The pace of global, economic, and technological development has compelled the organizations to take serious measures to remain competitive. This rapidly and constantly changing environment demands the organizations to generate equally fast responses in order to survive and prosper. High amount of uncertainty made it much more difficult to plan, as often unforeseen events change their outcomes. With small incremental changes bigger ones are also needed to produce dramatic results.
There are evidences financial institutions that make the investment decisions for billions of Euro, like insurers, banks, asset management companies, and pension funds, are increasingly realizing that there is a considerable link between our rapidly changing environment, climate, and investment policies. Companies in the financial sector can only manage risks and contribute actively to the protection of their interests subsequently through their risk awareness and following investment policies and decisions.
In order to be capable of adapting to unpredictable environmental conditions, organizations need higher management commitment and strategic flexibility. After foreseeing and contemplating real options, they need to be accompanied with some innovative ideas and full participation of all to ensure proper execution.
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A similar change process was developed by Disney Land, when it experienced lack of innovation and creativity, low employee moral reduced market share and incapability to cop up with the competition and constantly changing environment after the death of its pioneer Walt Disney. The interventions adapted in Aegon and Disney Land was almost similar and as a result both were able to achieve their potentials.
Reason to change
The decision of Aegon Company to implement a change management process was based on certain factors. Normally the motive behind the change process is to be more profitable and competitive. Of course this was the thing in mind in Aegon, but following were the factors which immediately compelled the top management to take the decision of adapting an appropriate change process.
Low investment yields
Government imposed price controls
Regulatory reforms and investigative pressures
The following objectives were considered before implementing the change process.
The company aimed to b financially strong and profitable. This could be achieved through remarkable growth in premiums, Underwriting Profitability, attracting new investors, Capital and cost efficiency, Radical investment decisions and getting good Investment Returns.
Customer satisfaction to be increased through setting low prices than th market, differentiating the company by offering innovative products, creating relaxation and ease in terms and conditions and improving the quality of relationships between the company and the customers.
This was concerned with improving the systems and behaviors within the company. It involved civilizing the processes of client relationship management, enhancing underwriting process, innovation capability, and other business processes.
Learning and Growth Perspective
Learning and growth perspective talks about efficiently utilizing human resources of the company. It can be achieved through trainings, seminars, meetings, etc to improve workforce skills and knowledge in different fields. It consists of underwriting skills, marketing skills, financial skills, claims management skills, and others.
Industry Specific factors
A decade ago and in financial sector even a few years ago the impact and power of the ethics, norms, and underlying values and behaviors was not given a significant importance. They were considered intangible having no trivial part in growth and profitability of the organization. Changing norms is hard, but not impossible. Now dynamic organizations are realizing that just changing the norms can reduce the crises and tension in the sector, by re-aligning the motives of agents in the financial sector and the society.
The financial services industry needs to adapt its internal processes and policies and its products and services to meet the challenges its clients face as well as to safeguard its own viability. The emphasis needs to be given to the things that offer certainty in investment decisions and provides business opportunities for clients. In order to adapt their own operations to the new challenge, financial services companies need to include adequate planning in their internal governance procedures, in line with the existing financial corporate risk identification, controlling and reporting structures and best practice in reporting requirements. The organization need to be aware that to what extent the changes in environment will impact or enhance the value of investments and shareholder value.
Always on Time
Marked to Standard
For the companies dealing in asset management it is more important for their fund managers and financial analysts to develop tools to assess risks and opportunities remain limited. They need to consistently evaluate their client portfolios for environment and climate change risks and opportunities in order to be able to respond to changes in policy and legislation. Then adapting the measures to minimize risks or maximize opportunities from it. Also the clients need to be educated about the benefits and processes being used to incorporate extra financial issues in the management of their assets.
Strengths and weaknesses of Organization
In the initial discovery phase before actually implementing the change process, an audit was conducted which covered both aspects internal and external. The audit highlighted the gap between the current organizational state and desired organizational state. This gave a real picture of the scenario and helped the organization to streamline the things accordingly.
Aegon had a rich history of success and profitability. Aegon was considered a strongÂ brand with in United Kingdom and locally was a known company in financial services. It was comparatively established having 27,000 employees and over 25 million customers.
