Change management is a conscious leadership decision to reorganise and redeploy a company's resources to new business realities. Change is crucial for a company's survival, but many companies resist change until it's forced upon them.
Most transformations undertaken in non-crisis conditions end up failing: employees' attitudes and behaviour remain unchanged, ambitious targets slip downward, and the change management programme is finally abandoned, leaving the company worse off than it was before.
At one time, companies were expected to have a nearly immortal lifespan. But research indicates that the average life of a Fortune 500 business is now about 45 years and getting shorter, as indicated by the rise in mergers and acquisitions, and in bankruptcies.
Change management lessons from the car industry
A few years ago, Japanese car manufacturers realised that rising gas prices would drive buyers away from all-wheel drive sport utility vehicles and other gas-guzzlers. But companies such as Ford and GM resisted developing fuel-efficient fleets, and instead offered generous rebates and no-cost financing. Higher gas prices, however, pushed buyers towards fuel-efficient competitors such as Toyota.
Change management requires flexible structures
Successful companies recognise that a competitive environment is constantly changing, and have built flexibility into their structures. A hallmark of these companies is their willingness to embrace new technologies and new market realities. Instead of simply trying to hold on to old markets, they'll court new ones. But some companies that have had success in the past find it difficult to leave that past behind.
How national differences can influence change management
In embracing change management, the role of national regulations and culture can be as significant as that of company culture.
It can be difficult to institute change management in Europe, for example, where labour laws make it difficult to trim headcount, and where CEOs typically have strict limits on their power to manage. As a result, in addition to troubles at car manufacturers such as DaimlerChrysler, telecommunications, banking and utilities are struggling.
The structure of corporate ownership also plays a role. In Europe, many large firms were first launched as family-held businesses, and the family continues to hold a controlling stake even after the company goes public. Although family owners often hire an outside professional to manage the business, the real control rests in the family's hands, which can hinder change.
Contrasting business practices
There's a contrast between the European business model and American and Asian business practices.
Although some industries in the US have resisted change management, there are intra-industry variations where individual companies in otherwise sluggish industries do exhibit initiative. For example, while the American steel industry has been in the doldrums, so-called mini-mills – which use low-cost innovative processes, and can handle small orders and still turn a profit – are springing up across the country.
In the US, where publicly held companies are usually controlled by outside investors rather than by families, significant change can be easier to implement.
Asia, however, appears to be the exception to the rule. It's not unusual for families in Asia to retain control of their large businesses. Toyota is one example. But culturally, Asians pursue a bimodal approach that accepts rapid change, even in a family-owned setting. This can offer unique advantages: the stability and long-term outlook of family ownership, with the ability to change rapidly that's often associated with businesses that are not owned by families.
The challenge of organisational change implementation
To remain competitive, today's business environment is dictating the need to change. Acceptance of the need for change management has grown tremendously. Many consulting firms have a significant number of personnel who can advise companies about not only designing, but also effectively implementing a programme of change management. They map out processes to help firms think about what they need to do to spread changes through the organisation in order to stay competitive.
However, although there's a great deal of optimistic rhetoric about organisational change, implementation can be difficult.
Gaining buy-in and generating enthusiasm across the organisation can present challenges. Upper management may be committed to a change, but the trickle-down effect may become stalled if teams aren't given time and energy to focus specifically on managing change. There's a need to draw employees from all divisions, regions and levels, to communicate the change goals and the need for change, and to build trust across all levels of a company.
The rise of the global manager
As more companies expand their sphere of operations, one of the most significant challenges will involve standardising business practices across borders.
During the 50 years following World War II, most international corporations ran business operations in each country as if it were a separate company. Until recently, an overseas CEO in an international company would plateau as a country manager. The challenge today, particularly as it relates to change management, is to create a new level: a global manager.
Multinational companies such as General Electric, HSBC and Microsoft have successfully migrated to this standard of global management.
The drivers of change
Microsoft navigated from being one of the competitors in the computer operating system arena to virtually dominating it. Then, after establishing leadership in the office software category, the company moved into the internet platform race with its browser development. Microsoft has continued its change management with forays into games and handheld technology.
Early on, however, Microsoft's top executives didn't grasp the importance of the internet, and were slow to capture the opportunities it presented. But because the organisation itself was open to change, a few individuals were able to convince the leadership of the need to move into the internet sphere. In turn they reinforced the efforts and redirected the company.
Change management can filter down from top management to the rest of the company, which is how we typically think about it, or it can flow up from the rank and file. The most effective rollout of a major change initiative comes when it flows both ways. But that requires a deep level of participation and commitment by management and employees. It takes creativity, dedication and perseverance to involve the company in change.
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