In this paper we are going to examine the new management styles and accounting controls that were adapted to manage the resistance to change in company when it was changed from public sector type to corporate approach for improving its performance, profitability, measurement, and empowerment with accountability.
The main issue discussed in this paper is about the problems and issues faced while transforming the UK water industry from public sector to private sector. This process has been in process since 1980. The main criteria of change were accounting targets that were being implemented to improve the performance of the industry. Power was being decentralized in order to achieve these financial targets by doing so it over threw its traditional bureaucratic style management.
According to Ojala (1997) "Change is the only constant in the twenty-first century marketplace". Carson (1998) said "Organizational change is any alteration of activities in an organization, that may be the result of changes in the structure of the organization, transfer of tasks, new product introduction, or changes in attitude of group members or process, or any number of events inside and outside of an organisation". Change is an accelerating constant (Dawson, 1994). In present world, change is essential in organizations. It is happening continuously at rapid speed. Because change has become an everyday part of organizational dynamics, Managing change has become the "silver bullet" in seeking the final component of successfully managing strategy, process, people and culture in most modern organizations. More and more, staying competitive in the face of demographic trends, technological innovations, and globalization requires organisations to change at much higher rates than ever before. Managing change well is a continuous and ongoing combination of art and science that assures alignment of an organization's strategies, structures, and processes.
Reasons for change:
According to Johnson and Scholes, (1999) in his book "managing Corporate Strategy" Said political, economic, technological and socio cultural factors influence organisations, their strategies, structures and means of operating and including their human resource practice (PEST). In case of UK water industry we cannot say exactly change has to be done for particular reason, it was privatized for improving its performance, profitability, measurement, and empowerment with accountability many new technologies have been introduced after privatization. Burnes (1991) argues that if the change in structure and tasks are not accompanied by change in behavior, then the objectives of the changes process are unlikely to be fully met Chapman (2002) argues that change processes are designed to improve business efficiencies, provide a better adjustment to external or increase the quality of work life. Here in UK water industry accounting targets, new information systems were being implemented to improve the performance of the industry as the management thought that every employee would take more responsibility in achieving company's financial and operational targets if these procedures were implemented.
"Organizational change is any alteration of activities in an organization, that may be the result of changes in the structure of the organization, transfer of tasks, new product introduction, or changes in attitude of group members or process, or any number of events inside and outside of an organization" (Carson, 1998).
Dunphy and Stace (1993) said there is no one approach which is suitable for all circumstances and objectives. Argyris (1996) argued that 'psychological contract is the perceptions of mutual obligations to each other held by the two parties in the employment relationship, the organisation and the employees. Such perceptions may be the result of formal contracts. Or they may be implied by the expectation which each holds of the other and which is communicated in a multitude of subtle ways' coming to the case study we can clearly see how things were changed after privatisation the management the senior manager powers were cut and middle managers were given more responsible to achieve the targets given to them this situation was not there before.
There are a number of ways in which change can be categorized, Ackerman (1997) has distinguished between three types of change: developmental, transitional and transformational.
Developmental change may be either planned or emergent; it is first order, or incremental. It is change that enhances or corrects existing aspects of an organisation, often focusing on the improvement of a skill or process.
Transitional change seeks to achieve a known desired state that is different from the existing one. It is episodic, planned and second order, or radical.
Transformational change is radical or second order in nature. It requires a shift in assumptions made by the organisation and its members. Transformation can result in an organisation that differs significantly in terms of structure, processes, culture and strategy. It may, therefore, result in the creation of an organisation that operates in developmental mode - one that continuously learns, adapts and improves.UK water industry also comes under transformational change we see that there were many changes in terms of organizational structure like senior managers losing power to middle managers and a lot of new procedures were introduced in working patterns like rewarding performance and penalty for not performing.
John Kotter and Leonard A. Schlesinger suggested a model of managing change that related managerial strategies to the source of the resistance to the change. Kotter and Schlesinger suggest that a contingency approach should be adapted to every change management situation; that is to say, there is no one way of managing every change, but one has to select an appropriate way of acting which fits the particular situation. For
each type of source of resistance, an appropriate strategy for change and management style should be selected. This is illustrated in the following table:
Comparing this model to UK water industry the strategy used is participate because the management extensively used information systems to know the performance of each individual employee and all the decisions were taken according to that.
