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Leading and Managing Change: IBM Case Study

Department of Business & Management

Assignment Brief
Module Title:Leading and Managing changeMG625
Assignment No/Title:IBM case studyAssessment Weighting:50%





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This assignment tests the following Learning Outcomes for the module:Delete any that do not apply and ensure that alternative instructions are entered in the box above.
1: Recognise and explain theory and practice in the management of change within organisations.
2:  Compare and evaluate different cultural characteristics and assumptions between national groups and organisations, and their effects on organisational practice. 
3:  Evaluate the steps needed in developing an effective team and the way teamwork varies across national boundaries 
4:  Identify the role that organisational structure can play in developing an effective organisation
5:  Distinguish between a range of learning styles and their application in personal and organisational settings.
The Assignment Task:



Read the case study on the changes that have taken place at IBM and prepare a report (with references) to the company on how the company planned and implemented the change.
In doing this, include answers to the following two questions.  Each question carries equal marks.
Either   (i) draw up a Cultural Web diagram for the organisation before and after Gestner took over and implemented change and describe the main differences and implications for change.
Or         (ii) draw a change kaleidoscope for the organisation at the point at which Gestner took over.   Using this model (Balogun and Hope-Hailey), discuss the change options available to him at that point.
What theories are you aware of that would explain the steps Gestner might have taken to help to overcome resistance to change?
 Do not exceed the word limit of 3000 words



Answer

LEADING AND MANAGING CHANGE

Introduction:

In today’s organization, for achieving the sustainability, implementation of change is very much important. However, the success or failure of every change is mainly dependent upon the management of change. If any change can be managed in an effective ways then the change can be sustainable, otherwise, it is difficult to manage the change in the long-term basis. This assignment is proposed to demonstrate implementation of change process and the management of the change process based on the case study of IBM.

1) Change Kaleidoscope for the company at the point at which Gestner took over the company:

Change Kaleidoscope is one of the frameworks that is very much useful in the contexts of the implementation of the sensitive change process. The Balogun and Hailey developed this framework for codifying and pulling wide range of the implementation option as well as contextual features, which is one of the required considerations during a change. Kaleidoscope mainly contains two different types of rings such as outer ring and the inner ring (Thomas et al. 2011). Among them, outer ring mainly considers the contexts of change that either constraints or enable any change. On the other hand, inner ring mainly contains the implementation option available for the changing agents. From the case study, it has been observed that Gestner was appointed as a chairperson in the year of 1993 and immediately after his appointment; he has implemented huge number change in the company for cutting some operational costs.


Change Kaleidoscope

Figure 1: Change Kaleidoscope

(Source: Oreget al. 2011, p. 463)


For the reduction of huge losses that IBM faced in the present time, Gestner has mainly cut the costs related to the human resource. Along with that, he also implemented some effective reward management strategy to motivate the existing employees. Along with that, he also implemented some effective reward management strategy. Change kaleidoscope model at the time when Gestner was appointed as a chairperson is as follows:

