PARIS GRADUATE SCHOOL OF MANAGEMENT

ORGANIZATION DEVELOPMENT AND CHANGEASSIGNMENT 1

SUBMITTER ID SEMESTER

: HO YEOW CHUNG : MAL10048 : JUNE/2010

Evaluate the significance of the main triggers for change which exist today, in terms of the amount of pressure they put on organizations.

In the 21st century, business market has become more competitive than before. The competitive environment has brought changes to organizations who are trying to survive and to earn profit in the market. Organizations are systems that exist in the context of an external environment, in a dependent relationship, and that interact with it in order to survive and grow (Harigopal, 2006). From the perspective of organizational development, change is .a set of behavioral science-based theories, values, strategies, and techniques aimed at the planned change of the organizational work setting for the purpose of enhancing individual development and improving organizational performance, through the alteration of organizational members. Onthe-job behaviors (Weick & Quinn, 1999; Porras & Robertson 1992). According to Cummings & Worley (2008), there are three major trends are shaping change in organizations: globalization, information technology, and managerial innovation. We will be discussing how this three major factors shape the change of an organization later in this paper and we will discuss on the factors that recommended by other researchers too.

According to Anna (2002), Douglas Kellner, Globalization is used in so many different contexts, by so many different people, for so many different purposes, that it is difficult to ascertain what is at stake in the globalization problematic, what function the term serves, and what effects it has for contemporary theories and politics. Globalization is changing the markets and environments in which organizations operate as well as the way they function (Cummings & Worley, 2008). In fact, globalization made a lot changes to the world economics and politics. According to Manfred (2005), globalization should be confined to a set of complex, sometimes contradictory, social processes that are changing our current social conditions based on the modern system of independent nation-states. The emerging of new economy countries such as China, India, Brazil and Russia has changed the world economy system. Globalization has changed the world become smaller as everyone of us could reach every angle on the earth. Because of this, the global competitiveness has increased as more products or services are free flow between countries. The emerged of China has changed the way business being operated in the region, more foreign direct investment are going into China instead of ASEAN countries which were the preference before this.

Cummings & Worley (2008) emphasized that information technology is redefining the traditional business model by changing how work is performed, how knowledge is used, and how the cost of doing business is calculated. According to Businessdictionary.com, Information Technology is a set of tools, processes, and methodologies (such as coding/programming, data

communications, data conversion, storage and retrieval, systems analysis and design, systems control) and associated equipment employed to collect, process, and present information. In broad terms, IT also includes office automation, multimedia, and telecommunications. Technological Forces; the world is presently characterized by dramatic technological shift. The technological advancements, particularly in communication and computer technology have revolutionized the work place and have helped to create a whole range of new products or services (Harigopal, 2006). With the growth of information technology, business environment has changed from brick and mortal to click and mortal. Online companies such as Amazon.com, Ebay.com and Lelong are some examples of businesses emerged from the development of Information Technology and it has changed the way of doing business. Besides e-commerce, information technology has stimulated the development of various business functions such as electronic database marketing, electronic database interchange, and intranet.

New organization forms due to the development of globalization and information technology. According to Cummings & Worley (2008), managerial innovation has responded to the globalization and information technology trends and has accelerated their impact on organizations. New organizations forms such as consortium, strategic alliances, networks, virtual corporations provide new ways of thinking about how to meet the expectation of consumers. There is no single company in the world such as IBM, Mitsubishi, General Electric, BASF and Procter and Gamble could control or change the environmental and market uncertainty it faces. In order for organizations to maintain its sustainable profitable position, the management apply new way of monitoring such as Six Sigma, Lean Manufacturing Practices, reengineering, mergers and acquisitions. All these factors contribute to the change of an organization.

Besides the three factors discussed earlier on which contributed to the organization change, Harigopal (2006) suggested that forces for change could be divided into external forces and internal forces. External forces including the factors of political, social, economic and competitive environment. Whereas internal forces are changes happen in the organization itself. Political forces such as the change of government, the instability of politics environment would cause to the organization to change and to suit to the environment in order to make sure the business is going on. The change of government policies and regulations will explicitly lead to change. For example, Malaysian government fixed the exchange rate of 1 USD equivalent to RM 3.8 had lead to the change of company forex policy. Malaysian government had announced that RM 50 will be imposed on credit card holder as a tax. With the implementation of the credit card tax, bankers are changing their way of attracting new customers as the public refused to hold more credit cards.

A variety of changes exist in an organization due to the nature of the human environment. Harigopal (2006) had highlighted few factors such as system dynamics, inadequacy or existing administrative process, individual/group expectations, technology, structure, profitability issues and resource-constraints which will lead to the change of an organization. An organization is made of a system and many sub systems which will bring the organization operation in place. The coordination among the systems and how to modify the system so that the organization cold run better are the sources of change. Basically, every organization wants themselves to growth and develop in the market place, the process of growth and develop will lead to changes and this is the nature of business environment.

