Primary Approaches to Management of Changes in Company Business
Changes in strategy, business processes, structure, and culture, can be made progressively, in small steps, or radically, in great leaps.
Agility of implementation and degree of novelty of organizational changes are the main differences between these two approaches. Organizational development and re-engineering of business processes are on the opposite ends, with compromise alternatives to development in between.
Reengineering of Company Business
Reengineering is a fundamental rethinking and radical redesign of an enterprise and its most important processes. All these results in a dramatic improvement (by order of magnitude) of the essential quantified indicators of costs, quality, the performance of service and time frames. According to this concept, it is a case of in-depth restructuring of an enterprise involving the entire value chain. The process of satisfaction of customer needs shall also be subject to radical restructuring.
Orientation towards the business process and customers is the main prerequisite for achieving the objectives of re-engineering as well as creative use of the state-of-the-art information technology at the workplaces of qualified employees. New solutions shall be intentionally implemented by undemocratic means. Management shall be concentrated in the hands of a tiny number of persons who are vested with all the required legitimate power so that to implement the intended changes vigorously and in a short span of time.
Satisfaction of needs of internal and external customers is at the heart of any restructuring of business processes. What shall be designated as the core processes depend on the strategy of the enterprise? However, the primary focus shall be placed only on some of them (for example, development of new products, integration of logistics, etc.).
Supporting processes shall be optimized not in isolation but only with due account for the needs of the core processes. A new approach is required to the issue of the so-called points of overlapping interests.
Particular attention is paid to information technology. The objective of implementation of information technology is to process information about customers and business processes to the full extent. However, this means entirely new fields of the application rather than just automation of processes. Owing to the objective-oriented use of data banks, expert systems, and telecommunication networks, one can significantly extend the areas of responsibility of employees.
Enhanced data bank will not give the desired results if the expertise of employees is not changed, which means not only organizational parameters (duties and powers) but also purely qualification settings (capabilities, abilities, and skills).
Cooperation of personnel (for example, in workgroups) shall be radically improved. When required, an employee shall have means of communication with any colleague. Other changes are also necessary concerning human resource management. Thus, a compensation plan (remuneration) is especially important. Incentive system should be oriented, first of all, towards actual capabilities of employees rather than towards their previous merits and achievements.
Small companies are oriented towards re-engineering to a lesser extent as compared to industrial enterprises since headcount of the former is low and such companies have no complicated system, of business processes which can be subjected to radical restructuring.
Changes in the Scope of Organizational Development
Organizational development shall be understood to mean the concept of planning, launching, and implementation of the processes of changing of social systems with the involvement of a wide range of participants.
Organizational development is defined and a long-term, thorough and comprehensive process of changing and development of an organization and people working in it. The process is based on training of all the employees by way of direct interaction and transfer of the field experience. The purpose of changes is to improve both the performance of the organization and the quality of work.
Members of the organization shall implement changes. Internal and external consultants (the so-called change agents) can serve as auxiliary labor but not as the vital implementation of changes. Needless hierarchical levels shall be eliminated, and relations of powers shall come down to a partnership with the focus on confidence.
A comprehensive concept of organizational development includes both structure-related and personnel-related aspects. An attempt is made within the scope of the structure-related approach to create favorable frame conditions for the achievement of the objectives of organizational development using changes in organizational regulations (for example, organizational plans, descriptions of specific role-based functions). The personnel-related approach implies taking of measures aimed at improving skills of employees (development of personnel) and encouraging to accepting and implementing changes. It is apparent that setting of objectives of the organizational development (economic and social performance) shall rely on a combination of these two approaches.
Organizational development is implemented in stages. At first, unfreezing of the social system shall take place. Viewpoints, values and behavior patterns of members of the system are challenged, and expertise of their acceptability for the achievement of the system objectives (efficiency, innovation activity and humanization of labor) is carried out. The movement towards changes begins at the second stage. New behavior patterns and organizational regulations are tested and solidified in the course of personal training. Change processes require a logical end as they are known to be endless. That is why stabilizing, and consolidation of the new authorized behavior patterns and organizational rules are required. It takes place at the stage of the so-called refreezing of the process of changes.
Organizational development is typical of the majority of small companies since it enables them to achieve the objectives of changes with least possible risks and expenses.
