Nike has been finding it difficult to find a replacement for Philip Knight, the founder and long time CEO of the organization.
The purpose of this report is to explore possible management and leadership styles in relation to William Perez's role as the new CEO of Nike. This report identifies the processes related to change management and guides Perez through organizational transformation processes in order for him to be able to fulfil his role as CEO of Nike.
This report stresses the importance of organizational development and transformation. Issues addressed in this report include the culture of the organization, different leadership styles, the structure of the organization, the processes of organizational development and future recommendations.
Organizational Transformation's primary goal is to help an organisation become more healthy and effective, especially during change. The key custodians of organisation health are not the internal or external HR or OD specialist; they are the organisation's leaders and managers. Holbeche, L (08-09).
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Organizational development is a planned approach to organizational change designed to enable an organization to respond and adapt to changing market conditions and to set a new agenda. Organizational development is frequently linked to organization structure, which can act either as an enabling or restrictive mechanism for change. For organizational development to succeed, any policies or strategies introduced must fit with the corporate culture.
In practice, Organizational Development can take on many forms, and typical OD activities can include some of the following:
- Organizational assessments
- Career development
- Leadership development
- Talent management
- Change management
Culture is comprised of the assumptions, values, norms of organization members and their behaviours. Members of an organization soon come to sense the particular culture of an organization. Edgar H. Schein stresses that, "When one brings culture to the level of the organization and even down to groups within the organization, one can see clearly how culture is created, embedded, evolved, and ultimately manipulated, at the same time, how culture constrains, stabilizes, and provides structure and meaning to the group members. These dynamic processes of culture creation and management are the essence of leadership and make one realize that leadership and culture are two sides of the same coin."
Organizational change has a low success rate and it is critically important to get it right, this is support by Cameron who states that, "The failure rate of most planned organizational change initiatives is dramatic. It is well known, for example, that as many as three-quarters of reengineering, total quality management, strategic planning and downsizing efforts have failed entirely or have created problems serious enough that the survival of the organization was threatened".
According to Edgard Schein, "Organizational learning, development and planned change cannot be understood without considering culture as the primary source of resistance to change."
Culture can be broken down in to three levels, artifacts, espoused values and basic assumptions and values.
Artifacts are the surface, the aspects which can be easily identified but hard to understand. Artifacts include the manners of address, the type of language used, the dress code. It is vital not to judge solely by the Artifacts, one may see Google staff as laid back, enjoying their time at work, having fun and jump to the conclusion that they are inefficient, this being far from the truth. Artifacts also include buildings, furnishings, settings, PR, rituals, Mission, stated values and technology.
Beneath artifacts are the Espoused Values, these are the conscious strategies, goals and philosophies and ideology of the organization.
The essence of culture is represented by the basic underlying assumptions and values which are difficult to discern because they are largely at an unconscious level. This is also known as the hidden beliefs and assumptions or shared tacit assumptions.
Nike has had an evolutionary culture as opposed to a revolutionary culture. It has developed over many years without great intervention or change. Most of the key employees have been with Nike for many years and 'outsides' sense they have 'their' way of doing things. Nike is based on authenticity. Perez must ensure Nike is prepared for organizational change and that this is correctly implemented. As Drucker argues, "a good organization structure might not always bring about a good performance, but a bad organization structure makes a good performance impossible no matter how good the workforce is." Perez must understand Nike's core values and maintain them, things like the association of Nike with key sportsmen from around the world and targeting the athletics segment of the clothing industry.
Always on Time
Marked to Standard
Leadership plays an important role in any organizations development. The personality of the leader and his style of leadership can determine the extent to which the organization will develop. Perez needs to be visionary and have the ability to influence others in order to bring about the required change to Nike. The leader can either reduce resistance to change, or increase the pressures for change, or be a pressure for change. Knight would have helped shape the organizational culture; he has his own effect on Nike's culture based on experiences and personality.
In order for employees to be more efficient Perez must provide staff with a spirit of involvement, motivate them through co-operation and be willing to learn from the organization. Analysing different styles of leadership will help improve understanding and recommend which style Perez must adopt.
Different leadership styles include: Authoritarian, Participative, Laissez fair also known as Delegative or Genuine.
