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Analysing Organization Change at Tesco

INTRODUCTION

Tesco is a multinational chain of stores for retail with its headquarters in the United Kingdom. In 2008, Tesco became the fourth largest retailer in the world, displacing the fifth largest distributor Metro AG, the first movement of positions among the top five companies in the sector since 2003. Although originally specializing in food and drinks, it has diversified into areas such as clothing, electronics, financial services, selling and renting DVDs, compact discs, digital downloads , Internet service , telecommunications , medical and dental insurance and software.

Companies that are able to compete successfully in today's rapidly changing business environment, which is characterized by globalization of the economy, exploding information technology, downsizing, restructuring, and new employer-employee relationships, must be ready to make significant changes in the way they operate. Changes can be realized in a number of areas. They can, for example, be observed in attitude or behaviour. Many major organizational changes, however, are technological ones. Sometimes these changes are not intended to change behaviour, but they almost always do in some respect. Another type of change is replacement of personnel; when top management is impatient with the pace of productivity, they often replace key individuals. Changes also occur in organizational structure, formal roles and jobs, control systems, work processes, and other elements of the organization's internal environment (Hough, 2003).

The motivation for change typically stems from the fact that something is not working (e.g., continued negative feedback from customers, reduced profitability, threats of acquisition, or other market pressures). For most organizations, a crisis is the catalyst for change. While a crisis may be sufficient to initiate a change, it takes much more to successfully integrate the change into the work processes. Managers must have more than an extensive knowledge of the marketplace, how to compete in it, and what internal structures must be in place to make the company successful (Atuahene-Giman, Li, 2004).

SIGNIFICANT ORGANISATIONAL CHANGE AT TESCO

Organizational change is defined as the ability to adapt to different organizations transformations suffered by the environment inside or outside, through learning. Another definition is the set of variations on the structure of organizations and suffering that result in a new organizational behaviour.

Recently, TESCO has come across a significant change in terms of introducing and implementing a self-service check out system throughout its network. The implementation of this new payment system at Tesco is undoubtedly a strategic plan change. This is because the self-check-out system is a new system that differs from normal or traditional payment terms in terms of carrying out transactions. The cash payment required operating through a teller, but the checkout system does not need any cashier. This Self-service brings a new procedure or method to facilitate the customers. The use of the new system serves customers in a better way and provides better service without having to spend so much time in the store. When introduced into Tesco, this self-checkout system helps clients improve shopping experience and also facilitate them for easy shopping. This was done to make customers feel part of Tesco. The customer in store will select the shopping from the shelves and move to the self checkout, scan and pay for the items. The intended effect is the synergy of both the self checkout and the cashier checkout.

The objective of this task is to investigate the Tesco self-service machine. This introduction of self-service check outs was a strategic shift. It was first introduced in Dereham, Norfolk in 2003. The purpose of the system was to accelerate check out processes and reduce labour costs associated with retail outlets. This work is to study the triggers of change, the process involved and the benefits for the organization.

MANAGING ORGANIZATIONAL CHANGE

Lately, TESCO has confronted a substantial change in terms of introduction and implementation of self-service check out system throughout its branch network. Organizational change occurs when a company makes a transition from its current state to some desired future state. Managing organizational change is the process of planning and implementing change in organizations in such a way as to minimize employee resistance and cost to the organization, while also maximizing the effectiveness of the change effort. Therefore, the objective of this report revolves around the process used by TESCO to manage the implementation of the check-out system.

Today's business environment requires companies to undergo changes almost constantly if they are to remain competitive. Factors such as globalization of markets and rapidly evolving technology force businesses to respond in order to survive. Such changes may be relatively minor—as in the case of installing a new software program—or quite major—as in the case of refocusing an overall marketing strategy. "Organizations must change because their environments change, " according to Thomas S. Bateman and Carl P. Zeithaml in their book Management: Function and Strategy. "Today, businesses are bombarded by incredibly high rates of change from a frustratingly large number of sources…. Inside pressures come from top managers and lower-level employees who push for change. Outside pressures come from changes in the legal, competitive, technological, and economic environments." (Bateman, Thomas , Zeithaml, 1989). In case of TESCO, both the internal and factors played their role in bringing about the change.

Organizational change initiatives often arise out of problems faced by a company. In some cases, however, companies are encouraged to change for other, more positive reasons. "Change commonly occurs because the organization experiences some difficulty, " Bateman and Zeithaml wrote. "But sometimes the most constructive change takes place not because of problems but because of opportunities." The authors used the term "performance gap" to describe the difference between a company's actual performance and the performance of which it is capable. Recognition of a performance gap often provides the impetus for change, as companies strive to improve their performance to expected levels. This sort of gap is also where many entrepreneurs find opportunities to begin new businesses (Bateman, Thomas , Zeithaml, 1989).

