Business transformation addresses basic questions and seeks to restructure organizations around the needs of the customers, owners, employees, suppliers, and regulators- the five core constituencies of an organization. Central to the success of any business transformation is the way in which the organization addresses its purpose, its culture, its processes, its performance, and its human resources. Only a small number of organizations seem to truly understand the impact of these issues on the full potential of business transformation. Often, business transformation can be associated and linked to cost reduction, but the concept of business transformation goes far beyond just improving financial matters. Business transformation allows the organization to assess and improve its ability to meet its strategic goals.(William A. Pasmore, 1994)
Paramount to any business transformation effort is a competent change management program. Although an awareness of a need for change may be apparent, strategic management attempting practical implementation of business transformation may make them ineffective by failing to understand the degree to which successful change depends on its acceptance by the workforce. Human implications are often ignored, underestimated, or overlooked. As is the degree of impact the revolution has on the attitudes and behavior of managers.
Despite the best and deliberate efforts of strategic management, the major changes needed to transform an organization can fail. Executives and employees see change differently. For senior management, change means growth and opportunity for their organizations and themselves. For many employees, change is perceived as disruptive and intrusive. To increase the likelihood of a successful business transformation, strategic management must reconsider the mutual obligations and commitments that link management to the employees. How the leadership of an organization presents and addresses change during the radical business transformation of a company often dictates the success or failure of the business transformation effort.(john p kotter, 1998)
Strategic management in the Organization must understand how business transformation works. One way of better understanding it is to look to corporate America to see how strategic management there have dealt successfully with business transformation. Business transformation was pioneered in a few large corporations in the 1980s as those organizations faced an increasingly competitive and global economy. The old paradigm of beating the competition that dictated survival was replaced by new concepts, which have evolved from looking for total quality to learning to stay ahead of change to seeking world-class improvement through innovation and business transformation. The motivations most frequently cited by senior executives for turning to business transformation are competitive pressure, need for improved profitability and need for greater market share (in that order). Business transformation is the number one initiative cited by senior executives as the vehicle to accomplish their strategic goals.(Eileen Davis, 1995) yet business transformation is not easily accomplished without a clear understanding that business transformation means change.
A TRANSFORMED ORGANIZATION
Business transformation does not just make all new processes, it creates new organizations. The multidimensional change that radical process redesign brings assures that no aspect of the organization is untested.10 the most important characteristic of a transformed organization is its customer focus. Not only does the organization put the customer at the center, but all systems and staff must be arranged to serve both external and internal customers. Transformed organizations typically have flat structural designs so that participants can be close to customers, constantly gathering information about the customers' current and future needs. This customer-based focus provides the foundation for the organization's vision, strategy, structure, and job design. As a result of this customer orientation, organizations constantly do more than meet customer needs; they also make new demands for their goods and services.(John J. Gabarro, 1992)
Michael Hammer and James Champy reflect that business transformation typically leads to an organization with a particular set of characteristics:
Processes are simple versus complex.
Jobs become multifaceted, as people perform greater ranges of tasks.
Employees become empowered, rather than suppressed.
The focus moves from the individual to the team.
Organizational structure shifts from a tall hierarchy to a flat structure.
Players in the organization are professionals, rather than managers.
Organization is driven by an end to-end process vs. a department.
Basis for performance measurement shifts from activity to result oriented.
Managers become coaches.
Focus is on satisfying customer needs and not on the supervisor.
Fundamental business transformation of the value system shifts from being protective and defensive to a productive disposition.
BUSINESS TRANSITION STRATEGY
Robert Miles in Leading Corporate Business transformation says understanding the concepts and knowing how to transform does not guarantee success. Then he goes on to identify one of the major determinants that increase the chance of success, and that is, effectively employing a system or methodology of change management
With business transformation, the compelling need to change is driven primarily by the marketplace and the competitive environment. Without a compelling need to increase competitiveness, efforts to transform an organization will enter a realm of complacency. To control, shape, and direct change, the organization must develop a thorough understanding of the desired condition in which the executives want their corporation to look like in three to five years. This means that people within the organization must change, as well as the organization must change. For these reasons, a competent change management program is necessary. What comprises such a program? Mitchell Weisburg of Lumen, Inc. reflects that a change management program should include the following:
Process that transforms an organization,
Process which is accomplished through a coordinated campaign, and
Process which encourages and enables individuals to release the old way of doing things and embrace the new way.
