Friday, 28 September 2012

MBA Essay - Implementing Strategies

Introduction
This assignment answer is framed around {Removed} Distribution Limited (ADL). ADL was formed in 2001 to distribute a new range of Samsung branded compatible laser and inkjet supplies products to the reseller channel. It is a small entrepreneurial business and currently has three employees; these being a sales manager, account manager / administrative assistant and a warehouse manager.
The market that ADL operates in is mature; characterised as almost “perfect competition” and thus could easily be viewed as a “zero sum game”. Acquisition of new business mainly involves the targeting and transference of existing trade away from competitors to ADL. ADL’s competitive advantage previously, was to focus on the brand strength of the Samsung name, in the hope that this would allow them to position the range at a price premium to its competitors. This was done in an attempt to avoid the sort of margin erosion that so often occurs in a mature market and in the hope that this type of market positioning would enable a higher conversion rate of new resellers thus leading to accelerated growth.
Whilst ADL has enjoyed some considerable success with the above approach, it is still failing to meet it’s key performance targets and whilst it’s shareholders remain committed to the business, questions are now being asked of it’s management as to why performance is not improving at the required rate.
ADL is failing to meet its objectives in a number of key areas. The most critical being:

1. Performance against revenue targets.
2. Performance against profit targets.
3. Acquisition of new customers.
4. ADL is losing money at the rate of 5K per month.
5. Stock turnover is lower than expected

Which objectives to choose and why?
The choosing of objectives raises a number of questions, examples of which could be:
1. Whose stakeholder interests are best served within the choosing of the above five?
2. Other stakeholders, such as staff, could have other problems that may have an impact on the current level of performance, which are not being addressed by focusing on any of the above five.

Ultimately, the shareholders of ADL chose objectives 1,2 and 3 as the three key objectives to initially focus on because it was felt that unless ADL could improve it’s sales and revenue performance and attract enough new prospects, the company would not be able to improve it’s cash burn rate. Whilst ADL recognised that employees may have other concerns that were not reflected in the choosing of these core objectives the general consensus was, that unless the company was fundamentally profitable, the viability of the whole business would be in question and the ultimate effect on all it’s stakeholders would be obvious.
Having identified which objectives to focus on, the management of ADL were given four months (due to expire at the end of December 2003) to show an improvement in the performance of the company.

Questions for consideration
The identification of ways of improvement it could be argued, could be said to be dependent on a number of fundamental questions. Some of which could be...

1. What business is ADL actually in? In other words, are they just a supplier of FMCG products or should they be something different?
2. Are ADL clear about where they are now and where they want to be?
3. What is the measure of success?
4. What is ADL’s locus of control are they a voluntaristic or deterministic type of company?
5. Having identified the need for change, will there be a willingness on behalf of personnel at the point of delivery to actually implement the change?
6. Do ADL have the right Structure, Systems, Process’s and Culture to deliver any required changes?
7. What sort of change and implementation strategy will be required? Radical as opposed to Incremental, Continuous as opposed to Discontinuous or something completely different?
8. What sort of leadership behaviour will it take to deliver the required changes – Transformational or Transactional, a mixture of the two or something completely different?
9. Individuals often appear to prefer a degree of homeostasis, are {Removed} prepared to accept that any change may make their people feel uncomfortable and the subsequent problems this may cause?
10. Organisational change may result in short term inefficiencies – how will the company deal with this?
11. Is {Removed} looking for commitment or compliance from its people?
12. Management often assume that strategy making is done in a vacuum. There is a danger that any organisational changes made by ADL may ultimately not produce the required results. This may happen as a result of competitors in ADL commercial environment implementing strategies that counteract any improvements achieved as a result of the ADL change, or indeed, the wider environment as a whole may have changed to such an extent that it makes any actual improvements on ADL’s part, ineffective.
13. How will {Removed} deal with resistance amongst staff, should it occur?