This style is where leaders tell their employees what to do and how to do it without consulting or negotiating with employees. This is often found within the army on the battlefield or by a chef in a kitchen. It is not to be confused with bossing people around, the leaders that adopt this style often need to and it can be the best style in particular situations. If the leader has time and wants to increase moral, motivate the employees and gain more commitment then they should use the participative style.
The participative leadership style, also known as democratic, involves the leader including one or more employees in the decision making process. Despite the fact that the leader consults with employees or managers to determine what to do and how to do it the leader maintains the final decision making authority. Leaders that adopt this style gain the respect of their employees.
Laissez fair or the management style of delegation style is often seen as giving a free reign to employees. The leader allows the employees to make decisions. However, the leader is still responsible for the decisions made. Employees are able to analyse the situation they are confronted with and decide what needs to be done and how to accomplish it. The leader cannot do everything therefore delegates tasks and prioritization responsibilities. This style is frequently used where the leader knows and trusts his managers.
A good leader uses all three styles, dependent upon the situations requirements. For example Perez could adopt the authoritarian style of leadership with new employees, in order to form them to fit their job role and develop/settle in more rapidly. He may use the participative style with a team of workers, though he knows the problem he may not have all the information, the employees have faced this situation before and can be left to handle it.
Perez can adopt the delegative approach when confronted with a situation where the employees know more than him. For example with a team of workers that have a highly specialized tasks, such as those in the R&D department. They know their job and are best left to do it, provided they have proved their efficiency together and have previously made correct decisions, acting responsibly.
The leadership style adopted by Philip Knight was mostly the genuine/laissez-fair style of leadership. Many of the employees had matured by his side through the years, he had given his managers the freedom to make their own decisions and this had been proved efficient for Nike.
The structure of the Organization
The organizational structure is the formal system of task and reporting relationships that controls, coordinates and motivates employees so that they can cooperate to achieve the organization's goals. Structure enables the organization to apply the process of management and creates a hierarchy of command which makes it clear for employees to identify their roles and tasks they are responsible for within each department. In small organizations there is less complexity than in larger ones, therefore the need for a structure increases with the size of the organization. Drucker argues that good organizational structures do not always lead to good performance but a bad organizational structure makes good performance an impossibility, regardless of how good the employees are.
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The manager's obligation is to create an organizational structure and culture that motivates employees to work hard and develop themselves and allows groups to cooperate effectively.
Large organizations are increasingly marginalizing the role of their founders. The founders of both Yahoo & Dell have been replaced by professional managers at the shareholders demand.
An organization can be split into several divisions such as production, marketing, finance, R&D etc.
According to Wall (2004) there are five organizational structures, these include: international division structure, international geographic/regional structure, international product structure, international functional structure, matrix or mixed structure.
Philip Knight used the Matrix structure. This brings together the functional, geographical and product structures and combines them in an attempt to meet the needs of a specific activity or project. Once that activity or project is completed, the 'team' is often disbanded and return to their original position within the divisional or other structures of the organization. Employees report to different bosses in different departments to accomplish the different tasks.
Management of change theories have been conceptualized to answer how successful change can happen within an organization. It refers to changes in the work environment that necessitates the workforce to make certain adaptations to way they are used to working. The ability of an organization to adapt to change is crucial for successful organizations such as Nike, if not properly implemented the company could face huge difficulties. In order to implement change effectively, barriers such as resistance to change must be successfully removed. The need for organizations to adapt has become vital to their survival, however individuals or groups in different departments have different opinions of how tasks should be carried out therefore a common vision must be shared by all in order for the change to be successful, this can be very time consuming.
Organisational Change Management issues are often under-estimated or ignored entirely. In fact, people issues collectively account for the majority of project failures.
This survey by KPMG looked at disastrous projects. One of the questions asked for the prime cause of the failure of change implementation.
Although the result did not state "people" as the cause, it is interesting to note that many of the causes were to do with the behaviour and skills of the participants. Arguably all but the "technical issues" were related to the capabilities, attitudes and behaviour of people.
Lewin's Three Step Model
Lewin (1951) introduced the three step model for successful change management. The first step in the process is called unfreezing the situation.
Unfreezing is necessary to overcome individual resistance and group conformity. This can be achieved in three ways. Firstly by increasing the driving forces that direct behaviour away from the situation. Secondly, by decreasing the restraining forces that negatively affect the change. Lastly by finding a combination of the first two methods. These steps can include activities such as motivating the employees by preparing them for the change, encouraging and reassuring them of the need for change and make the employees contribute to the change process by helping identify problems and brainstorming solutions.