Business transformation allows strategic management, executives, and managers an "opportunity" to reconstruct a commercial entity totally focused on today's and tomorrow's business problems. This new and transformed organization will replace an organization that often finds it looking backwards and looking to solve problems with dated solutions. Business transformation does not seek change for the sake of radical change. The objectives are about competitiveness and repositioning for market place dominance. Radical change is a characteristic of these objectives and becomes an outcome of taking a process view and departing from old ways of doing business through functional departments. Processes become horizontal in nature while functions have established themselves vertical in a tall hierarchy. Processes cut across functions and functional activity feeds processes.
Although, it is not necessary to destroy an organization and start over, business transformation allows people throughout the organization to move away from traditional ways of thinking and working. This radical change can be as much fearing as it is exhilarating. For many people, it becomes an obstacle that is impossible to negotiate. Often, the cultural against the kinds of radical change can cause the business transformation effort, as grand as it may be in concept, to fail during implementation. As result, people up and down the hierarchy become disillusioned.
Managing resistance to change in an organization is without doubt the most challenging and the hardest part of business transformation and the part least receptive to a mechanical approach.(John P. Kotter, 1996)
In 1995, when managers were surveyed about their concerns and the problems they were facing in their current business environment, managers were asked what they believed was the biggest problem facing them in their organization. Their short answer was "staying ahead of change." The greatest number of managers in the survey believed their biggest problem today is adapting to and managing change.(Eileen Davisi, 1995) Accepting the challenge and beginning to address the issue of change during the planning process will allow more time to accept change. However, many organizations' leadership, during business transformation, tends to focus on innovation and mechanical processes rather than on a plan for change.
Prior to implementation, there must be a plan in the synchronizing of changes to the complete set of business processes which includes their guiding factors and their enabiers. Roger Burton, president, of the Process Renewal Group Inc., emphasizes the importance of a methodology which incorporates change into the processes. Changing direction, policies, jobs, organization, technology, facilities, locations and human resource aspects requires a plan for support of an aligned strategy. This architecture must have a change management program to integrate business processes.
STAGES OF CHANGE
John p. Kotter, in Leading Change, develops and talks of eight stages of making major change.(kotter, 1998)
ESTABLISHING A SENSE OF URGENCY
Investigative the market and competitive reality
Identifying and discussing crises, possible crises
MAKING THE GUIDING COALITION
Putting together a team with enough power to lead the change
Getting the team to work together like a group
DEVELOPING A VISION AND STRATEGY
Making a vision to help direct the alter effort
Developing strategies for attain that vision that had
COMMUNICATING THE CHANGE VISION
Utilizing every potential vehicle to constantly commune the new vision and strategies
Having the guiding partnership role model the behavior expected of workforce
EMPOWERING BROAD-BASED ACTION
Getting rid of obstacles
Encouraging risk taking and nontraditional ideas, actions and activities
Changing systems that undermine the alter vision
GENERATING SHORT-TERM WINS
Planning for visible improvements in performance, or "wins"
make those wins, Visibly recognizing and rewarding people who made the wins probable
CONSOLIDATING GAINS AND PRODUCING MORE CHANGE
Re-invigorating the process with new projects, themes, and change agents
Hiring, promoting, and developing people who can implement the change vision
Utilizing increased credibility to change all systems, structures, and policies that don't fit together and don't fit the business transformation vision
ANCHORING NEW APPROACHES IN THE CULTURE
Articulating the connections between new behaviors and organizational success
Making better performance through customer- and productivity-oriented behavior, more and better leadership, and more effective management
Developing means to make sure leadership development and sequence
AVOIDING COMMON ERRORS
Resistance to change during business transformation is an expected reaction. In order for business transformation to be a success, this resistance must be anticipated, planned for, and overcome. The challenge of change during business transformation is a critical matter for success and survival.
Kotter cites eight errors common to organizational change efforts and their consequences. According to Kotter, who is a professor of leadership at Harvard Business School, the first common error is allowing too much complacency. Kotter says the biggest mistake people make when trying to change organizations is to go forward without establishing a high sense of urgency with fellow managers and employees.
The second error, according to Kotter, is that of failing to make a sufficiently powerful guiding coalition.
The third error is underestimating the power of vision.
