1. INTRODUCTION
1.1 Authorisation
This report has been written for Dr Raymond Gordon, the MGT8033 Course leader to outline the importance of diagnosis in organisational change and how the integration of hard and soft diagnostic issues can contribute to the holistic plan for the restructure program at Little-bit.
1.2 Limitations
There were no limitations encountered in the production of this report, other than the specific assumptions made regarding the changes to pricing and quality strategies at Little-bit in the absence of definitive data. However, the report will be limited to Little-bit operating at the organisational level, not as a division of the larger organisation Big-bit.
1.3 Scope of the report
The report will firstly discuss the theoretical framework of selected diagnostic models, and explore their application at organisation, group and individual level. Research evidence will be presented as to the importance of alignment between the three levels of diagnosis and the dynamic nature of the models when operating in an open-systems framework. The diagnosis of Little-bit will extend through all three levels reflecting this synergy, before moving onto a critical discussion of the hard and soft elements associated with diagnosis. Enlightened evidence will be presented as to the importance of hard and soft issues being viewed as complimentary and how this applies to the current restructure of Little-bit in comparison to the probable neglect of some diagnostic issues in the first restructure, confined to the evidence presented in the case study.
Having outlined the importance of detailed and appropriate level diagnosis, various theories of the type and scope of change interventions will be reviewed and applied to the type of change necessary to implement the new functional hierarchy and the changes in culture required to enact the new pricing strategy. Further to this, a blended approach will be outlined to how specific interpersonal and human resource interventions will be used to bring about and consolidate the restructure within a three stage process of preparation, transformation and consolidation. The restructure plan will not be outlined in its entirety, but will focus on the complimentary blending of the balanced scorecard, team building over the first six months, followed by performance management and career development programs in the twelve months subsequent to the restructure.
2. DIAGNOSIS IN ORGANISATIONAL CHANGE
Unlike other change management theories and approaches that are often contradictory, confusing and usually lacking in empirical evidence (By 2005), there appears to be a strong relationship between the use of diagnostic models and successful change efforts (Burke & Litwin 1992; Di Pofi 2002). Such models are grounded in an open-systems framework for conducting comprehensive diagnosis, where in simplistic terms, the organisation is viewed as a system of three interrelated elements (inputs, transformations and outputs), that interact with the environment (Burke & Litwin 1992; Coghlan 1994; Nadler & Tushman 1980).
2.1 Levels of Diagnosis
The models postulate that for change interventions to be successful the level of intervention is crucial and as such the level of diagnosis must also be appropriate (Burke & Litwin 1992; Coghlan 1994; Myer, Tsui & Hinings 1993; Nadler & Tushman 1980). Although there are variances in the implied configuration of the components in each level, the framework of the models cited above is representative of three levels; individual (job), group (team) and organisation. Additional levels are included by other models as noted by Coghlan (1994), which tend to be diagnostic of inter-level dynamics in particular. It could be suggested however, that these inter-level relationships are diagnosed in the alignment or ‘fit’ component of an open-systems perspective which is the basis for many diagnostic models (Waddell, Cummings & Worley 2004) and will be incorporated in the following discussion of the necessity for diagnosis at all three levels at Little-Bit. Good
2.1.1 Organisation Level Diagnosis
It is clear that Little-bit can no longer operate profitably whilst maintaining current product quality. Utilising the three stage model of organisational level diagnosis (Appendix 1) proposed by Waddell, Cummings & Worley (2004), it is evident that the task environment (industry structure) is no longer in alignment with both the strategy and organisation design (strategic orientation). Consistent with Porter’s Five Competitive Forces model (in Robbins, Bergman & Stagg 1997) the industry structure in which Little-bit is operating is no longer stable. New entrants are already threatening Little-bit by introducing lower priced substitutes, and the current strategic orientation of the organisation is insensitive to respond to these threats as the organisations’ flexibility is not simply confined to its flattened structure (Graetz et al. 2006). Good
