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In today's rapidly challenging business environment, it is readily acknowledged that it is necessary for organisation to make changes in order to stay competitive. Change management is vital in an organisation as it act as a way to ensure that business is moving in the right decision which indeed requires proper handling as it relates to human involvement. Many researchers argued that implementation is not solely the end point of a process of formulation but rather the interaction of many interactive and discontinuous factors i.e. management decision processes, environmental and business sector characteristics (Wilson, 1992:49).
Before implementing a change, a lot of planning is required to ensure all the aspects of a particular problem are properly identified to avoid uncertainties and ambiguities. Thus, in order for management to have positive consequences, it is vital to identify and analyse the overall impact of the change programme i.e. organisation structure, employee's attitude, beliefs and behaviours. The aim of this report is to discuss and evaluate the factors affecting the implementation of change in Nissan Motor Company (Nissan).
Background of Nissan
Due to huge debt, Nissan built alliances with Renault S.A. (Renault) to ensure the survival of the business. The said alliances benefited both parties in terms of market penetration and capabilities. As a result from the said alliance, Renault obtained an equity stake of over 36% in Nissan and its leader, Carlos Ghosn was appointed as the key person in charge for the implementation of the change. During the transition change, Ghosn met will all the employees from different departments to discuss on the current state of Nissan and the way to move forward. Thereafter, a radical or transformational change plan was implemented in order to ensure the success of the business in terms of profitability.
Based on Beer's model of effective change strategies, Nissan adopted the combined strategy of Theory Economic (E) and Organisation Development (OD) (Beer and Nohria, 2000). This is supported by Eriksson and Sundgren (2005) conclusion that both theory E and OD should coexist as the success for a change relies in the interface between the two strategies. In Nissan, the application of the E strategy is seen from the implementation of aggressive cost-cutting plan through downsizing, lay-offs and restructuring that is related to the its performance while in terms of OD, it involves the change in having English as the medium of communication in the organisation, setting up of the nine cross-functional teams for generation of ideas and culture change within the organisation which mainly touched on the Human Resource practices that overall leads in creating the capability to sustain competitive advantage. With the said changes in place, Nissan has managed to revive its business to compete in the market and at the present moment is one of the leading automakers in the industry.
The implementation of change in Nissan
Much literate suggest that implementing change is not an easy process. Although the change is foresee as an advantage to the organisation, there will always be mental rejection from the humans included in the process. Therefore, implementation of change needs to be handled sensitively with a structured approach to ensure the success transition from current to future state. In terms of Nissan's implementation, it is classified under the blue print change (Hayes, 2010:427) as the final result is known i.e. Nissan to be profitability and be one of the top auto producers in the industry which Ghosn was able to formulate a clear plan of action in achieving the said vision.
Factors affecting the implementation of change in Nissan
Organisation's readiness for change
Readiness for change is believed as one of the key factors leading to a successful implementation of change. It was noted that one half of all unsuccessful organisation change efforts failed due to lack of readiness for change (Kotter, 2007).
Figure 1: Lewin's three step change process
Drawing on Lewin's three step stage model of change, it clearly explains the importance of successful implementation of change by unfreezing the current situation followed by adaptation of the current changes which leads to new behaviour and norm (Hayes, 2010:29). The unfreezing stage creates a situation for readiness for change through motivation in terms of the company's clear vision which is seen attainable in the future that consequently increase the employees level of confidence in accepting to the need for change.
Once the alliance took place, Nissan minimises barriers to change by maximising the opportunities of a change effort which are accentuated in the unfreezing process. All changes have been well planned in a short span of time. Meanwhile in the moving stage, change has been recognised and acceptance of change has taken place in the workforce. As everyone in Nissan is aware on the urgency for a change, it has automatically built a powerful coalition between management and employees. Beer et al. (1990) highlights the importance of coordination and teamwork especially for companies acting the change process in relation to cost, quality and product development opportunities. Self and Schraeder (2008) conclude that positive perception to a change is due to the visibility of support and commitment while the negative perception is due to visible lack of support or inconsistent behaviours of the management. Due to the positive acceptance in Nissan, Ghosn has managed to restore and reinforce the new changes in the company in the refreezing step.