TimeGestner mainly implemented this change to transform the financial condition of the company and establish it as a profitable organization. For transforming the economic condition of the company, Gestner has taken two years of time from 1993 to 1995 to transform the economic condition of the company by eliminating the surplus staff of the company. Gestner has implemented the change to generate a long-term solution of the present problem faced by company that is surplus amount of staff. The main requirements of the stock market or shareholders of IBM are securing huge amount of profit through buying or selling the share of the company (Colquitt et al. 2011). Therefore, for the achievement of huge amount of profit in a very short time, shareholders expect a short-term result.
ScopeFor implementing the change, it is important to realign the output by eliminating surplus staff. The prescribed change of the Gestner not only affects a single department of the IBM but it affects the whole organization by generating huge amount of profit. Surplus amount of staff is always burden for any company that always incurs extra operating costs. Therefore, for securing huge amount of profit it is important to terminate the surplus staff. However, it is also important for the company to manage stress of the existing employee for securing outstanding organizational output.
PreservationsTo generate a profitable company, it is important for the Gestner to maintain their existing employees along with the elimination of the surplus amount of staff. This is because; only a satisfied employee can generate superior value so that it is important to provide effective assistance to the employees so that they can manage their stress (Shin et al. 2012). For managing the change with effectiveness, Gestner implements an effective reward management strategy by which he divides the single remuneration structure to different segments and provides more performance per pay payments. This payment structure motivates employees with more effectiveness. During the implementation of the change, Gestner must facilitate continuous reduction of the work force whenever required basis.
DiversityAs IBM is one of the big software organization that operates their branch in different countries so that they hire diverse range of employee in order to enrich their company with different types of skills. Therefore, every employee has different values, attitudes or norms (Cameron and Green, 2015. For this reason, when formation of employee union was proposed, some of the employees stated yes and some of the employees stated no. there are different division in the company such as accounts, project development, administration, marketing and sales.
CapabilityFor managing the change with more effectiveness, Gestner has divided the salary structure into different parts and provide more award to the existing employees for their single achievement in the company. Moreover, for implementing the change, Gestner has provided more performance per pay remuneration. Along with that, he proposed some counseling for the management of stress. However, during the era of Aaker, the organization has faced huge change. However, the company faced the loss during his time for his ineffective decision to hire surplus number of sales staff.
CapacityFor implementing the change, Gestner has hired mainly two professional who are specialist in cost cutting. However, for terminating the employees, Gestner has faced US$8.9 billion loss.
ReadinessIBM was facing huge loss during the time of 1992 so that it is easily assumable by the staff that a change will be implemented to change the condition of the company. However, they were not motivated towards the change because it terminates their job (Lewis et al. 2016). However, huge supports are required for the employees to make them understand the necessity of change but the organization has taken autocratic approach to implement the change during the era of Gestner. However, for motivating the existing employees, the organization has taken some approach but that was not sufficient for motivating the employees.
Power For implementing the change, Gestner holds the ultimate power. For the successful implementation of the change, the major stakeholders within the organizations are the two employees who designed the change and the shareholders who wanted to achieve huge profit through the change.

Table 1: Change Kaleidoscope model at the time when Gestner was appointed as a chairperson

(Source: Carteret al. 2013)

During the implementation of the change, the choices that were available to the Gestner can be understood through the core level of the Kaleideiscope.

Change pathDepending on the implementation of the change and end state, there are mainly four principles such as total transformation, transformation with the big bang approach, adoption of the incremental change path and the approach of reconstruction through the big bang approach. Among them, Gestner has realigned the whole system through the incremental change path. However, there are other option is available such as Gestner could adapt the reconstruction with big bang approach and implement a completely new system. Through this approach they can implement an aggressive marketing strategy, reduce work force and change the administration system to achieve fully functional organization.
Change start pointAs stated by Gioia et al.(2013), change start point mainly describes the point from which any organization can initiate the change. For reduction of the surplus staff, Gestner follows the bottom up approach and for implementing the reward management strategy; Gestner has followed the top down approaches. However, there is another option available that can help the organization to generate better level of productivity such as for providing reward Gestner should follow the bottom up approach because bottom level employees such as sales representatives, software developer and marketing agents are directly associated with the organizational work. Therefore, providing rewards to them is very much effective for the company.
Change styleFrom the case study, it has been observed that Gestner has mainly followed the autocratic leadership approach to implement and manage change. This is because; he thinks that it is effective leadership strategy for aggressive change. However, following democratic approach will be more effective if Gestner would follow this leadership strategy. This is because; consulting employees before implementing change not only motivates employees but also helps them to provide their best effort to implement the change (Jacobset al. 2013).
Change interventionThrough this change management process, Gestner mainly wanted to reduce the loss by eliminating the surplus employees. However, along with that, IBM has different target available such as Gestner can implement more aggressive marketing strategy and increase the profit of the company. Moreover, Gestner can increase the performance level of the company by providing extensive training to the employees.
Change rolesAs opined by Cornelissen and Werner, (2014), for implementing change in the company, different people play different roles. However, for increasing the effectiveness of change, Gestner can involve the employees that are involved in the change in multiple role such as he can involve the managers of IBM to understand the impact of change among employees so that he can implement strategies to resolve the problem.