Unfortunately, as Thomas (1993) noted in an article for HR Focus, statistics show that many organizational change efforts fail. For example, 50 percent of quality improvement programs fail to meet their goals, and 30 percent of process reengineering efforts are unsuccessful. The most common reason that change efforts fail is that they encounter resistance from employees. Change appears threatening to many people, which makes it difficult to gain their support and commitment to implementing changes. Consequently, the ability to manage change effectively is a highly sought-after skill in managers. Companies need people who can contribute positively to their inevitable change efforts. The management at TESCO developed a set of objectives – sales increment, cost effectiveness, customer satisfaction – before implementing the change and measured these developed objectives to ensure success through the attainment of these developed objectives.

AREAS OF ORGANIZATIONAL CHANGE

Bateman and Zeithaml identified four major areas of organizational change: strategy, technology, structure, and people. All four areas are related, and companies often must institute changes in the other areas when they attempt to change one area. The first area, strategy changes, can take place on a large scale—for example, when a company shifts its resources to enter a new line of business—or on a small scale—for example, when a company makes productivity improvements in order to reduce costs (Bateman, Thomas , Zeithaml, 1989). There are three basic stages for a company making a strategic change:1) realizing that the current strategy is no longer suitable for the company's situation; 2) establishing a vision for the company's future direction; and 3) implementing the change and setting up new systems to support it. At TESCO, the management has followed the same process and stand efficacious in implanting the new system successfully.

DRIVERS OF CHANGE

There are four primary drivers of major work-place change. They are a change to the organizational structure, a new product or service, new management, and new technology. Organizational structure may change through major downsizing, outsourcing, acquisitions, or mergers. These actions are often accompanied by layoffs, particularly as certain positions become redundant. A new product or service has implications for changes in production, sales, and customer service. Additionally, by changing product or service the organization may face new competitors or new markets. New management, such as a change in chief executive officer or president, often brings a period of transition during which upper-level managers are likely to alter existing business processes and personnel policies. Finally, new technology can create vast changes to the organization. Technology can change the production process or the working conditions (i.e., telecommuting), and these changes may influence the skills that employees use on the job (Gioia, Dennis , Thomas, James , 1996). The changes are caused by the interaction of forces, these are classified as:

INTERNAL DRIVERS

Internal drivers are those from within the organization, arising from the analysis of behaviour organizational and presented as alternative solutions, representing conditions of equilibrium, creating the need for structural rearrangement, is an example of these technological adaptations, changing strategies, methodological, policy changes, etc.

EXTERNAL DRIVERS

External drivers are those from outside the organization, creating the need for internal order changes are examples of this force: The government decrees, the standards of quality, limitations on the environment both physical and economic etc.

DRIVERS OF CHANGE IN TESCO

Over the years TESCO has been able to apply its strategies effectively and efficiently to become one of the big Global retailers in the world. Both, internal and external drivers have played their role in sparking the change at TESCO. The main triggers are discussed below:

CREATION OF VALUE FOR CUSTOMER

As part of TESCO strategy to retain existing customers and attract new ones, the Company decided to create more value for its customers. This resulted in the Implementation of the self-checkout system. TESCO wanted to make the shopping experience Exciting for the customers.

GROWING CUSTOMER BASE

The success of TESCO can be attributed to numerous factors one of which is its fast growing customer base. The self-checkout was implemented to ease congestion on Checkouts. With the implementation of the self-checkout customers do not have to stand in long boring queues to pay for their shopping. They can use the self-checkout which is simple and faster especially if the customer has purchased only a few items.

TECHNOLOGICAL INNOVATIONS

In view of the growing age of technology, it is essential for all organizations to enhance their technologies if they want to be successful. TESCO implemented the self-checkout to improve upon its operational efficiency.

COMPETITION

Competition among organizations is one of the common triggers of change in most Industries. TESCO implemented the self-checkout system to gain a competitive Advantage against its competitors. This also led to differentiation in the market as TESCO distinguished itself from the other retailers by the use of the self-checkout System.

COST OF LABOUR

One of the major aims of every business is to maximize profit. TESCO wanted to Increase its operational capacity at the front end and at the same time saves cost hence the use of the self-checkout. For instance instead of employing five cashiers to operate Five cashier checkout, only one cashier will be required to assist customers on five Self-checkouts.