As a conclusion, there are few factors that lead to the change of an organization. The major three factors suggested by Cummings and Worley (2008) are Globalization, Information Technology and Managerial Innovative contributed to the change of an organization. However, other researchers suggested that actually the environment of the business itself contributed to the change of an organization and forces coming from externally or internally. With the only purpose of running business; to gain profit margin, changes are essential to make the organization better and more profitable.

References: Thomas G. Cummings and Christopher G. Worley, 2008, Organization Development & Change, Cengage Learning, Canada. K. Harigopal, 2006, Management Of Organization Change, Unipress Publishing, Malaysia. Anna Dimitrova, 2002, Challenging Globalization-The Contemporary Sociological Debate About Globalization, A Theoretical Approach, Centre International de Formation Europeene, Institute Europeen des Hautes Etudes Internationales. Karl E. Weick and Robert E. Quinn, 1999, Organization Change and Development, University Michigan of Business School, Annual Reviews Psychol, 1999 50:361-86. Manfred B. Stegar, 2005, Ideologies of Globalization, Journal of Political Ideologies 10(1), pg 11-33.

Evaluate the success of change interventions by using examples from real companies (reported in the press or academic literature) of how two organizations have responded to these pressures to change. Explain the type of changes interventions made, using terminology used in the course where possible.

Case Study One- Transforming a high-performing company: An interview with Roberto Setubal, CEO of Itau Unibanco. This article is basically outlined the details of the interview with Mr Roberto Setubal, CEO of Itau Unibanco. Its unusual for a CEO who has led a company through more than ten years of strong growth and financial performance to stop and consider whether the business should be run differently to meet future challenges. Its even more unusual for such a chief executive to initiate a major transformation introducing a new way of managing this highly successful company-a transformation involving its culture, organizational structure, decisionmaking processes and leadership style (Oliveira, 2009).

The CEO of Itau Unibanco, Mr Roberto decided to transform the company so that the company would be able to face the future challenge despite they had gone through steady organic growth since inception. During the beginning of the transformation journey, Mr Roberto decided to change the companys management model from command-and-control model to an open and creative dialogue model. This change is the Human Process Intervention which focuses on the interpersonal and group process approaches (Cummings & Worley, 2008). This approach focuses on helping members of groups to improve working relationships with one another and assess their interactions and devise more effective ways of working. Whereas the change of the management model in Itau Unibanco serves the purpose to stimulate open and creative dialogue among employees. This change was difficult and resistance of change existed strongly in the senior management level who get used to the old style of management model. Most of the senior management staffs who were older than 50 years old refused to accept the open dialogue concept as they grown up in the environment of command and control and the open dialogue concept are totally new to them.

Another transformation made by Mr Roberto was to change the companys decision making processes and risk-management processes. Yet I began to realize that it had become such a large and complex organization that we could not continue managing it in the same centralized way as before, this is in line with one of the goals of the change program-to make decisions at the appropriate levels and in appropriate forums which also frees up time for the top team to discuss strategic issues are some of the points that emphasized by Mr Roberto to the

change in organization decision making process. All the while the company made all decision at the central level and Mr Roberto decentralized the decision making processes to make it simple and he wanted the company to be developed in a higher-quality decision process in order to prepare themselves to face the demanding future. This is part of Human Process Intervention which focuses on organization process approach (Cummings & Worley, 2008). This approach aimed to improve organization processes such as visioning, task, problem solving, leadership that accomplish between groups. This change intervention helped Mr Roberto to reduce the number of direct report from 20 to 10 which caused to a more effective decision making process when the organization was growing bigger. Mr Roberto (2009) hence commented that they created a new management model, which involves the organizations structure as well as processes.

The 2nd part of the transformation that made by Mr Roberto was the transformation on corporate culture. This is link to the attempt made by Mr Roberto to create open and creative dialogue whereby he hopes to hear different voices and ideas from their employees. We had a closed and centralized system. Weve now made it more transparent, with checks and balances built into the process so that they would not only be in place but would also be perceived as being in place said Mr Roberto. He believed that it was very important to have all the information and ideas on the table before decision was make and he was looking for more open environment for discussion. Then they started with top management and quickly worked their way down to create bottom-up pull for change. Organization culture could be help in change or it could be a resistance to change (Harigopal, 2008). To change organization culture was the toughest part in change process but it was crucial to make sure the culture would help the organization in achieving its goals. Another part of the culture change that adopted by Mr Roberto was to change the company to be more democratic; hence he started with himself to allow himself to be challenged by others. This change was the combination of both human process intervention, organization process approach and technostructural intervention, employee involvement where Mr Roberto change the process how employees should behave and think in the organization and get them involved in the change. During the interview, Mr Roberto emphasized that they want to make sure their staff offer their ideas, discuss freely, grow professionally, and contribute to the future of the company. This again pointed out that the involvement of employees in the change process and they wanted their organization culture to be changes as well to a more open atmosphere. Mr Roberto emphasized that the new process is at the heart of modernizing the companys culture at the end of the interview.

