development. 4.1.3 Economic for today Layton, Robinson and Tucker (2005) present different types of market structure. Among them are perfect competition, monopolistic competition, oligopoly and monopoly. Iron ore miner SMC is, most likely, an oligopoly. Oligopoly, in its turn, is defined as a market structure characterized by (1) few sellers, (2) either a homogeneous or a differentiated product and (3) barriers to market entry. This idea was used to critically examine the company’s strategic change from the point of view of market structure. 4.1.4 Organizational change Chapter 5 of ‘Organisational change’ by Senior and Fleming (2006) describes resistance to change most organizations have to deal with when introducing innovation. The authors also provide some guidelines for dealing with such conflicts. This text has helped the researcher to explore the conflicts that took place during the SMC’s change process. It was also the basis for a critical examination of the methods of dealing with resistance which the company used. 4.1.5 Human resource management ‘Human resource management’ by Hartel, Fujimoto and Strybosch (2008) mentions that ‘’during times of change, employee motivation levels may change at any time, therefore, continual monitoring is necessary.’’ Furthermore ‘’organizational change affects the ability to engage and motivate employees’’. So, the motivation problems SMC met and their ways of solving them have been analyzed in view of Hartel et al’s principles. 4.1.6 Organizational behavior Martin (2005) outlines that people are the most basic units that compose organization. An organization is, consequently, a group of people working towards the same goal. This author also provides a formula for understanding people’s attitudes. Therefore, Martin’s theory will be used for analyzing results of the questionnaires in order to explore SMC employee’s attitudes toward the change, as well as the impact of change on organizational behavior. 4.1.7 Management Samson and Daft (2006) provide an overview of different managing structures, from flat to vertical, purposed for satisfying different business situations and managing styles. This book was used to review SMC’s new structure. 4.1.8 Organizational culture Brown (1998), in his book about organizational cultures, illustrates a relation between culture and the concepts of organizational change. This information, therefore, was used to determine whether SMC has changed enough in culture to solidify the change. 4.2 Questionnaire SMC employees filled out the questionnaire in order to help the researcher in collecting the data about impact of the change on individuals and the whole organization. 4.3 Interview On the basis of the data collected from the questionnaires, as well as theoretical framework from the journals, a list of key interview questions was made up for interviewing a SMC executive, who was one of the decision makers and executives working with the company in the processes of change design and implementation. Information received from people that have had direct experience designing and implementing the innovations on different organizational levels was an important and helpful element of the research since it provided a more clear review of how the change process, as a whole, was leaded. 5 Findings 5.1 Leading Change A senior manager from Sinosteel, Sijun Cheng, was appointed as SMC’s Managing Director and, therefore, responsible for all the major decisions made in the company. Together with the Chief Operating Officer of SMC, Julian Mizera, and a new board of directors Cheng managed to re-organize the company and reduce levels of stress and uncertainty among the employees. These results were achieved with the help of seminars, at which Sinosteel, as well as its plans for future strategic development of the acquired organization, were introduced to the employees. 5.2 Corporate strategy Most of Midwest employees were stressed and frustrated by the acquisition because of the fear to be fired and replaced by cheaper Chinese employees. However, none of the Midwest people was fired within the first two years of SMC’s operations. Such a strategy of the company helped to reduce people’s levels of fear and frustration. Furthermore, the company’s management prepared a clear and straight plan for future operations of the company, hired additional staff to support the operations, provided the employees with above the average wages and, therefore, ensured the staff felt secure in their positions. 5.3 Economic for today SMC’s being an oligopoly has helped the company to not only improve its internal structure, but to also strengthen its market position as a result of the change. The market has relatively high barriers to entry, so success of SMC is more dependent on its internal processes than on the levels of competition. In addition, a limited number of major competitors, as well as relative predictability of market moves, provided SMC with the time necessary to implement the internal changes effectively. 5.4 Organizational change The major strategies that helped SMC’s management to fight resistance to change included consistency in plans and strategies, and effective communication. In addition, strong leadership combined with clearly outlined and consistent strategy helped the company to reduce resistance to change within the shortest terms. Employees were lead through the change with a clear understanding of the final goal. At the same time, it should be noted that, in most cases, employees did not participate in the process of designing the change. 5.5 Human resource management Though human resource management strategies of the parent company use some methods for monitoring and improving motivation, the management did not cope with the task of reducing uncertainly levels in the process of acquisition. Though this error was corrected afterwards, it has been determined that the employees experienced lack of communication and, consequently, information, during the acquisition and the earliest stages of change implementation. Motivation and job performance, as a result, were in a decline during that time period. 