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Heraclitus of Ephesus (475BC - 535BC) said that "the Only Constant is Change". His words carry apt resonance for the business environment in the 21st century. In the climate of mega mergers, ever advancing technological breakthroughs, unstable currency markets, corporate downsizing, outsourcing of the workforce, terrorist threats and even the bankruptcy and bailouts of sovereign nation states, (Robbins, S. & Judge, T. 2009). Large organisations need to adapt to a flexible new dynamic, or their very survival is at stake.
A leaders role is pivotal to successful and lasting change in an organisation, many large organisations have failed in change efforts, failure can result in large financial losses, loss of momentum for the organisation, a decline in morale of the employees. The "CEO's role is be the visible champion of the Transformation". (Duck, J. 1993). In the era we live in, the workforce has to get used to a faster paced metamorphosing environment, with few exceptions the old adage of a 'job for life' is over. One such notable exception is the German firm Siemens, who has recently promised jobs for life and even jobs for generations for its German based workforce. (Schafer, D. 2010).
Eight critical steps have been developed by John P. Kotter to increase the likelihood of achieving the objectives of the change, these steps need the un-faltering guiding hand of a leader to see them through and not call an early victory, these essentially consist of:
1."Establishing a Sense of Urgency"
â€¢ Analysing the market and the market competitive environment
â€¢ Disaster Mitigation planning, analysing new market opportunities
2. "Forming a Powerful Guiding Coalition"
â€¢ Creating and empowering a team to realise the changes.
3. "Creating a Vision"
â€¢ Having clear objectives of what is to be achieved with the change efforts.
â€¢ Developing strategies for achieving that vision
4. "Communicating the Vision"
â€¢ Ensure the objective are communicated with Clarity.
â€¢ Modifying existing behavioural norms.
5. "Empowering Others to Act on the Vision"
â€¢ Removal of obstructions/barricades to the change objectives.
â€¢ nurturing non-conventional modes of thinking and working
6. "Planning for and Creating Short-Term Wins"
â€¢ Allowing the 'low hanging fruit' of the objectives to be harvested, encouraging this and rewarding it.
7. "Consolidating Improvements and Producing Still More Change"
â€¢ Increase the pace of the change, within the different policies/procedures of the organisation.
â€¢ Recruit the right people to fulfil & maintain the changes.
â€¢ Keep the changes dynamic & moving, do not lose the momentum.
8. "Institutionalizing New Approaches"
â€¢ Linkage of Organisational achievements to the change process.
â€¢ Ensure adequate succession planning and development programs are in place.
Care has to be taken by the change leader, not to try to make cultural changes prematurely during this process, the change leader should be aware of the currently cultural norms and not try to make major seismic shifts which are needed, too early. Time is needed for the organisation to see the fruit of the changes, increased performance, which is normally around stage 8, then the likelihood of the changes solidifying is much greater. (Kotter, P. 2006).
One 'weapon' at the CEO's disposal when undergoing major changes is the 'Transition Management Team'. (Duck, J. 1993). This can be constituted of existing members of the companies structure, or can be outsourced to specialised consulting companies who are Transition Management Advisors.
Transition management advisor Jim Canterucci introduces five levels of change management skills which he claims are essential for a leader.
"Level I - Accepts Need for Change": defined as being able to clearly articulate the change the reasons why it is appropriate. will work on minor changes.
"Level II - Defines/Initiates Change": defined as working in specific areas and analyses the fulcrum point in procedures which need to be changed.
"Level III - Manages Change": defined as leading on a higher organizational level, communicates the affects of change, redefines existing models and employee training programs. Able to frame the changes into the organisational vision.
"Level IV - Manages Complex Change": Defined as being a leader who understands the VABE's (Clawson, J. 2001), Values, Assumptions, Beliefs and Expectations of the organisation, the cultural landscape. will balance and steer the changes at any current state at a snapshot in time with the overall goals of the change and realign any effects of dissonance.
"Level V Champions Change" -. Defined as a revolutionary role, in the context of the changes being made to the organisation. will support dramatic, risk taking actions, has strategic control of the whole process. contrasts the current organisation with the vision of what the organisation will be like, on successful implementation of the change program. (Canterucci, J. 2008).
The single most important attribute for the change process that the change leader can utilise is communication: without clear, concise, unambiguous communication, throughout the different phases of the process, the barrier of natural resistance to change which all people have, is unlikely to be overcome, thus dooming the efforts from the start. (Robbins, S. & Judge, T. 2009).
Bakcell was the first mobile operator in the territory of Azerbaijan.
established in March 1994 as a Joint Venture with GTIB and the Ministry of Communication of the Azerbaijan Republic.
