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MG625: Change Management Strategy Applied by Gestner at IBM

MG625 Department of Business & Management
Assignment Brief
Leading and Managing change: IBM Case Study
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:

For the achievement of success of any company, it is important for any organization to implement change because it creates growth opportunities for any company. Moreover, it enables any company to meet the dynamic requirement of the customers of the company. Therefore, for thriving business in the dynamic marketplace and creating core values of the business implementation of change is necessary. However, every change creates some types of resistance from the employee’s end because it creates some problem to conduct their job in the workplace. Therefore, in order to manage the change in the company it is important for any company to implement some effective strategy because effective change management strategy allows any organization to implement change with more effectiveness. This assignment is intended to describe a case study that describes the change management strategy that Gestner has applied to manage resistance to change at IBM.

1) Change Kaleidoscope at the point at which Gestner has took over IBM and Different options available to him:

The Balogun and Hailey proposed change Kaleidoscope that is one of the diagnostic frameworks that is very much useful in the change management process that is sensitive in nature. As stated by Mausner (2011), change kaleidoscope mainly consists of three different layers. Among them, the internal circle gives huge set of choices, the central ring mainly relays to the different contextual issues that are mainly considered during making a revolutionary plan in the company. The outer ring of change kaleidoscope relays to the huge strategic adjustments contexts. The case study describes that IBM has appointed Gestner as chairperson in 1993 to transform the loss making company into profit making organization. 

Change Kaleidoscope


Figure 1: Change Kaleidoscope

(Source: Mainiero and Sullivan, 2015, p. 111)

After joining IBM, Gestner had applied a number of changes in the company. However, along with the change he also implemented some change management process such as division of the single remuneration structure into different parts, provision of the reward in every single achievement and not asking for the complete commitment from their employees. Change kaleidoscope at the point of the appointment of Gestner is as follows:

TimeThe main reason behind the implementation of the change is transforming the financial condition of the company and establishing it as profitable company (Sullivan and Mainiero, 2012). After implementing change, IBM has started to achieve profit in the year of 1995. Therefore, from 1993 to 1995, this two year is required for implementing the change. Gestner implemented this change as the long-term solutions. However, stockholders expect a short-term result from it because they want to make profit in a very short time period.
ScopeThe change in the IBM is mainly implemented by realigning the output through elimination of the surplus amount of staff. However, the prescribed change not only involves a single department but the whole organization because elimination of the surplus staff occurs from the whole organizations. As stated by Valentine (2013), surplus amount of staff is always an obstruction that creates huge financial loss. Therefore, in order to reduce the burden in the IBM, Gestner has terminated some excess amount of staff. It is also mandatory to reduce as well as manage stress among employees for securing best results because frequent termination creates a fear among the employees.
PreservationFor the achievement of the profit in the company, Gestner has planned to maintain their existing employees with more effectiveness. For managing change he not only implement the effective stress management strategy but they he also implements an effective reward management strategy and remuneration structure.
DiversityIBM is one of the software giant that is highly popular in different country, therefore, they hires diverse range of employees in different branches of them for enriching their company with different skills and knowledge (Valentine, 2013). As IBM hires employees from different country so that every single employee has, different types of attitude, norms as well as different values. For their diversity, the unity among those employees is not so strong. For this reason, when formation of the employee union was proposed, then some employees voted for the union and some employees voted against the union. Other reasons of their weak unity are there are different branches in the company such as accounts, marketing, project development, sales and administration.
CapabilityFor the management of the change, Gestner implemented a system to provide reward for every single achievement of employees. Moreover, Gestner also has divided the single salary structure into different parts. Among them, he planned to provide most of the parts as per the performances. However, Aaker has also implemented the change but due to ineffective implementation of change such as hiring more employees, IBM has faced huge amount of loss.
Capacity for implementing changeAs the change only requires termination of excess amount of staff, therefore, it does not require the investments of huge amount of money. For the implementation of the change, Gestner has hired two professional who has extensive knowledge in the cost cutting.
Readiness for the changeFrom the history of the company, it has been observed that in the year of 1992, IBM has faced huge loss so that a change was implemented to develop the financial condition of the company. However, employees had the knowledge that changes are going to be implemented but they were not motivated or excited regarding the change because the change terminates their jobs (Kappen and Nacke, 2013). Any change always required huge amount of supports so that employees can cope up with the changes. However, in this case employees did not receive enough support from their immediate boss that creates a stress among them because of the fear of job loss.
PowerFor the implementation of the change, the entire power is associated with the Gestner. In this change implementation and management process, the stakeholders are the employees along with the two professionals and the stockholders of the company whose aim is to achieve huge amount of profit.