2.1.2 Group Level Diagnosis
At group level, symptoms permeating such as non-sanctioned deals, poor relationships with intermediaries all point towards the necessity for diagnosis at group level. These symptoms indicate problems existing within the balance of power, joint decision making and information flows of the organisation, which theoretically should be the strengths of the current matrix like structure (Burns 1989). In applying a similar three stage model of group level diagnosis (Appendix 2) as proposed by Waddell, Cummings and Worley (2004) and in keeping with the notion of alignment (Drazin & Van de Ven 1985; Nadler & Tushman 1980), the group design components are out of fit with the organisation design feeding into the system. Team effectiveness at the senior level is being compromised by weaknesses in the design components of the group and diagnosis is warranted to determine why the managers are incapable of obtaining information, which should be passing beyond the boundaries of individual groups. Good
2.1.3 Individual Level Diagnosis
As Samson posits (in Graetz et al. 2006) in his fourteenth management principle, understanding how an individual interacts with each part of an organisation is imperative and highlights the importance of the dynamic and interdependent relationships between organisations and individuals. Individual level diagnosis as viewed by the Job Enrichment model of Hackman & Oldman (in Hackman et al. 1975) focuses on variables such as absenteeism, turnover and productivity levels being compromised by unsatisfactory skills or poor performance. It is assumed that these are not alarming problems at Little-bit, however diagnosis at individual level in a open systems framework (Appendix 3) will be imperative in the second restructure, as individual design components will need to be changed to as to ensure alignment with the new organisation and group level designs (Drazin & Van de Ven 1985; Nadler & Tushman 1980). Furthermore, it will be crucial in identifying those who may resist change and those whose cooperation will be essential for successful interventions (Kotter & Schlesinger 1979).
2.2 The hard and soft issues associated with diagnosis
Having outlined the necessity of diagnosis at all three organisational levels, diagnostic models are recognised as still having limitations (Armenakis & Bedeian 1999), which appear to arise by using components in isolation and failing to use a holistic approach whereby both hard and soft issues are viewed as complementary (Stace & Dunphy 2001; Graetz et al. 2006; Whittington et al. 1999). Although no definitive list dictates what issues are considered hard or soft, there appears to be a general consensus that strategy, systems and structure are hard issues, whereas leadership, work practices and organisation culture and values fall within the realms of soft (Stace & Dunphy 2001; Graetz et al. 2006; Whittington et al. 1999).
In acknowledging that additional variables can be included (such as the extensive list of transformational and transactional variables theorised by Burke & Litwin), the inherent tensions and the growing need for organisations to subscribe to an effective integration of both, is well documented (Beer & Nohria 2000; Burke & Litwin 1992; Stace & Dunphy 2001; Whittington et al. 1990). The failure to integrate both the hard and soft issues associated with diagnosis and ultimately change is commonplace, with Burke and Litwin (1992) commenting that the hard elements are often viewed as the ‘critical dimensions’, with the soft remaining the domain of the behaviouralists. Effective integration has the capacity to ensure that when they are both diagnosed, the deeper level behavioural interventions will help to facilitate and institutionalise the harder systems and structural changes (Beer & Nohria 2000; Dunphy & Stace 2001).
Solid understanding presented
2.2.1 The application of hard and soft issues in the diagnosis of Little-bit
Although it is recognised that the implementation of Little-bit’s first restructure by the previous CEO was ‘masterful’, it could be strongly argued that the their failure to articulate the vision of how the new structure would be used to enact the new competitive strategy, is indicative of both poor hard level diagnosis and inherently linked to the absence of crucial soft issues such as culture and leadership (Graetz et al. 2006; Kotter 1995; Podsakoff, MacKenzie & Bommer 1996). This is manifested in the voiced concerns regarding quality and product erosion and public statements to this effect, indicating the failure to diagnose the effect of the assumed new pricing strategy on the shared key values and beliefs of organisation members regarding quality.
