Unit 4 BUSS4 - The Business Environment and Managing Change
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Section 13- managing change and section 14- planning strategy
March 21, 2022
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2021/2022
Summary
Subjects
kotter and schlesinger
internal
external
handy
culture
contingency plannign
strategic drift
incremental
disruptive
hofstede
lewins force field analysis
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Unit 4 BUSS4 - The Business Environment and Managing Change
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Managing Change 3.10
Change can be caused by internal and external factors:
§ When the business environment changes, managers must change the way the business is run - suit the new
circumstances. Might change staffing levels, location and product range or they might start spending more on
research and development, staff training and new machinery.
Internal factors
§ Change in leadership/management. If the director of a company leaves or is replaced- new director may have
different ideas about how business should be run= changes in the organisational culture or structure.
§ Better than expected performance could lead to a decision to expand the business, to take advantage of the
increased profits. Poor financial performance may lead to changes such as retrenchment, i.e. Cutting down or
reorganising in order to save money.
§ If there are changes to the staff, - could mean the business no longer has required skills so further changes need
to be made- company might go through recruitment or retraining, or outsource their work.
§ Business growth can lead to other changes. For example, a business expanding into international markets may
have to adapt its product range to match the needs of customers in other countries.
§ The type of business can influence the amount of change. If a business is innovative, it may keep coming up with
better methods of doing things- business may continually change to use these new methods. More traditional
companies might prefer to stick to the old, tried and tested methods.
External factors:
§ Availability of new technology Businesses might change production methods if new technology is faster/
cheaper= shorter product life cycles companies have to change and update their products frequently to stay
ahead of the comp. (rapid growth/ mobile usage)
§ If consumer tastes change, business might alter its product range to fit changing demand.
§ If the economy slows, people have less disposable income, so product prices may need reducing.
§ Changes in the law affect the way businesses are run - e.g. government restrictions on pollution may force
businesses to alter their methods of production or change to a local supplier.
§ Changes in the ethical views and social awareness of customers may result in companies purchasing ethically
sourced products from fair trade suppliers.
§ Changes in competition result in business losing a lot of its market share for particular products– they may need to
act to regain their market share or prevent further losses diversify its product portf. Investing In stars= cash cows
Value of change
§ Stay competitive and grow- can’t fall behind= insolvency. Making changes- new effective ideas, save time and
money. Sustain their comp adv.
§ Forced to change – to survive in dynamic markets- change becomes inevitable/ essential
§ Improved productivity and a better work environment
§ Enhance a businesses reputation- leader of change and innovation
§ Can be beneficial not only to the business but the economy. Govt can grant subsidises which help alleviate cost
pressure. Car manufacturers
§ Change can actually improve a businesses share prices and market capitalisation
§ Change can be foreseeable- netflix
§ Can be good to lead change- dyson
,Change can be incremental, disruptive, or somewhere in between
§ Incremental change is gradual; Usually the result of a strategic plan being put in place and often to minimise
disruption
§ Managers decide a timescale for the necessary changes and then timetable strategies for achieving them
§ Small changes as a business develops and responds to subtle changes in external environ
§ Involves little resistance
Disruptive change
§ Arises as strategy develops
§ Forces firms to suddenly do things in a different
Step change:
way to usual- close or sell off subsidiary
1. Dramatic or radical change busines companies, spend heavily on promotion to raise
2. Often required when s suffered strategic drift customer confidence- totally restructure
3. Often involves significant alteration § Negative event- makes customers go elsewhere
4. Gets it over quick/ decisively
A form of step change arising from changes in the
5. May require some coercion to overcome resistance
external environment
§ Media streaming: Netflix, YouTube
§ Disruptive change impacts the market,
§ Grocery retailing: Ocado, graze
challenging established ‘business model’
§ Travel and accommodation: expedia,
§ Rapid improvement in tech are the main driver
tripadvisor
of disruptive change since tech innovation
§ Fashion retail: asos, net a porter
provides ways of delivering goods and services
§ Consumer file storage: dropbox, google drive
as well as reducing Barriers to market entry
Lewin’s force field analysis (forces for a change and against a change)
Force field analysis provides an overview of the balance between forces driving changes in a business and the forces
resisting change. Driving forces must exceed restraining force- must not be an equilibrium
§ Successful businesses tend to be constantly adapting to their environ and changing rather than being inflexible
§ Lewin developed this concept to help understand change in different situations.