Based on Kotter's 8 step change model, the success of the transformational effort depends on the right action at each stage. Establishing a sense of urgency is very important step as it defines the current state of the company. It was argued that the need for change will only occur until a clear and present danger is recognise which need something to be done in ensuring the viability of the company (Self and Schraeder, 2008). Not only management demonstrate the need for change but must also provide indication that the requirement of a change is the right decision made for the company (Self and Schraeder, 2008). Readiness of change is a key to ensure a successful implementation process of change as when the level of readiness is high, employees are likely to initiate change with greater effort by displaying more cooperative behaviour that will result to more effective implementation.
Nissan was in bad shape before the alliance exercise due to its financial position and needed a solid strategy to ensure the viability of the business. Hence, the sense of urgency has been established at the highest priority with the support from the management. Kotter (2007) indicate that to ensure the success of the change, it is important to obtain 75% of the company's management in supporting the change effort or otherwise the transformation process could not succeed and the long term future of the company is in jeopardy.
As there is a sense of urgency for change, a leader must promote change by creating vision (Kavanagh and Ashkanasy, 2006). Kotter (2007) highlights the importance of a clear vision as it is needed in guiding people through a major change which leads to a reduction of error rate that determine the success or failure of the implementation. It is argued that vision is not based on originality but on how well it serve the interest of important constituencies such as employees and stakeholder (Kotter, 2001). Therefore, a vision needs to be clearly defined with development of strategies in order to direct the change effort. The said vision will assist employees to understand the reason for the change. According to Kotter (2001), aligning people to a shared vision by communicating the new direction will help in creating coalitions which consequently draw the importance of the vision by committing to achievement. Kotter (2007) indicate that by not having a sensible vision, it will dissolve the transformation effort as it creates confusion that leads the company moving in a wrong direction. This is supported by Kotter's (2007) finding that most companies have sense of direction but it is to complication to be useful and consequently result to a failure in managing change.
For Nissan, the main vision for the alliance exercise is to turnaround the company from a loss to profitable business while maintaining the company's identity and self esteem of its employees (Ghosn, 2002). The vision is clearly stated which is align with Kotter's (2007) suggestion on the important of a vision.
Many researchers highlight that culture is one of the important key aspects to be considered for the implementation of change. According to Smith (2003), culture in an organisation is not only related on how things are done but the set of values, beliefs, customs and systems that are build uniquely in the organisation which differentiate one with another. To change the culture in an organisation is not an easy tasks as usually employees are comfortable with the job and organisation and as a result they are resistant to change.
Burnes (1992:291) suggests that in approaching cultural change, a more considered and organisation specific approach should be adopted. For a company to implement a change, comparison between strategic significance (the importance of the company's future) of the cultural resistance needed to be analyse to ensure the success of the implementation change process (Schwartz and Davis, 1981). The process relies heavily on managerial judgment as decision are made with degree of certainty whether to ignore, manage and maintain the existing culture to fit he change environment. Hence, steps are taken to identify the degree of cultural risk involved in the change process that overall has an impact to the company's culture and vice versa.
Nissan is a company based in Japan with strong build culture in the organisation. It was difficult for the employees to accept the changes particularly in reward and progression system i.e. from seniority to performance based. It is the culture of Nissan to ensure that all employees have a lifelong career in the company which certainly create the culture of complacency that impacted Nissan's competitiveness. Meanwhile, another culture problem faced was the organisation's inability to accept responsibilities of which having a culture of blame. Ghosn has observed that all the said factors have contributed to Nissan's performance which requires a radical change process. It is noted that Nissan adopted Schwartz and Davis suggestion as mention above wherein the company's culture was change ultimately to ensure the success of the change implementation. During the change process, employees were given a period of one year to change their attitude and to adapt to the changes accordingly. The changes implemented have affected the employees work orientation in terms of resistance to change as it was foresee that their particular job was at risk.
The impact of resistance to change has been aversely discussed and many researchers highlight that it is the most significant threat to the success of implementation to change (Lines, 2004; Self and Schraeder, 2009). The expectancy theory clearly indicates that individual consciously choose course of action based upon perceptions, attitudes and belief which result to desires in enhancing pleasure and avoiding pain (Hayes, 2010:195). In order to avoid this to happen, awareness for changes need to be communicated to the employees through a clear vision and well defined strategy to ensure the effectiveness of the implementation process.
Kavanagh and Ashkanasy (2006) suggest that particularly for culture change, active engagement of the top management is required to ensure the effectiveness of the change. Management plays a vital role in supporting the change as they set as a leader whereby employees will adhere to the changes faster. This can be effectively done by showing the implication of the change to the organisation in terms of profits, productivity or quality work life. For the case of Nissan, a clear focus on the company's priorities and plan and successfully executed accordingly with the backup of a good leader. Transparency was built as a new culture in the organisation as it allows others to provide ideas rather than only top management. This as a result leads to a consistency between how the organisation operates in thinking and doing its daily operations.
