Managing in a Mixed Economy Essay Sample
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Introduction of TOPIC
The modern business environment is characterized by a high level of competitiveness which requires profit-oriented businesses to constantly reengineer their internal operations. The fast-paced nature of the change makes competitive advantages difficult to sustain. Three competitive strategies that the management of an organization has at its disposal are related to differentiation, cost minimization and quick response. However the main weakness in implementing these strategies is that the resulting competitive advantage is not sustainable because competitors can easily copy these strategies and achieve the same competitive advantage overnight. For this reason, any competitive edges arising from organizational culture are sustainable because building the right organizational culture is a long term process and competitors cannot transfer successful elements of the organizational culture because of possible misalignments. The misalignments occur because each company has its own unique structure of core competencies organized into a particular strategic focus and that structure determines the particular characteristics of the organizational culture. For this reason organizational cultures are not transferable from one company to another and for the same reason, competitive edges arising from cultural dimensions are sustainable. This is illustrated in the approach taken by Jon Sparkes.
Bringing about effective organizational change
Jon Sparkes was the Chief Executive at Scope, a disability charity. The disability organization operated in the voluntary sector. However it was facing financial meltdown. Sparkes embarked on a project of consolidation as a means of minimizing cost of operations. For example, he closed the shops which were making losses and then he diverted the savings generated from these closings to financing training and development expenses. He implemented a basic service center approach which reduced the cost of managing human resources by 30% and it also improved services. Therefore, essentially Sparkes’ approach was targeted at downsizing the existing scale of operations in order to enhance the strategic focus of the company.
The effectiveness of this strategy lay in Sparkes’ emphasis on enhancing the efficiency of human resource management. However this strategy created a paradox in the form of eliminating manpower committed to the vision of the organization. This was the critical issue to resolve because commitment to vision was the critical success factor. Eliminating people who were passionate about charity work would not appear to be a performance-enhancing strategy on the surface. However Sparkes’ strategy was to downsize the breadth of the organizational scale in terms of human resource management and to enhance its depth by changing employment policies (cited in Greer, 2000). In this regard, he targeted filling a certain number of positions with people with disabilities. The reasoning behind this employment structure was that people with personal experience in handling disabilities would offer a better quality of service in this regard. This is how the paradox of commitment and vision was resolved.
Sparkes implemented the principles of total quality management in implementing organizational change. As a result his focus was on all areas of the organizational structure such as organizational culture, governance, finances and the diversity program. The framework of total quality management is built on the interconnectedness between the different process chains of an organization. Therefore, in improving the efficiency and the effectiveness of human resource management at Scope, Sparkes set out to eliminate the redundant aspects of other areas of its existing operational structure. Elimination of redundant operations allowed him to downsize the scope of human resource management as well. Sparkes’ focus from the beginning had been achieving sustainability.
Therefore, he might have been reengineering operations in areas outside of human resource management, but his ultimate goal was to create a sustainable organizational culture by managing people. However he recognized that the goal of efficient and effective human resource management could not be achieved unless the four elements of Scope’s marketing mix were handled strategically. As a result, the objectives of his plan to implement organizational change included pricing decisions, service offerings, raising awareness and enhancing availability of Scope’s service offerings. He drove strategy implementation in all four areas by improving relations with external stakeholders. This helped to raise the awareness of the organization. However Sparkes recognized that the good reputation depended on Scope’s internal practices. For this reason he had created the long term goal of filling a certain number of positions with people with disabilities.
The strategy of organizational change to accommodate people with disabilities was effective not only in terms of creating good will for the company but it was effective also in terms of enhancing the efficiency of service delivery (cited in Mathis, 2007). As mentioned before, Sparkes had shut down several loss-making entities to free up resources which he had subsequently invested in training and development. Although this had increased the cost of operations in the short term, the long term result had been enhanced efficiency in customer care (cited in Baschab, 2005). Enhanced efficiency in customer relationship management had been facilitated by enhanced efficiency in human resource management because the strategies involved had been targeted towards improving relations with the key stakeholders. These stakeholders included commissioners and partners in community based organizations. By improving relations with these stakeholders, Sparkes had been able to send targeted messages towards its consumers thus giving them more choices. Therefore, Sparkes had adopted the approach of total quality management not only in strategic management of human resources, but also in resolving the conflict between organizational commitment to vision and eliminating sizable numbers of voluntary workers in its organizational structure.