§ After forces are written, numbered to show how significant they are. 1 (least) to 5 (most)
§ The numbers are added up to show the total force for and against the change
§ Analysis - decide whether plan should go ahead/ help work out how forces can be strengthened and weakened.
Driving forces: Forces for change External
§ Need for higher profits § Customer demand
§ Poor efficiency § Competition. Tech change
§ Lack of innovation § Legislation and taxes
§ Need to change culture § Political environ
§ Change of leadership (all intnl) § Ethics and social values
Restraining forces: Forces resisting change
Internal
Degree of resistance- normal (disruptive, stressful)
§ Change is met with scepticism- can be difficult to implement change
§ Resistance with achievement of organisational obj
§ Scepticism can be healthy- where there are weaknesses in propose change
,Flexible businesses are able to restructure frequently:
§ Flexible – one that can adapt and respond relatively quickly to change in its external environment in order
to gain advantage and sustain its competitive position
§ Changing the organisational structure= restructuring
§ Businesses that can restructure quickly and efficiently- adapt their structure to keep up with changes in the
external environment – to implement new strategy
§ Businesses may decentralise in fast changing environ- more power and flex to diff dept.
§ Important in times of hardship- during a recession. Businesses – quickly switch to centralised struc as small
decisions become imp to success of business
Benefits of flexible organisation:
§ Maximise efficiency of decision-making communication and division of tasks – reduce costs = competitive
§ Reduction in unit costs from efficiency
§ Responds to and meet changing customer needs and wants
§ Concentrate on core competencies rather than trying to undertake every business activity
§ Attractive place to work for best people
§ More likely to identify and respond to need for change- its too late to change
Role of data:
§ Can help forsee change
§ Restructure
How change will affect you
§ Delayer
Recognise challenges
§ Centralise
Plan aheador decentralised
§ Use flexible
Evaluate employment
effect contracts
of strategies once implemented
The longer a formal structure has been in place the harder it will be to implement change; resistance, difficulties.
Delayering
Mechanisedimproves
strcuturescommunication
vs organic one and reduces costs
Delayering – removing parts of organisations hierarchy- middle managers
§ Less labour costs= less total costs
§ Flexible structures delayer = reduce their costs= improve communication- give more responsibility to employees at
lower levels of hierarchy= empowered= productive/ innovative
§ Flatter structure- wider spans of control- quicker commu- help with decision making in changing environments-
Internal decision making inc/ responses
§ Delayering- respond to changes- difficult to in econ condition- if it can carry out a delayering strategy quickly-
gain adv over competitors
Cons:
§ Redundancy costs.
§ Delayering – job losses- loses vital skills and experiences- reduce flexibility of business in the future. Sig one off
costs.
§ Initial costs- training, slower productivity
Evaluation:
§ Will the flatter structure after delayering suit the business- some businesses need more layers, rigid structure-
culture of compliance- may lose this - unsuccessful
§ How many layers are being removed. 10 layers removed compared to 1 – stronger impact
,Flexible employment contracts:
§ Involves arrangements where there are a variety of options offered to employees in terms of working time,
location and pattern of working
Business offer this- attractive prospect to highly skilled workers
§ Flexi time- employees work full time hours, can decided when to work, around fixed core hours
§ Part time, mobile working. Compressed hours- employees work a set number of hours per week, over a fewer days
§ Annual hours- employees work a certain number of hours over the year- choose when to work. E.g. employees
with children might not work as much is school holidays
§ Job sharing- two people share one job. Home working- employees work from home instead of at the business
premises
Advantages:
§ Access to wide variety of candidates-talented skillset- hire best candidates. More females, working classes-
improves motivation so employee productivity should improve. Helps recruitment and staff ret
§ Diversity- shared opinions, ideas= put into practise- more understanding of present issues arising with.