According to Brooks (2003) 'an individual's feeling of being powerless is his perception of the power of other person vis-à-vis his own power. It is also the strength of his desire to hold power. Comparing with our case study after privatization powers have been cut for many senior managers and the middle managers were given powers to achieve the targets. As the privatization is under process the customers also expect a better quality of service then before and the management should be ready to answer the shareholders and stakeholders, therefore many new implantations were been done to achieve competitiveness, profitability, remuneration, performance. Accounting was the main tool used to measure the profits, performance and efficiency of the industry. This brought about a corporate culture within the industry where the performance of individuals and departments was being observed more deeply.
According to Burnes (2004) there is no best way to approach to change and the organisations, particularly those that are being privatized, should adopt approaches that are suitable to their own circumstances and that they should incorporate both the structural and cultural aspects of change. The management of UK water industry fallowed the same thing the work of senior managers were reduced and the middle managers were given more powers to achieve targets and they made extensive use of information systems.
Burrell and Morgan (1979) Social Paradigms in different perspectives:
According to Burrell and Morgan (1979) there are four types of paradigms they are
- Interpretive Paradigm
- Functionalist Paradigm
- Radical Structuralist Paradigm
- Radical Humanist Paradigm
Interpretive Paradigm: This paradigm "seeks to explain the stability of behavior from the individual's viewpoint". Researchers in this paradigm try to observe "on-going processes" to better understand individual behavior and the "spiritual nature of the world".
Functionalist Paradigm: This has been the primary paradigm for organizational study. It assumes rational human action and believes one can understand organizational behavior through hypothesis testing.
Radical Structuralist Paradigm: Based on this paradigm, theorists see inherent structural conflicts within society that generate constant change through political and economic crises. This has been the fundamental paradigm of Marx, Engles, and Lenin.
Radical Humanist Paradigm: Theorists in this paradigm are mainly concerned with releasing social constraints that limit human potential. They see the current dominant ideologies as separating people from their "true selves". They use this paradigm to justify desire for revolutionary change. It's largely anti-organization in scope.
Resistance & managing the resistance:
Resistance-Why does this happen?
Charles Handy in his book The Age of Unreason (1988) said resistance is due to
- Fright (e.g. impending take-over)
- New faces (at the top, new broom)
- Questions (are the old ways best?)
- New structures (give talent its head)
- New more appropriate strategies / standards
We cannot say that there is resistance in UK water industry the only threat to the employees was as the new information systems were introduced the management came to know the performance of each and every individual employee, so there was a little bit resistance in introducing information systems.
Alvin Zander (1950) an early researcher on this subject, defined resistance to change as "behavior in which it is intended to protect an individual from the effects of real or imagined change" (cited in Dent & Goldberg, 1999). Zaltman & Duncan (1977) define resistance as "any conduct that serves to maintain the status quo in the face of pressure to alter the status quo" (cited in Bradley, 2000,). According to Folger & Skarlicki (1999) resistance is defined as "employee behavior that seeks to challenge, disrupt, or invert prevailing assumptions, discourses, and power relations.
According to (Wilbur, 1999) those who are in charge of implementing a change must understand all that the change will involve and affect. "Managing change occurs in four broad stages. An organization determines a need for change, creates a change management team, and develops a plan of action. The second stage is "the implementing, managing, and maintaining stage when the change plan needs to be executed. The third stage involves developing tracking and monitoring instruments to assess the successes or failures of the change so that necessary adjustments can be made. The last stage consists solely of continuous tracking and monitoring until the organization has institutionalized the change".
Piderit (2000) believes that the definition of the term resistance must incorporate a much broader scope. She states that "a review of past empirical research reveals three different emphases in conceptualizations of resistance: as a cognitive state, as an emotional state, and as a behavior"
The literature on change management stresses that people's reactions to change are not only logical, but also emotional. One such model of emotional reaction is that of a four-stage transition, from denial and resistance to exploration and commitment. In this model, people initially feel threatened by the future changes and often therefore deny the need to change and resist it; they often feel a sense of loss, similar to that experienced in bereavement
Weick and Quinn (1999) said organizational change can be classified as two types they are:
- The change being continues and gradual where the employees may not realize the change in the organisation
- The other is a dramatic one, which overthrows the existing system completely
When comparing this to case study we can say that second one is applied to UK water industry because the change is been done in all levels of the organisation .the responsibilities are changed for every employee so the employees will feel difficult to work in new style. Zeira (1989) had argued that the magnitude of perceived personal risk from change and level of dissatisfaction with current situation are the main issues to learn if the managers are willing to move towards new situation and to what extent they resist to the change. Due to the decentralization of power the senior management was brought down with which they were dissatisfied.
