Change Management: ExxonMobil Case Study

Change is only permanent feature of our life. Life of individuals and organizations are evolving ever since their creation. Modern companies are in a state of cultural change. From working more or less alone to solving specific tasks, we are now required to work in an interdependent way. Teamwork is vital.

These changes require that we change what we expect from the co workers. We have to change the values we highly believe. Values like awareness, teamwork, tolerance, responsibility and information are paramount – just as flexibility and change readiness.

Team work make in imperative that we develop project team instead of specific tasks. Therefore, our daily lives are becoming project oriented. [Baekdal, Thomas, Change Management Handbook]

Overview

What is Change Management?

Change management is a structured approach to transitioning individuals, teams, and organizations from a current state to a desired future state. [Wardale, Dorothy. 4 components of the module; 2009]

The current definition of Change Management includes both organizational change management processes and individual change management models, which together are used to manage the people side of change.

Change Management is be essentially linked to oganisational Change which is “Organisational change is the process by which organizations move from their present state to some desired future state to increase their effectiveness”. [Organization Theory, Design, and Change by Gareth R. Jones]

Organisational change may be formally defined as an “Organisation-wide effort to enhance the effectiveness of an Organisation by strengthening, modifying, or replacing the culture, structure, technology, task, and human processes through the application of planned interventions with or without the assistance of external agents”. [People Change Management in Power Distribution]

All changes interface with three Organisational components which constitute the Organisational culture. Those three components are:

• The historical and political evolution of the company.
• The management and organization of the company.
• The people who work for the company

The historical and political evolution of a company will have a significant bearing on its acceptance of change. The important factors are Base or origin of company, values of company, image it like to promote, traditions and norms practiced by individuals and company policies.

Changes will impact the roles of management. These changes consist of structure and operation of organization, style of leadership, role of senior management, and effect of change on workforce, their acceptance and willingness to take remedial measures.

Most of the issues in change management are ‘people’ oriented. Every decision on change ‘impacts’ the people. All cautions should be exercised in the people oriented changes. Typically with any change people expect a reward pay hike, promotion or other type of recognition. Think carefully the impact of change in every job it affects. [Change & Knowledge Management]

Importance of Change Management:

Change Management is proactive support focused on preventing incidents and problems by effective planning.

Some of the benefits are:

• Consistent planning for change
• Consistent planning in case of failure of change
• Communication with appropriate parties before change occurs
• Approval received from appropriate parties before change occurs
• Reduction in incidents and problems caused by unplanned change
• Time spent on preparation and prevention rather than fire fighting and downtime.

Model of Planned Organizational Change

When organizations are caught flat footed, failing to anticipate or respond to new needs, management is at fault. Change can be managed by observing external trends, patterns and needs, managers use planned change to help the organization to adapt to external problems and opportunities

Four events make up the change sequence:

• Internal and external forces for change exist
• Organization managers monitor these forces and become aware of a need for change; and
• The perceived need triggers the initiation for change, which
• Is then implemented.

How each of these activities is handled depends upon the organization and managers’ styles.

Forces For Change

Forces for organizational change exist both in the external environment and internally within the organization.

Environmental Forces

External forces take its root in all environmental sectors, including client, competitors, technology, economic forces, and the international arena.

Internal Forces

Internal forces for change arise from internal activities and decisions. If goal of rapid company growth is set by top managers, internal actions will have to be changed to meet that growth.

Steps For Effective Organizational Change

The four steps for organizational change process are as follows:

• Assess the need for change
• Initiate change
• Implement change
• Evaluate the change

Assessing the need for the change

The external and internal forces translate into a perceived need for change within the organization. Managers sense a need for change when there is a performance gap-a disparity between existing and desired performance levels. The performance gap may occur because current procedures are not up to standard or because a new idea or technology could improve current performance.

Managers in every company must be alert to problems and opportunities, because the perceived need for change is what sets the stage for subsequent action that creates a new product or technology. Big problems are easy to spot. Sensitive monitoring systems are needed to detect gradual changes that can fool managers into thinking their company is doing changes slowly, because managers may fail to trigger an organizational response.

Initiating change

After assessing the need of change the next crucial step is to initiate change which is true part of change management. This is where the ideas are developed.

Search

Search is a learning process about current happenings inside or outside the organization that can be used to meet the perceived need for change. Search typically unfolds existing knowledge that can be applied or adopted within the organization. Hiring of experts, consultant is a very important aspect of such search.

Creativity

Creativity is the development of novel solutions to the perceived problems. Creative individuals develop idea that can be adopted by the organization. Creativity can be designed into organizations. Companies or departments within companies can be organized to be creative and initiate changes.

