etgs

Strategic Change Management

Prof. XXX

A.B.C

2/15/2011

Total number of words 4,600 excluding Cover page, Table of contents, conclusion and bibliography.

Table of Contents

Particulars………………………………………………………………..Page Number

Introduction………………………………………………………………4

Task 1 a

Kubler Rosse’s 5 steps of transition cycle…………………..……………4

ADKAR Model…………………………………………………………...6

The Burke Letwin Model………………………………………………...7

Task 1 b

Kurt Lewin’s Model…………………………………………………......8

Task 1 c

Strategic HR intervention………………………………….……………9

Task 2 a

Economic Downturn……………………………………………………10

Increasing Competition…………………………………………………10

Task 2 b

Human Resources…………………………………………….………….11

Physical Resources………………………………………………………11

Financial Resources……………………………………………………..12

Task 3 a (Stake holders)

Employees……………………………………………………………….12

Share holders………………………………………………….…………12

Customers……………………………………………………………….12

Environment…………………………………………………………….12

Task 3 b

Advantages and Disadvantages...……………………………..………...13

Task 3 c

Strategic Marketing Management…………………………..……………14

Task 3 d

Force field analysis……………………………………………………….16

Task 4 a

McKinsey’s 7S Model……………………………………………………16

Task 4 b

BPR………………………………………………………………………18

Goal based evaluation...………………………………………………....18

Conclusion……………………………………………………………….19

Bibliography...……………………………………………………….…..19

British Airways Merges with Iberia

Introduction

British Airways (BA) is among the top five passenger carriers in the world. The Headquarter is

based at Heathrow, London. They earn 4-star ranking for the product and services. The journey

for British Airways has not been so smooth in the past(Sky Trax, 2011). BA it’s most difficult

time during 1970’s especially when British Overseas Airways and British European Airways

merged in 1974. The problem was caused due to major cultural issues among the European

employees and British employees. This led to poor customer service, with a huge impact on

operations. (Emerge Education, 2011) Even in March 2010 with restrictive workers from United

Union where pays were restricted, cabin crews were restricted and free travel benefits were taken

off. Pre-tax losses were reported for £531million. 19Aircrafts were grounded in December2009

which reduced their capacity by 5%. Still this just reduced their losses by £22million a year with

losses of £1million a day in operations (Taylor, 2009).

The only solution which British Airways found was its merger with Spanish airlines Iberia on 9th

April 2010 to create one of the world’s biggest airlines. This merger was provisionally agreed in

November 2009 and was signed in 2010. BA says the merger would benefit shareholder,

employees and the customers. It would save £350million (400million-euro’s) a year for BA. It

will be called International Airlines Group(Travel Daily News, 2010).

Task1a

Kubler Ross 5stages of transaction cycle:

(Grant, 2002)

This model was initially developed to help patients who were dying cope with death and

bereavement, it also provided insight and guidelines with the actual trauma and change and

helped others to adjust emotionally(Busines balls, 2011).

A change is set in an order for understanding and identifying the exact competencies for

managing them efficiently. As per the book “The Guru Guide” 50-70% of corporate changes in

1980’s and 1990’s failed in achieving their objective. As per the survey in the mid of 1990’s;

2/3rd of restructuring efforts in corporate environment failed, and the satisfaction among

employees was low, with lack of trust among employees (Grant, 2002).

Denial: Denial may be a conscious or an unconscious act of refusing to accept fact, information

or truth in relation to the concerned situation. Some people just refuse to accept the change as

they feel that they may be overlooked in the change process.

Anger: People can express their anger in different ways. Some may be angry with themselves

and some may be angry on others. It is the next step after denial. Anyone who may be in the way

could be blamed. Most of the time management, colleagues or shareholders are blamed. Major

part of the anger is towards the ones who are not affected.