The conflict mentioned above was particularly relevant in Scope’s context because charity work demanded firm commitment from its workforce and therefore voluntary contributions were one of the critical success factors. Yet Sparkes had eliminated a substantial percentage of these contributions in enhancing the economic focus of the organization. However the strategic focus of the organization in terms of providing better services had not been diluted because Sparkes had also changed the nature of its workforce by hiring more people with disabilities. Additionally, Sparkes had embarked on a major project of managing relations with the key stakeholders in order to build better relations with its customers. These strategies had enabled Sparkes to restructure the organizational culture in such a way as to reduce the headcount on one hand and enhance focus on core competencies on the other. This combination of strategies was the key to resolving the paradox of bringing about effective organizational change based on organizational commitment and vision (cited in Mello (2005).
Models of managing change
The best practice view of change management is applicable in the approach that Sparkes adopted. In this respect, initiatives for change management followed a top down direction (cited in Hitt, 2007). Therefore leadership commitment was one of the determining factors of success in the present scenario. The top leadership was able to mobilize the resources for change effectively because Sparkes, who was the chief executive and who was the initiator of the change, had prior experience in human resource management which was the central strategy in the organizational restructuring at Scope. As a result he had the necessary experience and expertise which allowed him to manage the strategic alignment process between HR and the rest of the organization effectively (cited in Aaker, 2004). The strategic alignment process was particularly difficult in this case because Scope was a charity organization in which the most important assets came from the voluntary workforce. However in order to improve the strategic focus of the organization, Sparkes had eliminated a substantial percentage of these assets. This would have the effect of limiting the core competences of Scope except that the Chief Executive had been able to manage stakeholder relations to widen the reach of the streamlined workforce. As a result of these strategies, the organization had successfully made the transition from being an organization with an uncertain future to one that was financially secure. Implementation of the best practice model had been critical in this case of change management.
The type of change that Sparkes initiated was incremental (cited in Besterfield, 2005). The basic organizational structure had remained the same. For example organizational vision and service offerings had not changed. Instead Sparkes had implemented change in the form of business process reengineering in terms of scaling down existing opera
tions to boost profitability. The incremental framework had simplified the process of change to some
As mentioned before, Sparkes had emphasized the management of relations with stakeholders in order to rationalize operating costs. Therefore stakeholder management had been an integral component of change management at Scope. Other critical elements, in accordance with the best practice view, had been top leadership commitment, culture alignment, balance of training and development and an efficient performance management system. These were the underpinnings of an initiative that Sparkes had undertaken to put the organization on a long-term financially secure position. All these elements had been successfully integrated into one particular framework for managing change and that framework had been the seven stages of the organizational development process (cited in Evans, 2004). Implementation of this framework that had enabled employees to envision the benefits of change had simplified the process and enhanced its effectiveness.
The process of organizational development consists of seven stages and change management at Scope had gone through all seven stages. Development of the process through all seven stages had been facilitated by Sparkes’ background in HR development. This had allowed him to identify the problems that had led to the financial problems of the organization and this process of identification had allowed him to determine the future state of the organizational structure at Scope after the implementation of change. When it came to managing the transition, Sparkes had identified the targets for change by studying the existing operational structure of the organization. He had subsequently focused the change initiatives on rationalization of costs. Because of his experience and expertise in human resource management, the Chief Executive had managed to contextualize business process reengineering in terms of human resource development (cited in Fred, 2006). As a result, cost savings had been strategically reinvested to strengthen the structure of the existing organizational culture so that it could be a source of sustainable competitive advantage. At the beginning of the process, Sparkes had made the mission clear to the rest of the organization and this mission was the attainment of sustainability through organizational development. He had achieved this mission effectively.
The role of human resource departments
The process of organizational change involves realignment of its existing strategies to enhance cultural effectiveness. As a result, the process cannot be successful without extensive involvement on the part of human resource managers. The cultural dimensions of an organization are the responsibility of the human resource managers to build and maintain. Therefore implementing organizational change without weakening strategic focus depends on the experience and expertise contained within the human resource department. An example of this relationship is illustrated by the successful change management process at Scope. The process had been carried out according to the top-down approach.
The problem frequently encountered in this framework is that employees resist change because their involvement is extremely limited in the process and therefore they are uncertain about the future and their ability to cope with it. However Sparkes had managed to eliminate this problem by building an effective communications structure. So maintaining employee relations had been central to the process of organizational development as he had approached it. The central theme of his approach had been to build a framework of managing employee relations based on efficiently and effectively communicating with the employees regarding the change and the roles they were going to play in it. As the change agent, he had emphasized upon the important role that the human resource department was going to have to play in evaluating and reinforcing change (cited in Grover & Kettinger, 2008).
