Importance of Change

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EXECUTIVE SUMMARY

Change is everywhere. Staring from the advertisements on TV to the design of the iPod in your pocket to the services delivered on the streets of London, people and organizations are constantly changing by creating new ideas, services, and products and re-engineering old ones to fit their changing circumstances. This essay evaluates the importance of change, how change and innovation is important to organizations strategic goals and the different types of change management techniques used by organizations to reduce resistance to change. It also discusses the success of an Operational change done by AXA PPP Health care to ensure better customer service and reduce operational costs with details of steps taken by the organization to reduce resistance towards the change.

INTRODUCTION

Change is often given complex definitions. We prefer the simple one: ‘A transformation or transition from one state, condition, or phase to another.' This definition is a more suitable definition for organizational change which is the key point of discussion for this essay. Hence we can define organizational change as a planned movement occurring from one organisational state to another that has a commitment to producing a specified outcome. The types of organizational change can be divided in three broad categories. Incremental change which aims to improve the existing systems, policies and procedures. Strategic Change that aims to establish new systems, policies or procedures. Transformational change the transfiguration from one state to another that is fundamentally different. This essay explores transformational change adopted by AXA PPP healthcare to improve performance and achieve long term goals and objectives.

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The industry studied in this case is the healthcare industry and how change is important for the industry. The Healthcare industry is one of the fastest growing and most dynamic industries in UK. It is the largest single industry in the United Kingdom. According to a recently released congressional report, the industry is comprised of over 750,000 physicians and 5,200 hospitals, and it receives approximately 3.8 million in patient visits and 20 million outpatient visits daily. As overwhelming as these figures are, they pale in comparison to the overall annual expenditures associated with the industry. This is where the health insurance industry plays a critical role. Innovations in medical science and healthcare industry have made it paramount for the health insurance industry to evolve in order to cope with constant changes. Hence organizations providing health insurance need to understand the importance of change in order to reduce costs and maintain its competitive advantage.

Importance of Change

Change and contemporary synonym of innovation are the only constant facts of human lives (Heraclitus). Age by age human environment, ideas, technology and ideas change trough to find excellence or curiosity. The main importance of innovation arises from our changing environments. Through the human history people first needed to kill animals with their stone based weapons after they developed agriculture they establish communities and finally states. They introduced new machines without using man power to match increasing demand. Contemporarily now we have technologies such as information systems, computers and our developed modern ideas. Without change the level of development the human race has achieved would have never been possible. Hence the saying if one doesn't change, one will become extinct.

In competitive market place change is inevitable fact for companies to survive. Technological, ideal, sociological and environmental changes is turnover being of the world. In competitive area companies should create new managerial system, new products and appropriate financial systems to struggle to their competitors, because market does not accept gaps. Therefore change is as important as any other factors significantly important for a company to Survive.

Another importance of the change gives opportunity to influence the direction and shape of industry. Apple Computers took the industry with production of iTunes, iPod and iPhone with with their ability to constantly change according to changing market conditions. (Davila, Epstein & Shelton 2006 pp.1). Christensen find resource allocation is a problem while company is changing due to barriers like culture; also he adds matching the market to technology is another difficulty. However Apples' success to keep their resources while they were entering the mobile phone and mp3 player because they have expanded and redefined their sector with their effects on other sectors, also increase company resources with these interventions.

Resistance to change

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Any change is always met by some form of resistance. It may be a small change, or a big change, individuals tend to develop a comfort zone in the current environment which easily gets disturbed by the smallest of change. Resistance to change is an inability, or an unwillingness, to discuss or to accept organizational changes that are perceived in some way damaging or threatening to the individual. (Huczynksi & Buchanan 2001). However as discussed before change is important and an organization has strong reasons to change. Hence any organization will have two force, one force supporting the change and one resisting the change. The following diagram explains the relationship between the two forces.