THE PROCESS OF ORGANISATIONAL CHANGE

Every change effort should be accompanied by an action plan. Once a compelling reason to change has been identified, it is necessary to create a picture of what the change will require, how the organization will effect it, and what the organization will look like when the change has been implemented. Although each action plan for change will be unique, all plans should follow a basic structure: (1) identification of a course of action and allocation of resources to achieve the organization's change goals; (2) designation of the authority, responsibility, and relationships that will drive the change efforts; (3) determination of who will lead the change effort and the specific roles and responsibilities of these individuals; (4) a description of the procedures and processes that will expedite implementation of the change; (5) identification of the training that will be required to enable people to incorporate the change into their work processes; and (6) identification of the equipment, tools, or machinery that will affect the way work is accomplished (Atuahene-Giman, Li, 2004).

Many organizational changes are initiated and implemented through the authority of top levels of management. The problems are defined and solutions are developed by top-level managers based on information that is gathered by others with help from a limited number of people. Once a decision is made, the changes are often communicated to people in the organization through memo, speech, policy statement, or verbal command. Since only a few people, usually at the top, are involved in making the decisions, the change is usually introduced very rapidly. However, this strategy has proved to be largely ineffective in dealing with organizational change processes, particularly for successful integration. A common misconception about carrying out a change is that it must be directed from the top. The foundation of successful change management lies in involving the people who will be affected by the change.

Sharing responsibility for change is a process whereby those at the top and those at lower levels are jointly involved in identifying problems and/or developing solutions. Virtually continual interaction takes place between top and bottom levels. The shared responsibility or participative approach can be addressed in several ways: (1) Top management defines the problem and uses staff groups or consultants to gather information and develop solutions. These identified solutions are then communicated to lower-level groups in order to obtain reactions. The feedback from the lower levels is then used to modify the solution, and the communication process starts again. The assumption underlying this approach is that although involving others in the definition of the problem or its solution may be impractical, the solution can be improved and commitment obtained by involving lower levels. (2) Top management defines the problem but seeks involvement from lower levels by appointing task forces to develop solutions. The task forces provide recommendations to top management, where the final decision is made. These task forces are composed of people who will be affected by the change and have some level of expertise in the areas that will be affected by the proposed change. The assumption here is that those who have the expertise to solve the problems are those groups that are closer to the situation. Also, the group's commitment to the change may be made deeper by this involvement. (3) Task forces composed of people from all levels are formed to collect information about problems in the organization and to develop solutions. The underlying assumptions in this approach are that people at the top, middle, and lower levels are needed to develop quality solutions and that commitment must build at about the same rate at all levels. These approaches emphasizing shared responsibility usually take longer to implement but result in more commitment from all levels of the organization and more successful integration of the change into the work processes (Hough, 2003).

CHANGE MANAGEMENT OBJECTIVES - TESCO

Before, implementing the change, TESCO devised the following objectives to measure the effectiveness of the organisational change. The developed objectives were:

A significant increase in customer satisfaction

To achieve cost effectiveness

A substential increase in sales

THE IMPLEMENTATION PROCESS

The implementation of the TESCO self-checkout systems could be said to be a strategic Change. This is because the self-checkout is a new system which differs from the Normal checkout in terms of the way transactions are carried out. The cashier checkout requires a cashier to operate but the self-checkout does not require a cashier. The self-checkout brings a new procedure or method of serving Customers. The use of the self-checkout and the normal checkout give the customers an enhanced service without having to spend so much time in the store. The self-checkout when introduced in TESCO was to help improve upon the customers Shopping experience and also to make the shopping very easy. This was done to make the customers feel a part of TESCO. The customer in store will select the shopping from the shelves and move to the self-checkout, scan and pay for the items. The intended Effect is the synergy of both the self-checkout and the cashier checkout.

RESISTANCE TO CHANGE

Understanding the factors that drive change and how people react to change is critical to the successful implementation of change. It is part of human nature to resist change. People prefer the security of familiar surroundings and often do not react well to changes in their work or social environment. Resistance to change often takes some typical forms. One typical reaction is denial, which individuals use to protect themselves.

