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Students Last Name Goes Here 1

ORGANISATION CHANGE

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Students Last Name Goes Here 2 Organisation Change Each economic entity conducting international business faces numerous external threats. The most common threat for the companys welfare is an activation of competitors business operations. In particular it is an improvement in the technology of the manufacturing thus enhancing the quality of goods and ratio of price-cost for each manufactured item. The case study on Stanley Australia concerning implementation of the organisation change due to increasing competitive pressure in a global business environment is in the focus of this essay writing. It analyses a case study based on the organisation change experience of Stanley Australia and Stanley Bostitch subsidiaries of Stanley Works, US-owned Company operating throughout the world, employing more than 550 employees together. The Corporation manufactured diverse portfolio of hardware consisting of more than 50000 products. High quality of the companys products was the most important value that provided high business reputation of the company. Organisation change in the global environment Organisation change is the response to the changes in four market forces defining the globalisation of industries and markets: economic, social, political and technological. Understanding of the global forces assists a company to identify the critical success factors in a global industry and market (Drori, Meyer & Hwang 2006, p.309). Becker and Freeman (2006) point that understanding and transforming global trends into the corporate strategy is the core responsibility of the top management. It is highlighted that factors of global business environment such as innovation in goods and services, technology progress, elimination in trade barriers, labour and talent shift, increasing competitiveness and demanding and sophisticated consumers tastes accelerate the pace of change. The authors

Students Last Name Goes Here 3 describe ten major global trends that determine constantly changing both local and global business environments: growing number of consumers and changing customers tastes; activation of economic activity in Asia region; increasing access to information, education, expansion of knowledge; globalization of labour and talent markets; stricter environmental regulation and constraint usage of natural resources; improved communication and interaction among the business entities; more frequent application of scientific knowledge and techniques to management of the

business activities. Regarding the background of the change need in Stanley Australia, it should be underlined that the period of the outstanding quality, which no competitors could reach, lasted until the late 1980s. Improved quality of Chinese products and much lower costs comparing to Stanley figures were the reasons for losing market share and shifting the customers towards the cheaper goods from China. This situation demanded immediate response and complex of action from the US headquarters and local entities. New CEO, John Trani, had to address the existing problems. He decided to implement rapid and drastic changes including: the number of the companys manufacturing sites were cut from 123 to 70; extensive personnel downsizing was conducted; organisational structure was changed from divisional to matrix. The leadership style applying by Trani can be described as authoritative. It is characterized by giving strict orders and instructions to reach specific goals in a short time frame and ensure

Students Last Name Goes Here 4 that no objections or personal opinions of subordinates will be expressed. It was chosen upon the analysis of a critical situation in the financial figures and rapidly falling market share. The main goals set before the local Australian firms representing Stanley Works were to increase profitability and market share by costs cutting and additional or alternative products proposing. Concerning the communication between US headquarters and Australian divisions it should be mentioned that the detailed action plan and structured plan were not given. The Australian CEO was recommended to cut costs and reach the expected level of profit. It was decided to implement the needed changes in two ways: - ceasing manufacturing operations by closing 4 plants and selling 1 plant. - combining two Australian subsidiaries into one new entity. Sourcing of alternative products revealed that particular Australian product lines such as screwdrivers, knifes and hacksaw blades were unique thus this investigation helped to save 90 jobs during the major transformation. Changes were made in all areas of Stanley Australia and Stanley Bostitch: people, structure, process and technology. The most radical change was made in personnel area. The reasons why the implemented organizational change was partially successful were combined with the time pressure: - insufficient communication; - employees affected were not fully involved in the process of change thus the understanding and supporting of the proposed procedures were met with resistance. Isern and Pung (2007) argue that the business environment is constantly proposing modern companies diverse possibilities for development but also testing their strength and readiness to radical changes in accordance with the encountered obstacles and threats. They underline that

Students Last Name Goes Here 5 radical organisation changes involves drastic changes in all or significant areas of operation in the short time frame. Regarding changes implemented at Australian subsidiaries - decisive step in closing manufacturing plants and firing more than a half of the employed workers over an 18month period, merger of two related but culturally different companies are the evidences of radical changes. Concerning the cultural change inside a company, it should be mentioned that the management of a company put an emphasis on giving more rights to the employees in decision making and delegating the responsibility for the actions taken. Moreover, it was recognized that communication inside a company and involvement of each individual in a team work should be improved. The main aim of such a direction was to integrate employees from two related but diverse companies. Management decided to give employees more freedom in decision making in particular it concerns the employees from Stanley Australia used to the culture of rules and total control. Processes were also altered during the organisation change. Drastic ceasing in manufacturing and focus on the overseas purchase rather than on domestic production made significant changes in organisational processes. New carrier opportunities were opened for marketing and logistics specialists. Concerning the technological side of the organisational process it became more advanced, but there was also accident that caused the injury of the worker connected with increased storage space and lead times. The processes became more IT supported, and management hoped to hire more skilled professionals in the future to operate new systems.