It was well recognized for its outstanding and distinct retirement and pension plans.
The staff was quite proficient and creative, who could efficiently communicate the product benefits to the customers.
There was lack of strategic flexibility. It failed to renew its strategies to cope up with unpredictable changes in their environment. There was a lot of ambiguity and uncertainty in the systems and procedures.
The organization lacked the process of incremental development. There was no system in place to assure that organization is learning through its past experience and strive towards excellence.
There was low level of awareness about the company profile, its operations and products among the target customers. Even if they were aware, they were not able to differentiate certain products.
The financial products of the company were not well recognized in areas other than pensions. The company had certain other good and above average products but proper steps was not being taken to make the customers aware of their significance.
Aegon was unable to properly repositionÂ the brand within the financial industry according to the rapidly changing environment.
There was rigidity in market strategies and actions. There was lack of proper and fruitful marketing research. The one already in place was inadequate or incorrect, which resulted in failure to understand the customer needs and demands for new and innovative products.
There was Lack of vision on the relationships between organizational structures, Environment changes, processes, technology, customer services. People within the organization did not seem to share a common vision.
There was no formal system which could ensure radical decisions are taken. There was no formal system for identifying various alternatives for tackling a particular situation, weighing those alternatives on basis of their outcomes, and than choosing the best among them. Also a few heads use to take decisions, with no involvement or feedback of others. It was a reactive organization rather than being proactive.
The organization was unable to reflect both local knowledge and global power to its target customers. There was no clear Band Icon people can associate them with. Proper measures were not being taken to improve the good will of the company.
In spite of being well established and successful since years, the company was unable to remain as profitable as was before.
Alternative forms of OD
Organizational development is a long term effort to improve vision, learning and problem solving processes through a collaborative ongoing management system. Organizational development requires the deliberate amount of commitment from the top management of the organization towards the change process. It has three different models for change management.
Kurt Lewin's change model
Kurt Lewin is one of the pioneers of organizational development. This is one of the early fundamental models of organizational development. Lewin's model provides a general framework for understanding organizational change. This is known to be the base or outline of the various organization interventions being used.
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This model considers change phenomena as alteration of those forces which actually control the behavior of a system and keep it constant. It talks about moving from one form of equilibrium towards another form of equilibrium.
Steps of Lewin's Model
Lewin's model comprised of three steps:
It involves preparing the people for change and motivating them to accept it. In this phase initially the comparison of current and desired stage is given. It is done to reduce those forces which are maintaining the organization's behavior and norms at its present level.
Mostly in this phase people being involved in the process of change experience a certain amount of anxiety and discomfort. They naturally have tendency to attain old traditional ways and stick to the practices being followed. So resistance towards the change is high in this phase.
The resistance can be overcome by educating and involving people. They need to be communicated and motivated towards change from a psychological perspective. Things should not be directly imposed rather they should be made aware of the outcomes of change. Positive aspects should be highlighted.
Change is actually implemented in this phase. In this step change intentions are transformed into actual change effort. It involves intervening the system to develop new set of values and behaviors by making certain changes in organizational culture, processes, and structures.Â This step shifts the behavior of the organization, departments, units, or individuals to a new level. Usually the concept of cognitive restructuring is used to inculcate change in behaviors.
This phase immunes and stabilizes the organization at a new state of equilibrium. Steps are taken to support the new patterns to stabilize the change. It is accomplished through use for various supporting mechanisms that enforce the new organizational state, such as organizational culture, norms, policies, and structures.
Action research model
Action research model focuses on planned change as a cyclic process in which initial research about the organization provides information about consequent action. It is basically a model for planned change but has tendency to be applied to certain other settings like schools and health sector. It is a process of diagnosing, taking appropriate action, then rediagnosing and taking new actions. It's a chained reaction.
It starts with the development of questions, which are answered by the collection of data. Consultant collects the data, analyze it, and interpret the results. Action research is problem centered, and action oriented. It involves the client system in a diagnostic, active-learning, problem-finding, and problem-solving process. Collected data is not shared in the form of a normal written report and the findings are not imposed on the people. Rather open joint sessions and meetings are arranged to collaborate in identifying and ranking specific problems. Then various techniques are used in finding the real causes of problems and afterwards plans are developed to realistically fix the problem and get the desired results.
