Change Management – Know before you go

Assessment of the environment

This article is related to the seminar topic and specialization of Géza Nagy (student), which is focused on change management. This publication reviews end extend two seminar papers - Effective Change Management in Small Businesses during Organization Development; and Strategy of Change Management in Small Businesses during Organization Development – highlighting the pre-change activity needed before planning and implementing an effective change process.

In Hungary small businesses ("micro businesses: 0 – 9 employees; small businesses: 0 – 49 employees (includes micro); medium businesses: 50 – 249 employees; small and medium enterprises: 0 – 249 employees; large businesses: over 249 employees" by European Union definition)[1] sooner or later must face the problem of the need for organizational development. Most of the time they struggle with the problem of disorder, excessive workload, waste of information and the lack of competitive advantages due to the formal problems inside their "organizations". They, as time goes on and their market share is growing, have an instinctive demand for being a real organization with structure, hierarchy, strategy, management, administration, effective and informative communication, human resource management, well defined positions (jobs) with experts.[2]

One of the advantages of small businesses is the higher profit margin as compares to the larger corporation, due to small company has lower overhead costs and pays fewer expenses, therefore, small company can be profitable and easier to manage than the larger one. They are having less number of employees which are easier to manage, so managers can focus on the core functions. However the owners experience high amount of waste in effectiveness, complaint from both the clientele (e.g. wrong or late shipping) and the employees (e.g. loss or misunderstanding of information between them). While they are flexible, they are also unprofessional. As they are unprofessional, they are also unprofitable. This, and more likely the recognition of it, causes the primary demand of organizational development.[3]

Meanwhile the idea and the processes of satisfaction of this well justified demand seem very survival regarding the small businesses' future, these enterprises pay too much of a price for becoming better organized and more successful on the market. Due to the lack of professional change management knowledge and practice, the stakeholders – employees, customers, suppliers, investors, partners, experts, etc. - (and sometimes even the owner is also amongst them) got very afraid of the change of the situation, the culture, the day-to-day business and "everything". They unfortunately handle their fears by quitting, blocking, undermining, and other destructive actions. They suppose that they will not be needed, they will not match, they will not be able to cope with or handle the new scene and the challenges, so try to keep the comfortable status quo or find a new place, which is as comfortable as the old had been.[4]

It is a very interesting problem, as the well managed and stable small businesses are the backbone of every economy in the world, but without organizational improvement these enterprises cannot fulfill their missions in the long run. That is why it is worth finding the solution for this problem of too high a price for development. A professional assessment of the environment (inner and outer) can reveal the underlying fears about change, the real reason behind the resistance. When manager of the change project understands current mental state and hidden interests of the stakeholders, he can work out an efficient and effective communication strategy to handle the resistance, and get the needed buy-in and support for his endeavor.[5]

The best way to assess the environment is to segment the inner and outer world into stakeholders. They are important, because we initially implement the change projects to fulfill their expectations. Without these expectation the company might remain in its comfortable status quo. That is why the owner (the manager of the change project in small business) has to know and understand the different stakeholders to be able to design a realistic and effective communication and implementation strategy.

The stakeholders are interested, because they are risking a lot in the business: money, job, career, source of knowledge and experience, place to service or supply, relationship, 'playground', etc. As they are involved somehow, it is their interest to support a development (change management) strategy. However we have to be able to communicate to them how the planned and executed changes (e.g. organization development projects) put them into a win position, and not a lose one.[6]

"Stakeholders can be broadly categorized into: a, internal stakeholders – employees, management; b, connected stakeholders – customers, suppliers, competitors; c, external stakeholders – government, pressure groups."[7] These groups are different in their special interests, but common in their main interest – successful and profitable, long-term business. In this categorization one element is missing: the owner. He is also a very important, if not the most important stakeholder.[8]