Students Last Name Goes Here 6 Purchasing and forecasting functions along with the planning procedures took the leading positions in the organisational structure. Consequently, marketing and sales department were increased and got more responsibilities and strategic influence. Problem Solving Skills and Effectiveness of Management Process Change leaders should understand the adaptive behaviour stages that employees can demonstrate. It is vital for managers to understand that individuals unconsciously use welldeveloped and habitual defence mechanisms to protect themselves from change and from the feelings of anxiety change causes (Bovey & Hede 2001, p.534). It is proved that many companies failure to implement change due to active resistance of the employees. Each change leader regardless of context should understand that there are following stages of employees reaction to the threats and uncertainty of the change: discovery, denial, passive resistance, active resistance, exploration, commitment, and broadcast. True leader faces the potential negative reaction of the employees and is able applying his persuasiveness, charisma, confidence, perfect communication and psychological skills to transfer passive and active resistance into further stages that show the understanding and readiness of the employees to be an active part of the change process (Burns 2004). Change Management Skills in a Global Context Communication skills are one of the most vital skills that are required to be applied by a change leader during the transitional time of organisation change. Clear communicating of companys vision and objectives that are established and must be achieved increases the chance for success. Organisation change is effective if the employees: are aware of the need, importance and urgency of change;

Students Last Name Goes Here 7 feel themselves as members of a united and high-spirit team that is responsible for the implementation of the new procedures and processes; show the desire to participate in a change process and understand the steps to be taken; apply all the skills and knowledge to reach set goals; are motivated to sustain the change (Elving 2005). Moreover, it is emphasized by Aitken and Higgs (2010) that understanding the scope of change, the reasons determined its need, the level of responsibilities given and goals to be achieved increase the level of employees commitment. Unfortunately, time constraint was the main reason why these two key factors of a successful organisation change were partially implemented. Sudden merger of Stanley Australia or Stanley Bostitch with two radically different cultures, closure of 5 plants, shift from domestic manufacturing to the overseas purchases were the cardinal changes that had to be communicated to the employees to involve them into the change process and increase their commitment. The management of the company tried to communicate the reasons and necessity of such cardinal changes with the aim the employees understand the reasons and urgency. Naturally, there was no time for participation and involvement of the employees. All the decisions were made by the management, and employees had only to accept them. Stanley Australia managers also use the negotiation tool to decrease the level of dissatisfaction and resistance of the employees. According to Bovey and Hede (2001) employees go through four phases during the change process: initial denial, resistance, gradual exploration and commitment (p.534). Negotiating as an effective managerial tool should be applied by the managers to shift employees from the stages of resistance through motivating, explaining and facilitating to the commitment stage. Stanley Australia managers tried to motivate

Students Last Name Goes Here 8 employees who survived after the cutbacks with the aim to increase their efforts in helping the company to meet the established goals. They put an emphasis on the importance of each employee in the future commonwealth of the company and consequently the increase in their bonuses and wages level. Leading organisational change The most essential skills for the leaders who are responsible for successful change implementation are an ability to aspire all members of a change process that is to create unique transformational vision and communicate this message to them. Another noteworthy aspect is to understand that each employee especially in case of a rapid and cardinal change fears the potential change and resist it if he does not understand the depth and background of the problem, proposed solutions and expected results (Isern & Pung 2007). According to Pardey (2007) another important quality of a leader is the ability to change to settle conflicts, to compromise and to be firm in making decisions. Employees need to understand that the time of such drastic change will soon be in the past, and they are responsible for the welfare of the company in the present and future. To form such an attitude, change leader must be true inspirer and coach to lead a new team. It should be emphasized that initiative and new ideas must be supported as they are the drivers for the successful organisational development. Complex Ethical Problems in Change Situations The planning stage with the development of the detailed plan of change implementation, practical recommendations were not given to the local Australian managers. US headquarters showed limited approach to the preliminary stage of this change process. If one of the crucial steps in radical organisation change is a process of extensive lay off, ethical issues concerning