Table 1: Change Kaleidoscope at the point of appointment of Gestner

(Source: Created by author)

When Gestner was implemented the change, then there were several option that was available to him. That can be described by analyzing the core level of the change kaleidoscope:

Changing the pathDuring the change implementation, there are mainly four different options available to any person such as transformation with the big bang approach, total transformation, and reconstruction approach by following the big bang approach and adapting the incremental path change (Hailey and Balogun, 2012). Among these four different path, Gestner was applied the incremental path change by realigning the whole system. However, it also would be effective if Gestner could reconstruct the whole system by following a big bang approach. Gestner, could apply more effective marketing strategy, employee motivational strategy to motivate the workforce or he can change the sales approach of their company to achieve huge profit.
Changing the starting pointChange start point is the point when any individual change the time to initiate change. Gestner mainly follows the bottom up approach to reduce the number of staff but he follows the top down approach to provide the reward because he provides rewards to the managers first and then to lower level of employees. However, it would be more effective for Gestner if he could apply both type of change by following the bottom up approaches. This is because; in any company bottom level, employees are generally associated with performing organizational tasks. Therefore,  Gestner can easily increase the performance level of the company by providing effective reward to bottom level employees.
Changing the styleIt is clear from the case study that for the implementation and management of the change, Gerstner has applied the autocratic leadership strategy. The main reason behind following this strategy is at that point IBM requires aggressive change. However, it would be also effective if Gestner would apply the participative leadership strategy. This is because; involving employees in the decision-making strategy always increases the understanding regarding the change among employees (Berman and McLaughlin, 2014).
Changing the interventionGestner mainly required implementing the change because of reducing the operating costs. Along with the reduction of the surplus employees, there are other target are also available such as providing effective training to the employees so that they can increase their performance level. Moreover, Gestner could implement the effective as well as aggressive marketing strategy for implementing the change.
Changing the rolesIn any change management process, different peoples are involved in different process. From the case study, it can be said that effectiveness of the change management process can be increased by assigning multiple roles to different employees (Sullivan and Mainiero, 2012). Along with guiding employees, Gestner can utilize the managers to understand the strength of the sub-ordinates so that IBM can implement different effective strategies to increase their strength.

Table 2: Choices that was available to Gestner during the implementation of change

(Source: Created by author)

2) Application of theories into the steps that Gestner has applied to overcome the resistance to the change:

The case study of IBM described that during the year of 1992-1993 the organization has faced huge losses of 4 million dollar. For transforming a loss making organization to a profit making organization, IBM had hired Gestner as the Chairperson of the company. Immediately after his joining at the IBM, Gestner has taken different stages by which the organization can decrease the operational costs such as the reduction of the surplus amount of employees in the company. Moreover, Gestner also provide more focuses to maintain an effective relationship with the customers, application of the decentralized structure etcetera. However, the decision of Gestner to reduce staff creates huge de-motivation among employees because it creates an uncertain future for them, therefore the productivity of the company decreases. For the reduction of the employee resistance, Gestner has applied different change management strategies such as division of the single remuneration structure into many and effective reward management strategy. Different change management is there that can effectively describe the steps that Gestner has applied to reduce the resistance to change among the employees.

Kotter’s change management theory is one change management theory that divides the overall change management process into eight different stages. The first step of the Kotter’s change management model is the creation of the urgency (Appelbaum et al. 2012). In this step, development of the sense of urgency for implementing change is created. From the case study, it can be said from the case study that before implementing the change, Gestner has felt the necessity of reduction of the surplus employees. The next step of this change management theory is building the right team by involving the suitable employees. From the case study, it can be said that for the reduction of surplus employees, Gestner has hired two professional named Gerald Czarnecki and Jerome York. With the help of the two professional, Gestner has reduced huge number of surplus staff. The next step of the change management process is generation of the effective and appropriate vision for implementing the change. The next step of the change management is communication of the vision statement with the employees that are involved in the change management process so that they can take active participation in the change management process. After the development of the vision in the IBM, Gestner had communicated the vision with the employees so that employees can take some specific actions to achieve the vision statement of the company. After the development of the vision and communicating the vision, it is mandatory to empower some actions based to achieve the vision statement of the company (Todnem By, 2015). In this step, it is very important to reduce all the barriers regarding the change and get additional support so that the change can be effectively implemented. From the case study, it can be said that Gestner has assumed that he could have faced huge amount of employee resistance so that he takes different action to reduce the barriers of change. For this purposes, he implemented effective reward management strategy and divide the salary structure into many parts, among them, some of parts are paid to employees for their effective performance level. For empowering action, it is mandatory to focusing on the short-term goal of the company. As stated by Gill (2012), effective focus on the short-term goals and dividing the main goal of the company into different achievable as well as small parts can helps any company to achieve the main goal with more effectiveness. The main goal of the Gestner is achieving profit from the company, for the achievement of which he divides the goal into different short-term goals such as reduction of surplus employees; align the organizational performance with the customer’s requirements and implementing the performance per pay. This theory describes that for the achievement of success, it is mandatory for any company to be persistent (Todnem By, 2015). From the case study, it has been observed that for transforming the company from loss making condition to the profit making condition, Gestner did not gave up till 1995, when the company started to make profit again. Kotter’s change management theory clearly demonstrates that for managing change in any company, implemented change must be reinforced and should be a part of the organizational culture. 