Managing change is a complex process because of two restraining forces (cited in Hill & Jones, 2007). One is employee resistance and the other is misalignment with strategic focus. Jon Sparkes had dealt with both challenges effectively by applying his previous experience of managing human resources in the context of charity work. He had been extensively involved not only in facilitating traditional HR successes, but also in innovative realignments of HR staffing to enhance the efficiency of delivering services. This experience had enabled him to put the issues of managing people at the heart of his change management initiatives at Scope. This strategy had been central to his mission of achieving sustainability through the new organizational structure. So the approach that Sparkes had adopted had its foundations in the organizational development process as framework-ed by the issues of managing people.
These issues were centered round ethical dimensions, corporate social responsibility and workforce diversity. These three themes were particularly relevant in this organizational context because Scope was a not-for-profit organization. Therefore, employee commitment to the vision and the mission of the organization was more of a psychological contract than an economic contract (cited in Armstrong, 2005). This psychological contract came from personal involvement inasmuch as the employees did their work more out of ethical and social considerations than out of profit incentives. It is the ultimate goal of every private-sector profit-oriented organization to attain this level of integration in terms of employee commitment. Yet this situation already existed at Scope. The problem was to maintain this level of employee commitment despite cutbacks in the numbers of the workforce. Sparkes had solved this problem by hiring new employees who had personally experienced the problems resulting from existing disabilities. As a result, the level of personal involvement in the restructured workforce had been enhanced.
Most change management projects fail to attain desired goals. This is because the management of most organizations when initiating change has little or no experience of the role that the human resource department should play in the successful implementation of change (cited in Bank, 1993). As mentioned before, one of the primary challenges to implementing change successfully is to reduce employee resistance. This is the responsibility of the human resource department as they are directly responsible for managing employee relations by means of reward management and performance system management. Managing organizational core competences is also the responsibility of human resource management. All these elements are realigned during the organizational development process and therefore the possibility of misalignment with strategic focus is all too real. For this reason, involvement of the human resource department is of paramount importance. However this importance is not recognized when the management of an organization does not have prior experience in the development of human resources.
Such was not the case at Scope where the Chief Executive had been extensively involved in human resource development activities in the public sector and at Scope before being appointed in the top position. As a result of this background, Sparkes had perceived how competitive strategies such as service differentiation, cost reductions and quick deliveries had to be implemented in the context of the organizational development process as prescribed in the human resource department. In organizations such as Scope involved in charity work, the role of the human resource department is particularly highlighted because of the level of personal involvement which employees invest in their duties and responsibilities. Therefore even when it comes to maintaining alignment between business strategy and change management strategy, the functional repercussions are firmly rooted in human resource management. As a long-time practitioner in human resource management, Jon Sparkes had perceived this inter-connectedness and had made it central to his approach to managing change.
Culture is defined as a set of shared values, beliefs and attitudes. It is the task of human resource management to provide incentives for employees so that they are willing to embrace the emotional components of the organizational culture in terms of the shared values, beliefs and attitudes. In charities, such behavioral alignment happens under its own momentum because motivational factors are taken care of by personal involvement. Therefore this is a psychological contract which underlies the nature of employee involvement in non-profit organizations. In profit-oriented organizations however, this is replaced by an economic contract whereby employees do the work that they are assigned out of the desire for self improvement.
As a result, the sphere of influence for human resource management is enhanced to a considerable extent. This enhancement is in the form of reward management activities which the human resource department is in the best position to handle because of its contribution to engineering a particular cultural alignment. The organizational culture will assess which aspects of employee performance are more desirable in terms of their contribution to the strategic focus of the company and according to this assessment, reward management takes place. Human resource management is in the best position to meet the requirements in this area because no other function has the same level of integration into the organizational culture. Other functions such as marketing or finance have closer relations to the strategic focus of a company, but they certainly do not have the same level of perceptual map of the organizational culture that HR does.
The modern business environment is known as the information era. In this environment, competitiveness stems from the availability of information. Businesses which have more detailed information about the existing industry dynamics have a greater ability to anticipate changes and adjust its vision, mission and strategies accordingly. For this reason, the practice of business process reengineering that involves the embedding of technological advances in existing operations has become widely adopted. The trend is particularly pronounced in the HR industry. A number of factors have contributed to the emergence of software applications that automate HR functions. One of these factors is the highly structured and repetitive nature of HR functions.
As a result of the structured and repetitive functionalities, HR represents one of the major areas in which cost savings can be achieved through automation. Because of this business case, there has been intense competition among HR service providers in the software industry (cited in Baldwin & Curley, 2007). Some of the software developers are even outsourcing their programming and testing activities offshore in order to reduce costs. Majority of the software products involved represent integrated solutions which bring diverse functions together under one technological platform so that the flow of information from one department to another becomes instantaneous. This standardization of the operational base through technological sophistication also facilitates the collection of detailed information. This technological sophistication represents a major opportunity for HR functions to add strategic value to the different elements of an organizational structure.
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