As a conclusion, Itau Unibanco recorded strong financial growth for the past 10 years yet Mr Roberto, CEO of the company took initiative to change the company in order to face the future challenges. There are several types of change interventions used by Mr Roberto in the

change program that he implemented in the company. Human Process Intervention was used to improve the overall people interaction and communication efficiency. Both interpersonal, group process approach and organization process approach were used to support the change. Another type of intervention that used by Mr Roberto was Technostructural Intervention where Mr Roberto engage his employees in the change program, this is the employee involvement approach so that the employees were motivated and committed to the change.

Case Study Two: Leading Change: an Interview Peter Gossas, CEO of Sandvik Materials Technology (SMT).

Sandvik Material Technology is a company producing advanced alloys and ceramic materials. They supplies customers in a broad range of industries with products and system solutions. Mr Gossas the CEO of the company believed that they would only survive if they operate themselves in a constant operational improvement environment. In order to achieve this, Mr Gosses launched series of change programs and the result of the change was good and they achieved their goals such as 6 % growth in certain business units and those units previously running below cost and now earned a premium on their cost. This paper will summarize the different change approaches that Mr Gossas introduced to the company in order to change the organization.

The company was transformed with lean manufacturing and continuing with sales and marketing, purchasing and product development. After the transformation, the company earned financially after first 3 years said Mr Gossas during the interview. The transformation was accompanied by the use of Human Process Interventions, Technostructural Intervention and Human Resource Management interventions (Cumming & Worley, 2008). In the process of human process intervention, Mr Gossas introduced organization process approaches which started with the transformation program by putting the spotlight on manufacturing, and there we defined production lead time as the first area in which they needed to develop their competency. The aim of organization process approach was to improve interpersonal and group process in the organization. In order for them to achieve that, they need to cut lead time and make sure good material flow, material utilization and quality control. Another effort made by Mr Gossas was to leverage the new ways of working in all the functional and business units to drive product development in a more efficient way. They see opportunities in creating links between their

people in R&D, sales, purchasing, manufacturing, and customers. Mr Gossas further commented that the leverage process actually speed up production development process through the parallel development of the properties of a new product, the choice of raw materials that go into it and the best way to manufacture it and introduce it on the market.

Other than human process intervention, Mr Gossas utilized Human Resource Management intervention. Developing Talent approach (Cumming & Worley, 2008) was used as Mr Gossas (2006) mentioned that the change must be driven by developing competence within the organization, by managers and workers in each unit creating and taking ownership of their change programs because they are motivated by pride in improving their professionalism and achieving better results. In order to make sure their staff is performing in the right track, Mr Gossas introduced monitoring system whereby the company will conduct monthly peroformance reviews in which the eladers of products areas, which are clusters of SMT units, describe the operational progress of each units has or has not meet the KPI. There are few factors to be preset to measure the effectiveness, such as delivery reliability, lead time and quality. Managers of SMT were asked to measure their own results based on the quarterly financial report and this would make sure the business unit contribute financially and they could understand their current position and compare to the desire position. Besides developing talent approach, Mr Gossas utilized the approach of employee involvement whereby to involve their staff in the change. This mentioned in the article that managers and workers in each unit will create and take the ownership of the change programs. Every employee in SMT understands that this business system is not n action plan; its a religion that is about what should characterize a really good company, and there were no alternative to this religion. Mr Gossas mentioned that the management put a lot effort to make sure everyone understand the concept of change in the company. The company also encouraged employees to involve in the change program by visiting other departments where they can learn from each other and get away the skeptical about new business system where they might experience failure in the past. Performance management approach (Cummings & Worley, 2008) was used in the change program to monitor on the performance of workers as mentioned earlier yet now the company celebrates success in public, and unsatisfactory results were noted too.

Other than the above interventions mentioned, Mr Gossas wanted to make sure the continuous change approach (Cummings & Worley, 2008) was introduced and this is emphasized during the interview. This approach is part of Strategic Change intervention and it was aimed that organization to change themselves continually. The culture of continual change is just beginning to take root, but there is no finish line on this path. As a conclusion, Mr Gossas utilized strategic change intervention, technostructural intervention and human process intervention in the change program of SMT. The interventions was allied in different level and

units of the company and this is to make sure that the company could continue to enjoy sustainable profit in the future. Some of the business unit showed positive growth financially after change program has taken place and this is good sign for SMT to continue the momentum. However, the different type of changes introduced by Mr Gossas in SMT already changed the overall corporate culture of the organization and now they are working on new procedures and new way of doing things. There was an important approach launched by Mr Gossas; that was continuous change approach, which will make sure the organization moving towards continuous improvement. This is important as the business environment nowadays change drastically if compare to last time, if the organization fail to react to the change, the company will be left behind.

References: Thomas G. Cummings and Christopher G. Worley, 2008, Organization Development & Change, Cengage Learning, Canada. K. Harigopal, 2006, Management Of Organization Change, Unipress Publishing, Malaysia. Johan Ahlberg and Tomas Naucler, 2006, Leading Change: An Interview with Scandviks Peter Gossas, Mckinsey Publishing. Frederico Oliveira, 2009, Transforming a High-performing Company: An interview with Roberto Setubal, Mckinsey Publishing.