Idea Champions And New-Venture Teams

If creative conditions are successful, new ideas will be generated that must be carried forward for acceptance and implementation. This is where idea champions come in. The formal definition of the idea champion is a person who sees the need for and champions productive change within the organization. Champions are passionately committed to a new product or idea despite rejection by others

Implementing Change

Effective Implementation of perceived change is the most vital part of Change Management. Creative culture, idea champions and new-venture teams are ways to facilitate the initiation of new ideas. One frustration for managers is that employees often seem to resist change for no apparent reason. To effectively manage the implementation process, managers should be aware of the reason for employee resistance and be prepared to use. Techniques for obtaining employee cooperation are:

Resistance To Change

Idea champion often discover that other employees are unenthusiastic about their new idea. Members of a new-venture group may be surprised when managers in the regular organization do not support or approve their innovations. Several reasons for employee resistance are:

1. Self-Interest.
2. Lack Of Understanding And Trust.
3. Uncertainty.
4. Different Assessment And Goals.

The reasons for resistance are legitimate in the eyes of employees affected by the changes. The best procedure for managers is not to ignore resistance but to diagnose the reasons and design strategies to gain acceptance by users.

The strategies for overcoming resistance to change typically involve two approaches: the analysis of resistance through the force field technique and the use of selective implementation tactics to overcome resistance.

Force Field Theory of Change Developed by Kurt Lewin:

It’s the process of determining which forces drive and which resist a proposed change. To implement a change, management should analyze the change forces. By selectively removing forces that restrain change, the driving forces will be strong enough to enable implementation. As restraining forces are reduced or removed, behavior will shift to incorporate the desired changes.

The theory underlying organizational development proposes three distinct steps for achieving behavioral and attitudinal change:

1. unfreezing,
2. changing, and
3. refreezing.

In the first step, unfreezing, the diagnostic stage of organizational development in which participants are made aware of problems in order to increase their willingness to change their behavior. Diagnosis is done by change agent. This diagnosis helps determine the extent of organizational problems and help unfreeze managers.

The second step, changing, a step in the intervention stage of organizational development in which individuals experiment with new workplace behavior. There the change agent implements a specific plan for training managers and employees.

Refreezing, a step in the reinforcement stage of organizational development in which individuals acquire a desired new skill or attitude and are rewarded for it by the organization. [5]

Selective Implementation Tactics

The other approach to managing implementation is to adopt specific tactics to overcome employee resistance. The following five tactics have proven successful:

1. Communication and Education. Communication and education are used when solid information about the change is needed by users and others who may resist implementation. Education is especially important when the change involves new technical knowledge or users are unfamiliar with the idea.
2. Participation. Participation involves users and potential resisters in designing the change. This approach is time consuming, but it pays off because users understand and become committed to the change.
3. Negotiation. Negotiation is more formal means of achieving cooperation. Negotiation uses formal bargaining to win acceptance and approval of a desired change.
4. Coercion. Coercion means that managers use formal power to force employees to change. Resisters are told to accept the change or lose rewards or even their jobs. Coercion is necessary in crisis situation when a rapid response is urgent.
5. Top Management Support. The visible support of top management also helps overcome resistance to change. Top management support symbolizes to all employees that the change is important for the organization.

Evaluating The Change

The last step in the change process is to evaluate how successful the change effort has been in improving organizational performance. Using measures such as changes in market share, profits, or the ability of manages to meet their goals, managers compare how well an organization is performing after the change with how well it was performing before. Managers also can use benchmarking, comparing their performance on specific dimensions with the performance of high-performing organizations to decide how successful the change effort has been.

Types Of Planned Change

Now that we have explored how the initiation and implementation of change can be carried out, let us look at the different types of change that take place in organizations.

The types of organization changes are strategy, technology, products, structure, and culture/ people. Organizations may innovate in one or more areas, depending on internal and external forces or change. In the rapidly changing toy industry, a manufacturer has to introduce new products frequently. In a mature, competitive industry, production technology changes are adopted to improve efficiency.

In the diagram, the arrows connecting the types of change show that a change in one part may affect other parts of the organization: a new product may require changes in technology, and a new technology may require new people skills or a new structure.

Technology Changes

A technology change is related to the organization’s production process-how the organization does its work. Technology changes are designed to make the production of a product or service more efficient.

How can managers encourage technology change?

The general rule is that technology change is bottom up. The bottom-up approach means that ideas initiated at lower organization levels and channeled upward for approval. Lower level technical experts act as idea champions-they invent and champion technological changes. Employees at lower levels understand the technology and have the expertise needed to propose changes.