Strategy for Improvement
Lawrie J Mullins in his book “Management and Organisational Behaviour, Sixth Edition, Prentice Hall, p825” cites Elliot who comments... “Change is a complex psychological event, managing change places emphasis on employee and customer needs as the highest priority.” This appears to differ from Kotters view in his “eight stage change process” who commented “One should encourage change by spreading dissatisfaction within the organisation” This could raise the question – what is the right approach to setting the implementation strategy? As managers, managing through people and managing interactions are often, part of the everyday approach to doing business. Whilst on the face of it, “spreading dissatisfaction throughout the workforce” may make sense; there could be inherent dangers in having, for example, a sales force of dissatisfied workers with a low morale. However, it could also be an acknowledgment on Kotters part, that dissatisfaction and low morale are a natural consequence of any substantial change process and perhaps the key managerial concept when that type of change process is required, is to accept that there will be forces of resistance and the most effective way of dealing with it when appropriate, is to implement change quickly in an attempt to minimise the effects on both internal and external customers.
The management and shareholders of {Removed} recognised that, whilst change had to take place and whilst they viewed the change as a crisis response, that it was important to ensure that effects on both customers and employee’s were minimised as much as possible and as a result, they therefore adopted the following measurable approach.

Vision Statement
“ADL are not in the distribution business they are in the business of improving the profitability of their reseller partners”.

Grand Strategy
To accelerate sales and ensure that the company meets its 2003 forecast of 618K. To achieve this by focusing on a cost leadership position relative to its competitors.
To review ADL cost base, primarily focusing on costs of sales, in an attempt to improve profitability by 5%. Operational Goals – to be implemented by end of August Meeting Sales forecast of 618K

1. Acquisition of 30 new accounts with a minimum spend of 5K each.
2. Current conversion rate of new customers is one in twenty, improve to one in ten.
3. Increase sales within existing accounts from an average of 3K per month to 5K.

Cost Leadership Focus
1. Identification of the {Removed} value chain in relation to competitors to identify whether there are possible areas of improvement.
2. Undertake an analysis of our competitors pricing and attempt to position the {Removed} pricing lower to enable sales to target competitors more aggressively.
3. Evaluate options to establish whether {Removed} can create a sustainable competitive advantage to retain customers when competitors respond to this new strategy.

Functional Goals to support the above
1. Using the {Removed} database, develop a targeted marketing campaign to target the top three thousand resellers in the UK via fax and email. Allowing for a 1% response rate, this could yield, thirty good quality accounts @ 5K each.
2. Undertake a gap analysis to analyse the {Removed} product range vis a vis competitors. Work with suppliers and manufacturers to ensure that ADL have the right product set with which to target prospects and support their existing customers.
3. Analysis of competitors accounts coupled with market knowledge, may yield whether ADL can improve its purchasing position and thereby obtain a reduction in cost pricing. ADL’s target was a reduction in cost pricing by 5%. If this could be achieved, the additional gross profit, taken across the year should ADL hit 618K, would be 30.9K. If this could be done this alone would eradicate the cash burn and contribute towards bringing {Removed} into profit.

Areas requiring change to facilitate above strategy
Before embarking on this, it is worth summarising the managements thought processes before undertaking this change approach. Perception of environment in which this decision was made – crisis. In certain organisations, it could be argued perhaps, that managers may not have viewed the current situation as a crisis but as an “opportunity” instead and approached the situation from an entirely different perspective. Rather than looking at a “radical” perspective to change they may have used a somewhat different approach, veering more to methodologies such as “logical incrementalism”, Evolutionary or a “continuous learning” approach in an attempt to achieve the desired outcome instead.

It could also be argued that, as the market {Removed} operate in is mature, that to some extent ADL are constrained by its external environment and that they should therefore adopt a more deterministic approach. However, the management of ADL felt that, as ADL has already proved, the organisation can grow in a mature market and has achieved that by being intensely pro-active and success driven. A voluntaristic approach would therefore support the

current change strategy more appropriately, as this would represent the internal ethos as espoused by staff. Type of leadership required for change – largely transformational but with a strong ability to micro manage. It is worth noting that ADL is made up of only three people. The shareholders of ADL follow the “Theory X” view of motivational theory, articulated by Douglas McGregor. That is, that people essentially want to do a good job and do not need senior management telling them what to do but rather, that the team had suffered from a lack of adequate support, especially when it came to looking at internal practices and procedures and that a manager that could reduce the burden in this area and streamline the process would be more effective in supporting the team and helping them achieve their full potential. This was felt to be more appropriate than a manager that was autocratic and bureaucratic. Style of leadership required – Participative but with a contingency view.
Thus accepting that a coercive style of management could be used if it was necessary to achieve desired result. The management team however, recognise the importance of obtaining “buy in” from those involved. Whilst a crisis approach, by its very nature, implies change without negotiation, there seemed little to be gained in achieving an outcome, which ultimately, could break the psychological contract between staff and the organisation. This could result in staff not implementing, or even, sabotaging attempts to implement change. Ultimately, it is often the personnel in the front line who deliver success as they are the interface between the customer and the company, it is therefore important that as much as realistically possible, given the particular type of situation faced by the company, coupled with the prevailing culture, attitudes, beliefs etc, that key staff are given every opportunity and support to commit to the change objective.

