Show MoreA Strategy for Organizational Change
The situation of AB Organisation is very complex and difficult, due to the unstable situation given in the external environment and in the internal structure of the company.
The first step that the new Managing Director of the AB Organisation must take is to analyse the past and present situation of the company, to know the reasons of the situation nowadays.
Through the SWOT (Strengths, Weaknesses, Opportunities and Threats) analyse and the PESTEL (Political, Economic, Sociocultural, Technological, Environmental and Legal) framework the company will know their own strengths and weaknesses, the needs of their customers and nature of the environment in…show more content…
This will be reached by visioning techniques and scenario building, so we could create different organisational realities and select the most favourable for the company.
To apply this vision in the company, we have to use a changing program or strategy. Due to the situation of the AB Organisation company we consider that the best strategy for change is the Four Phase Model of planned change of Bullock and Batten(1985).
This strategy will describes Planned change through two major dimensions: change phase and change process.
So we are going to follow 4 steps in our change program, to change the present situation of AB Organisation.4
The first phase consist in explore and decide if we want to realise changes in the AB Organisational company. Due to the situation of the company with its under-performing and counterproductive Management, and the change of the industry, we consider absolutely necessary to put in practice a radical change. Our first task is to plan the changes.
For this first step we are going to need an impartial part in this process, which has
Organizational change is the procedure by which organizations transform from their current form to preferred form to have an overall higher effectiveness. Organizational change denotes to any change in the structure, technology or culture of an organization that aims at increasing the effectiveness of the organization. It is also refer to any change which occurs in the complete internal and external environment of an organization. When an organizational system is disturbed by some internal or external force, the change may occur. Organization Change may be intended or autonomous, but in specified cases the management of the change is very necessary.
Organizational change is a significant issue in contemporary environment for any dynamic organization. This is a primary technique to keep up with the constantly changing environment and the competitive market, so for almost any organization planning and managing change is a key to success in both productivity as well as competitiveness. Close organizational structure creates an organizational viscosity and conflict of interest within the organization which affects the organizational change; thus making the organization incompetent in the environment it is operating in (Anderson, 2009). Managing change cycle is a restoration process through which the organization copes up with the external and internal environment.
Change management is a strategically planned approach to initiate and manage the change process in the organization structure, technology and culture as well as the individuals/teams behavior and attitude towards the change transition in the field of the business processes, technology implementation or any other policies of an enterprise (Stephens, 2003). Change management is about modifying or transforming the organization in order to maintain or improve its effectiveness.
Organizational Change in Shell Oil Company
Shell Oil Company is the US based subsidiary of Royal Dutch Shell. The Royal Dutch/Shell Group is unique among the world’s oil majors. In 1907, Shell was formed from the Merger between two oil Giants; Netherlands-based Royal Dutch Petroleum Company and the British-based Shell Transport and Trading Company Happened. It is the world’s biggest and oldest joint venture. Shell currently is one of the America’s leading oil and natural gas producers, gasoline and natural gas marketers and petrochemical manufacturers. Shell is operating its business in 50 states and has more than 22,000 employees in America alone, delivering energy in technically innovative ways (Shell Co., 2009).
Changes in Shell Oil Company
From 2000 onwards, Shell Co. has gone through comprehensive organizational change, in both internal and external aspects, and has emerged with a new outlook. Shell has experienced changes in structural point of view as well as some minor changes in the technological and cultural aspects. This transformation program covers the following three main areas describing the need of the organization with respect to shaping external environment structure:
Organization restructuring (from a Mechanistic Bureaucracy to a Simple Flexible Structure)
Empowerment and development through cultural change.
Effective decision-making through behavioral change strategies.
Need of Change in Shell Oil Company
After the revolutionary change in the oil exploration and marketing industry in the late 90’s left with a very dynamic environment for the companies thus the need for a major organizational change was eminent. Shell responded to this need and planned to restructure the complete business after the millennium as per to comply with the newly demanded changes of the competitive oil markets.
Formerly, Shell Oil Co. had a very formal and rigid organizational structure with major emphasis on the standardization within the organization. This was to ensure the standards of the premium quality of the products Shell was producing and providing all these years. The company was following a Mechanistic Bureaucracy as well. The company’s procedures, techniques and culture were borrowed from the parent company for the various operating companies shell owned. Coordination and Control; another major aspect in Shell was the concept of coordination through complete control; it was believed that only through proper control can proper coordination be achieved in the company, hence the employees had no authority and autonomy under their job descriptions. Strategic Planning; Planning in Shell in the olden days was also considered only for long term achievement, the concept of operative or business planning was yet alien to the company (Leban et al., 2005).