Managers can facilitate the bottom-up approach by designing creative departments. A loose, flexible, decentralized structure provides employees with the freedom and opportunity to initiate continuous improvements. A rigid, centralized, standardized structure stifles technology innovation. Anything managers do to involve the grass roots of the organization-the people who are experts in their parts of the production process-will increase technology change.

New-Product Changes

A product change is a change in the organization’s product or service output. New-product innovations have major implications for an organization, because they often are an outcome of a new strategy and may define a new market.

The introduction of a new product is difficult, because it not only involves a new technology but also must meet customers’ needs. Companies that develop new products usually have the following characteristics:

• People in marketing have a good understanding of customer needs
• Technical specialists are aware of recent technological developments and make effective use of new technology
• Members from key departments-research, manufacturing, marketing-cooperate in the development of new product.

These findings mean that the ideas for new products typically originate at the lower levels of the organization just as they do for technology changes.

One approach to new product innovation is called the horizontal linkage model. In this model people from research, manufacturing and marketing departments meet frequently in teams and task forces to share ideas and solve problems. Research people inform marketing of new technical developments to learn whether they will be good to customers. Marketing people pass customer complaints to research to use in the design of new products. Manufacturing informs other departments whether a product idea can be manufactured within costs limits.

This teamwork required for the horizontal linkage model is a major component of using rapid innovation to beat the competition with speed.

Structural Changes

A structural change is a change in the way in which the organization is designed and managed. Structural changes involve the hierarchy of authority, goals, structural characteristics, administrative procedures, and management systems. Almost any change in how the organization is managed falls under the category of structural change.

Successful structural change is accomplished through a top-down approach, which is distinct from technology change (bottom up) and new products (horizontal). Structural change is top down because the expertise for administrative improvements originates at the middle and upper levels of the organization. The champions for structural change are middle and top managers. Lower-level technical specialists have little interest or expertise in administrative procedures. If organization structure causes negative consequences for lower-level employees, complaints and dissatisfaction alert managers to a problem. Employee dissatisfaction is an internal force for change. The need for change is perceived by higher managers, who then take the initiative to propose and implement it.

The top-down process does not mean that coercion is the best implementation tactic. Implementation tactics include education, participation, and negotiation with employees.

Top-down change means that initiation of the idea occurs at upper levels and is implemented downward. It does not mean that lower-level employees are not educated about the change or allowed to participate in it.

Culture/People Changes

A culture/people change refers to a change in employees’ values, norms, attitudes, beliefs, and behavior. Changes in culture and people pertain to how employees think; these are changes are in mindset rather than technology, structure, or products. People change pertains to just a few employees, such as when a handful of middle managers is sent to a training course to improve their leadership skills. Training is the most frequently used tool for changing the organization’s mindset. A company may offer training programs to large blocks of employees on subjects such as teamwork, listening skills, quality circles, and participative management.

Another major approach to changing people and culture is organizational development.

Organizational Development

Organizational development (OD) is the application of behavioral science knowledge to improve an organization’s health and effectiveness through its ability to cope with environmental changes, improve internal relationships, and increase problem-solving capabilities. Organizational development improves working relationships among employees.

The following are three types of current problems that OD can help managers address.

Mergers/Acquisitions. Culture differences should be evaluated during the acquisition process, and OD experts can be used to smooth the integration of two firms.

Organizational Decline/Revitalization. OD techniques can contribute greatly to cultural revitalization by managing conflicts, fostering commitment, and facilitating communication.

Conflict Management. Conflict can occur at any time and place within a healthy organization. Organizational development efforts can help solve these kinds of conflicts.

OD Activities

A number of OD activities have emerged in recent years. Some of the most popular and effective are as follows.

Team-Building Activities. Team building enhances the cohesiveness and success of organizational groups and teams.

Survey-Feedback Activities. Survey feedback begins with a questionnaire distributed to employees. Employees are engaged in problem solving based on the data received from questionnaire.

Intergroup Activities. These activities include retreats and workshops to improve the effectiveness of groups or departments that must work together.

Process-Consultation Activities. Organizational development consultants help managers understand the human processes within their organization and how to manage them.

Symbolic Leadership Activities. This approach helps managers to use the techniques for cultural change, including public statements, ceremonies, and slogans.