The fourth error is under communicating the vision by a factor of 10 (or 100 or even 1,000).
The fifth error is permitting obstacles to block the new vision.
The sixth error is failing to make short-term wins.
The seventh error is declaring victory too soon.
The last of Kotter's errors is neglecting to anchor changes firmly in the corporate culture.
None of Kotter's change errors would be costly in a slow moving and not-too-competitive world. Handling new initiatives quickly is not essential component of success in relatively stable or cartel-like environments. But for us, today, stability is no longer the norm. And most experts agree that over the next few decades the business environment will become only more volatile. Making any of the eight errors common to business transformation efforts can have serious consequences.
CHANGE AND THE WORK CULTURE IN CORPORATE GROWTH:
Prior to embarking on the examination of change management, it is only proper to explore change from a macro sense and in an organizational context. Philosophically, change has many faces and by most counts is determined by environmental conditions, experience, and the element of time. Lumen, Inc., a change consulting group, identifies change in the following context:
Change is a reliable constant.
Change is about strategies and not values.
Change can be crises and/or opportunity.
Change is the redirection of behavior.
Charlotte Wells and Mitchell Weisberg of Lumen, Inc. Identify the following drivers of behavior:
Change has taken this world from the domestication of animals to robotics in the workforce and from gunpowder to laser technology in star wars in order to accomplish a quick defeat of our opponent. Cultures over time have experienced a furious pace of change. As result, the planet has shrunk and the boundaries of our continents have been rearranged dramatically. In only the past ten years, strategic management have dealt with the element of change on numerous fronts.(John M. Ivancevich, Peter Lorenzi, 1994)
The size of the work force has been reduced. Entire layers of management have been eliminated at General Motors, IBM, and Sears and Roebuck. Reward systems are constantly being revised to reflect employees' acquired skills versus their seniority.
New evaluation methods focus on group accomplishments instead of individual accomplishments. Exciting new approaches to oversee employee involvement in decision making are becoming commonplace in many firms including Weyerhaeuser, Zenith, and Bristol Meyers. Computer-integrated manufacturing has been utilized to analyze the value added to a product by a person or a team. The United Auto Workers (UAW) union is collaborating with Toyota and General Motors, producing higher quality and lower cost automobiles.
Workers normally resist attempts to change their ways or routines of working within the structure of which they work. This resistance is grounded in the preference for the familiar and the difficulty of unlearning. Within this preference, there exist old habits, a certain laziness, and possibly complacency which make most men not willing to contribute in an effort to conform or change and will try to avoid it.
Attitudes toward change normally depend on whether the individual thinks the new system would be advantageous to him. If he has experienced comparable changes in the past, he is likely to assume that new changes would affect him in more or less the same way that previous ones did. If the individual has not seen much change, his attitude will depend on the extent to which he is satisfied with his position under the existing system. He may also have preconceptions about change which are based on rumor, expectations and fears, or lack of facts. His own basic motivations may incline him to support or to oppose change.
FORCES OF CHANGE
Six forces have been identified which have readily been accepted as justification or reason for change. Once these forces are identified, described, and understood by workers, the changing nature of the work force will help precipitate change. These six forces include:
The changing nature of the workforce,
Changing social trends,
World politics, and
Nature of the Work Force
Different work values have changed over the years and even generations. Older employees seem to emphasize loyalty while the younger place higher values on relationships and job satisfaction. The numbers of women in the workforce have increased. This gives way to the increased number of dual-income couples. As result, organizations now must give consideration to transfer polices as well as child care and elderly care support.
Technology has reshaped the work force of today and the implementation of computers; new telecommunication systems, robotics, and other new technology have had a great impact on organizations. Organizations now must increase their investment in the retraining of their personnel, since many current employee skills are now becoming extinct. Flatter organizations are now becoming common since the introduction of computer control for direct supervision and information technology. The result has become a viable solution to make sure organizations remain responsive in a competitive environment.
Economics reshapes organizations on a daily basis. Several major events over the years have transpired and stand out as significant. World oil prices have escalated over time and have impacted organizations throughout the world. Inflation and. interest rates have risen. Collapse of numerous financial markets sent shock waves throughout the world. Subsequently, collateral fallout necessitated how businesses throughout the world would conduct business.