According to Carnell (1990) the process of changing attitudes to individual's resistance to change might affect the individual's performance and self -esteem. According to Carnall (1999) the five stages of process are denial, defend, discarding, adaptation and internalization comparing this theory to the case study it was much evident that when the change was introduced it was not at all accepted and the staff found it unacceptable despite of the best effort from the management.
This is the first and second stage of denial and defending as per Carnall's theory, Discarding and adaptation stages are that the senior managers had to persuade somehow and empower the middle mangers with the new set of responsibilities despite of the refusal to acceptance initially. This stage shows how the senior managers had to discard the certain matter and force the lower level managers to implement the change. The middle level managers then accepted more responsibility this shows the stage of adaptation to the change. At the end we can see that how the middle managers have found the change more efficient as it rewards better for their contribution, the senior manger have become more comfortable with the new system in place when compared to the pre-privatized era.
According to Schein (cited in Darwin et al, 2002), organizational culture has three levels. The heart level is the basic assumptions people unconsciously accept without any questioning; the second level is the core values, in which strategies goals and philosophies are identified; the third level, namely the surface level, is about the organizational structures. According to schein the UK water industry comes under second level in which there were goals identified and the company has made several changes to achieve these goals.
According to Hultman (1995), there are two models of resistances to changes they are active-resistance or passive resistance. Symptoms of active-resistance include finding fault, ridiculing, appealing to fear, and manipulating. Passive-resistance symptoms include agreeing verbally but not following through, feigning ignorance and withholding information. Coming to the case study we can see that they found many faults and they implemented a change in accounting targets that will boost the performance of the company.
Rashid, Sambasivan and Rahman, (2003) said "Difference in organizational cultures also drives different attitudes in particular changes" comparing this to UK water industry there was a lot of difference in previous management and present management , the previous management was tall pyramid style. Orders and decisions were taken by only senior management and all the middle managers had to fallow their orders. There was no big decision making involved in their job and responsibilities were minimum to the middle managers. With the new management middle managers were supposed to take decisions and responsible for their performances and they had enough decision making involved in their jobs. Previously there was no risk in their job and after privatization they had always threat of job security. Previously the senior managers could be held responsible for performances since decision making did not largely involve middle managers. This was not the case under the new management. Now the middle managers had added responsibilities and as a result of empowerment. They felt that this empowerment and added responsibilities would make their jobs more risky and insecure.
Jeffrey D.F, Laurie W.F and Randall .T.M (2002) told that there are three generic resistance-giving backgrounds.
- The complacent background which is constructed on the basis of previous success.
- The resigned background which, are constructed from historical failure rather than from success in an organization where things had gone wrong.
- The cynical background which is also constructed from historical failure either directly or vicariously experienced through stories and narratives of others experiences.'
Comparing this to the water industry we can look at the case from background of complacent we cannot say that it was a failure but it was privatized for better performance and efficiencies. We can see that the responsibilities of middle level managers has changed and they even did not have a job security .they thought that the senior management is making them to work more than the required targets one of the senior manager were arguing that the company's main problem would be that the basic structure that prevailed as a public organisation will not suit the private sector and that the management will still remain too hierarchical. Therefore in the case of the UK water industry we cannot completely agree with the three models of resistance background. It is evident that employees did not say that the change was unacceptable at all or they dint say that the new system wouldn't work. Hence we cannot completely agree that the resistance background applicable to UK water industry.
Driving forces against the change:
Individual resistance to change According to Dent & Goldberg (1999), individuals aren't really resisting the change, but rather they may be resisting the loss of status, loss of pay, or loss of comfort in UK water industry as the power was being decentralized middle managers had a threat in job securities because they were given a lot of powers and the results will have an impact on their job.
Potential loss of power base among the professionals After the privatization the total structure has been changed from the old bureaucratic style it has been replaced with flatter and less management structure. almost all the managers has the power to take decisions for which they are responsible for some senior managers lost power in some extents that they used to have.
Rewarding the performance After privatizing the water industry the company had an excellent information system through which each and every employee's performance can be known this made them reward the individual for high performance.