Students Last Name Goes Here 9 downsizing often emerge. Employees perceive downsizing as ethical and inevitable only if it is the last attempt to cut costs after the variety of methods including wages decreases and bonuses cuts (Smith 2006). In Stanley Australia case radical process of manufacturing operations ceasing was unexpected. 300 employees had to lose their jobs, and it is clearly that such procedure was perceived as unethical and unfair. At the same time, the management of the company devoted maximum efforts to reduce the dissatisfaction and show support and respect to these employees. The management developed the strategy implying attempt to make it possible for the employees to depart with dignity. This strategy aimed to decrease the level of internal resistance and frustration within the company. The management also paid attention to the former employees assistance with searching for the next job or support with the retirement process. The company considered honesty and openness to be the essential virtues of the downsizing procedures. To prove the chosen policy, employees were the first who found out the news about the cutbacks. Such a privilege was half an hour before the media, unions and Commonwealth Employment Service got to know the details of planned lay off. Addressing the natural fears and resistance of employees, the company proposed several programs. Special consideration was given to the employees older than 50, understanding that it would be the most difficult task for this age group to find the job at the market. Professional firms, Commonwealth Employment Service, Department of Social Security were involved in providing outplacement advisory services to the employees. Complex Sustainable Dilemmas in Change Management and Responsible Leadership Taking into account sustainability issue, it should be mentioned that organisational change in Stanley Australia was made very hastily with the emphasis on the short-term financial figures

Students Last Name Goes Here 10 rather than implementing long-term strategy that includes broad vision of sustainable development of the company. A special feature of the concept of sustainable development should be consideration not only environmental components but economic and social relationships with stakeholders, employees, suppliers and customers. According to Doppelt (2003) environmental component of sustainability in the organisations should be displayed as a model borrow-usereturn rather than unsustainable scheme take-make-waste. On the level of individual company, sustainable development means adopting business strategies and activities that meet the needs of the enterprise and its stakeholders today while protecting, sustaining and enhancing the human and natural resources that will be needed in the future (International Institute for Sustainable development n.d.). The leader who is responsible for the implementation of change procedures must understand that the company depends not only on physical and financial resources, but also rely heavily on the natural and human resources. Each economic activity of the company must be conducted in such a way these natural and human resources cannot be destroyed and degrade. Millar, Hind and Magala (2012) point the following key sustainability dilemmas: - balancing short term goals and guaranteeing long term development; - implementing organisational change and supporting stability and reliability; - how to combine reaching strategic goals and daily routine operating procedures applying local and international responsibilities; - how to manage corporate reputation and brand when implementing radical organizational changes. Leading organisational change demands responsible leadership that implies making business decisions taking into account not only shareholders interests, but also those partners

Students Last Name Goes Here 11 and members of the company activity who are affected greatly due to the implemented decisions: employees, clients, community, and environment (Ulen 2010). At Stanley Australia the efforts to consider the interests of the employees and to behave respectively even with those workers who had to be fired were made. The number of redundant employees at Stanley Australia was 300 out of 400 presently employed. It was a complicated task for the managers to conduct such a wave of personnel reduction without loud scandals and litigation. Skills Required for Leadership of Others One of the most crucial part in implementing new global strategy of Stanley Works in Australia was the merger of two companies similar in production activities but different in the internal organisational culture. The emphasis was made on applying communication skills and creating the spirit of one unique team where each member either from Stanley Australia or Stanley Bostitch will be equal and fully responsible for the decision making. The most essential problem that had to be solved by the Stanley Australia managers was the cardinal difference in organizational culture of both companies. Stanley Australia culture can be characterized as traditional with strict rules, processes, high level of control and loyalty. In contrast, Stanley Bostitch demonstrated a high level of support for its employees. Trust and high level of belonging and commitment were part of its daily operations. It was made the decision during the merger that at the individual level all processes of Stanley Australia will be utilised as the most advance and efficient. Therefore, the managerial efforts that addressed motivating and supporting former Stanley Bostitch employees to accept the new procedures deserved praise. Negative reaction and resistance due to the fear of new procedures and uncertainty about the future should be transferred into the support and involvement in new team activities due to efficient management strategy education, support, communication and listening (Kavanagh &