The good thing about the action research is that it is a self-correcting mecanism maintaining and enhancing the effectiveness of the system. Even after the completion of organizational development interventions, it give the system with practical and useful tools for self-analysis and self-renewal.
Components of Action Research
Action research has three main ingredients.
It highlighted the participative nature of organizational development. It focuses on bringing change but after creating awareness and studying all components of organization.
It emphasize on collaborative and co learner behavior. Like to keep learning from environment.
It is a process of repetitive process of continuous improvement.
Steps of Action Research
Action research involves following eight steps:
Problem identification: Sensing one or more problems to be solved. It is done by considering certain queries like why this problem exists and what its consequences are, how to learn to better understand the problem and design a creative possible solution, what sot of information is needed, and how to efficiently utilize the available resources to address the problem.
Consultation: Deciding to change and fixing internal or external organizational development practitioner. Selecting of right consultant is the essence of change management. As consultant is the thinking tank behind all interventions. Considering its importance, this decision should be carefully made.
Data gathering and preliminary Diagnosis: It involves collecting data from the organization and properly identifying the problem. Data is collecting from inside the organization as well as from outside the organization.
Getting feedback: It involves providing others all relevant and useful data collected to make them realize the strengths and weaknesses of the organization. As people will be more comfortable and supportive towards the change management process if their involved is assured one way or the other.
Joint problem diagnosis: In this step after going through the data shared people commonly select the real problems from various identified and prioritize them.
Joint Action planning: Specific actions to be taken to fix the problem are finalized. The organization decides how to best reach the desired stage. It is also decided whether the organization need to change its structure, processes, culture or all.
Action: Taking action and actually implementing change. It's a transition period of moving from present state to desired future state.
Data gathering after Action: As action research is a cyclic process, it involves getting feed back after the process of change and data gathering.
iii. Contemporary approaches
It is modification of action research model to include current approaches to planned change. More emphasis is given to employee involvement, shared vision and specific organizational development activities. It focuses more on identifying key strengths of the organization and leveraging them rather than diagnosing a problem and fixing it up. Aegon implemented change process through incremental and continuous phases of OD with certain dramatic steps.
P: 2 Develop systems for involving others in process of change.
Involving Stakeholders in change process
Stake holders are able to significantly influence the policy objective or success of any of the phases of the measure. Stakeholder management in industry of financial services has rapidly gained substance due to seismic changes to the sector's business environment. Effective stakeholder management can enhance corporate value drivers. Stakeholder management and the corporate strategy should be fully aligned.
These may include government agencies, employees, customers, advisors, community and other interest groups. The company shard basic information with all the concerned parties involved but the main emphasis was given to employees, policy holders, and investors. The stakeholders of Aegon included:
Policy holders (Direct customers)
Investors (At individual and corporate levels)
Brokers (Middle parties)
Initialization and Involvement
Aegon managed to communicate the importance of change to its stakeholders. First of all the company Identified key stakeholders and their views about the company and change process. Than the positions including values and expectations of key stakeholders was analysed. The launch of full fledges campaign regarding change inside and outside the organization helped a lot. The CEO managed to be receptive towards the suggestions and views of others. Strategies were developed to involve and motivate key stakeholders. They were assured that their interests are identified and strategies are developed to engage them.
After introducing the change, workable strategies were formulated for engaging stakeholders. The strategy clarified the intent and logic of consultation with key stakeholders. The strategy was developed while keeping in mind three main objectives:
Avoid Conflict: The main purpose of involving stakeholders in the change initiation process was to involve different sort of conflicts at a later stage. This helped them to understand the change perspective. Collaborative efforts aimed to engage stakeholders in a process of resolving conflicts among them through negotiation, mediation, and collaborative learning.