Level of communication
Another important aspect in implementation change is communication as it has an important impact to the success or failure of a change programme. It plays a vital role in the change process as it allows leaders to create a shared sense of direction, establish priorities, reduce disorder and uncertainty as well as facilitating learning (Hayes, 2010:177). In having a good communication, leaders need to ensure that all communication channels will provide information sharing that allows accurate absorption of relevant information by employees. Employees need to be constantly aware on the changes as they contribute to the success of the implementation of change. Meanwhile leaders on the other hand should continuously collect feedback by interacting with employees as well. As a result, organisation will look forward for a successful outcome in the change implementation.
Clampitt et al. (2000) indicate that communication strategy has a huge impact on how events will be remembered which in turn shapes employees response. The environment for communication should be open and supportive to enable employees in sharing their concerns, frustration and need without fear of revenge which will lead in building the credibility of the company for a better implementation process (Self and Schraeder, 2008). Meanwhile Abrahamson (2000) suggest that dynamic stability plays a vital role in communicating change implementation as it suggest carrying change by involving elements within an organisation by engaging employees gradually. It aligns the overall concept of change as employees are aware on the proposed changes while management collects feedback by interacting with employees. The application of dynamic stability will allow organisation for a successful outcome in change implementation.
When the change process took place, Nissan adopted underscore and explore communication strategy wherein the message was conveyed to all level of employees all across the company in order to get employees aligned with company's goals. This is supported by Clampitt (2000) findings which indicate underscore and explore is the most effective communication wherein it combines two strategies together i.e. tell and sell strategy; and identify and reply that allows managers to shape the change outline and allow reaction from the concerns of employees. Ghosn reiterate that the success of the company relies on the employees and as a team all employees should work hard in aiming to achieve the targeted goals. Despite pouring all the information, Nissan listens to the employees concerns and in fact created a new way of communicating through email. The said method reduces ambiguity and provides a clear picture on how the change will develop a better future for Nissan. Employees are likely to accept the pain of change if it clearly shows how their contribution affects the future gains. It is a norm that people expect something in return for the sacrifices made in the foreseeable future. Moreover, Kotter (2007) points out the effect of communication both in words and behaviour are the most powerful form which nothing undermines change more than behaviour by individuals that in consistent with their words.
Role of leadership
Kotter (2007) indicate that by definition, change requires creating a new system which sequentially always demands leadership. The role of leadership in change management includes creating a vision, aligning relationship around the vision and inspiring others to achieve the vision (Hayes, 2009: 117). In implementing change, a leader plays a key role in shaping the success of the change process which is in line with Beer et al. (1990) suggestion on the role of a leader in mobilising the initial commitment as a step to begin for the change process. Evidence from literature indicates leader's role in the change process wherein it have an impact to the success of change through the linkage between both leader and follower behaviour (Higgs and Rowland, 2005).
Ghosn is considered as a transformational leader as he brought changes in the company and the effect of the changes is sustained under his leadership style. Studies have indicated that transformational leaders are able to realign the employees' values and norms by promoting both personal and organisational changes which indeed enhance employee's ability to accept change (Kavanagh and Ashkanasy, 2006).
Ghosn leadership is not based on the Japanese style but rather applying the multicultural experience that enables him to embrace culture differences and building on them. This is considered one best way to manage change as studies have found that a flexible, loosely applied culture based on some diversity and possibly involving the existence of number of subcultures is prove more effective (Kavanagh and Ashkanasy, 2006). For a change to take place, leaders need to convince people on the necessary of the change which usually need a strong leadership and visible support from the management. Kotter (2007) indicate that managing the change is not enough, as leaders have to lead the direction in ensuring the implementation of the change.
One of the changes made from the alliance exercise was the implementation of a new management style by setting up a nine cross functional team which the main objective is to achieve the goal for Nissan Revival Plan and business commitments. With the new management style, teams are given three months to review their operations and come up with recommendations for profitability and growth. As a result, it brought employees into a new organisation context through new roles and responsibilities that consequently create a situation that forces new attitudes and behaviour on employees in accepting the need for change which is supported by Beer et al. (1990) as the most efficient way in changing behaviour.