Table 1. Comparative Analysis of Approaches to Change Management
|Standard of Comparison||Reengineering of Business Processes||Organizational Development|
|Origin of Method||Management consulting; engineering sciences||Conventional management; social psychology|
|Conceptual Framework||Attempt to analyze the company business from the standpoint of engineering sciences; the building of optimal business process as the basis for decision making; process-oriented approach||Management of company personnel; scientific and intuition-based opinion as the basis for decision making; preferred functional approach|
|Main Idea||Radical rethinking and redesign of business processes and procedures in an organization||Long-term and comprehensive changing and development of an organization owing to gaining of experience of making of the right decisions|
|Tasks of Management||Unconventional view of an organization; building of a team of leading professionals; clear understanding of the optimal business process; persuasion of personnel inappropriateness of the new approach; control of actions leading the changes astray||Strategic view of business, tasks, position and qualification of members of an organization; maintaining and development of potential of an organization; creation of self-developing basis in the team; involvement of employees affected by changes|
|Attitude to Personnel||Granting of additional powers; the building of professionals; firing of saboteurs and experts who fall outside of the new system||Democratization of management; creation of stability and prospects for development; reliance on employees capable of learning and ready to assume responsibility|
|The depth of Changes||Complete rethinking of business processes; discontinuity of process; changes in great leaps||Time-consuming process of training and development; continuity of process; changes in small steps|
|Timeline||Project scheduled; results are apparent relatively soon after project completion||For an extended period of the strategic development|
|The object of Changes||Enterprise as a whole or the core processes||Enterprise as a whole owing to improvement of its elements|
|Objectives||Significant and quick rise in profitability (economic effectiveness), liquidation of ballasts||Gradual rise in profitability and humanization of labor (social performance)|
|Applicability||Stagnation of an enterprise and low profitability; liquidity crisis, failure to succeed||Not limited|
|The strategy of Changes||Top-down strategy||Top-down strategy; bottom-up strategy; bipolar strategy; multiple point strategy|
|Methodological Approaches||Reengineering of processes in compliance with the marketing strategy; adoption of organizational structures and job duties; changing of value system of employees (orientation towards the process of value creation or towards customers); implementation of the state-of-the-art information technology; re-training of personnel||Structure-based and personnel-based approach (new forms of organizational structures; change of viewpoints and behavior patterns of employees; advanced training of employees)|
|Key Roles||Leader (with clout); process owner (as its manager); re-engineering team; steering committee (consisting of the leader with clout and specialists); reengineering czar as specialist)||Change agents (consisting of specialists and the process owner as consultant); customer system (area under restructuring); catalyst of changes|
|Strengths||Applicability in crisis situations; possibility of radical renovation; possibility of quick rise in profitability; conceptual consistency of measures; significant extension of expertise of specialists; implementation of the state-of-the-art information technologies; availability of techniques and procedures for business modeling||Continuity of changes; relatively small cost of errors at small intervals of changes; consideration of development ability of members of the system; encouraging of self-management and self-organization; long-term perspective; lack (decrease) of resistance to changes; extensive use of expert opinions|
|Weaknesses||Revolutionary approach; solely process orientation; substantial cost of error; instability in the phase of changes; limitations of time and actions in connection with the intention of quick improvement of results; exclusion of alternative strategies (only top-down); low social acceptability; high resistance of a part of management||Insufficient response; overstated requirements to soft skills of participants of the process of organizational development; inadaptability in crisis situations; insufficient IT support|
Some intermediate alternatives exist in between the extreme forms of changes, that is, business re-engineering and organizational development. The can be different in the degree of involvement of members of an organization and freedom of action of the senior management concerning the implementation of changes. Depending on this, the emphasis is laid on economic and/or social performance. Type of crisis determines the urgency of changes and, thereby, the extent of their radicality.
Successful use of one or another method depends heavily on the measures taken concerning human resource management. Besides taking of measures aimed at retaining of employees, differentiated concepts of staff reduction shall not be ignored. Managers of re-engineering programs shall solve employment issues without inflicting of moral harm on the dismissed persons and do their best to ensure employment of such persons on the labor market.
The objective of change management is to achieve and fulfill the potential of personnel for improving the competitiveness of an enterprise rather than to downsize it.