Many managers assume that if people think the change is a good idea, they will not resist it. Why would the work force resist changes if the changes will fix what they wanted fixed? People may want change, but not necessarily the changes that have been identified in the plan. Workers may have their own ideas about what should change, and frequently the changes they think fix the problem involve someone else changing, not them. In addition workers may think the ways to make things better is simply to adjust and manipulate their work processes, not to implement the drastic changes identified in the proposed plan. Alternatively, workers may not think that is wrong with the current way of working. Often the process of changing looks too hard, looks like it will take too much energy, and seems confusing. A strictly structured change process often ignores the ingrained human resistance to change. When that happens, people who are affected by the change end up expending most of their time and energy figuring out how to stop the change or altering the change until it looks like something they can live with. If the desired change is not very desirable to the work force, managers need to find out why. Insufficient information about the driving force behind the change and the benefits expected from it is likely to cause distress among those affected by the change. People tend to act in their own perceived self-interest. Managers often think of change initiatives in broader terms, while the work force tends to think of it differently, in more narrow terms of how the change will affect their work. Sometimes managers forget or overlook this reaction to change. Effective strategies for organizational change involve an understanding of the human beings in the work force.

RESISTENCE MANAGEMENT AT TESCO

Effective planning is imperative in any organization if it is going to be successful in Its activities. The management of TESCO had to decide on the number of self-checkout they were going to begin with and in which of their stores they would be introduced first. The checkout leaders were trained to operate the self-checkout as they would be assisting the customers to use the new system although the self-checkout has a screen Demo which makes the system user friendly and easy to understand and operate. Some cashiers thought that the self-checkout was going to put them out of their jobs As automation of a system normally leads to the elimination of the manual aspect of The system and this made them insecure with their jobs. The managers had to educate the cashiers on the purpose of the self-checkout and the Potential benefits it was going to bring to both customers and the organization as a Whole. The purpose was to motivate the cashiers to be confident and welcome the Change. The initial implementation was a form of feasibility studies. The customers were encouraged to use the self-checkout with the assistance of the trained front end Leaders. Management observed the system for a period of time to determine the Number of customers that patronized it and also to get feedback from both the Customers and staffs. The positive feedback gave management the green light to introduce the self-checkout in other TESCO outlets.

EXTENT TO WHICH CHANGE WAS SUCCESSFUL IN MEETING ITS OBJECTIVES

This change management process (implementation of the self-checkout) has had an immense effect on the entire organization as it serves a major role in the customer Shopping experience and also impact positively on the sales of TESCO as an Organization. The major benefits of the self-checkout will be discussed below.

INCREASE IN SALES

In this marketing era where the customer is the focus of most companies, customers will always go to shops where they can get a good and timely service. TESCO being one of the world’s leading international retailers currently has 3000 self-checkouts in 750 stores. This is a great improvement since the self-checkout was first implemented. The number of self-checkouts in stores attracts more new customers as they know They can always leave the store in time through the use of the self-checkout. This Increases customer base which impacts positively on sales. 25% of TESCO’s UK Transactions are through self-checkout (TESCO plc). This means that a quarter of UK TESCO sales can be accounted for by the use of the self-checkout systems. This is represented in the pie chart below as blue.

COST EFFECTIVENESS

This is an important factor to consider when planning any change management Process in any organization. According to TESCO’s annual statement 2005, the self-checkout was introduced into 130 stores and over 850,000 customers use them every Week. The use of the self-checkout helps to save on labour cost as a number of the self-checkout systems could be operated without the need for a corresponding number of Cashiers. The self-checkout can compensate for the shortage of staff. However a Trained supervisor may be required to assist customers with the self-checkout in case Of any malfunctioning.

CUSTOMER SATISFACTION

The self-checkout has brought about good customer services as customers don’t have To spend time in the store queuing to pay for their shopping. Datamonitor (2008) stated that the use of technology is one of the greatest ways to improve upon customer Satisfaction. This helps to build a good relationship with the customers which results in customer loyalty. In TESCO’s annual report and financial statement, 1.5million customers prefer to use the self-checkout in more than 200 stores weekly. This shows that customers are very satisfied with the system and this also has a huge Impact on sales.

CONCLUSION

Although the self-checkout has been well received by retailers and their customers, there are a few challenges with the system. When customers buy loose items like tomatoes in a small bag without a barcode, it will be priced by the weight. The customer has to go through the menu of the self-checkout which often gets customers confused and frustrated especially those without any IT knowledge. Another problem is when a customer has only one item and scans it the system gives a warning if it is not placed in the bagging area. This often irritates customers. Minors also use the self-checkout to purchase alcohol and this could result in Tesco losing its License to sell alcohol.

NEED FOR FURTHER CHANGES IN THE FUTURE

In light of the difficulties discussed above, it is suggested that a supervisor or expert staff is positioned at the checkout area from the maiden of the store to closing to assist customers who come upon any difficulties using the system to circumvent any delays in transactions and also to check the id of anyone alleged to be a minor. The self-checkout should be upgraded to make it further users friendly and also to lessen the rate at which it reports errors.

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