Employing people on flexible contracts can make is easier for a business to hold onto valuable employees- open
up more job opportunities for skilled applicants- wider range of skilled employees when it comes to
implementing change- may not need to retrain people
§ Flexible employment contract allow businesses to be more flexible themselves- business is more effective at
managing change. If a business has lots of employees on zero hour contracts- easily cope with increases and dec
in demands
§ Flexible workforce- core and peripheral workers. Core= provide stable environment for the change. Peripheral-
additional work
§ Flexible business can outsource some of its work to manage change. If a business is updating the machinery in its
manufacturing dept- might outsource some of manu while staff are trained and get up to speed with new
employees
§ Decrease fixed costs, overheads- lower bills, rent etc as work from home
§ Take adv of develop in tech- simple and cost effective to work from home
§ Increasing need for businesses to deliver services to customers on 24/7
§ Reflect changing profile of UK workforce- more women and ageing pop. Staff have caring responsibilities
Disadvantages
§ Can be impractical for businesses that need to serve the public during normal working hours
§ Flexible contracts- poor communication and teamwork- make it more diff to manage change effectively-
businesses put strategy in place to deal with it
§ Administrative work and red tape involved
§ Loss of customers if key employees reduce working hours
§ Lower employee productivity
§ Managers find it difficult to manage or administer flexibility
§ Home workers can be easily distracted at home
§ Inability to substitute for certain skills if certain employees are absent
§ Job sharing can lead to confusion over responsibilities and unequal workloads
§ Pressure to work certain hours of days- international hours- could be difficult
,Flexible working
§ Employees have flexibility when to work. Able to meet personal needs (Maslow’s – SA). Therefore reduce staff
turnover, improve retention, reduce recruitment costs, reduce induction training= lower costs= higher profit
margins
However:
§ Employees feel insecure as they don’t have permanent contract. Earning are unpredictable (Maslow- safety and
security needs)= demotivated= inc turnover, reduction in retention- inc recruitment costs, inc induction training=
higher costs spread over fewer output= lower profit margins
Zero hour contracts - allow employers to hire staff with no guarantee of work
§ Employees work only when they are needed by employers-short notice. Employee pay depends on how many
hours they work. Lack of job security (MHON) – de motivation= turnover, absenteeism- higher costs, low prod,
§ Some zero hour contracts require employees to take shifts they are offered, while others do not
Adv for businesses:
§ Greater flexibility
§ Reduce labour costs-only pay them for hours they do
§ DIS: Businesses may have issues planning cash flow as business doesn’t know how much theyre paying as
employee pay depends on hours workers
§ De-motivational gains. According to Maslow’s hierarchy of needs employees require job security otherwise they
will become de-motivated
Knowledge and information management increases flexibility
§ Knowledge and information management refers to the collection, organisation, distribution and application of
knowledge and information within a business
§ Knowledge - any data gathered by the business, as well as producers, workers’ skills and individuals’ expertise.
Knowledge – stored and organised in specifically designed databases – allow anyone to quickly sort and find the
information they require
Useful data – directly relevant, correct, up -to date and easy to analyse
§ Business – employees to record specialised knowledge – If someone leaves, business can use knowledge
gathered from that employee
§ Business can improve internal communications – implementing procedures to collect and distribute to learn
about difficulties faced- help avoid same problems in future. Business – try to improve communication between
sites and dept, staff can contact individuals who have required expertise easily
§ Wide range of knowledge and information easily accessible by everyone in business= flexible and able to
respond to change. If people have information to hand- quickly assess current position of business and decide what
action to take. Makes it easier for staff to change roles and learn their new responsibilities quickly
§ Data needs to be maintained and updates to make sure the most up to date information is accessible- large
businesses – employ people just to deal with day to day management info
,Organic structures are better suited to change than Mechanistic ones:
§ Mechanic structures are very rigid- work well for businesses in a stable environment
Mechanist structure: RIGID
§ Uses a centralised, traditional struc- well defined hierarchy of power. Decisions made by managers at top of
hierarchy
§ Tall struct- messages take a long time to travel. Clear chain of command. Narrow spans of control
§ Well defined job roles- specialisation, individualistic jobs- Hofstede’s cultutral dimension
§ Suited to businesses that don’t need to adapt to change very often. Dept – given tasks, which vary – easy to
assign resources- slow to make changes within business
§ Employees are specialised in certain tasks and tend to work separately on them e.g., each marketing employee
may focus on a specific market rather than all of them looking at the whole market.