The new flatter structure afforded many advantages (Graetz & Smith 2005), however they were undermined by failure to diagnose the tension between the pricing strategy and the culture required to establish the new goals and the way these goals would be communicated through the new structure (Beer & Nohria 2000). This is consistent with the rational model of organisational analysis remaining largely silent on matters such as questioning ‘taken for granted’ assumptions and underlying values (Smircich 1983). Furthermore it is probable that there were no clear boundaries established, or training and development provided to clarify how the collaborative decision making process would actually work (Davis & Lawrence 1978), which subsequently generated much conflict and politics and contributed to the apparent slow response times and the weak relationships with external agents.
Interesting analysis
3. THE RESTRUCTURE CHANGE PROGRAM
The multifaceted plan for the second restructure is outlined in Appendix 4. The plan is composed of eighteen stages, however only the four primary interventions will be outlined in details. The implementation of a balanced scorecard will guide the alignment of the new functional hierarchy with the assumed new pricing strategy, (Kaplan & Norton 1996) and will be used actively with team building and the introduction of both performance management and career development programmes. The blending of change interventions is advocated by Stace &Ampersand "&" is only used with references, when those references are contained in brackets. Otherwise you use "and". Dunphy (2001) and is recognised by the prominent ‘INNFORM’ study, which concluded that simultaneous and complementary changes to processes and boundaries are essential if changes to structure are to succeed (Whittington et al. 1999).
3.1 The scope and style of change interventions
There is little doubt that the restructure does not have the luxury of time to implement a consultative, incremental change process. This is indicative of many organisations having to respond quickly to unpredictable and imminent environmental changes (Nadler & Tushman 1999). Although it is argued by proponents of emergent change that unpredictable internal and external environments require a non-linear, open-ended devolved process of adaptation (Burns 1996; By 2005; Dawson 1994), there exists considerable evidence that effective change, especially in crisis, needs to be planned (By 2005).
A three stage model of change will be used over a six month period as an overarching template for the change process, with research appearing to reach the general consensus that change models “transition from normality through some form of disruption and then to re-defined normality” (Elrod II & Tippett 2002 p. 285). This said however, it will be recognised that the spectrum of change events, can also be viewed as situational or contingent and as such not fall into the planned-emergent dichotomy (Dunphy & Stace 1993). Therefore to accommodate situational aspects of change, the Dunphy and Stace (1993) change matrix will be also used to form a contingent framework for the style of change management necessary for the corporate transformation.
3.2 Preparation
The outgoing CEO has actively dedicated their exiting months to creating a vision of the new structure. Creating and communicating a vision is essential in both emergent and planned change models (Beer & Nohria 2000; By 2005; Kotter 1995). Despite such efforts, resistance still ranges from full optimistic support to blatant obstruction. Due to the strong quality culture existing at Little-bit, the quality-price compromise will conflict deeply with those who do not perceive the change to make sense, and will also unearth parochial self –interest in some (Kotter & Schlesinger 1979), who will perceive loss in the new structure.
However, the radical nature of change required almost mutually excludes the benefit of an incremental approach, whereby resistance could be minimised rather than overcome (Armenakis & Bedeian 1999; Kotter & Schlesinger 1979). A directive leadership style will therefore be necessary to initiate the repositioning of the organisation, which is identified by Dunphy and Stace (1993) as the most common strategy to regain alignment with a changing environment. Furthermore, Little-bit is painfully exposed to the history of the initial unsuccessful restructure, which was highly collaborative and participative. So although extensive research has shown that “participation leads to commitment, not merely compliance” (Kotter & Schlesinger 1979), time constraints do not allow for extensive participation in the preparation stage. The directive approach will use the restructure to “place people in a new organisational context which imposes new roles, relationship and responsibilities upon them” (Burns 1996 p. 191), which is argued, will force the new attitudes and behaviours upon those resisting the quality compromise (Burns 1996). The issue of the top management team in little-bit deserves particular attention as there is a shake-up and there are those who may have to leave the organisation. There were 4 assist directors and under the new structure there will only be 3.Moreover 1 may need to come from elsewhere because of the range of responsibilities – HR & finance
3.2.1 Organisation Confrontation Meeting
Within the first month all key stakeholders will be identified and a map of their influence created in order to carefully select those change agents who may act as change facilitators (Stace & Dunphy 2001; Waddell, Cummings & Worley 2004). Through the forum of an organisation confrontation meeting, the new vision will be articulated to all key stakeholders and representatives from every department. Such a meeting is aimed at mobilising and directing the resources of the organisation to implement the new structure through the balanced scorecard, and are particularly applicable with changes in leadership (Beckhard 1967). Consultants will be employed to empower the change groups identified in the meeting, and together with senior management will communicate through every channel (Kotter 1995) the need for change and how it will be implemented. Herein lies a problem – senior management themselves are likely to be resistant or some of them at the least. A strategy is needed to address this group specifically to ensure that support is obtain and that it is actually support and not genstures and responses covering up covert actions.