There were many loopholes and problems in the company prior to the changes such as, outdated system, lack of professionalism, and lack of business visions, bureaucratic structure, aggressive market competition, and other environmental factors.
Change Process in Organization
A company is known by its employees; therefore the first step taken by the Shell was to recruit professional market experts from outside the organization. Proponents of organizational change, including the heads of several departments were made into teams and think tank as what lacked in the Shell business portfolio.
Shell had many operating companies working under its name so, the finance function, and Group Planning, had little success in persuading the Committee of Managing Directors of the need for large-scale change. In the early 90’s, Cor Herkstroter was made the Chairperson of Shell. Professionally he was an accountant, who had devoted a lifetime towards Shell; he was a reserved person and was a risk-averse person by nature. He is describes as a reserved, Formal and Charismatic person. However, Herkstroter was widely respected for his intelligence and excellent Planning. By 1999 it was identified that there was a change needed in the company so he wanted to adopt a simple adhocracy structure to have a more flexible buffers to adopt the new environment of the Oil Industry. In early 2000, he took the bold initiative and restructured Shells Management staffing by recruiting almost 50 new managers in the company as well as separated the position of CEO and non-executive chairman of the board (Kanter, 2003).
The board of management was broken down into three sub-committees; the human resource committee, the audit committee, and the finance committee. The main purpose of these committees was to understand the external and internal environments and accordingly review both old policy and room for changes; if there was any requirement for a change then how would be this change delivered in the company and what other steps would be taken as to ensure future growth and prosperity in the company.
Change in Shell: The Intervention Strategy Model (ISM)
There are many tools available to help guide successful change in an organization. The concept behind this model is that the organization is a system made by various sub-systems. All resources whether they are human resource, an operation or a function, a good or a service are sub-systems and a small part making the entire system. The complete system is dependent on the change of any of the sub-systems; hence, if one of the many sub-systems shifts, the change in the complete system would be eminent (Dunphy, 2002). The intervention strategy model(ISM) is based on the premise that messy change situation may be effectively manage through the application of system thinking. This is hybrid model which is firmly based on the traditional investigation techniques associated with the school of operational and system management.
This approach indicates that any process or activity could be a system, herein Shell Oil Company is considered as a system. A system approach provides clarity, understanding and sense of direction. More importantly it provides a mean of tackling knowledge management related change events and gets things started. A system must have a predetermined objective that the interrelated components strive to achieve (Dunphy, 2002). In case of Shell, they had clear objectives to introduce a Simple Structure in the company.
The intervention strategy
An intervention strategy may be regarded as the procedural methodology for successfully intervening in the working processes of the original system. The ultimate result should be a stable new environment, which in incorporates the desired change. After the analysis of Shell intervention strategy, it seems and fit to some extent in intervention system model (ISM). Intervention system model share the following three basic phases approach.
Definition phase; in this phase strategy of change is defined, its nature, impacts and formulization. Identification of problems is must important part of this phase. In case of Shell they did the same, first they scanned and analyzed the whole system (organization) and identified the problems which they were facing and then they formulized the change strategy. They created Think Tanks consisting of heads from all departments to ensure this step being carried out with the utmost perfection (Cook et al., 2004).
Evaluation phase; this phase involves generation of options and potential solution to the problems. A wide range of techniques are available for option generation, e.g. attitude survey, brainstorming, Delphi, interview, desk research etc. There is no clear picture about the option generation in the case of Shell, but solution to the problem is obvious i.e. restructuring of organization, empowerment and development of employees etc.
Implementation phase; this is the practical phase of the intervention strategy, the objectives are clear and current, options selected and review, and the system well defined and understood. Now all that is left is to introduce the change to the system, but for this Shell needed a sound strategy.
Contemporary Organization Structure of Shell Oil Company
The Structure of Shell was transformed from a strict bureaucratic structure to a simple flexible structure characterized by autonomy in decision making to respective department members, flexibility in work arrangements and approach defining for goals achievement. However, the company did not compromise its formalization (Shell Co., 2009). Shell was employed with the Matrix Structure to ensure the proper freedom and flexibility of the company to cope with the dynamic environment (Robert, 2002).