From the diagram one can observe there are four main causes for resistance to the change, Parochial Self-interest, Misunderstanding & lack of trust, Contradictory Assessments and Low Tolerance for Change

CHANGE MANAGEMENT AS AN STRAGTERGY

Nowadays most business enterprises are engaged in strategic planning with using new ideas, objects, practices and reaching the goals. Generally strategy is a simple way to analyze the current situation of organization, expected future situation, right direction confidently and achieving the objects. Actually it is more than that which provides the systematic way for identifying and evaluating factors external to the firm and fixing them with the organization's abilities. In addition strategy is a long process over long time period with individual of resources with a competitive environment to meet up customer needs. In other words, strategy is a method of process of direction and scope of an organization to achieve opportunities with its pattern of resources and meet the demand of markets and stakeholder expectations. Change is the one part of strategy which introduces new technologies, ideas, practices, products, marketing policies and a new ways to merchandise. Likewise changes normally relates to new ideas which are implemented successfully. William ylvisaker, the former CEO at Gould inc. transforms its organization by changing the firm a manufacturer of car batteries and electrical equipment to a high-tech electronics firm. In case of changing in personnel half of the committee members left the job. In the ten toughest corporate managers in Fortune magazine Ylvisaker was named one for making such radical decisions in change management sector.

Generally Strategic management depends on allocation of resources to accomplish organizational goals and hunting new strategy and successful implementation. The overall strategic plan involves the contribution of line managers from different purposeful department such as production, marketing, financing, research, development and innovation. Thus organization is needed excellent middle managers to perform the challenging task force to conquer across the functional barriers. Furthermore strategy can change the management to reach its desired results in a challenging environment. Opportunity is perfectly allowed in an organization by strategy. In addition positive main policy and strategy may be the same essentially. A new idea or policy of developing of new product that adopted in marketplace may be an essential element of a company strategy for new development or marketing. One company would be grown by only present markets and products while other company may be invented new way or strategy to develop their company. The key factor of strategies is given direction and introduced new idea. Also strategy affects planning and greatly changes other areas of managing as well. It has been seen that it is effectively important to be able to classify the right product to present in the competitive market that is a part of innovation. Innovation may be indicator to success as a strategy in an organization while it can give right direction in right time or present new method in management sector. Overall strategy can change the company goals focus on both the end points including purpose, mission, goals, and objectives and achieved them while innovation introduces new method of strategy.

This essay evaluates the use of change and innovation in strategic planning of AXA PPP healthcare and structure of the change management team which is covered in the Organizational review.

Management approaches

Many organizations adopt different approaches to manage change efficiently and effectively. As discussed, there is always resistance to change; hence the approach adopted by the organization and the communication of objectives that are to be achieved from the change play a very critical role. One of the classic models for managing change was proposed by Kurt Lewin which involved a three stage process.

Unfreezing –

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This stage consists of the ground work that needs to be done in order to prepare for the needed change by:

– increasing the driving forces that direct behavior away from the status quo

– decreasing the restraining forces that push behavior towards the status quo

(status quo - conceived to be an equilibrium)

Changing – This stage consists of the process of changing. It is the transition done by the organization in to the new state and movement to another equilibrium level which is desired by the organisation

Refreezing –

This is the final stage in which the change has kicked in, resistance is minimum and the change is somewhat made permanent.

– objective is to stabilize the new situation

– change is a break in the organization's equilibrium state

Many alternative models have been suggested by various authors, however most of them revolve around the model suggested by Lewin with minor alterations. One of the most recent model suggested by M. Nieto was Slush model. This model replaces the refreezing stage with a slush stage. This model is more appropriate for the fast changing business environment is the current scenario when compared to the classical model suggested by Lewin. Nieto's slush model enables the transition from one change to another more change, much more efficiently and effectively.

ORGANISATIONAL REVIEW

AXA PPP HealthCare

AXAPPPhealthcare is one of the UK's largest, most experienced providers of private medical insurance. They have been providing private medical care since 1940. They offer a range of private medical insurance plans to enable individuals and employers to meet their healthcare needs. AXAPPPhealthcare is a member of the AXA Group - a world leader in financial protection with over 170,000 employees across UK, Europe, America, Asia- Pacific & Africa, 400,000 shareholders and revenues of €93.6 billion in 2007.

To achieve operational excellence in each of the key areas, AXA has adopted a continuous process improvement program based on listening to the voice of the customer. AXA performs these programs to ensure continuous change by adapting to changing market environment and runs innovative projects through its Change Management team.

Change management Team

AXA has a change management team which is responsible for driving all initiatives taken towards process improvement, innovation & change and Process compliance. The Change management team is an integral part of the organization and plays a key role in strategic planning to help achieve long term goals and objectives set by the company. Following teams are a part of the Change Management team in AXA

Six Sigma Team –

Team consists of Green belts, Black belts & Master black belt who is mentor and leader of the team. Responsible for driving process improvement and process re-designing.

