Strategic Thinking and Implementation
The Company and the Change
The Change
The Change Models
Lewin’s Change management Model
The Change Models for Toyota
Barriers to Change & Methods to Overcome Them
Resistance to Change
Managing Change
The Company and the Change
For this question we choose Toyota Motor Corporation as an example where there has been a major change in the company. The change occurred when the company changed its production process to remain competitive in the market and to gain competitive advantage at a time when the competitors from Germany and America were gaining in the Japan car market as well as in the market in the rest of the globe (Toyota-global.com, 2015).
Since being established in 1937, Toyota Motor Company has been one of the most popular brands in the car industry. Based in Japan, the Company was founded by Kiichiro Toyoda with the sole aim of manufacturing automobiles (www.toyota.co.jp, 2015). The company has even been number one in the car industry in terms of sales a number of times and is seen the leader in the Japanese and Asian car brands that have established themselves in the global market and have given tough competition to the car manufacturers in of Germany and America.
The core competency behind the success of the company was the application of the Japanese quality and efficiency standards into every aspect of their operations (www.toyota.co.jp, 2015). While the company enjoyed initial years of great success all across the globe and dominated the home as well as foreign markets like America, the company hit bad time when the technological development and changes in the tastes of the consumers led the company into a bad phase. Therefore the company had to make a change in the organization to remain sustainable and competitive in the market. The company had always been known for creating car designs faster and creating a more reliable and safe cars. But the company always had a higher price tag than the ones of their competitors (Toyota-global.com, 2015).
The company made profits of $8.13 billion in 2003 which was more than the combined profits of their competitors like GM, Ford and Chrysler. The company made this possible through the adoption of a production policy that was called “Just in Time Production” policy that has caught the fancy of the business world and has become one of the most popular management philosophies in the academic world. The process also includes the concept of continuous quality improvement which has required the introduction of significant changes in the organization from time to time.
The continuous presentation of new product and features in the market and with speed is believed to the main reason for the present success of the Toyota Motor Company. An example of the speed and the agility of the company is can be found in the way Corolla, one of their most successful cars ever, was designed and developed within a period of just 15 months (www.toyota.co.jp, 2015). The company has not been able to not only develop a continuous development culture within the company but also has been open to take lessons from other companies like Ford Motor Company as well as from other sources like quality gurus and the industrial engineers (Toyota-global.com, 2015). The cost effectiveness of the company is another product differentiation that has kept the company ahead in the market the company. The company is able to offer the same level of comfort and luxuries in its cars at a much lower price than their competitors.
The Change
As part of their continuous improvement and quality improvement policy, the company made a major organizational change in 2010 (Toyota-global.com, 2015). However this was not the first time that the company had attempted to make an organizational change to gain a competitive edge in the market. The changes were made in 2010 were spread all across the organization with the reevaluation of the hierarchies in the organization that meant a complete overhaul of the organization which can be considered a major change in the organization (Cameron and Green, 2004).
The changes that the company went through were:
1) The renaming of the Business Development Unit and Marine Business Division as the Marine and Unit Business Division and this unit would look after the sale functions (Toyota-global.com, 2015).
2) With the purpose of consolidating the local and foreign administrative functions of the company and to work on the future projects and management activities and for the achievement of cost efficiency, the Purchasing planning department was reconstituted into the Purchasing Administrative Department while the new Purchasing Planning Division was formed by combining the Global Purchasing Promotion Division and the Body Parts Purchasing Division. This was another major organizational change in the company (Cameron and Green, 2004)
3) To make the Japan market the focal point of the company’s business promotions, the company brought the Advertising and Marketing division of the directly under the mother company to be controlled from Tokyo and the primary objective of the company as changed from marketing to sales.
4) In order to strengthen the customer services of the company, the Strategic Production Planning division was merged with the customer service operations (Toyota-global.com, 2015).
These were all major changes in the organizational structure of the company that required extensive change of roles and responsibilities and reorganization of human resources.
The primary driver of the company taking up such a massive organizational change initiative was the increase in competition and the urge to maintain the competitive advantage of the company over their rivals. The other important factor for the change was the change in the demands of the consumer where post the recession, the cost was still a major consideration for the customers while they went o by a car in 2009. The recession had taken a toll on every company and Toyota was no exception to it (Cameron and Green, 2004). The recession had eroded the financials of the company and had put considerable pressure on the resources of the company.
Therefore the company had to adjust to the changing conditions by taking measures that resulted in cost saving and economies of scale. The company also wanted to use the core competency of the company that has been with it for year-their ability to innovate and research. This was possible through the restructuring so that the company could save on costs as well as develop cheaper methods of manufacturing the same quality of the product (Floyd, 2002). But the overwhelming and underlying ai was to effect company growth that had become stagnant since the last few years.