Kotter’s change management process

Figure 2: Kotter’s change management process

(Source: Eisenbach et al. 2014, p. 84)

When Gestner was implemented a change in IBM, then most of the employees were going through high level of stress because of the fear that they will lose their job in any days. Beckhard and Harris’s change management model is one of the powerful tools that create the suitable conditions and possibility for the change. According to this theory, for the achievement of profit making organization from the loss making condition through the change, dissatisfaction*desirability* practicality must be greater than the resistance to change. According to Turner (2013), this theory clearly stated that, before implementing any change, any team or individual need to be dissatisfied, which is one of the driving forces to implement a successful change. In this case, before implementing the change in the IBM, Gestner felt that the financial condition of the organization is not good so that it must be transformed to profit making condition t6hrough the effective change. Gestner felt that the change related to reduction in human resource related costs is important to maintain organizational sustainability, which is the major reason behind the implementation of the change. After feeling the necessity of the change, a solution must be developed according to the change objective (Fernandez and Rainey, 2015). For implementing the change in the IBM, Gestner assessed the future result and uncertainty of the change so that appropriate action can be initiated to manage the uncertainties. In this case, Gestner has decided to provide good reward to employees. Moreover, he also divides the whole salary structure and decides to provide it according to the performance that also helps him to reduce the future uncertainties. For resolving the problem, a practical as well as executable strategy needs to be implemented. In this case, for change the financial condition of the organization, Gestner has decided to reduce the human resource related costs and eliminate surplus amount of employees (Fernandez and Rainey, 2015). Resistance to change mainly includes the belief of any individual that can limit the change. Resistance to change is very normal after the change implementation and mainly performed by the affected group of people. In this case study, the employees who were facing rapid job termination were mainly associated with the resistance to change. For resolving the problem, Gestner has implemented different change management strategies such as performance per pay remuneration strategy and effective reward management strategies.

Beckhard and Harris change equation

Figure 2: Beckhard and Harris change equation

(Source: Fernandez and Rainey, 2015, p. 169)

Lewin’s change management model is one of the effective models that help any individual to understand the structured as well as organizational change. For implementing change in the company, Lewin’s change management model proposes three stages that are unfreeze, change and refreeze (Thomas, 2012). The first step of the change management process mainly involves the preparation for the change. 

Lewin’s change management model

Figure 4: Lewin’s change management model

(Source: Levasseur, 2011, p. 74)

This phase of the change management process is crucial and important because most of the people mainly resists the change in their company because it carets some uncertainty in their job. From the case study, it can be said that for the implementation of the change, Gestner first hired two specialists to reduce the costs regarding the maintenance of human resource. After that, he proposed some reward for every achievement and divided the structure of the remuneration into different parts (Burnes, 2014). Along with that, he also develops some stress management strategy to manage the stress among the existing employees. The next step of this model is implementation of the change. Therefore, at this step some good assurance as well as leadership strategy is important because effective leadership can manage the stress among the employees. As stated by Lewin et al. (2014), effective implementation of change always requires effective communication. From the case study, it can be said that for implementing the change, Gestner follows the autocratic leadership strategy and do not ask employees for their complete commitment. He requests every employee to be prepared to leave the organization. However, this is not one of the effective change implementation processes but it is effective strategy for the company to achieve profit. The final stage of the change management process is the refreeze, where the employees accept changes and the organization started to be stable (Kotter, 2011). From the case study, it has been observed that IBM has started to achieve profit in the year of 1995 so that in this time the organization started to be stable. 

Force field analysis is one of the effective decision making tool that is also applicable here. This theory helps to make effective decisions by analyzing the forces against and for a change (Lewin, 2011). By applying this theory in the case study, it can be said that, before implementing the change, the force filed must be in equilibrium stage between the restraining and favorable forces. When, Gestner has implemented change, and then the equilibrium condition in the working must be upset (Burnes, 2014). After the change implementation, the driving forces that can help IBM to maintain a profitable condition are the effective change management strategies implemented by the Gestner. On the other hand, restraining forces are the employee resistance, their low morale and highly dissatisfied employees that resulted in low organizational productivity.

Force field analysis

Figure 5: Force field analysis

(Source: Lewin, 2011, p.111)

Conclusion:

It can be concluded from the above discussion that effective change management strategy of any company helps them to implement change more successfully. However, during the implementation of the change, facing resistance from employees is very normal that can ruin the whole change implementation process. Therefore, for successful implementation of change, organization must involve their employees in the decision making process of the implementation of the change. Moreover, for the successful implementation of the change any company must apply the effective leadership strategy because it helps any employees to adopt the change more quickly. Therefore, effective leadership strategy reduces resistance regarding change from the employee’s end.

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