Based on findings, it is noted that most successful cases in change relies on powerful coalition in the company (Kotter, 2007) as it is influence by the nature of work environment and organisational culture of which leaders could affect the employees attitudes in working towards change and motivation (Kavanagh and Ashkanasy, 2006). The new functional team have allowed employees to think in a different perspective which leads to the mechanism in explaining the necessity for change across the entire company.
Ghosn as a leader incorporate the values of team work in Nissan to ensure all employees are dedicated to the shared vision in building urgency and momentum around the need for change. The requirement of more coordination and teamwork between functions and business units is identified as one of the key factors in implementing a change which is supported by research findings where there is linkage between leadership behaviours to the activities involved in implementing change (Higgs and Rowland, 2005).
Proper planning and coordination for the change
Literature indicates that successful implementation of change is a difficult goal (Higgs and Rowland, 2005) and often flounders because of improperly framed by management. Finding from a survey with organisations indicate that 66% has agreed that one contributing factor for the implementation problems is ineffective coordination of implementation activities (Alexander, 1985). Leaders have a very important role in the selection and planning of a suitable management approaches as proper planning needs to be carefully identified to ensure a strong foundation which leads to an easier process of implementing change. Goodman and Rousseau (2004) indicate that time is key factor in organisational change but it is always neglected due to performance driven results. It takes time for ensuring a success of change as rushing and expecting too many outcomes will lead to failure.
It is agreed that organisation is more effective when components such as structure, technology, systems and people are aligned with each other and when there is a good fit between the organisation and the environment (Hayes, 2010:305). In implementing change, action taken for the change should be identified to determine the flow of changes to ensure the outcome of the change process. Goodman and Rousseau (2004) suggest that it will help organisation to understand the lag between change and results by paying attention to feedback cycles which allows identification on mistakes as well as recommendation action for improvement.
Planning should not only include the aspect of the results but to also determine the obstacles for the change to materialise. Goodman and Rousseau (2004) suggest that change intervention allows the increase of knowledge sharing for a better result performance where it reduces time for a given engagement that will result to faster outcome on the result. It is noted that knowledge system is widely used due to its beneficial functions such as positive feedback on a change as it improves in performance. However, it is argued that knowledge exist in the organisation but is not properly used that affects the coordination of the implementation process. For Nissan, the company has indentified the main problem of the company and tried to apply a new set of actions in a different manner which in line with the double loop learning process. Argyris (2002) indicate that double loop learning take place when errors are corrected through exploring the possibility in doing things differently.
Information sharing will increase the knowledge of the employees which can be adapted through a learning process that allows a collective ability to act more effectively in an organisation (Hayes:2010: 322). Moreover, creating a new learning experience will allow companies to build its competencies as it is related to detection and correction of errors (Argyris, 2002) which is associated with continuous improvement. Hayes (2010:308) indicated that most literature in organisational learning focuses on the acquisition of knowledge, the recognition of its potential and its application to improve organisational performance. Based on Nissan case, it is summarise that the key to implementing change is a continuous improvement built in terms of information between people and processes, combination both business and human dimension towards shared objectives.
Despite identifying the need of organisational learning, it is feasible for companies to plan a systematic training approach within the organisation as change is related to individual change. Change will need employees to think and behave in a different way and it is vital for organisation to provide the knowledge and skills to ensure the success of the change. Hayes (2010:350) indicates that training and development enables company to align between competencies of the employees and leaders as well as the task and structure of the system.
Managing change successfully has never been an easy task and can neither be problem free. Buchanan et al. (2005) summarised the related factors influencing the nature and outcome of change are such as
individual, group, organisational, social and political. Therefore before any change takes place, it is important for a leader to properly analyse the implementation of the organisational change in order to determine the extent for the change that will benefit both organisational performance and employees.
From the Nissan case, it was observed that one of the main lessons learn from the implementation of change process is the clear focus set by Ghosn wherein a clear plan is executed based on priorities. Ghosn brought in clear vision by altering the core organisational process with the nine cross functional team. Moreover, factors such as having a high urgency level for the need to change and a strong guiding and powerful coalition has managed Nissan to motivate the employees while creating an environment that accept change and subsequently sustaining the company's competitiveness. Based on the Nissan performance after the alliance exercise, it is concluded that the company is able to sustain its change due to these aspects of organisational readiness; fit with the competitive strategy, managerial values and internal power distribution and the values and power of key stakeholders (Buchanan et al., 2005).