Develop a "Shared Vision": The CEO clearly highlighting the goal of the organization for change "To be the best long-term savings and protection business in the UK" magically worked in making the stakeholders realize the importance of change. Now the direction was clear, so stakeholders were invited to suggest ways to achieve. When they started thinking in this respect the need for change became clearer and appreciate able. Various meeting session and collaborative efforts intended for the stakeholders to come up with a vision or direction that they can agree to and buy into.
Formulate Creative Solutions: This way various paths all collaborative efforts hope to use dialogue and group processes to develop creative solutions that may not have emerged from traditional planning exercises.
Contribution of employees was ensured through information sharing, motivational techniques, training and development sessions encouraging feed back and empowerment. The lack of any of above factors might have become a barrier to collaboration. Misinformation, insufficient time, lack of commitment and responsibility, entrenched positions, or uneven authority can undermine the collaborative process. The company efficiently managed it.
Since it is a fact of life that all parties involved cannot be fully satisfied. That's why Aegon mainly focused on those stakeholders whose involvement was most significant and result oriented. In addition, if all stakeholders were given more then enough time the key stakeholders might have been ignored and the change process and collaboration clearly would not have worked.
Analysis and Evaluation
Stakeholder involvement helped the company in sustaining competitive strategies, cost leadership and differentiation. The company adapted right set of actions for ensuring involvement of stakeholders. The main reason for low resistance was they were involved early in the process. True Information was shared,Â participation was encouraged. The various tactics of involving stake holders and creating trust were wisely used.
The CEO's step of publicly sharing the need for change created an image among the customers and other interest groups that the organization is dynamic enough and always strives towards excellence. Decisions were made on consensus basis. This fostered shared authority and responsibility to affect and implement decisions. The following model was adopted for change:
P: 3 what were the models implemented for ensuring ongoing change.
Model for change
The company followed Action research change model. The following steps were followed:
Problem Recognition Initially the need was change was recognized, the reason behind was stumpy performance and low profitability. Areas for improvement were identified. A strategic decision of building a new and dynamic organization by re-establishing all the core values and things that had been flaked away.
Entry of consultant Consultancy firm was hired for supporting on going change process. Information was gathered through interviews, process observations, market reviews, industry cases and performance data. Areas for improvement were prioritized after thorough analysis of internal and external assessments.
Data collection and problem diagnosis After identifying options were developed to address each root cause issue fix the problem. Main changes suggested involved increased employee participation, empowerment, simplifying financial products, developing solid marketing strategies and to inculcate a culture of continuous improvement.
Planning Phase Alternative courses of action were considered, views were taken and most appropriate alternative was taken. While doing this the best practice adopted was involving people in the change process. This mined the inherent talent and creativity of the workforce to meet challenges and solve problems. The organization has developed several ways for employees to participate in planning and shaping the change.
Implementation Implementation of change process is very critical in organizational effectiveness. A sound idea can fail if the organization does not pay careful attention to identifying desired outcomes, developing appropriate activities, and giving employees the appropriate skills to do the work.
It involved actual change in the systems of the organization. Anxiety and resistance were dealt by using psychological perspectives. Plans were implemented through detailed OD action plans and supporting governance. Change was initiated from the lowest level. Culture of organization was shaped by eight behaviors, promoting internal integration and external adaptation.
The main reason of success of change management was that the company focused on changing its core values and norms. It is often hard to recognize and understand the impact of culture as it entrenched in every facet of an organization. To change organizational culture, board and staff members were made recognize the current culture, the consistency between the organization's values and its culture, and then steps were taken to change the culture.
Stabilization and feed back
Once the change management process was institutionalized, the courses adopted as change management strategy were practiced consistently to make them a part of the organization. Feed back was utilized for improvement and focus was given to the neglected or weaker ones. This way the whole process keeps on repeating and the result is a constantly improving organization.
All these efforts resulted in very positive changes in Aegon. Since the problems were rightly diagnosed they were fixed up. The overall culture, values, norms, and behaviors were changed which served as the catalyst of the change process.
The high commitment and support of the top management particularly CEO was remarkable. It not only developed a feeling of shred vision and common destination but also resulted in achievement of desired goals. Customers and stakeholders were satisfied with intervention's result. Sharing of a common set of goals, a common perspective and vocabulary on what to do and how to accomplish it; allowed employees to coordinate their behavior more effectively.