The owner's interest in short term is the profit and in the long run is the value of the whole business (tangible and intangible). The expectations can vary concerning the different types and groups of stakeholders. The managers would like more power, influence, resources for their more convenient work (e.g. subordinates, equipment, financial decisions, etc.). The employees would like to get higher salary, better working conditions, more support and help from their superiors and colleagues, more and better communication and information flows, etc. The customers are interested in more valuable products and services for lower prices, better customer service, special care (all of them want to be VIP), etc. Suppliers want fair price for their products and services, regular orders and payment on time. Competitors would like to be in a fair market climate and seek the possible co-operation with other ethical organizations. They would like to complement, not to fight. Governments are finding the way of higher taxation and expect the regular payment of 'obligations'. Pressure groups fight for the sustainable development of the economy, they want to reduce pollution and maintain the ecological balance, etc.

We have to tabulate the different stakeholders with their specific interests and expectations. By the application of the tabulated data, we can create really 'SMART' objectives later during the strategic planning section.

'SMART' objectives can be:

a, The management must be trained to be professional managers and leaders in 2 years, they have to attain 10 courses and complete them with at least 90% exam rates.

b, The new structure of the organization with all the needed positions and job descriptions must be designed in 2 months. The structure and the positions are the responsibility of the owner and the management, the descriptions are written by the employees under the control of the specific manager.

c, A new processing line must be implemented in the factory in 6 months. Responsible for this: operations manager and head of processing. All the employees work in the factory are involved. The waste product rate must go under 3%.[9]

"These are often 'SMART' – Specific, Measureable, Achievable, Relevant/Realistic, and Time-bound."[10] The objective must aim those purposes and involve the particular groups to get their deeper buy-in and support.

So, first we have to survey all the stakeholders (or the representatives of the every type of stakeholders) on their – a, expectations; b, interests; c, fears of change. Then we have to work out a communication plan – a, demonstrating how their expectations are meet and interests are considered by the implementation of the changes; b, minimizing the fear and mental blocks. These two communication approaches will reduce the instinctive resistance in the environment.

We can easily survey the internal and connected stakeholders, even in personal interviews and meetings, but the external world can mean a more difficult task for us.

To analyze this area, STEEP analysis is one of the best tools. It can give us information on 5 different parts of the macro environment: Social, Technological, Economic, Environmental, and Political factors. The social factor can show the culture, size, and the structure of the workforce, the class and segmentation of the market. So, the owner will know who and how will work for him, and who and for how much will buy from him. The technological factor will reveal the trends of the future performance, the possibilities of development of tools, machines, hardware and software, they will need to meet the market challenges. The economic factor refers to present and future state of the economics. GDP, growth of the industry, inflation, prices, wages. These data can modify the objectives and the resource allocation of the strategy. The environmental factor is about the ecological effects and viewpoints that can influence the future of the business. The owner has to consider how the sustainable growth is a key point in the PR communication in his industry. Then CSR (Corporate Social Responsibility) actions should be part of the strategy according to the importance of this issue in the environment. Finally, the political factor helps the owner understand how the government (policies on healthcare and taxation, unemployment, exchange rates, inflation, economic growth) or the government agencies (regulating competition, pollution, and industrial relations) can determine the course of the strategy of his company.[11]

The execution of this analysis can be done with the assistance of some outer economic experts and the research of many websites and printed media concerning the macro changing in the country or the world by the owner and the management.

To be able to plan the full communication strategy concerning the decrease of the resistance factor, the increase of the buy-in and support, and the overall mental state of the stakeholders for the process of change, we need to check the organization readiness, too.

It is greatly recommended to check the readiness to get the chance to improve the scene and make it easy for the team to accept anything that comes with the process of the planned changes. The checklist below helps to determine if the owner and his team is ready or not. In case that the company is ready for the change, the owner can start to work out the strategy to make the path as smooth as possible toward the development goals.

"Determining Organizational Readiness

  • The organization's top managers are strong supporters of this change.
  • The people leading this change believe it is important to involve others in planning for this change.
  • I understand what is wrong with the way things are now.
  • I have all the information I need to get on board this change and I understand the sense of urgency.
  • I have a clear picture how the organization will be different after the change has been implemented.
  • I understand the priority of this change in relation to other initiatives within the organization.
  • I know where to go for help and/or support if I have questions, concerns, or challenges related to the change.
  • I am confident in the ability of the organization to sustain this change.