Bargaining: Once the anger subsides next stage is a big round of bargaining, to find a way to

avoid incorrect things. In an organisation bargaining may be to do work with less salary, to be

transferred in a different department or be demoted. Mostly bargaining goes in vain. False hope

should not be offered while bargaining. Alternative practical things can be offered. (Changing

minds, 2011)

Depression: With initial denial, anger and bargaining eventually a person has to accept the

change. The unacceptable change leads them into depression. A person can just see the end and

ignore the solutions. People need support from the company. They need to be kept moving, with

professional coaching and counselling. (changing minds, 2011)

Acceptance: In this stage the individual agrees involve himself in the change process and moves

to the next level. People eventually seem to be happier as they adjust with the change and move

forward. (changing minds, 2011)

Extended grief cycle

(Changing minds, 2011)

To gain advantage from the change it has to be looked at as a challenge, mistakes should not be

repeated in the future. Commitment has to be built with the help of goals. It should build self

confidence among employees. The change should be optimistic way and should be

communicated in an effective and an efficient way. (Grant, 2002)

ADKAR Model

Adkar model provides a framework which helps to understand change at an individual level.

Five elements should be together for a change to take place successfully.

(Hiatt, 2006)

Awareness: It shows individuals understanding towards understanding the change and what the

risk may be if they don’t change. It should have information about internal and external factors

due to which a change has to be made.

Desire: It is the willingness of an individual to involve in a change. Desire is a willingness of an

individual to be involved in a change, it also depends upon the persons personal situations.

Knowledge: It shows the information, training and education crucial for the change. It also

represents information with regards to behaviour, process, tools, systems, skills, work profile and

technique essential for implementing the change.

Ability: It shows realisation or beginning of the change. It is also known as converting

knowledge to action. The ability should be demonstrated for the change to be implemented.

Reinforcement: After the change has occurred it should be reinforced for the change to be in

place. It is a mechanism for the change to be in place. A change can be reinforced by

recognition, reward, incentives and success.

ADKAR model provides answer for why some changes fail and some succeed. It has been

proved that the major reason is inadequate training or improper communication.

(Hiatt, 2006)

The Burke –Litwin Model of Organisational Performance

This model classifies social-behavioural factors which influence companies’ performance. The

factors in this model are organised as casual relationships and there is hierarchical relationship

between different factors. This model is not a manual of how a change should be implemented,

but it links different factors casually. It focuses on the ripple effect among different factors.

Proper use of the model helps to understand the importance of the change. It is a dynamic model

the values are constantly refigured. The change mostly occurs in one or more variables; the

variables in an organisation may be leadership, mission and strategy. The elements can be

transactional and transformational and both are crucial for managing a change. This model shows

difference between variables the once influenced by the climate and the once influenced by the

culture. The other set emphasises on the concerned with the process of organisational

transformation which are the changes in the behaviour like the values. These demand for a strong

change in the culture of the company. (Carr, Hard, & Trahant, 1996)

(Smet, 1998)

The above diagram shows how the different factors and variables in the organisation are related

and how do they contribute in organisational performance.

Task1b.

The driving factors for BA towards change were financial pressure, economics, transition of a

new CEO and the need to be competitive. And the reasons for change were changes in customer

expectations, increasing competition in airlines industry, the merger of British Overseas Airways

and British European Airways and increasing employee expenditure.

Kurt Lewin’s Change management model

This model focuses on the factors that influence them to change. According to him the three

steps required for amending a change successfully are Unfreeze, Change and Refreeze. This

theory has also been criticised for being too basic. Most of the things have been changed after the

introduction of this theory since1947. Still this theory is very much relevant. Most of the recent

changes are based on this model.

Unfreeze: This stage gives us an understanding of the dynamic world. It is about getting

prepared for the change. It shows the importance of the change. The necessity of the change

determines the urgency. Unfreezing is motivating others and our own self for the change.

Change: This is the transitional phase of the change. Kurt Lewin was aware that change is a

continuous process not an event. It’s a movement inside the company where the reactions occur.