Purpose of eight behaviors
Having satisfied and loyal customers is the main aspiration of every organization. A culture of thinking first for the customers was institutionalized, which fostered employees to be more creative and caring towards their employees. This helped in empathasizing, thoroughly understanding customer needs and wants and coming up with the best possible financial products.
It created awareness among the employees that why change is important. Change benefits and myths were also clarified to avoid any resistance or misconception about the ongoing change process. Things were not imposed on the employees. They were clarified and their suggestions were also considered. As a result, employees positively embraced change.
Importance of encouraging excellence cannot be denied as, the awards and fellowships can significantly affect the lives and work behaviors of the employees. The company managed to get more excellence by rewarding more excellence. As a result there was dramatic change in attitude and commitment of employees towards their jobs.
Act with integrity
Integrity is the core quality of a successful and empowered workforce. It fostered employees to honestly and consistently follow a certain set of core values and strive to excellent work on every occasion.
Making right decisions and sticking with them while implementing is a critical issue in the effectiveness of any organization. It enabled employees to take good decisions by practical tools to respond to inappropriate or illegal behaviour. It helped Aegon in two ways: employees started feeling more empowered and their relatedness towards the company goals also increased because of timely decisions.
In the change process the structures and policies for decision making were aligned with the values of the organization. The trusting relationship between management, employees and constituents presented the organization a strong foundation for making and acting upon good decisions. Organizational development effort not only set the tone for the organizational culture but also clarified the status of power relationships.
It encouraged maintaining a good working relation with the peers. It helped setting goals and following a shared vision with more dedication and commitment. The spirit of working together enhanced employees' morals and they started performing extra ordinary to achieve common objectives.
Learn and grow
Because of training sessions and other measures a culture of learning cultivated within the organization. As a result people started looking beyond problem solving towards innovation and continuous learning. This positively increased the capacity of the organization to change. As a result the employees became active in evaluating their work and learning from success and failure. They understand that evaluation is about improving their effectiveness, to remain accountable to the people they serve, and to share what they have learned with colleagues. This way the organization stepped out being a learning organization means having the systems in place to evaluate and learn and having an organizational culture that is open to learning and change.
Relate and communicate
Communication helped the people to understand the need for change and learn for new ways for achieving goals. The deviation and gap between desired and actual organizational systems was clarified. Effective communication about change implementation and likely results reduced speculation among employees. Employees were able to recognize their role in change process and realistically prepare for the change.
Role of audit
External audit highlighted significant changes in the environment, and the impact of those changes on the company's competitive position within the industry. It highlighted the weak spots like ambiguity in public about the company products and operations, complicated financialÂ services,Â fragile presence within the marketplace, and the need to respond to the customer needs, creating consumer loyalty and identifying ways to meet future or emerging needs. It facilitated the company to take global expansions and local expertise both under consideration.
Internal assessment pointed towards the lack of strategic direction, missing competences, poor research and development. It fostered management towards improvement of values and behaviors. It helped to manage people in tune with the learning Culture. It seemed to have drawn their attention to issues like developing trust, collaboration, teamwork, quality orientation etc. It created more role clarity and gave direction to the employees in terms of their work and to align themselves with the vision of organization.
Link between Audit and Business Strategy
Business strategy of a company guides the overall direction of the organization and specifies resource allocation and plans to achieve its goals. It involves situational analysis, formulation and implementation. Major strategic decisions are taken on behalf of data collected trough different internal and external assessments.
Audit serves as base for the strategy as it not only give internal and external assessment of resources, capabilities but also point out weaker areas. Audit clearly gives a top down analysis hat from where organization need to change and how this change will result in .It produces the data needed to determine whether a change in strategy is necessary and exactly what changes should be made. It significantly identified the key factors that organization must focus on to be successful.
As in audit of Aegon, the requirements and capabilities to be fulfilled within the company were properly clarified. They were then harmonized with aptitudes of the organization. Since the assessment was fine, it resulted in organization being a learning organization and achieving its aspirations. It resulted in increased customer satisfaction, remarkable market share, satisfied work force and good reputation of the company.