Bakcell was the first company to provide cellular communication services in Azerbaijan.
Initially Bakcell deployed an Analogue System, in 1998 Bakcell replaced the analogue system with a digital GSM system, operating in the 900 MHz band.
Bakcell was privatised in 2004.
Bakcell is the second largest company in Azerbaijan, outside the oil and gas realm.
Market Share: Bakcell currently has a 36% market share, with competing companies having 46% (Azercell) and 18% (Azerfon). Bakcell is the fasting growing company in the last 12 months and is slowly but steadily eating in to the subscriber base of Azercell.
Current & Future Technology
Bakcell currently covers the country with 2.5G technology. it has 3.5G installed and ready to launch, once the license is issued by the Ministry of Communications.
Bakcell currently employs 1000 permanent staff. (Bakcell, 2010).
Mission and Vision
Giving you a better deal
Our goal is to be the leading mobile phone network in Azerbaijan.
Everything we do is about giving you:
Real value for money.
Easy to understand products and help whenever you need it.
Innovative services that benefit your work and social life.
A network that always listens to you and treats you fairly.
A company you can be proud of and which helps Azerbaijan develop on the
world stage". (Bakcell, 2010).
Bakcell Company Assessment: Utilising the McKinsey expanded 7-S Framework (Pascale, R. Athos, A. 1981):
The strategy of Bakcell is realise the vision of achieving and maintaining the position of the number cellular operator in Azerbaijan. This entails being top in revenues, subscriber base and overall number one in positive subscriber perception. Although Bakcell was the first cellular operator in Azerbaijan, it did not successfully capitalise on that strategic advantage. It lost market share to its competitors and failed to keep up with technology advances, to enable it to offer a modern portfolio of services to its subscriber base, along with a poor re-investment strategy.
Around two years ago there was a change in executive management, which has given Bakcell a new vision for the future, as well as the management skills and technical skills to realise that vision. Bakcell is currently the fastest growing mobile operator in Azerbaijan and has completely replaced all of its old legacy infrastructure, with a modern future proof alternative.
The current organisational structure of Bakcell can be described as a mechanistic model. (Robbins, S. & Judge, T. 2009). Key decision making is centralised mainly at CXO level. Cross functional teams operate on many projects, however clear delineated boundaries have not been drawn, which often leads to assumptions and effort duplication.
Bakcell is close to finishing a 'process re-engineering project' to provide a company wide set of policies, procedures, processes and work instructions. This covers all aspects of the business, from HR (Human Resource) related procedures, such as performance appraisals, recruitment, reward and recognition programs, to in depth technical processes for the supervision/monitoring, enhancement, maintenance of all the variety of network elements.
On the financial side, Bakcell is in the third stage of implementation of an ERP (Enterprise Resource Planning) system from Oracle, which allows management of all tangible assets, finances, materials, logistics and human resources.
Bakcell employs a colourful mix of nationalities, including engineers from Israel and Pakistan who share a desk together. Bakcell believes in strength in diversity.
Leadership levels generally bounce between level 3 (competent manager) and level 4 (effective leader) (Collins, J. 2005). However in some cases Laissez-Faire is demonstrated. (note that in Azerbaijan it is almost impossible to terminate the employment of a veteran).
An ambitious training program was embarked on starting in 2008, substantial funds were set aside and utilised for technical and non technical training. As per companies training procedures, each employee is entitled to two non technical trainings per year, these are chosen at the managers discretion and cover a wide variety of topics, from project management to time management. Technical trainings requirements are based on each individual job title and on the level of seniority in that role. All training are carried out on the premises where possible (Bakcell has created its own training centre), cross training is encouraged, when time permits and there is unfilled seats available on the courses. Further management training for Heads of Department level and their potential replacements is currently been carried out by the Mercia group.
Bakcell Currently employs 1000 full time permanent staff.
this is broken down into: technical staff 500 customer care 200 marketing, sales & distribution 200 Finance/Logistics 100
shared values ( originally super ordinate goals in McKinsey's model)
To attain and maintain the position of number one operator in the market, to encourage self development of the employees along that journey and to be the number one choice of the people of Azerbaijan and to help the country develop on the world stage.
Swot Analysis Bakcell (Humprhey A. circa 1960's) (no clear accreditation was found).
Difficult regulatory environment.
Stringent labor laws in Azerbaijan.
Difficult to find skilled sub-contractors.
Unstable power throughout whole country (increases opex (operational expenditure) costs by having to purchase many generators).
Reliant on third parties for some fiber optic routes. (routes are historically un-reliable).
Vendor delivery schedules un-reliable.
Need for constant re-training as technology rapidly develops.