Organic Structure: Flexible
§ Uses a decentralised structure, employees get more say in decision making
§ Flat structure- fast communication, throughout business. Wider spans of control
§ Best suited to an uncertain, changing environ as information can be acted as quickly
§ Employees in organic- work in teams, tasks can be adapted to suit the situation. ‘job’ focus
§ Better way to manage change in fast changing growing markets
1. Informal
2. Flexible and fluid
3. Favours verbal communication
4. Decentralised decision making and empowerment
Resistance is the most common barrier to change
§ Organisational structure- some structures = difficult to manage change. A tall= difficult to communicate change
and reasons to lower layers
§ Resources- businesses need the correct resources in place before making a change e.g. a business shouldn’t
introduce new machinery until they employ someone who can operate it
§ Poor management- when managers are unable to communicate effectively and engage workers- usually result of
a lack of trust between manager and worker
§ Passive resistance- when people carry on with old ways despite being aware of new needs and being shown
processes. Passive resistance- most common in employees and suppliers
§ Active resistance- when people argue against change, challenging motives for change. Workers can organise
themselves through their trade union – refuse to carry out tasks, customers- show active resistance by refusing to
make purchases from company
Businesses need to be able to communicate effectively with groups of workers throughout the business. If workers
feel engaged and kept up to date with any changes- less likely to resist them
Good planning and strategies can help businesses to avoid some of the barriers to change. For example, a business
may have to give staff better training before implementing the change.
,Kotter and Schlesinger- resistance to change- suggested 4 main ways why change Is resisted
Parochial self interest
§ People -more concerned with their own situation rather than success of the business- if they cant see how the
change directly benefits them= resistance. can’t see that ultimately a more successful business may individual
benefits too. Arises form perceived threat to job security, status and financial position
§ E.G. organisational change through delayering may meet resistance from middle-managers who fear loss of
income or redundancy –can't see a more successful business - create new positions higher up hierarchy.
Misunderstanding and fear Prefer the status quo (low tolerance of change) Differing assessments of the
situation (differing views)
Don’t believe assessment § Workers fear they do not have skills to cope
managers tell- have more to with the change, unwilling to reskill § Disagreement with
lose that they’re told
§ Wont perform well- lose job security managers assessment
Lack information/ poor § They may be loyal to existing relationships § May agree change is
communication- lead to and methods- comfortable In their teams. Low needed but have a
incorrect info= uncertainty/ tolerance from past exp- resistance to change better idea of what to
confusion- anxiety may grow change
Kotter and Schlesinger’s six ways of overcoming resistance to change § Stakeholder analysis
could be used here
1. Education and communication – addresses misinformation
§ Managers need to raise awareness of the reasons for change and how it’ll be carried out. Education=
discussions, presentations and reports- clearly communicate the reasons behind planned change- address conrn
EV- l/t solution (time is needed)
2. Participation and involvement 3.Facilitation and support
§ Key stakeholders should be involved in design § Listening to concerns of workforce by regular meetings=
and implementation of change. If they help workers adjust- feel supported- help meet needs of
participate in decision making- engaged- part workers. Support with change- so they can cope.
of process- more difficult to resist change Provide training
§ Give them sense of ownership Ev is it necessary to get them involved. Compliance to
change- paternalistic management
EV- slow process down. Extra skills/input could help
the time outcome. Stakeholder analysis. High
power, high interest – need to involve them. 4.Negotiation (bargaining) and agreement
5.Manipulation and co-option Stakeholders opportunities to negotiate - compromising
over sticking points = full agreement over proposed change.
Offer rewards to win over influential people- have Financial/ non-financial incentives may need to be offered
high power high interest- may get subordinates to by business to obtain full acceptance of change. If full
support. Manipulate info regarding change- agreement can't be made = voluntary redundancy or early
exaggerate theres no other alternative. retirement - offered to employees are resisting change.
§ EV: Kotter – may result in ‘mischief’ Ev – may need to compromise to a different change you
§ Risk strategy. Unethical – If found= lose trust don’t want
6. Explicit and implicit coercion- last resort. Implicit – suggesting likely neg cons without explicit threats
§ Just force and make the change happen, threatened to comply or consequences. Redundancies, losing out on
promotion, transfers. Explicit
§ Distract workers ‘get them out the way’. Long term may change behaviours and they may agree
, Why businesses struggle to implement change: Why businesses struggle to implement change:
§ Start ups- lack of financial resources § Start ups- lack of financial resources
§ Lack of experience § Lack of experience
§ Low skill employees – difficult to give them greater § Low skill employees – difficult to give them greater
responsibilities for same pay responsibilities for same pay
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