3.2.2 Team Building
Crucial to the preparation stage will also be the relationships and communication between the new senior management team. Team building will be used to minimise the risk of the strategic ‘flex’ required to respond to external threats being compromised further by the new functional hierarchy (Volberda 1996), and will focus explicitly on integrating disparate efforts of the previous structure and enhancing decision making and communication (Cohen & Bailey 1997; Waddell, Cummings & Worley 2004). It is argued that team work and hierarchy can exist as complimentary processes (Palmer & Dunford 2002), and by focusing on this, team building will by carried out at the highest level during the first three months. It will be crucial
The human resources, research and development and contracts departments will be raised before the existing departments are restructured. Therefore team building will be used to establish and strengthen cross unit communication to ensure information channels are forged for both vertical and horizontal knowledge integration (Whittington et al. 1999), critical for both internal and external relationships. In addition, team building will be used extensively in the preparation, to address conflict and politics manifesting at the senior level, aspects of which are often ignored in planned change efforts (Burns 1996; Dawson 1994). Yes this is extremely important, so is a strategy for any required exits from the entity The use of an external team building consultant will facilitate the impartial resolution of the internal context issues (Waddell, Cummings & Worley 2004).
3.3 Transformation
Another essential requirement will be for senior management to provide high profile, transformational leadership that will motivate members to the new vision (Eisenbach, Watson & Pillai 1999; Kotter 1995). The responsibility of leaders as summated by Elrod II & Tippett (2002, p. 289) is to “understand the path, communicate the expectations, establish the handholds, and encourage the travellers”. The implementation of the balanced scorecard will be the primary means of facilitating the restructure. Although such leadership cannot be outsourced (Stace & Dunphy 2001), consultants will be employed to provide the subject matter expertise which Little-bit does not possess internally (Beer & Nohria 2000) in developing the balanced scorecard.
3.3.1 Balanced Scorecard
The balanced scorecard will link the long term strategy of Little-bit with the development of new work designs by setting and measuring performance against four measures; people (learning and innovation), internal business, customer and financial perspectives (Kaplan & Norton 2005). Each functional unit, group and individual will establish balanced scorecards during months three to six, with clear measures and targets to assist in the implementation of new work design. These scorecards will be linked to the corporate scorecard, which will be established first by senior management and will enable consistency of vision (Kaplan & Norton 1996). The effectiveness of this intervention lies in the setting of goals at every organisation level, which will take on a more consultative approach, consistent with the suggestion that once the directive transformation has begun, consultative approaches should predominate (Dunphy & Stace 1993). Well explained
3.4 Consolidation
Although the balanced scorecard has been criticised as failing to operationalise the soft, human elements of change interventions (Stace & Dunphy 2001), it will provide an effective means throughout the change transformation and beyond, of monitoring the success of the change process and value creation against all facets internal and external to the organisation (Kaplan & Norton 2006). By ensuring that the hard exterior of the balanced scorecard does not exclude the soft, the human resources function will play a pivotal role in ensuring the new structure, processes and boundaries work (Whittington et al. 1999). You have to remember that this function will now be the province of one of the assist directors – this could have a serious impact on acceptance of information by staff from other divisions
3.4.1 Performance Management and Career Development
The human resources function will enable the correct diagnosis of hard issues such as performance management and reward systems, which are necessary to help stimulate and direct energy towards creating the new culture that was required to enact the strategic systems change (Millett 1998; Kotter 1995), with rewards used to reinforce changes, not drive them (Beer & Nohria 2000). The performance management system will be developed concurrently with the balanced scorecard and will provide the precursor for the establishment of a career development program. Such programs are generally utilised when organisations dismantle career structures through delayering (Marchant 1999). However, the career structures at Little-bit have will be equally as traumatised by the new structure. A proactive and dynamic career development program will be designed to elicit motivation and organisation commitment (Marchant 1999) through a new career structure, which will benefit not only the individual, but the organisation as well (Nankervis, Compton & Baird 2002), in the twelve month period following the restructure.