The key areas
Because of the nature of the change, the management of ADL recognised that this would be a top down approach. However, the management team acknowledged that to be successful, the change would also need to be bottom up and supported by all personnel.
“Ultimately, leading change is a shared responsibility of everyone in an organisation, from top to bottom. The whole organisation must pull in the same direction. If the whole organisation is not aligned with the change effort, the effort will fail (2606/7 Implementing strategies, Module 3, pp 1.8, edition 13, Learning Resources, 2002).
The following are key areas that may need to be addressed as part of the initial process. Implementation Approach (2606/7 Implementing Strategies, Module 3, pp 1.17, edition 13, Learning Resources, 2002)

(A) Establish the need for change.
(B) Form a powerful lead team.
(C) Create the vision.
(D) Communicate this to all parties.
(E) Empower people to act.
(F) Plan for and create quick wins.
(G) Consolidate improvements and use them to develop more change.
(H) Institutionalise the new systems.

Possible critique of the above Implementation strategic approach
If this is a crisis response, why the above approach for change and why not just implement from the top? Often it could be argued, that change strategies do not fail because of bad planning or indeed, necessarily bad execution. They fail because there may not have been enough consideration given to overcoming the forces of resistance and obtaining “buy in” from the people involved in the process. Forces of resistance will be covered in greater depth later.

Establishing a need for change
It could be argued that unless individuals are aware of the need to change, they will not accept change. Change, as mentioned earlier, often impacts on the homeostasis of an individual. The more the person is aware of the reason for change, the more likelihood that they may accept it. This is a fair viewpoint and may be the case. However, another viewpoint is that the more information an individual has, the greater likelihood that they may act in there own self-interest. For example, a critical employee, in this case the sales manager, could, on understanding that the company has four months to turn things around, may just as easily look for another source of employment rather than buy into the change programme. This could perhaps mortally wound the project before it has even started to be implemented.
How much is communicated at this particular stage, may well be determinant on the situation and the make up of the individuals that are being faced with the problem.
Form a powerful lead team. It is perhaps easier, in {Removed}’s case, to form a strong lead team, as the organisation has only a small number of staff and the ethos of the business has always been to attempt to empower people and share views, opinions and ideas. If the organisation were larger however and the situation was similarly viewed as a crisis, the approach may need to be somewhat different; perhaps by bringing in external managers, in an attempt to divorce the current management from the process and thereby creating a somewhat fresh perspective. This may be even more relevant if the current management team were somewhat associated with the current state of affairs that the company were experiencing.

Communicate the vision
The textbooks argue that everyone needs to understand the vision and why this is a good thing. How can you be absolutely sure though, that this has actually occurred? Often, change fails because individuals become disengaged from the process as a result of not buying into the concept. Is that a failure of the communication of the vision or the effect of an individual’s own subjective view of the world in which they live? Even the best communication of the requirements to change may fail to impress those that are unwilling to listen.

Empower People to Act
McClelland argues that effective leaders empower their people to act. What happens however, if the people expected to deliver the change do not want the empowerment and increased level of responsibility that this may bring? In ADL’s case, two out of the three employees’ are nearing retirement. There is no certainty that these two individuals would want that additional involvement or increased responsibility. They both may well do an excellent job already but want no more than their normal pay cheque at the end of each month.
The key areas that may require change continued...