5.6 Organizational behavior Employees’ attitudes towards the change were initially negative. In addition, the restructuring of the company (creation of three new departments) and a large number of newly hired employees cause some lags in the operations of the organization: new communication channels were to be created and new employees – trained. Nevertheless, the executive team managed to organize to the work of new department and trainings of the employees in an effective manner. 5.7 Management Organizational structure of SMC currently implies that lower level executives report to team leaders or department managers. The managers of the departments, in their turn, are the subordinates of SMC’s Managing Director and Chief Operating Officer and, finally, the board of directors. Though such structure is not complex, it provides simplicity of communication channels and, thus, reduces potential delays in communication. 5.8 Organizational culture After the acquisition the company changed much and, what is good, the changes were aligned with organizational culture. The culture itself, however, was modified in accordance with the new vision and mission of the company. The changes, therefore, became an integral element of organizational culture, thus providing the employees with a solid mental ground for accepting the changes. The process of changing culture was interrelated with and integrated into the overall change management strategy of the organization and was a successful change management initiative. 6 Discussion and Analysis 6.1 Managing Organizational Behavior The uncertainty related to organizational change, according to Jimmieson, Terry and Callahan (2004) can be categorized into four different groups. They are role conflict, role ambiguity, and role overload. The role conflict can be said to have a direct relation to the change of the previous psychological contract: an individual’s role expectations have to change. Similarly, role ambiguity takes place when post-change role expectations are absent or not clear (Jimmieson, Terry & Callahan, 2004). So, uncertainty caused by a change leaded SMC’s employees to job dissatisfaction and a decrease in confidence. Job dissatisfaction, as a result, caused deficient performance during the acquisition process. Obviously, it was the mistake of SMC’s former management. The previous team did not devote much attention to informing the people on what was going on in the company and what results it would lead to. Ineffective communication caused all the employees to experience one problem in the process of change implementation: fear, distrust, uncertainty and resistance to change. Such reactions of all the people were caused by lack of two-way communication and, consequently, sufficient information about the process. As such, an effective communication process should, according to Rogers (1995), undergo five essential stages. They are knowledge, persuasion, decision, implementation and confirmation. Rogers’ innovation-decision process implies that at the knowledge stage people learn about the upcoming change. At this stage employees feel a need for information in order to reduce uncertainty. Then comes the persuasion stage. In this process people form attitudes towards the change. Two-way communication should be provided to the employees at this stage in order to make sure they have enough sufficient information for feeling confident and secure in relation to the change. During the decision stage people perform practical activities that will show whether the change will be accepted or abandoned. This may, for example, involve a small-scale testing of a new idea. If the results are positive, the implementation stage comes in force. At this stage all the involved employees put the change to use and, finally, on the basis of positive experience, confirm that the change has been positive (Rogers,1995). Following these simple steps when implementing a change would help the company’s management to improve individual and overall organizational behavior. 6.2 Culture Today many change management decisions of the supervisors are heavily influenced by the employees (Barnett and Carroll, 1995). On the other hand, such decisions, in many cases, have a direct impact on the subordinates. Therefore, effective change management decisions should always take into account how employees, as one of the most valuable assets of an organization, will get influenced by the decision. In this context it can be said that employees, as an internal resource of a company, are the key to creating a competitive advantage through change and innovation (Teece, Pisano & Shuen, 1997). Therefore, the task of the company is to ensure that its employees adapt to changes well and, a result, continue showing good, or even improved, performance. In case of SMC employees, unfortunately, had no power over taking any decisions. In addition, as the research findings suggest, during the acquisition process employees did not even have sufficient enough information regarding the upcoming changes. Since the process of change management consists of a number of stages (invention, acceptance, disenchantment and decline), it is important to manage it from the very beginning (Carson et al, 1999). Invention and acceptance stages of the change life cycle model are the ones in which effective implementation of an innovation is most likely to take place. Disenchantment and decline, consequently, are the states at which an ineffectively implemented change might be abandoned. The major problem of SMC related to this aspect of change management is that the invention state was under-managed. As a result, employees’ level of acceptance was lower than it could be if effective communication was present before. In addition, having faced an organizational change, the people had to change their psychological contract with the company (Chreim, 2002). This, as a result, leaded to losing a feeling of job security (Anderson & Schalk, 1998). Uncertainty that arose from this process leaded to the feelings of anxiety and loss. Chreim (2002) also points out that an innovation makes employees change their attitudes and behavior. This, in its turn, leads to the fear of unknown and desire to get back to the old ways. So employees’ uncertainty, anxiety and feelings of loss are the factors that evoke resistance to change at SMC. Nevertheless, the positive thing is that new management was able to change the situation to better having restructured the company and incorporated the change into the new corporate culture. Therefore, later in the process, innovation was a part of the company’s culture and, therefore, had a solid support represented by clear vision and mission understood by the employees. 