References

1. Baekdal, Thomas, (2006). Change Management Handbook.
2. Technology and immediacy of information (on-line) available http://www.wikipedia.com
3. Becta (2003) Available http://www.becta.org.uk/tsas.
4. Daft, Richard L, (1997). Management. Florida: Dryden Press.
5. Change Management Report by Zulfiqar,Shamsullah,Shahzad,Rizwan; 2009

Case Study: EXXON MOBIL

Company Profile:

Company History:

Exxon Mobil Corporation is the second largest integrated oil company in the world, trailing only BP p.l.c. The company is involved in wide range of oil and gas related activities such as exploration, production, transportation, and marketing in more than 200 countries. Exxon Mobil is a major manufacturer of basic petrochemicals, such as olefins, aromatics, and polyethylene and polypropylene plastics. The company is operating 4000 service stations under the brand names Exxon, Mobil, and Esso. Mobil Corporation and Exxon Corporation are merged in 1999 to form Exxon Mobil.

[Exxon Mobil Corporation Business Information, Profile, and History http://companies.jrank.org/pages/1494/Exxon-Mobil-Corporation.html#ixzz0cW28yLUs]

The Merger of Exxon and Mobil – 21st Century

In December 1998 Exxon agreed to buy Mobil for about $75 billion in what promised to be one of the largest takeovers ever. Merger was necessitated by reducing Oil prices and prevailing Asian economic crisis. By Merger both companies foresaw annual Profit benefit of $ 2.1 Billion.

Based on 1998 results, the proposed Exxon Mobil Corporation would have combined revenues of $168.8 billion, making it the largest oil company in the world, and $8.1 billion in profits.

As discussed earlier Merger/Acquisition are an important part of organizational development (OD). Exxon Mobil has utilized this tool effectively to maximize their profits and reduce operation cost and overheads.

Exxon Mobil in the 21st Century

The integrations of Mobil into Exxon resulted in delivery of cost saving and two contrasting corporate cultures. Exxon’s strength was always reflected in finance and engineering while on contrast Mobil’s strengths lie in marketing and deal-making. By union of both giants Exxon Mobil resulted in cost saving of $4.6 billion. These saving were used to fund the company’s growth by internal means, and expanded their Oil & Gas output. Between 1999 and 2004 after successful merge, Exxon Mobil earned $75 billion in net profits and generated $123 billion in cash.

As Exxon Mobil prepared for the future, perhaps the most significant event on the horizon was a change in leadership, environment policy and meeting geo political situation challenges in region such as Middle East, North Africa, and Caspian Sea. However, most of significant is meeting challenges posses by decade old environmental policy of non acceptance of Green House gases (GHG) effect on climate. This Organizational Change is discussed in depth in next part of report.

EXXONMOBIL AND CHANGE MANAGEMENT ON ISSUE OF CLIMATE CHANGE

Old Guards and Organization Resistance toward Climate Change:

ExxonMobil released its 2005 Corporate Citizenship Report (May 2006) and its report on Tomorrow’s Energy (February 2006). Both make clear that Exxon’s fundamental business approach and thinking on climate change had not changed. The company firmly believes that oil is the future and that concerns about climate change do not merit meaningful investments in clean energy and alternative fuels.

In these two reports, ExxonMobil acknowledges that human activities have contributed to the increased concentrations of greenhouse gases (GHG) and that this accumulation “poses risks that may prove significant for society and ecosystems.” The company declares that “these risks justify actions now, but the selection of actions must consider the uncertainties that remain.” Exxon then goes on to describe:

• the complexities of climate science;
• the limits of climate knowledge;
• the limits of current climate models;
• the uncertainty of projections

ExxonMobil declares that “even with many scientific uncertainties,” action is still justified. However, by emphasizing the remaining points of uncertainty rather than the scientific consensus that has emerged on the human role in climate change, ExxonMobil continued to take a deliberative approach that casts climate change as a long-term problem rather than a priority for near-term action.

Despite their rhetoric, ExxonMobil was not taking the actions needed to address the financial and competitive risks posed by climate change due to inherent organizational resistance to change. Leadership shrugs off from taking decisive actions and taking lead toward this grave issue.

ExxonMobil operates on the assumption that oil and gas will continue to represent a large percentage of the energy mix, whereas renewable energy sources will remain minimal.

In contrast, the private venture capital community has begun investing heavily in clean energy technology, as have ExxonMobil’s competitors. ExxonMobil continues to lag behind. ExxonMobil lags behind competitors like BP and Royal Dutch Shell on low-carbon leadership

ExxonMobil’s nearly only focus on oil and gas has placed it behind competitors like BP and Royal Dutch Shell, which have committed billions of dollars toward the development of low-carbon technologies that they intend to build as new profit centers for their companies.