The second step of Lewin's model for change is movement. This transformational process is made up of convincing the employees to agree that the current situation is not beneficial to them and encourage them to look at the problem from another perspective. The employees should know what the change is actually for, most resist because they are not aware why the change is taking place or needed.
The third step is refreezing, this must take place after the change has been implemented in order for it to be sustainable, otherwise employees can revert back to their old behaviours. This step stabilizes both the driving and the restraining forces. This can be accomplished through the introduction of procedures for the employees. This would also help new employees will find it easier to fit in with the organization.
Lippitt's Phases of Change Theory
Lippitt, Watson and Westley (1958) extended Lewin's three step model to include seven steps. This focused more on the role and responsibility of the change agent than on the evolution of the change itself.
Lippitt's seven steps
- Diagnosis of the problem
- Assessing the motivation and capacity for change
- Assessing the resources and motivation of the change agent. This includes the change agent's commitment to change, power and stamina.
- Choosing progressive change objects. Action plans and developed and strategies established.
- The roles of the change agents should be chosen and clearly understood by all employees so that the outcomes and expectations are clear.
- Maintaining the change. Communication, feedback and group coordination are necessary elements.
- Gradually terminate from the helping relationship. The change agent should gradually withdraw from their role over time. This will happen when the change becomes part of the organizational culture (Lippitt, Watson and Westley 1958-1959).
Lewin's model is rational and goal oriented. It is however limited because it does not take into account personal factors such as human feelings that can affect the change process. Lippitt's Phases of Change is an extension of Lewin's Three-Step Theory. The focus is on the change agent rather than the change itself. Lewin analyses the forces that impacts change.
Activities Contributing to Effective Change Management.
Cummings and Worley (2008) have identified the following activities contributing to effective change management.
Motivating change is the phase in the successful implementation of change. Motivation is vital because changing from the 'norm' is regarded as a daunting experience. Employees feel their future in the organization is uncertain. They must feel that the change is necessary, this way they will understand they are part of the change process and help this occur.
Creating a vision is the second phase. This is done by the leader and provides a common goal for all employees, allowing them to understand what the change is for and how it will benefit the entire organization.
Develop political support. Organizations are made up of powerful individuals and groups that can either block or promote change. Individuals within the organization have different interests, opinions and concerns about how the change may affect their positions and levels of authority within their groups. Leaders and change agents need to gain their support to implement changes.
The fourth phase is managing the transition, this is moving from the current state to the future state. This is not an instant process, it needs the organization to discover how to proceed with the implementation of change in to reach the goal. This is done through the planning of special management structures for operating the organization during the transition.
Sustaining the momentum is the final stage. When the changes are implemented there must be a continued focus in maintaining them. This phase is the equivalent of Lewin's refreezing. The employees might return to their previous behaviours if the changes are not sustained.
Resistance to Change
Resistance to change is what individuals or groups do when they perceive that a change that might occur is a threat. The risk of change is seen as greater than the risk of standing still.
Employees resist change because they have to learn something new. In many case there is not a disagreement with the benefits of the new process, but rather a fear of the unknown future and about their ability to adapt to it. People are reluctant to leave the familiar behind. We are all suspicious about the unfamiliar, we are naturally concerned about how we will get from the old to the new, especially if it involves learning something new and risking failure. Resistance to change is defined as the fear that one will not be able to develop new skills and behaviours that are required in the new working environment. According to Kotter & Schlesinger (1979), if an employee has a low tolerance for change, the increased uncertainty that arises as a result of having to perform their job differently would likely cause a resistance to the new way of doing things. An employee may understand that a change is needed, but may be emotionally unable to make the transition and resist for reasons they may not consciously understand.
Resistance can be positive in certain situations. Managers see resistance as negative and the employees who resist are regarded as disobedient and obstacles the organization must overcome in order to implement the changes. However, employee resistance can play a positive role in organizational change. Constructive criticism and debate can produce better understanding as well as additional options and solutions. de Jager (2001) claims, "the idea that anyone who questions the need for change has an attitude problem is simply wrong, not only because it discounts past achievements, but also because it makes us vulnerable to indiscriminate and ill-advised change'.
Overcoming Resistance to Change
Kotter and Schlesinger (1979) set out six approaches to deal with resistance to change.