Several major projects are in budget and timescale over runs.
Losing highly qualified staff to the international market.
Difficult to terminate employees contracts.
Unsymmetrical tariffs imposed by regulator.
A reliance on un-licensed software.
Increasing cost for subscriber acquisition.
Internal information leaks to competitors.
Subscriber base of over 2,000,000 active subscribers.
Strong financial health (no external debt)
More contiguous coverage than competition.
Existing network infrastructure capable of handling another 600k subscribers.
Rapidly expanding subscriber base in business sector.
Existing infrastructure of over 2000 base stations nationwide. (more than competitors).
Highest ARPU (Average Revenue Per User) in the country.
Latest generation of network equipment.
Recent Award of fastest growing company in non oil and gas sector.
Currently engaged in process re-engineering program
Clear vision to become the number 1 operator in Azerbaijan.
Supporter of various charities.
Sponsors University students & has internee programs.
Best value Operator in Azerbaijan.
Heavily invests in technical and Management training for employees.
Disaster Recovery program in place to cover 70% of network elements.
Engaged in management succession program.
The country has an un-steady truce with Armenia, there are weekly shootings on the border, this could turn into a large scale war. (Armenia currently occupies over 20% of former Azerbaijan territories).
The economy is majorly reliant on the oil and gas sector, any sharp downturn in prices will cause an economic slowdown.
It is becoming increasingly difficult to enter the country, visa on arrival schemes have currently been abolished.
2011 is likely to see a price war between the operators, which will likely lead to profit erosion.
Mobile penetration has now reached 90%, which equates to future subscriber growth will mainly be through churn from other operators.
If a fourth mobile operator enters the market, all operators will lose market share.
Staff retention is becoming increasingly difficult.
If there are any major changes in the political environment, a revision of all major legislation is possible.
There is no formal building code legislation in the country, when this is brought into law, there is a risk of huge costs to Bakcell if this is applied retrospectively.
Market for mobile data/broadband is virtually untapped.
Potential expansion into mobile tv market.
Potential entry into fiber optic provision market.
Potential entry into data cloud storage market.
Location based services is in its infancy in Azerbaijan.
Potential to have an international gateway, to terminate incoming international traffic. this would lead to large revenue increase.
Mobile micro payments has yet to be introduced.
Number portability will be introduced mid 2011 which should give additional subscribers from churn from the major competitor.
Smallest competitor is reliant on Bakcell network for national roaming.
Both competitors are about to embark on major network upgrades, this will make their networks unstable for around 4 months, this can be good time to acquire subscribers from them.
Recently Bakcell acquired BP (British Petroleum) as a corporate client, this gives opportunity to acquire all of BP's subcontractors. (BP is largest investor and employer in Azerbaijan).
1. Bakcell is lacking a COO (Chief Operating Officer) in its current structure. The addition of a COO can take the burden of procurement, HR (human resources), Corporate Communications and the Regulatory/Carrier Services department, away from the CEO, leaving more time for the CEO to focus on strategic issues, rather than day to day operational issues, as is currently the case. (see exhibit 1 and exhibit 2 for current and proposed organisational charts).
2. Adoption of an Imitation model, a mix of mechanistic and organic, (Robbins, S. & Judge, T. 2009), could bear fruit in Network Engineering Department, where historically the main problematic issue has been lack of communication between the different subunits, leading to effort duplication, assumptions on the other units work, also a lack of understanding of the overall picture and progress within the department as a whole. (see exhibit 3 and exhibit 4 for current and proposed organisational charts).
3. Cost savings can be realised by outsourcing the basic network infrastructure which is currently maintained by the I.T. department. 37 positions have been identified as suitable for outsourcing, note that key functions such as Network Security is not suitable for outsourcing and will stay as an in-house function. Heads of Sub Units keep their positions and will be allocated new responsibilities in monitoring the Key Performance Indicators of the company who wins the outsourcing tender.
4. the call centre was initially considered for potential outsourcing, however the call centre operators are multi-lingual in Azeri, Russian and English, the Azeri language is not widely spoken outside Azerbaijan, so this aim could not be realised. However what could lead to cost savings is re-locating the call centre. Currently it is located on prime real estate in Baku, the capital city, technically it could be re-located without much difficulty to the regions, where the cost of office space is considerably lower. It is likely the government would be supportive and may even offer incentives to do so, as this would increase regional employment levels.
Exhibit 1: Current Org Chart Executive Level
Exhibit 2: Proposed Org Chart Executive Level
Exhibit 3: Current Technology Network Engineering Department
Exhibit 4: Proposed Technology Network Engineering Department
Exhibit 5: Proposed Outsourcing of 37 positions in I.T. department.