4. CONCLUSIONS
A theoretical framework of selected diagnostic models has been explored and research evidence used to support the use of diagnosis at all three organisational levels at Little-bit. The importance of alignment between the three levels of diagnosis in an open-systems framework was highlighted and the critical discussion of hard and soft issues providing evidence of weak diagnosis in the first restructure, and the importance of integrating hard and soft variables in the current diagnosis. Such issues focused primarily on the need for clear communication of the new vision and the change in culture required to enact the new pricing strategy and structure.
Various theories of the scope and style change interventions were reviewed and a multi-faceted restructure plan outlined operating within a three-stage change model of preparation, transformation and consolidation. In recognising the importance of a holistic change plan, integrating both hard and soft variables, the complimentary blending of the organisation confrontation meeting, balanced scorecard and team building were used to prepare and transform the organisation, followed by performance management and career development programmes subsequent to the restructure to consolidate the change. Throughout this change program, communicating the new vision through transformation leadership remained paramount to the change in culture and the success of the restructure of Little-bit.
An excellent effort well thought out and explained. Your work is easy to read and reflects a level that is similar to that of a practicing consultant.
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| Marking Criteria for assignment | Mark | Out of |
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| Set 1 | Has the assignment been interpreted correctly? Have you addressed the correct issues? | 38.00 | 40.00 |
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| Have you analysed and provided evidence that your thinking and analytical abilities are at a masters level? (not superficial, but in-depth analyses, less reliance on summarising from sources or quoting too much and more own reasoning based on analyses, etc) | 9.00 | 10.00 |
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| Have you been able to provide sound arguments and balanced viewpoints in reaching conclusions? | 4.50 | 5.00 |
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| Is there academic rigour in what you say? | 4.50 | 5.00 |
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| Do you build you case on a wide range of information and sources? Did you provide evidence of reading extensively | 9.00 | 10.00 |
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| Is there a good blend of theoretical, literature-based perspective and pragmatic perspectives based on own experience and the view of other “real world” practitioners | 4.00 | 5.00 |
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| Did you provide evidence of being a critical reader? | 8.00 | 8.00 |
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| Do your viewpoints make sense based on what is said on any relevant topic/theme in the literature | 7.00 | 7.00 |
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| Set 2 | Is there good and appropriate structure and logical flow to information presented | 2.00 | 2.00 |
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| Have all the relevant requirements been adhered to in relation to doing the assignment | 1.00 | 1.00 |
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| Have you made appropriate use of references and referencing technique | 3.00 | 4.00 |
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| Is it easy to read? Is the style of writing appropriate (eg not in the first person | 2.00 | 2.00 |
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| Is the level of language use acceptable (eg no gross spelling and grammar errors) | 1.00 | 1.00 |
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| Total for assignment criteria sets 1 and 2 | 93.00 | 100.00 |
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| Plagiarism - minor - 20% of marks available | 0.00 | 20.00 |
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| Plagiarism - minor - due to incorrect referencing | 0.00 | 20.00 |
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| Total after the application of criteria set 3. | 93.00 |
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| NB: | Alleged Collusion - mark suspended until decision on collusion finalised |
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| NB: | Alleged Plagiarism - major result suspended until decision on major plagiarism finalised |
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