The reaction may be from the employees or from the management. It generally occurs when the

required changes are needed. People should be made to unfreeze and moved in the required

direction. This is the most difficult stage and the employees are afraid and unsure about the

change process. This is a difficult time for people as they try to understand the changes, they

need time to someone to be along with them to understand the change. Support and guidance is

crucial at this stage and it can be provided by training, coaching and accepting the mistakes as a

part of the change process. Role models can be used so that employees can find their own

solutions. A clear picture should constantly be communicated to employees, so that they know in

which direction are they moving.

Refreeze: This stage is about achieving stability after the changes have been made. In this stage

are accepted and it becomes a routine. Employees build new relationships and it becomes a part

of their usual business. Now-a-days changes occur really quick, the next change in an

organisation could be in a matter of weeks or months. So the refreezing process may not be

accepted, the change process may be chaotic and higher level of flexibility is demanded.

(change management coach, 2011)

Task1c

Strategic intervention holds a huge value to a company especially during the process of change.

HR intervention can be in the area of policy formulation and personnel manuals which provide

guiding lines to the employees so that course of action can be decided. Here the policies are

mentioned in a simple way. Manual can be a book which holds information about the companies’

objectives, different authorities and responsibilities. It also clarifies procedures to be followed.

HR intervention also deals with training programmes so that improvements can be made in long-

term. HR team makes sure that training programmes are conducted effectively.

Performance appraisal is conducted in a timely manner for judging the ability of employees with

regards to their role in an organisation. It helps in determining increase in wages, transfers and

promotions, identifying best performer and requirement of training and development need.

(HR Connsultation Services, 2011)

Task2a

The Generic background to change with BA is the economic downturn and the increasing

competition in the airlines industry.

Economic Downturn: The current time has been against airlines industry. The entire industry is

facing worst time ever and it is very unlikely for the changes to change shortly. Different

marketing strategies are being adopted by airlines around the world. Airlines are bringing their

fairs down. In the following years the situations would be even more difficult as the fuel prices

are raising steadily. (Brentster, 2011) Back in 2008 the CEO of BA even said that the fares

would increase by 4% as the airlines would be spending £1billion extra on fuel. Willie Welsh the

CEO also said that the rise in ticket price was inevitable as the cost for fuel would exceed

£3billion. Martin Broughton the chairman, informed shareholders in an annual meeting that

“higher cost and economic downturn meant that it would be an achievement if BA broke even in

current financial year.” He informed BA and its peers were “up to our necks in the biggest crisis

the aviation industry has ever known.” BA also is planning to reduce its capacity by 5%. Mr.

Walsh BA would slow their recruitments or even stop them for a while. Previous year BA had

hired 3,000 new employees. (Stiff & Costello, 2008)

Increasing competition: Airlines industry as always faced huge competition and it is increasing

at a steady rate in the recent years. New airlines are constantly reducing their cost to attract more

flyers. The competition depends upon the route, the most popular route where BA flies is

London Heathrow to New York JFK and the competitors on this route are Virgin Atlantic,

American Airline and Delta Airlines. Today BA’s major competitor is Ryanair International

carrier established in 1985 in Dublin with just 57employees with primary route from east Ireland

to London Gatwick airport. And now it is one of the largest low cost airlines in Europe. As the

goodwill and the capital with Ryanair was increased the number of passengers also increased the

following graph shows the increasing number of passengers from 2006 to 2009.

(Fliiby, 2011)

Task2b

The resource implications for change may be Human Resources, Physical Resources and

Financial Resources. Implications of Human resources for change would require restructuring

the system, interviewing new recruits and hiring new people in the process of change.

Redundancies should be avoided and proper training programme should be conducted.

Implications in terms of physical resources may require purchase of brand new equipments and

tools required for operations, new vehicles and buildings as well. The most important heavy

financial resources would be required to cover the cost of recruitment and training of the new

employees. Redundancy cost is involves and if the firm requires relocation finance is required

for the transportation and setting up new infrastructure. If the business requires the existing

system to change cost is involved in refurbishing the building.