6.3 Systems – Leadership and Communication Chreim (2002) recommends organizations to improve their communication strategies and channels before attempting to implement a change. Improved communication, according the author, will help to provide the employees with meaning and background to change. This idea is supported by D’Aprix (1996), who states that a powerful rationale for a change will reduce uncertainty and confusion the employees might feel. Furthermore, such communication should be strategic – well-planned and thought over in advance (D’Aprix,1996). SMC, unfortunately had no such an opportunity, so communicating channels had to be established only after the acquisition. Nevertheless, further changes, such as restructuring of the company, were managed well enough as for the employees to accept them well. This is caused by improved communication and leadership that supports such communication. Lack of effective formal communication observed before caused employees’ searching for informal sources of information. This lead to negative consequence as informal sources might have provided people with incomplete or incorrect information and, in such a way, increased anxiety (Kramer, 2003). Another relevant fact to mention is that employees’ job motivation increased after the first changes were implemented under the coordination of the new management. Job motivation, in its turn has a positive impact on job performance (Halbesleben & Bowler, 2007). Therefore, it can be assumed that increased motivation made employees more willing to adapt to change and, in such a way, show better performance. 7 Conclusions and Recommendations Contemporary business environment is continually developing and changing. That is why companies, in order for their business processes to be able to adequately respond to the changes of the external environment, have to be constantly changing themselves. Changes and innovations, therefore, should be an integral part of normal business development and growth. However, in order for a change to be effective, the change life cycle should be managed effectively. In case of Sinosteel Midwest Corporation it is obvious that the company’s change management processes are now effective and successful enough – the employees are more than satisfied with their current positions. At the same time, the lesson learnt from the company’s experience is that company’s management should be continuously working on maintaining efficient and clear two-way communication channels. Furthermore, it is recommended that company’s management gathers employee’s feedback regarding all the planned or implemented changes and uses when analyzing completed or planning future changes. Such a two-way integration and cooperation will improve employees’ job satisfaction and, consequently, organizational performance. 8. Self-analysis I my understanding, Organizational change is a serial of activities to response to a change in internal or/and external circumstances to enhance organization’s efficiency and ability. Leading change is not an ordinary kind of management, which works with familiar things, this kind of managing more like ‘’do things correctly’’. Leading a change is about responding to the challenge from internal and external environment change, it is more like to decide how to ‘do a right thing’. Change is an issue than any company has to face, but as a natural people have fears for unknown, from where always comes resistance for the change. Therefore for any organization, leading change is extremely important and very difficult. Leading change is about managing different conflicts, has to deal with unexpected problems from unexpected respects. One of the most difficult parts for a change leader is to have a clear understanding about possible problems on a macro level during the changing process. Designing an optimal changing process is absolutely necessary in this stage. During work history, I experienced organizational structure change and currently I am facing a management style change due to change of CEO. Involving and observing these changes, I find that communication is extremely important for a change leader. Base on the leadership style assessment we have done, the mentor role part is relatively stronger that other roles. If I were in the position of leading an organizational change, my leading style would focus on the communication in and between each level in the organization. I would through effective communication let everyone understand the reason for this change, the advantage for this change and positive impact for each person from this change. As mentor of the change, I have to ensure myself and all the people implementing change not to do anything against the aim of change. I would keep the communication channel flowing in any stage of changing process. Keeping in touch not only with executives but also with front employees is a good way to immediate identify and solve the problems. I’m currently experiencing an unsuccessful change in my work place. O work in a floor tile retail company called Kevin’s Tiles. The last manager who is also the founder of this business got retired and his son has been put on the position. Since the new manager is on duty, he made several change for the work procedure without mention reason and consult with people. Many employees are very confused whether it is necessary to make the change, and the confusion slowly becomes resistance for the change in the work place. Some employee follows new procedure, some others follows the old one. The number of fault and complain increased. Because of short of necessary communication, the new manager couldn’t identify the trouble happening in the work place; it causes further negative impact for the change. From this case we can see, that lack of sufficient communication between management and employees causes extra resistance and problem for the change process. 9 List of References Anderson, N. and Schalk, R., 1998. The psychological contract in retrospect and prospect. Journal of Organizational Behavior, 19. 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