Structure
1. Lines of reporting
(a) Is the business structured in the right way?
(b) Is it too hierarchical, too bureaucratic or should it be even more empowering?
2. Management style
(a) Are the management too Task or too role orientated?
(b) Is the current management style too autocratic, laisre fayre or democratic?
(c) Do current management have the necessary skills to improve performance?
(d) Do they know why they do the things they do?
(e) Does current management lead? And if so, are the team prepared to follow?
3. Skills
(a) Do staff have the right skills?
(b) Is greater training required to help staff improve their own performance?
(c) Is staff able and willing to learn new skills?
(d) Are they equipped, not just to deal with the now but also with the future?
4. Technical competencies
(a) Intention to de-skill or re-skill?
5. Policies & Procedures
(a) Are there clear guidelines in place?
(b) Do staff have the right framework to support their business activities?
(c) Is staff capable and willing to set their own guidelines or do they need management to facilitate the process?
(d) Does their line manager support staff?
Systems
1. Information Technology
(a) Does IT empower staff or dis-empower?
(b) Is IT used to streamline business processes or does it add to them?
(c) Is there the right system in place or could it be improved?
(d) How can IT be used to improve performance and empower staff better?
(e) If IT can be improved, how much would it cost and can the business in its current state, bear the burden?
2. Logistics
(a) Does logistics staff have the right training and equipment?
(b) Can the warehousing function be improved to improve stock rotation and the cost of stock holding?
(c) Can the business move more into a “just in time” methodology of stock management? And if so, would this improve things?
Processes
1. Work flows
(a) Can current process be improved?
(b) Why do staff perform the routines that they do? Is it because it is the best way or is it because that’s the way it has always been done?
2. Staff Interactions
(a) Do staff interact well?
(b) Is there a mutual sharing and understanding of roles between staff or are roles just performed based on division of labour and specialisation?
Culture
1. What is the culture?
(a) Power, Role, Task or Individual? (Handy, C)
(b) Adaptive, Clan?
(c) Something different?
2. Does the culture support the change strategy or is it likely to impede it?
(a) If culture is grounded in values, practices and behavioural norms that match what is needed for good strategic execution, this may help energise people throughout the company to do their jobs in a strategy supportive manner (Thompson / Strickland, Crafting and Executing strategy, McGraw & Hill, Twelfth Edition, pp 413)
(b) If it does not, what approach needs to be applied to change it?
3. Is the culture strong within the company or weak?
(a) If strong – why?
(b) If weak – why?
4. Is there an inward looking culture or are staff willing to accept a different approach to doing things?
(a) What values do the staff hold?
(b) How has the culture developed?

5. Attitudinal and Behavioural approach.
(a) What are the attitudes & behaviours of key personnel?
(a) Is it congruent with the change process?
(b) If not, why is it the way it is and what needs to be done to change it?
Resistors to change
Why do people often resist change? There appears to be a number of reasons which could include.
(a) An individuals own subjective view of the world in which they live.
(b) The degree to which the individual feels the organisation has supported them previously.
(c) The level of commitment that an individual feels towards the organisation as a whole or for the task that they do.
(d) The psychological contract between the individual and the organisation.
(e) A desire to “go along with the group”. This may well influence individuals, even if often, they may not share the same view themselves.
(f) A misunderstanding of the reason for change.
(g) A loss of personal status.
(h) The fear of learning new skills and possible failure to master them.
(i) A fear of losing benefits and rights.
(j) A fear of having to assume greater responsibility.

Change strategy
The type of change approach employed may depend very much on the urgency of the situation at hand and on the level of need for the commitment of others. For example, it is possible, that any radical strategy employed as a result of the tragedy of the September 11th attacks may have been met with little or no resistance, because the crisis that prompted the strategy was of such a magnitude, that it out weighed any potential concerns that individuals may have had. Examples of possible change strategies (2606/7 Implementing Strategies, Module 3, pp 1.12 – 1.17, edition 13, Learning Resources, 2002):

Education and Communication
Where there may be a lack of understanding, this may help individuals to focus on why change is necessary. It could be argued that once an individual is aware of the need for change they are more likely to commit to it. A competing point of view perhaps is that once an individual is aware of the reason for change, they may not commit to it and lose commitment to the organisation far more quickly than if they had not been made aware of it in the first place. They may look outside the organisation for other opportunities and be more vocal in their anti policy view and destroy any possible commitment by others as a result. Education and communication is also a slow medium and may not always be possible if change is required in response to a crisis state.