Table 2: Different types choices available to Gestner

(Source: Cornelissen and Werner, 2014)

2) Theories that can describe the action that Gestner takes to overcome resistance of change:

From the case study, it has been observed that during the time of 1992-1993, IBM has faced major economic downturn. As a result, they have faced a loss of US$4 billion dollar. For reducing the amount of loss, IBM has hired Gestner as their chairperson. Immediately after joining IBM, Gestner has takes different strategies such major reduction of the staff, improvement of the customer relationship, decentralized structure and defining the core expertise of the IBM. For the achievement of this, Gestner has implemented huge change in the organization. He have cut the man power of the company but take a step to provide more award to employees according to their performance so that they can feel more motivation at their workplace (Petrou et al. 2016). Along with change implementation, Gestner has taken different effective step to minimize the resistance to change. There are several change management model that can describe the steps that Gestner has taken to overcome the resistance to change.

Lewin change management model is one of the change management models that mainly describes that there are mainly three different steps such as unfreeze, transition and refreeze for accomplishing a change. Lewin describes that majority of the people operates and prefers the safety zones so that they create motivation for the change before implementation of the change. For overcoming the resistance for change, Gestner has provided reward for the performance so that employees can be motivated and he can face minimal level of resistance while implementing the change. According to the Lewin’s change management model, the first step of the change is unfreezing that mainly involves the step for preparing the employees for implementing change (Andrade, 2016). At that time, Gestner has planned to cut huge workforce so that it can easily de-motivate the existing staff. Therefore, in order to reduce the level of de-motivation among the staff and make them more focus towards their work, Gestner has provide performance based reward and along with that he divide the whole salary structure into many merit budget. This strategy is effective for him to retain their talented staff. The next step of the unfreeze step is the change implementation stage. In this stage, changes are implemented but this implementation may take some time because people generally take some times to embrace with the changes. This step must involve the reassurance as well as good leadership strategy because it not only helps the management to implement change in the right direction but it also helps the employees to implement the change that are involved in the change implementation process. However, effective time or communication is important for implementing the change but here Gestner did not effectively communicate to implement the change. The next step of the change implementation step is the refreeze step. This step mainly required to anchor the changes with the culture of the organization in order to make the changes long-term (Heckmann et al. 2016). This step also involve some ways for make the changes sustainable. From the case study, it can be said that IBM is suffering so that they may required frequent cut in workforce size. Therefore, for making the change sustainable they did not request employees to provide total commitment to their organization. They have told them to stay in their organization but told them to be prepared to leave the organization.

 Lewin’s change management model

Figure 2: Lewin’s change management model

(Source: Smets et al. 2015, p. 879)

The Kurt Lewin developed force field analysis theory, which is effective to help any individual to make effective decision-making. This theory states, there are always two types of forces that are driving forces and restraining forces that makes any organization operating (Schein, 2012). For the effective maintenance of the operation, it is mandatory to maintain an equilibrium condition between these two forces. From the case study, it is observed that here the restraining forces are the employee resistance after the change that creates low level of the organizational productivity. On the other hand, the driving forces of the changes that help Gestner to achieve the change objective are the implementation of the effective reward management strategy, performance per pay remuneration strategy and implementation of the effective stress management strategy for employees.

Force field analysis

Figure 3: Force field analysis

(Source: Schein, 2012, p. 32)