Kotter and Schlesinger have suggested six change approaches to deal with this resistance to change:
- Education and Communication -the best way to overcome the resistance to change is to educate employees well about the advantages of changes. This gives them an idea about what they are to face and prepare themselves to adapt to the change.
- Participation and Involvement - according to this approach the employees welcome the change effort. When the employees are involved in the change they actually welcome change rather than resist it.
- Facilitation and Support - in these approach employees resist due to adjustment problems. Here managers can head-off potential resistance by being supportive of employees during difficult times. This helps employee feel tension free so that he can go on doing his works more effectively. This approach involves special training, counseling etc.
- Negotiation and Agreement - in this case the managers should encourage the employees by offering incentives to employees not to resist change. This can be done by allowing change resistors to veto elements of change that are threatening, or they can be asked to leave the company through voluntary retirement in order to avoid facing change.
- Manipulation and Co-option - if all the above factors don't look like working then Kotter and Schlesinger suggest that an effective manipulation technique is to co-opt with resisters. Here he suggested to select the resistors or resistor leaders and allowing them to participate in the change effort. These resistors are given a symbolic role in the decision making without threatening the change effort
- Explicit and Implicit Coercion - this type can be used only as a last here the managers force the Managers can explicitly or implicitly force employees into accepting change by making clear that resisting to change can lead to losing jobs, firing, transferring or not promoting employees.
According to Harrison and Bayer there are 8 considerations to be taken when changing organization culture they are:
- Capitalize on propitious moments: making sure that change is essential.
- Combine caution with optimism: to create outlook what the change gets to the company
- Understanding resistance to culture change: knowing why the staff is resisting changing and solving it in a particular way by convincing them.
- change element but remain community: the main aim of these is some people get used to particular divisions when the change occurs they might feel that they may be sent to the department that they don't have a idea about this fear should not be in the employees
- Select, create, and modify appropriate forms: employing symbols, stories, rituals, myths, and ceremonies
- Modify socialization tactics: the way that people gets used is the way the get used in the beginning so by changing the environment we can get actually we need to get.
- Recognize the importance of implementation: the company should recognize what changes have to be done and implement it.
- Find and cultivate innovative leadership: the leader of the employees should be confident and should be capable to convince others.
Six steps for effective change:
Beer et al. (1993) have mentioned six steps to effective change. They are
- Include mobilizing commitment to change through joint diagnosis of business problems.
- Develop a shared vision of how to organize and manage for competitiveness.
- Foster consensus for the new vision, competence to enact it and cohesion to move it long.
- Spread revitalization to all departments without pushing it from top.
- Institutionalize revitalization through formal policies, systems and structures.
- Monitor and adjust strategies in response to problems in the revitalization process.
Learning & Conclusion:
Managing Change is the essence of leadership. It is a constant process that never seems to finish, like running towards the horizon. It is perhaps also the most difficult task that any manager has to face, because it deals not with technical knowledge or expertise but with managing people's emotional reactions, attitudes, and expectations, and ultimately their working lives and careers. Hence, it is not always possible for the leader to be popular when managing change, but the needs of people must always be considered when making changes that are for the good of the organisation.
I think planning and assessing the employs in their view is very important before implementing change because if the change is not received then the total organisation will be in trouble. Everyone involved in and affected by change goes through a typical cycle of emotional reaction, which must be understood and effectively managed. Many people resist change, either covertly or openly and defiantly, and this resistance has to be overcome and converted to enthusiasm and commitment to the new order if it is to be effectively implemented. Understanding the sources of resistance can help in deciding on an appropriate strategy and management style to deal with them. There is no one strategy and style that will suit all circumstances and a contingency approach must be adopted. The process can be assisted and facilitated by change agents from either within or outside the organisation.
I feel in the present competitive world, change is inevitable process for any organization. Implementing new techniques is necessary in order to sustain or to improve market position. Implementing any major change in a large and complex organisation is a difficult task.
To successfully manage change, leaders must show understanding and compassion for those affected, but must nevertheless be determined and resolute. Despite the importance of emotional intelligence, having a thick skin also helps. Vision, strategy and leadership are essential elements of managing change, as are energy, consistency and a lack of complacency. In summary, there are never any easy answers in implementing strategy and managing change, but the process needs to be carefully considered and a plan prepared and worked through.
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