Human Resources: With BA back in 1981 staff number was reduced from 52,000 to 43,000

which was a decrease. In 1982 another 7,000 staff members were laid off and the number of staff

was left with approximately 35,000. (Emerge Education, 2011) Even recently BA has cut 1,200

jobs so by March 2010 they reduced the employees by the total of 4,900. BA has been bearing

losses of £29million by the end of September 2009. (BBC, 2009) If BA fails to respond to this

change it may not be able to reduce its losses.

Physical Resources: BA is already working really hard to reduce its cost on fuel. Recently they

have also grounded some of their inefficient carriers.

If BA would still continue to use their old carriers, it would huge expenses in terms of fuel cost

and maintenance. It will be difficult for BA to compete against other airlines.

Financial Resources: BA has reported pre-tax losses of £164million between April-June2010

where it was £148million in the same period 2009. The losses in 2010 were due to employees

strike. The entire impact in the quarter was £250million. Even the ash cloud from ice-land in

April was a major reason for losses were the airspace had to be closed for six-days. However the

major cause for the loss was when BA cabin crew the members of United Union went for the

strike for 22days. Fifteen days of strike in May and June was worth £142million and rest of

seven days the losses were worth £6 and £7million per-day. So the overall cost of the strike was

around £184million to £191million. (BBC, 2010)

Task3a

Key stake holders can be defined as “a stakeholder (either individual or organisation) that has

power to kill the project. (circle & Bourne, 2001) The key stakeholders with BA are the

shareholders, customers, employees and the environment.

Employees: Employees are one of the key stake holders for BA as service is the major part of

their business and they have a huge influence on the service being provided. When the strike was

announced at BA on 14th December 2009 by United Union members against the pension scheme,

it affected a million BA passengers. The strike was called when BA was already on the course of

loosing £600million and it was due to pension deficit of £3.7bn one of the largest in private

sectors. Strike of 12,500 Cabin crew impacted 910,000 passengers where the losses were around

£300million. This shows that the employees have a huge influence on the working of the

company and BA needs to involve the employees and the union and consult them about the

future changes. (Gurdian, 2009)

Employees can be kept involved in the change process by providing them with all relevant

information about the merger. They should be informed about the importance of the change and

how will it help them. They should be adequately trained for their future roles.

Shareholders: The merger has received an overwhelming response from shareholders in Britain

and Spain. In a meeting in London on 29th November 2010 the merger deal was backed-up by

99% shareholders. BA’s shareholders will hold 56% of the shares for International Airlines

Group where as Iberia’s shareholders’ will receive 44%. (Moore, 2010)

The shareholders have to be kept informed about the financial structure of the company. They

should be involved in the decision making for the change. They should be supplied with all the

necessary documents involved in the change.

Customers: Customer satisfaction is a major factor for success for any airlines and with BA

health and wellbeing is considered very important. Customer opinion towards the change process

is considered crucial for future development. The surveys are monitored through ‘global

performance monitor’ so that the future change can be made effective. (British Airways, 2011)

For the merger customers need to be continuously informed about how will the change effect

them, what will be the ticket rates, the service improvements and the changes in the routes and

destinations. They need to be convinced that the merger would benefit them to suit their needs.

Environment: BA is a leader with regards to CO2 emission with carbon per-capita of 367.7t.

They have saved 28,055tonns of fuel in 2009 which remarkable and exceeds all other estimates.

As per the published data BA meets the standards of being the leader in airlines industry. BA has

also shown keen interest in the fuel the use while using ‘Auxiliary Power Units’ which are small

jet engines located at the end of the airplane and provide power for ground operations. (EcoDesk

Beta, 2011)

In the process of merger it is necessary for both the airlines to consider the environment to meet

the government regulations. Environmental factors for either of the countries should be taken

into consideration so that the change should go smoothly.