Strategies that are followed by leading corporations have outstripped the abilities of organizational structures to support them. They suggested that there is a ‘structural-complexity’ trap that paralyses the ability of companies to react quickly to market needs (Robert, 2002; Cook et al., 2004). The main objection to the matrix structure concern its ability to create confusion over who reports to whom, loss of accountability and ineffective information management. There is also danger of evolving unproductive power struggles as priorities shift toward self-interest and political posturing. In consideration of this, Matrix structure was not applied to entire organization by Shell Co. management; only few segments of the organization were incorporated by such structure (Cook et al., 2004).
The new changed structure was still identifying differentiation in the formalization structure and the management structure. Therefore, the formal structure of all concerned companies to Shell continued without any major changes in the formalization aspect. The New heads and Board of Governance of Shell cleared the governance purposes of the various different systems or groups, including shareholder, legal obligations, the recruitment and all other related to the devised change intended in Shell. Management structure was the more affected part where major changes occurred, especially within the service and marketing divisions of Shell. Employee hierarchy was synchronized and redefined to enable productive employees’ employment, appropriateness of task arrangement and goal-setting, and empowerment decisions concerning employees’ ability and management discretionary trust (Robert, 2002).
Changed Culture and Behavior
Changes to the formal organizational structure were only one dimension of the organizational changes. Changing Structure may not induce a big enough change as to comply with the desired change required so there had to be some other changes initiated in the company as to promote a massive scale change, and change in employee was the other aspect holding the company back so this change was eminent. The criticisms leveled at Shell for being bureaucratic, inward looking, slow, and unresponsive were not about organizational structure, and they were about behavior and attitudes (Robert, 2002). The structural change may result in the desired change but to ensure the acceptance of this change the behavioral and employee attitude change is very important.
Hence due to this fact the overall culture and behavior within Shell also took a detour, from the complete standardized behaviors of employees to significant decisions concerning the behavioral factors towards empowerment of the employees. This not only encouraged a strong organizational culture in the organization but also improved the overall timely decision making at Shell Oil Co.
Results of Organization Structure Transformations
Over all transformation policy at Shell Oil Co. was successful. There was a clear consensus within the company that the organizational changes made during this period had created a structure that was much better able to respond to the uncertainties and discontinuous changes that affected the oil industry. The summary of the result is following; Customer service is improved, organization became decentralized from centralization, managers became more autonomous, more check on transparency and accountability, task driven organization, stress on team work and share responsibilities, Improved brand image, (by improving products quality and by good customer service), Introduction of new vision outlets, equipped with all modern facilities e.g. auto car washing, More focus on training and development of employee, market share increased, profitability increased. Therefore, the overall change was successful and the adaptation to the change was also positive from the employees which further induced the success.
Recommendations for Change Management Improvement
The best model of the change is that of Lewin’s Change Process which says that change process contains three steps:
Unfreezing: Reducing the forces that are striving to make status quo
Moving: Developing new behaviors values and attitudes
Refreezing: Introducing of new systems and procedures.
If we see at Shell one can conclude that change was sudden unfreezing step was not appropriate for such a large company. Another problem was that there was more emphasis given on implementation then other two steps, Intervention strategy is mostly useful in a small-medium enterprise but Shell is a large company. So the best approach for this is Lewin’s change process in which there would be proper unfreezing and then implementation of the strategies, structures and culture in the organization (Burke, 2008). The company should involve its operational core employees in decision making regarding organization’s long term goal setting and short term objectives. This would provide the consistency in transferring of communication and proper delegation of empowerment an authority which would increase the employee involvement in the change process. Progressive change in different parts of the company will increase the reliability of change effectiveness in consideration of remarks by the employees. And impact on their performance level signified in organization performance.
The real change process was started in Shell when the top Management identified the structural inefficiencies of Shell in comparison of the Oil and Gas Industry after 1999. Also after the management change in the Shell which gave spark to new managerial structural Change, it was then managed by some of the most charismatic leaders of the company. The Model used for the change was Intervention Strategy Model in which the implementation and management of the change was delivered in three stages.
The complete procedure was very fruitful for Shell. The only problem Shell encountered was the application of Matrix Structure which should have not been used as a new structure. This made Shell become a small subsidiary in various countries rather a Giant. The Structure was noted to have gone through several other changes until its final form of Professional Bureaucracy in the current most contemporary situations.
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