Participation and Involvement
This may allow those whose ”buy in” is sought from management, to feel that they have a degree of ownership in the change plan. It also allows the management team to draw on the expert knowledge of key staff. Possible drawbacks to this approach again are, that this may take time and would not necessarily be a suitable response to a crisis.

Explicit and Implicit Coercion
This could be used where the crisis pre-emting this approach, requires a radical and quick response and is of such a magnitude that the cost in terms of the breaking of any psychological contract between the people and the organisation is outweighed by the cost of delay or inaction. Possible advantages of this approach is that in presenting individuals with a fait accompli, they are likely to overcome any resistance more readily and internalise the new process’s and working patterns more quickly. Possible disadvantages are that individuals will only appear, to adopt to this new way of working and have less commitment to the organisation in the long term as a result.

Force Field Analysis
Involves identification of the individual’s reasons for resistance to the change, in the hope that in certain situations, these objections can be overcome and turned into drivers for the commitment to change.

Change approach employed in the {Removed} situation
A mixture of Education and Communication, followed by participation and involvement. Why? Because management recognised that whilst the change was viewed as a crisis, that it required its people to deliver the change and that therefore, whilst it may take slightly longer to implement, there was less likelihood of resistance and more chance of success with this type of approach.

Summary
In {Removed}’s case the management team felt that the existing sales manager, whilst extremely effective and competent in most areas of the business, did not have the necessary skill set to lead the changes. The board however, did acknowledge that the sales manager was key to successful implementation and the ongoing management of the business. The board decided to entrust the responsibility for delivering the strategy to another board member, who had experience in this field and who already, commanded a high degree of respect from the ADL team. Using a participative approach but mindful that coercion could be used but only if absolutely necessary; the representative of the board met with the sales manager and “together” they drafted an action plan.
This action plan then took on the following steps.

1. Presented to other members of the ADL team.
2. Together, concerns were raised.
3. These were identified and where appropriate overcome.
4. Where it was not possible to overcome, the management used the “price of non-conformance approach” to illustrate the problems of not changing.
5. As much as possible the strategy drawn up by the board was then “sold” to the team as their own and they were given ownership, under the guidance of the board representative to deliver it.
6. A review process was put in place to measure performance against pre-determined targets and ensure ongoing commitment to the plan.
7. As an aside and unbeknown to the sales manager and his team, the board also had a contingency plan in place to deal with the situation arising of the sales manager or any other member of the team not supporting the change process.

Conclusion
In concluding the assignment it should not be forgotten that this change approach applied to a very small business, where the staff have all been with the organisation, almost from inception. The culture, existing management style and personnel make up of the individuals made it more likely that they would in the main, be responsive to change. Also, because of the flat management structure of the business, it was also likely that any possible resistance could have been dealt with quickly to ensure that it did not affect other team members. Would this type of implementation strategy have worked if applied to a business, the size and structure of an Marks and Spencer? Possibly. Would the approach have had to be different? Definitely. Had the size of the organisation been larger, more fragmented and diverse, It is likely that there would have been greater unease amongst staff and less likelihood of any resistance being dealt with quickly. This would possibly be due to the hierarchical nature within these type of businesses and the ability of line management to effectively relay feedback up and down the chain of command. This may have the effect of slowing down communication and thereby allowing concerns to fester and permeate throughout the organisation.
In terms of communication also, it is not always possible to get large numbers of personnel into one room and therefore, the reasons for change are communicated along several different channels. This, combined with the “internal grapevine” may mean that the message can get lost or metamorphose along the route. The nature and type of approach to take is therefore likely to be contingent within the environment in which the decision is being made. What may work in one situation and result in the desired outcome may produce entirely the opposite in the next.

Bibliography
Daft, Richard L. Management, Sixth Edition (2003), Thomson South Western.
Handy, C. Understanding Organisations, Fourth Edition (1993), Penguin.
Mullins, Laurie J. Management and Organisational Behaviour, Sixth Edition (2002), Prentice Hall.
Thompson / Strickland. Crafting and Executing Strategy (2001). Twelfth Edition, Mcgraw Hill.
{Removed} of {Removed} (2002), MBA, 2606/7 Implementing Strategies Module 3, Edition 13, Learning Resources.
De Wit, Bob. & Meyer, Ron. Strategy Process, Content, Context, 2nd edition (1998), Thomson.