Eureka team –

Team is responsible for administration and utilization of the idea data base. All employees can log any ideas on Eureka, which are then filtered and implemented by the Eureka team through appropriate channels.

ISO & Risk –

Team of consist of internal auditors who ensure AXA complies with ISO requirements, Business continuity planning and Risk management.

Change Agents-

Each operations team has a change agent who is a part of the centralized change management team.

Transformation project done recently by AXA – A case study on Change management

AXA PPP Healthcare conducted a “voice of the customer” survey in 2007 which called for a need for change to ensure AXA keeps its competitive advantage in the fast growing and dynamic Health care industry. The key area of improvement identified was the turnaround time for the claims processed by the Claims processing team which operates from UK & India. This could be achieved by improving productivity, reducing reworks, improving service delivery and achieving operational excellence. The Change management team was given the responsibility to drive and implement the project with the support of Change agents identified within the operation teams. The objective of the project was To improve productivity by 20% (increase number of claims processed per day per assessor) and improve turnaround time of claims (to 93% of claims to be completed in 6 days) by end of 2008. The first step taken by the change management team was to review the existing process used for claims processing and then use the Lean methodology to reduce waste of time and intellect to enhance productivity. Data was collated for the existing process, review of current KPIs & use the Lean Tool kit to analyze the “as is” process was done. Time motion study was conducted to identify the true potential or capacity. Post analysis and time motion study, key improvement areas and implementation levers were identified, which were monitored on a regular basis by using visual performance dashboards. The new set of KPIs was communicated to all the teams and performance on the KPIs was tracked regularly. The major change in the KPIs was changing form target based to capability based KPIs. However, this change was resisted by employees. Using change management tools, effective communication and setting clear cut goals and objectives, the change agents were able to highlight the benefits of the change and over come the barriers faced.

Benefits achieved from Transformation project

* Productivity benefit of 24% achieved which resulted to a reduction of 28 FTEs and cost savings of 17920 GBP per month. Claims processed per person per day increases to 82 from 65.

* Target for Turnaround time exceeded, 94.3% claims were completed in 6 days for Q4 of 2008.

* Voice of Customer – Score for “Voice of customer” survey for 2008 was 87% which improved by 8 % compared to the score for 2007 which was at 79% .

Conclusion

For services the “process is the product” because the customer participates directly in the services delivery. Improvement in service delivery has a direct impact on customer satisfaction. Hence, the success change and innovation in service industry is very important. We can conclude from this essay that change management is one of the key areas and focus of every organization. Effective change management not only helps the organization to survive in the competitive market, but can also help the organization develop new markets, provide better customer service, enhance productivity, reduce costs & increase profits. From the example of AXA one can evaluate that change helped the organization to cater to its customers needs & reduce operating costs. AXA has enjoyed the rewards as it has given the required importance and attention to innovation and change management. To conclude, just as energy is the basis of life itself, and ideas the source of innovation, so is innovation the vital spark of all human change, improvement and progress.

References:

À Cainelli, G., Evangelista, R. & Savona, M. (2004) The impact of innovation on economic performance in services, Service Industries Journal, 24/1, pp. 116 - 130.

Christensen C.M, (1997) The innovator's dilemma: when New Technologies Cause Great Firms to Fail. Boston, MA: Harvard Business School Press.

Rao S., Ahmad A., Horsman W. & Kaptein P. (2001) The Importance of Innovation for Productivity, International Productivity Monitor, Number Two, Spring, pp. 11-18. Posted at www.csls.ca.

https://www.axa-abs.co.in (accessed on 1 April 2009)

https://www.axa.co.uk (accessed on 1 April 2009)

http://www.axappphealthcare.co.uk (accessed on 4 April 2009)

http://www.ftc.gov/os/2003/10/innovationrptsummary.pdf (accessed on 8th April 2009)

http://www.wkkf.org/DesktopModules/WKF.00_DmaSupport/ViewDoc.aspx?fld=PDFFile&CID=0&ListID=28&ItemID=5000546&LanguageID=0 (accessed on 12 April 2009)

Telephonic Conversation with Niall Stirling – Customer Relationship Manager (niall.stirling@axa-ppp.co.uk) - Phillips House, Crescent Road, Tunbridge Wells, TN1 2PL, 4th April 2010