Students Last Name Goes Here 12 Ashkanasy 2006). The most challenging task for the top management of the new amalgamated company was to motivate and inspire the new team of the best professionals that won the imaginary battle for the recognition of their unique abilities and talents and the possibility to work for the new company. In such a turbulent time, where uncertainty, fear, resistance are govern the attitude and behaviour of the employees, the most crucial task for the managers were to show confidence in the decisions made. They had to find ways to set clear goals with achievable results, to unite the diverse cultural and professional team into one mechanism where the roles and responsibilities are strictly divided, where each understands the goals set before him and has appropriate knowledge and tools to achieve them (Goehrig 2008). Internal policy of Stanley Australia was reoriented towards an emphasis on marketing and logistics areas. Employees of Stanley Bostitch were given additional instructions and training to reach the needed level of knowledge and experience in these fields and to become the equal members of the new team. Conclusion The Australian division of US-based Stanley Works Company underwent a number of significant changes in all areas of its activities: people, process, structure and technology. The most significant and challenging tasks for the management of the Stanley Australia company were to deal with the drastic changes in human resources. Extensive downsizing, merger of two culturally different companies, new direction towards the sales and marketing functions required wise and balanced application of change management skills. The most significant skills needed during such radical change have to address the initial fears and resistance of the employees. Managers of Stanley Australia

Students Last Name Goes Here 13 Unfortunately, time constraint and the obligation to implement all necessary innovations in the shortest term led to lack of employees involvement into the change process and insufficient communication. Managers tried to communicate a clear message about the reasons and the goals of this change with the aim to decrease the resistance and integrate employees in the new more skilled team. The management give them incentives and trust to take responsible decisions. Trusting environment should be created to assure that communication and cooperation are the background for the successful implementation and fulfilment of sophisticated tasks during one of the most difficult times in companys history.

Students Last Name Goes Here 14 Reference List Aitken, P & Higgs, M 2010, Developing change leaders: the principles and practices of change leadership, 1st edn, Butterworth-Heinemann, Oxford. Becker, WM & Freeman, VM 2006, Going from global trends to corporate strategy, McKinseyQuarterly, viewed 26 September 2012, <https://www.mckinseyquarterly.com/Going_from_global_trends_to_corporate_strateg y_1830>. Bovey, WH & Hede, A 2001, Resistance to organisational change: the role of defense mechanisms, Journal of Managerial Psychology, vol. 16, no. 7, pp. 534-548 Burns, B 2004, Managing change, Prentice Hall, NJ, Upper Saddle River. Doppelt, B 2003, Overcoming the seven sustainability blunders, The Systems Thinker, vol. 14, no. 5, pp. 1-7. Drori, GS, Meyer, JW & Hwang, H 2006, Globalisation and organisation: world society and organizational change, Oxford University Press, Oxford. Elving, WJL 2005, The role of communication in organisational change, Corporate Communications: an International Journal, vol. 10, no. 2, pp. 129 138. Goehrig, R 2008, The role of leadership in building high performing, sustainable organisation, Government Finance Review, vol. 24, no. 6, viewed 24 September 2012, <http://www.gfoa.org/downloads/CoralSprings_GFR_dec08.pdf>. International Institute for Sustainable Development n.d., Business strategies for sustainable development, viewed 26 September 2012, <http://www.iisd.org/business/pdf/business_strategy.pdf>.

Students Last Name Goes Here 15 Isern, J & Pung, C 2007, Driving radical change, McKinseyQuarterly, viewed 28 September 2012, <https://www.mckinseyquarterly.com/Driving_radical_change_2046>. Kavanagh, MH & Ashkanasy, NM 2006, The impact of leadership and change a management strategy on organizational culture and individual acceptance of change during merger, British Journal of Management, vol.17, pp. 81 - 103. Millar, C, Hind, P & Magala, S 2012, Sustainability and the need for change: organisational change and transformational vision, Journal of Organizational Change Management, vol. 25, no.4, pp. 489 500. Pardey, D 2007, Leadership in turbulent times: Effective leadership during times of organizational change, Strategic HR Review, vol. 6, no.5, pp. 16 - 19. Smith, I 2006, Continuing professional development and workplace learning - 15: Achieving successful organisational change - do's and don'ts of change management, Library Management, vol. 27, no.4, pp. 300 306. Ulen, TS 2010, Responding to change: internal and external factors in organizational success, Journal of Institutional Economics, vol.6, pp. 133-137.