Social trends span a large sector of society. Student bodies at universities have changed dramatically. Student population has more than doubled in thirty years. Women, recently a minority, on campus now are the majority. Individuals also are delaying getting married and starting families later in life. Divorce rate is at all time highs. The retail industry has shifted from major department stores to specialty stores.
World politics play a major stake in organizational behavior and evermore so from a global context. Since the United States and the remainder of the industrialized world entered into what has become to be known as globalization, changes are necessary. The largest employer in the United States, the Defense Department, plays a major part into world politics. From downsizing the military to awarding major contracts, organizations must acknowledge that the marketplace and its relationship with politics have gone through major changes in the last thirty years.
Competition will require an equally flexible and responsive work force that can change quickly to respond to short production runs, and an ongoing stream of new products. Heightened competition means that organizations will have to defend themselves against competitors throughout the world who can develop new products and services and get their ware to the market place quicker and cheaper.
More organizations in the world today face a dynamic and changing environment which requires the need to adapt. Managers need to understand why people and organizations often resist change and how this resistance can be overcome. When confronted by sudden change, most react with fear and anxiety. Whether it is a new assignment, reorganization, or implementation of new systems, the first reaction to change is normally defensive. The fact remains that change is necessary and lies at the center of successful management.
The firm communicates its quality actions through such avenues as company newsletters, bulletin boards, or employee recognition. Each plan or program uses a checklist that documents performance against goals. Examples include customer-related data such as on-time delivery and customer satisfaction survey results; employee-related data such as quality training and interview/hire ratios; supplier-related data such as a supplier performance index and supplier audit results; financial and operational information and statistical process control results.
Finally, organizations should utilization benchmarking and competitive comparisons to make sure that its key strategy, product, and customer satisfaction factors are all at acceptable levels. This is all brought together in a comprehensive strategic business plan, which combines short-term and long-term goals. The plan will address each target market segment with corporate purposes and strategic goals, competitive analysis, and current plans and initiatives under the new paradigm.
Implementing and controlling the effort is a critical step. Implementation and control steps for achieving total quality are commonly determined at the same time the plan is formulated. Execute feedback programs through the utilization of surveys, partnership calls, and other methods of determining that customer satisfaction is being achieved.
For an organization to successfully undertake business transformation, it should be presented or marketed as the future way of life for everyone. A total shift in the organizational, managerial, and technological paradigms in most cases is required. A vision must provide the necessary focus, direction, and road map for the business transformation efforts in order for the changes to fit together.
Strategic management must approach business transformation from an organizational wide perspective in conjunction with the effective utilization of key process change enablers. Providing positive leadership and effective management control in the midst of chaos is the biggest challenge to the organization.
In any business transformation process, the organization seeks radical change. Senior leadership wants to transform the value-added processes, as well as make significant differences in the time it takes to respond to customers and make changes. Information technology (computing and communication) should be the enabling vehicle to doing this. At this point many business transformation endeavors falter. Without addressing change management planning, forces of change and social issues in the context of business transformation, expectations and established goals of successful radical change will not be reached. This study finds that change management is critical to the success of any business transformation effort.
Change is not generally well understood. Change is a reliable constant and is about strategy and not values. Change redirects behavior and is generally resisted. It is this resistance that is generated out of the preference for the familiar. This preference contains a group of attributes that consists of old habits, difficulty of unlearning, and a propensity for the familiar.
The strategic manager must understand these characteristics as well as identify the environmental forces that culminate change. The changing nature of the workforce, economics, technology, and competition are driving forces in an ever changing global market place. Once the strategic manager is able to recognize and analyze these forces, the better off the organization will be able to plan for change and then transmit change to meet organizational goals.
When confronted with change, employees react with fear, anxiety, and rebellion. Their inability to adapt to change will result in defensiveness and turbulence which will impact the organization.
To control, shape, and direct change, the organization must promulgate a thorough understanding of the desired condition in which senior management wants to achieve for the organization. When the desired condition can not be met with continuous improvement programs, business transformation is often the answer. It is because of this lack of regard that many business transformation efforts fail. As result, a thorough plan for change must be introduced and managed as part of the blueprint for business transformation.
Strategic management must, as part of this plan, determine the organization's capacity for change. It is imperative that the organization be assessed on a readiness scale to ascertain the human issues and define the factors that must be dealt with prior to business transformation and in planning for change.
There is no "one size fits all" plan or methodology in determining how change management programs should be developed and implemented.
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