Education and Communication are essential. One of the best ways to overcome resistance to change is to educate people about the change effort beforehand. Up-front, honest communication and education helps employees see the logic in the change effort, this reduces unfounded and incorrect assumptions and rumours concerning the effects of change in the organization.
Participation and Involvement of employees. Where the initiators do not have all the information they need to design the change and where others have considerable power to resist. When employees are involved in the change effort they are more likely to approve change than resist it.
Facilitation and Support is important as employees may have adjustment problems, by the managers being supportive at difficult times they can avoid potential resistance. Managerial support helps employees deal with fear and anxiety during a transition period. Special training or counselling can help ensure the staff do not perceive the change as detrimental.
Negotiation and Agreements help managers' combat resistance through incentives to employees not to resist change. This can be done by allowing change resistors to veto elements of change that are threatening, or change resistors can be offered incentives to leave the company through early buyouts or retirements in order to avoid having to experience the change effort. This approach is appropriate if all else fails and those resisting change are in a position of power.
Manipulation and Co-option can be used when other strategies do not work or are too expensive. Kotter and Schlesinger $date$&page number- suggest that: "an effective manipulation technique is to co-opt with resisters. Co-option involves the patronizing gesture in bringing a person into a change management planning group for appearances rather than their actual contribution. This often involves selecting leaders of the resisters to participate in the change effort. These leaders can be given a symbolic role in decision making without threatening the change effort. Still, if these leaders feel they are being tricked they are likely to push resistance even further than if they were never included in the change effort leadership.
Lastly Jotter and Schlesinger argue Explicit and Implicit Coercion can be used. Where circumstances arise that speed is absolutely essential and to be used only as last resort. Managers can explicitly or implicitly force employees into accepting change by making clear that resisting change can lead to losing jobs, firing, transferring or not promoting employees.
In today's fast paced world the ability to change and innovate is key to survival, the strategic recommendations have been made after thoroughly analysing Nike together with different approaches and strategies from several reputable academics. Change is unavoidable and it is human to resist unknown, however this research shows that with the right preparation and strategic systems in place it is possible to overcome and successfully implement changes which will lead to the organization developing in line with its vision and mission. The recommendations below will support the conclusions drawn from the above analysis and research.
On the basis of the above analysis I recommend Perez proceeds with the transformational strategy, while monitoring and revising it periodically.
The change must start at the top. Philip Knight had his methods of running the business which have proved successful as received the backing of the employees. Though Perez is experienced he has a very different way of functioning, he cannot expect the employees to follow his lead from day one, he must also adapt to fit into the organization and gain the acceptance of the employees.
Perez should familiarize himself with the organization; he must understand the current culture in order to devise a plan to change this. If he tries to bring about change too quickly this will most probably fail as Nike is an organization with a well founded 'pop' culture which developed over decades under Knight.
An operations team should be formed and meetings organized in which the requirements should be set-out to enable the employees to be involved, this increasing motivation and provide all stake holders with a sense of ownership of the transformational process.
A feedback system needs to be created to help the employees feel more comfortable and know their views are taken into consideration. The transformation process must be transparent with the employees understanding and being involved in the transformation strategy. Adapting the culture successfully will be difficult as many of the employees have spent most of their careers working within Nike, it has become part of who they are, but getting all the employees on board will lessen the resistance to change. The feedback must be monitored, staff confidence levels should be monitored. When they show the first signs of losing faith their problems must rapidly be addressed.
Training employees is essential; to encourage motivation, increase self awareness and productivity surrounding their new roles and responsibilities. This will also help sustain the transformation.
Perez must agree with Knight exactly what his role in the organization is. This will avoid any problems in the future running of the organization. The responsibilities of both, and the levels of authority must be clear and not overlapping. Founders are often difficult to replace, they see the organization as something they can intervene in whenever they want. This however has proven to be bad for business and has caused some catastrophic events. This has been done to many founders of huge organizations such as Michael Dell within the Dell organization. The founders of Yahoo, Jerry Yang and David Filo are no longer directly involved in the management of the organization. Jerry Yany the ex-CEO has now been given the title of Chief Yahoo and sits on the board. They were replaced by professional managers that the investors saw as more appropriate for the evolution of their organization. Removing Knight from the organization completely may be a difficult task however a clear agreement understood by both parties must be reached in order for Perez to be able to successfully take lead of Nike.
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