Climate Change – ExxonMobil’s Change Strategy:

A newly published report (Dec. 2008) by ExxonMobil titled “Responding to Environmental Ethics: Moving from Petroleum to Renewable Energy for the 21st Century”. As title indicated an organizational shift in environment policy is happening at Exxon Mobile. Exxonmobil admitted link between Oil & Gas and climate change in following words “ExxonMobil’s focus on petroleum and gas products, especially those that are combusted to extract energy, has played a key role in promoting climate change through an enhanced greenhouse effect. The combustion of petroleum and gas has increased the concentration of carbon dioxide in the atmosphere to levels that are rapidly warming the planet, leading to severe consequences for the world economy and most of the Earth’s natural features.”

Exxonmobil inactiveness in past regarding Global warming is also addressed in said report “ExxonMobil has traditionally been skeptical of climate science. It wasn’t until recently that the company decided to accept that climate change is largely attributed to human activity and that something must be done about it”

A perceived Change is envisioned by Exxonmobil. This remarkable change in Exxonmobil’s outlook toward climate related issues happened due to following few theoretical Factors,

Environmental Factors:

As discussed earlier in our report, environmental Factors such as clients, competitors and changing technology are basis of any Organizational change. Same is true with Exxonmobil’s new Climate Strategy. Exxonmobil moved towards change after realizing that competitors such as BP Inc., Royal Dutch Shell and Chevron are taking lead on climate related issues concerning Oil & Gas Sector. Public awareness vis-à-vis global warming increased significantly over the few years which also contributed toward Exxonmobil’s new climate strategy.

Internal Factors:

Internal Factors such managers, top management and shareholders also play a decisive role in this Change strategy. Shareholders worried that competitors’ investment in alternative renewable energy may cause lower future growth.

Exxonmobil adopted knowledge as the basic search tool assessing change. Exxonmobil stated in their 2008 report said “In general, the company’s goal is to provide energy around the world to improve quality of lives while minimizing environmental impact and supporting communities. Second, the company assesses any issues identified in the first step through information from various sectors, including non-governmental organizations, academia, financial institutions, and employees. Then it develops a list of material areas that the company will focus on based on its analysis. In 2007, these material areas were

1. Environmental Performance,
2. Workplace,
3. Corporate Governance,
4. Transparency and Human Rights, and
5. Community Development

Implementation of Change Strategy:

After assessing perceived change, next logical step for Exxonmobil is initiation of Change Implementation at organizational level. Exxonmobil Called this “The End of Carbon Era”. To save environment damage petroleum combustion must be curtailed significantly in this century by taking action to fight climate change. Exxonmobil has decided to reinvest its business to remain one of the world’s most significant companies and ensure it viability. Exxonmobil is to invest in existing alternative technologies that are emissions-free. This will mean entering fields to provide reliable energy to the world and improved its tarnished image.

ExxonMobil has invested in improving its energy efficiency, increasing its co-generation capacity by 12% in 2005 and working to reduce gas flaring in Nigeria and elsewhere. It has also supported research into producing more fuel-efficient internal combustion engines, although the extent of that support is unclear.

The company states that “technologies like carbon capture and sequestration, hydrogen production and use, solar, and biotechnologies all require fundamental breakthroughs in research to overcome current barriers to cost, performance, safety, and public acceptance before they could enter into widespread use.”

Conclusion:

ExxonMobil claims that the risks from climate change justify action now. Exxonmobil which is world leader in petroleum production has assesses the change based on theoretical effecting factors, initiated perceived change and implemented change for betterment of mankind.

Our study concludes that the Exxonmobil has followed theoretical cycle of change and now successfully implementing the Change, thus transforming its global image.

Biblography:

1. http://www.fundinguniverse.com/company-histories/Exxon-Mobil-Corporation-Company-History.html
2. Baekdal, Thomas, (2006). Change Management Handbook.
3. Technology and immediacy of information (on-line) available http://www.wikipedia.com
4. Becta (2003) Available http://www.becta.org.uk/tsas.
5. Daft, Richard L, (1997). Management. Florida: Dryden Press.
6. Jones, John & Aguirre, DeAnne. (2004). 10 Principles of Change Management: Tools and techniques to help companies transform quickly.
7. Responding to Environmental Ethics: Moving from Petroleum to Renewable Energy for the 21st Century by Carlos Rymer. December 11, 2008.
8. http://companies.jrank.org/pages/1494/Exxon-Mobil-Corporation.html
9. http://www.fundinguniverse.com/company-histories/Exxon-Mobil-Corporation-Company-History.html
10. Organization Theory, Design, and Change, 5th Edition by Gareth R. Jones.