Along with the Lewin change management mode, Kotter change management theory also explains change management process in the IBM. Kotter change management theory is one of the most popular theories that divide the change management process into eight different steps. The first step of the Kotter change management process is increasing the urgency (Hayes, 2014). This step mainly involves creation of the urgency among the management of any organization so that they can feel motivation to achieve the objective. Therefore, before implementing the change, Gestner first feel the urgency of change by which they can cut the cost related workforce and develop strategy to motivate them. The next step of the change management process is building the team by which they can involve the right people according to their skills, commitment and knowledge. For implementing change and cut the operational costs, Gestner has immediately hired two experienced professional Gerald Czemecki and Jerom York who are specialists to cut the costs regarding human resource in most effective ways. After that, it is important to create a correct statement regarding vision so that effective change can be implemented according to the vision statement (Langley et al. 2013). For the development of the vision statement, Gestner not only selects an effective strategy but he also connects it with the objective, creativity as well as emotional connection. After the generation of the vision, it is important to communicate the vision with individual in company regarding the proposed change in the company. By comparing this step with the case study, it can be said that after the development of the vision and involvement of the right people, Gestner has communicate this vision with the other individual in the company so that the change can be implemented with effectiveness and all of the people can understand the necessity of change. After communicating the change with different level of management, it is mandatory to empower different action. As stated by Smets et al. (2012), for empowering the action, it is important for one people to get the support, reduce the barriers that can create problem and implement the feedback system in ways that are more constructive. From the case study, it has been observed that Gestner has assumed that organizational change that he has planned to implement can generate huge resistance from the employee so that he proposed different strategy such as performance peer pay and reward for the effective performance. Gestner also stated that he do not want the complete level of commitment from the employee, the only thing that he wanted from his employee is their performance. However, he requested employees to be prepared always for leaving the company. The next step of the Kotter’s change management model is focusing on the short-term goal. For the achievement of the ultimate goal in the organization, Gestner has divided the goal into different achievable parts (Kazmi and Naarananoja, 2014). The ultimate goal of the Gestner is securing a profit by cutting the work force related costs. For achieving which he slowly reduced the number of labor of IBM and only retain the star performers and the acceptable performers of the IBM. Kotter’s change management model described that being persistence is the key of every success. Therefore, for the implementation of the effective change management in the company, it is important for the Gestner to be persistence with the change. The next step of the change management is incorporating the changes by reinforcing it and making it a part of the culture of the workplace (Worley and Mohrman, 2014).


Kotter’s change management model

Figure 4: Kotter’s change management model

(Source: Hornstein, H.A., 2015, p. 296)

Beckhard and Harris’s change equation helps to manage the complex change with more effectiveness. According to this theory, for the implementation of the effective change, it is mandatory for the multiply of the dissatisfaction, practically and desirability to be greater than the resistance to change. From the case study, it can be said that for the implementation of the change, Gestner first feel a dissatisfaction that makes him feel the necessity of implementing change. Gestner feels the dissatisfaction because IBM faced a huge financial loss at that time. After feeling the dissatisfaction, Gestner felt that the organization required implementing a change so that the financial condition of the company can be improved. For implementing the change, Gestner first developed; a clear vision and then he implement the strategy. According to Macaya et al. (2016), for the successful implementation of the solution, it is mandatory to develop a detailed knowledge regarding the vision. In this step, Gestner has developed strategy to satisfy the change related need and along with that, he makes a plan to assign the human resource to implement the change. For implementing the change, he hired to specialists that are effective to cut human resource related costs. The next step is the implementation of the practical solutions. By aligning this step with the case study, it can be said that Gestner has decided to cut the costs related to surplus amount of employee of the IBM by cutting down the excess amount of employees (Kazmiand Naarananoja, 2014). High amount of job termination creates a fear among employees regarding the job loss, which resulted in a resistance regarding the change. As stated by Hornstein (2015), resistance to the change is the situation that creates obstruction to implement a change. In order to resolve problem regarding the resistance to change, Gestner has promised to implement an effective reward management strategy and performance for pay strategy so that the productivity of the company can be increased.

  Beckhard and Harris’s change equation

Figure 5: Beckhard and Harris’s change equation 

(Source: Kazmiand Naarananoja, 2014, p.221)

Conclusion:

The above discussion concludes the fact that for the implementation of any change more successfully, it is important for any organization to have effective change management strategy. It is very normal for any organization to face resistance for change after implementing it, therefore, effective change management strategy need to be developed before implementing any change. For the implementation of any change, it is important for any organization to involve their employees with more effectiveness because the whole change management process is mainly dependent upon them. For any successful change, involvement of effective leadership strategy is also important because it helps employees of any changed company to adapt those changes.

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