Task3b

Advantages

Stakeholder analysis gives a better understanding of the behaviour of stakeholders’ behaviour, so

that they can be managed in a better way.

Stakeholder analysis helps in better strategic decision making for future.

It helps in building relationship with stakeholders.

Analysis helps to prioritise stakeholders.

Disadvantages

The analysis has to be done at regular intervals as the situations are dynamic.

The analysis could be subjective at times as the management has access to the position of each

stakeholder.

Most f the times the actual cooperation with stakeholders is missing.

It is not possible to satisfy all the demands of the stakeholders.

(12 Manage, 2011)

Task3c

For developing the change management strategy in consideration to the key stakeholders should

involve all of them in a proper way in the change process.

Like all firms BA has a stake in how the stakeholders behave. BA operating environment

includes relationship with their stake holders as a part of their management. Proper stakeholder

management holds a lot of value for BA. The reason for stakeholder management is to achieve

market success. Stakeholder management assures profit, revenue and gives returns to

stakeholders. Consideration of stakeholders in decision making helps to avoid dissatisfaction of

stakeholders towards the company. (12 Manage, 2011)

For involving stakeholders in the strategy of change management we can use six step

stakeholders circle. Stakeholders can be internal, external, social and environmental. The six

steps are applicable to five project phases; identification, programming, appraisal,

implementation and to facilitate management.

Identification phase: It is done when the project is conceived in the project identification phase.

It includes studies which are pre-feasible which may be utilised for identifying, investigating,

selecting or prioritising an idea. This idea may later be used for considering cost, benefits,

environmental or stakeholder’s parameters. Social and ethical issues can be brought forward for

the consideration. The knowledge gained in the identification phase can be used forecast and

manage their behaviours and activities. (Chinyio, 2010)

Prioritising: As per the identification, stakeholders’ can be prioritised as per their influence on

the organisation.

Programming phase: This phase gives the guiding lines and principles which should be

followed whole running the project. Internal stakeholders can be managed through procurement

method. Procurement method shows the limits between participating companies and shows how

risk and responsibilities can be allocated. This tool is designed to manage project activities and

the stakeholders. It helps to identify potential conflicts which may arise among internal and

external stakeholders. (Chinyio, 2010)

Appraisal phase: In this phase projects key factors are assessed. The factors may be regarding

finance, implementation and quality. This is also known as ‘make-or-break’ point which decides

if the project is viable or not. Shareholders could determine if they could get adequate returns or

not. External stakeholders’ reaction can be measured and the final decision of continuing or

abandoning the project may be taken. (Chinyio, 2010)

Implementation phase: Different professionals in supply-chain are brought together. In this

phase the actual work of designing the company, managing organisation, contracting companies,

financial institutions and others come together. It was seen that high end of scale, client or their

representatives provide major inputs and influence to determine the work relationship. (Chinyio,

2010)

Monitoring changes: After the changes have been implemented they have to be monitored to

check if the changes are effective enough or not. Monitoring is the most important phase of the

change.

Task3d

Resistance does occur in an organisation during a change, it is considered as a process of change.

Resistance may be from different areas. It may be an individual resistance or from a group of

employees. It can be passive or even active, direct or indirect. The resistance may be seen in the

behaviour of the employees or in their attitude. Resistance can be major or even minor change, it

depends upon the nature of change. (EThames Graduate School, 2010)

Force Field analysis approach is one good way of managing resistance to change. It is based on

the concept of driving forces and restraining forces. As per this approach reducing the resisting

force is preferred as increase in driving force may result in increase in restraining force.

(EThames Graduate School, 2010)

My strategy to managing change with BA and Iberia would be to communicate the reason for

change to all the stakeholders of the company so they would be aware of the change in advance

and immediate news will not shock them. A clear vision should be communicated to them as the

company is already making huge losses and the merger would make BA one of the biggest

airlines in the world. If BA would continue to work in the same way it would be difficult to

survive for even 10years. Stakeholders should be involved in the process of change so that they

would know and understand the process of change. Their involvement would include their keen

interest in the process of change. Employees would prefer to be a part of change rather than

being spectator. There should be someone to listen to them their input and feedback should be

appreciated as it may prove to be valuable. Support should be taken from all the key power

players as they would provide important insights about their departments.