If the results indicate that your organization is not ready for a change, pre-changes have to be made."[12]

If the company happens to be not ready enough, it is safer to do some pre-change actions to avoid the waste of energy, time, and resources. The above checklist can help to plan the needed pre-change actions to make everybody ready. The owner himself must be ready first. He has to see how this change will improve his company, how it will make the team more effective and efficient, how he will get more profit at the end. He has to understand that to achieve these goals, he has to invest time, money and energy. He has to see, that he has to get the support of the management to be successful in this project.

He has to take steps to communicate his ideas to top of the business well enough to get the necessary initial buy-in and help to continue. Everybody must be dissatisfied with the existing scene in the company. If somebody is still happy with the status quo, the management has to find the way to show them the weak parts and the threats the team may face because of them. Everybody must see now the picture of the organization after the planned development. This appealing scene can be drawn by the owner and the management. After that the team has to be eager to be in that state as soon as possible. This must create the sense of urgency and priority in the company.

The managers have to involve everybody in the process of the change. As a pre-change action they can assure the team members that everybody will have tasks, responsibilities and that their comments, opinions and ideas will be taken into consideration. They are in-charge, not victims.

As a conclusion we can say that the assessment of the environment is a vital step before engaging in the strategic planning and the implementation of a change process like organization development. By the surveying the different types and groups of stakeholders, getting and tabulating all their interests, expectations and fears concerning the planned changes, we can work out efficient and effective communication strategies and approaches to get their buy-in and support. When we know the key ideas about the environments concerns, we can smartly avoid all the 'booby traps' which would block our ways during the implementation of our strategy. Not knowing the (most of the time hidden) interests, expectations and concerns inside and around the organization can be real 'blind driving' for the owner and the responsible managers, and can cause very sour experiences for everybody. In case that the changes which are planned to make the business more successful for all the stakeholders, turn out to be a chance to reduce their influence, gains, stability, and power, we can count on severe resistance on that side. We need supporter, not opponents to be successful in our endeavor. So, let's know, before we go.

BIBLIOGRAPHY AND WEB RESOURCES.

[1]Middlesex University. Definitions. Microbusiness Research Portal: Middlesex University, 2015.Date of citation: 12.2.2018. www.microbusiness.ac.uk/definitions/ 

[2] Nagy, Géza. Effective Change Management in Small Businesses during Organization Development. LIGS University, 2018, p. 6.

[3] Nagy, Géza. Effective Change Management in Small Businesses during Organization Development. LIGS University, 2018, p. 6.

[4] Nagy, Géza. Effective Change Management in Small Businesses during Organization Development. LIGS University, 2018, pp. 6-7.

[5] Nagy, Géza. Effective Change Management in Small Businesses during Organization Development. LIGS University, 2018, p. 7.

[6] Nagy, Géza. Effective Strategy in Change Management in Small Businesses during Organization Development. LIGS University, 2019, p. 23.

[7] Ritson, Neil. Strategic Management. Neil Ritson & bookboon.com, 2017. ISBN 978-87-403-0506-7. p. 30.

[8] Nagy, Géza. Effective Strategy in Change Management in Small Businesses during Organization Development. LIGS University, 2019, p. 23.

[9] Nagy, Géza. Effective Strategy in Change Management in Small Businesses during Organization Development. LIGS University, 2019, p. 22.

[10] Ritson, Neil. Strategic Management. Neil Ritson & bookboon.com, 2017. ISBN 978-87-403-0506-7. p. 19.

[11] Nagy, Géza. Effective Strategy in Change Management in Small Businesses during Organization Development. LIGS University, 2019, pp. 14-15.

[12] Passenheim, Olaf, Prof. Dr. Change Management. Prof. Dr. Olaf Passenheim & bookboon.com, 2014. ISBN 978-87-7681-705-3. p. 46.