Task4a

For the merger of British Airways and Iberia McKinsey’s 7’S model would be appropriate as it

provides emphasis on 7of the crucial factors of an organisation during the process of change.

McKinsey’s 7S model is generally not considered as pure strategic model, however it is thought

about remodelling an organisation. It is named from its 7factors which McKinsey discovered for

the development of an organisation i.e. strategy, skills, shared values, structure, staff and style.

Generally when a firm moves to change its organisation the 7S are to be followed in the

sequence. The strategy should be determined first and the following step defines in which area is

organisation good in where the strategy can be used. Finally it is to be decided which changes are

required in 5other factors so that the change can be effective.

Strategy: It shows which area should be focused and what actions can be taken to achieve a

good competitive edge. Strategy shows where should the firm compete and how.

Structure: It shows how different sections in an organisation relate to each other i.e. centralised,

functional division, matrix, network, holding, etc.

(Value Based Management, 2011)

System: It is the daily process of the company; it involves employees for identifying crucial

issues to get things done. System has big influence on what actually is done in a firm. It is

considered as a powerful tool for changing a firm.

Staff: It deals with what kind of employees is required by the organisation. It is not a question of

a single person as of total know-how possessed by the employees in an organisation.

Style: Style has 2elemants ‘personal style’ and ‘symbolic actions’. So management is not about

personal style; however it is about what people do in a firm. Style is about how people use their

personal skills.

Skills: These are the distinct capabilities of an individual or a company as a whole.

Shared values: Values provide as a guiding line for the organisation. These are things which

everyone is aware of and is very important for an organisation to survive and succeed.

(Karlöf, 1993)

Task4b

Business Process Re-engineering is a powerful tool which helps an organisation in most of

difficult situations. It has created interest in organisational circles. This tool is designed

specifically to help in situations where huge improvements are required which cannot be brought

about with the existing structure of the process being used currently. BPR does not replace

continuous improvement. Once the business has been reengineered, it requires techniques of

continuous improvement. This process is applied so that decay can be avoided (Robson & Ullah,

1996).

Five step approaches to BPR would be:

Developing business and process objectives: Vision drives BPR and is implied on specific

business issues like reducing cost, reducing time, improving quality.

Identifying business to be redesigned: Many companies use “high-impact” approach which

prioritises important processes or the once which come across companies vision. Some

companies also use “exhaustive approach” which checks all the processes in a company and

depending upon the urgency they are prioritised.

Measuring: For avoiding old-mistakes to be repeated it is important to understand and measure

the existing process. It gives a baseline for improvements in the future.

IT levers: BPR is influenced by IT capabilities.

Prototypes of new process: Design is not the end of BPR process, but it is a prototype with

iterations.

(12 Manage, 2011)

Goal-based evaluation

Inappropriate attention on goal-based model caused difficulties for decision making in an

organisation, so that the decisions makers find it difficult to guide the organisation through social

and political environment. “These evaluation of performance may show that the organisation is

performing effectively while, at the same time it may under attack from many quarters of

performing ineffectively.” The decision makers who are trying t resolve the issue would use the

evaluated information to fix the deficiencies in performance. Changes in the preference of

managers are shown in goal-based evaluation (Zammuto, 1982).

Conclusion

The report shows how different models and theories can help in the process of change in an

organisation. I learnt that every theory gas a unique nature, where some points could really help a

company to make changes easily in a particular situation. I was able to understand the factors

which are important to drive a change. It shows that HR intervention can make a huge difference

in the working of an organisation. Implications of human, physical and financial resources have

been clarified. Importance of stakeholders and stakeholder analysis to the firm is shown. It also

shows how resistance to change can be managed with few easy and effective steps.

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