The Change Models
There are several models that are followed by the companies, especially the large ones to effect change. The most popular and extensively used model for change in organizations is as follows:
Lewin’s Change management Model:
This model assumes that most people prefer to remain and work in the old system and are generally reluctant to change. Hence the model recognizes three stages of change after taking to consideration this assumption (Floyd, 2002).
The three stages are:
Unfreeze: The change process often resists change by those people who are against change and this step in the change process is the period that essentially thaws or unfreezes a situation. This means that the change managers slowly but surely instills a sense of change in the organization (Green, 2007).
Transition: after the employees have been sensitized enough the unfreezing process, the company and the change managers starts a transition process where the where resources need to be used to reassure employees and the actual process of change happens (Floyd, 2002).
Refreeze: After the change has been installed, the managers, the company representative and the employees go through a process where they settle down to the work at hand after accepting the change.
McKinsey 7-S Model:
The name is derived from seven factors that McKinsey identified as steps of change the work in unison as an agent for change. These factors that affect and enhance the process of change are shared values, strategy, structure, systems, style, staff and skills. Shared values are the combined values that the change managers want to enforce for change, a combined strategy to enforce the change, the organization structure that implements and sustains the change, the systems that are used to enforce change, the style of enforcing the change, the staff that are the objective of the change and the skills that need to be acquired to effect the change and reap results from the change successfully (Green, 2007).
The advantages of employing the model are that it combines both the emotional and rational components, allows the understanding of an organization and diagnosis and gives adequate guidance for organizational changes. The assumption of the model is that the factors have an equal influence in change and hence the approach is considered to be a unified approach.
Kotter’s 8 Step Change Model (Murthy, 2007):
This a model that intends to convert the change process into a campaign rather than a business process. This process considers the change process from the perspective of preparing the stakeholders of the change process form the change rather than effecting the change itself. The model was made popular by its belief that preparing the stakeholders for a change were enough to implement the change. Once the stakeholders were convinced about the change and were not averse to the change through the campaign process, the implementation of the actual change is very easy (Green, 2007).
There are eight steps in this model. They are:
1. Create and increase the urgency for change.
2. A team is build to work for the campaign on change
3. Create the vision for change.
4. Communicate the need for change.
5. Empower staff with the ability to change.
7. Stay persistent.
8. Make the change permanent (Pugh and Mayle, 2009).
The Kotter’s 8 Step Change Model differs in a fundamental way form the other two popular change methods described above. This model focuses on preparing the employees and stakeholders for change and not the actual change. This means that the stakeholders of the change are essentially made to accept the change even before the change happens and the stakeholders are also made to agree to the consequences of the change even before the actual change occurs. Creation of a dedicated team in favor of change, communicating extensively with the stakeholders and people and creating short-term goals for the employees is created by the change managers of the Kotter’s 8 Step Change Model. This creates a motivation among the employees which is essentially absent in the other two models. This model comes into extensive use for organizations that are large and extensive and have employees from varied social and cultural backgrounds.
The Change Models for Toyota
The organizational change that occurred in Toyota was conducted according to the McKinsey’s 7S model. As is evident for the above discussion of the change steps undertaken by the company in 2011, there were some very major changes in the organization. The company drastically changed several departments’ role and merged several departments together (Senior and Fleming, 2006). The change was very rapid and sudden as was required by the business environment in the market. The Kotter’s 8 step model requires some time for advocacy and creating a campaign to influence the minds of the employees. This requires quite some time. However the company had to adjust immediately the surroundings conditions especially to the increasing competition and the global recession effects. Therefore the Kotter’s model was not appropriate.
The Lewin’s change model is too short and simple for a large and complex and complicated company like Toyota. The large number of employees, the diversity of the employees and the complex nature of the global spread of the business would require a more robust and engaging model (Pugh and Mayle, 2009). Thus the company utilized the McKinsey’s 7S model. The change took into account the complexity of the company and the stakeholder — the employees, their varied culture as they were appointed from all places on the globe and the geographical spread of the business. A complete strategy involving the staff and utilizing the skills of the staff made it necessary for the company to follow the model (Cameron and Green, 2004). The model granted a sense of standardization to the change process and applied the same strategy throughout the organization as the a majority of the organization was affected by the change (Toyota-global.com, 2015).
Barriers to Change & Methods to Overcome Them
There are several barriers to organizational change. All the major barriers to change are change is essentially internal. This means that the barriers and impediments to change originate within the organization. Organizations tend to implement change to counter some environmental changes in the business. This is done so that the companies remain competitive and carry on a path of sustainable growth (Toyota-global.com, 2015). The organizational change often involves the changes in roles and responsibilities and accountability of the stakeholder — the employees primarily (Floyd, 2002). This is a shift from a status of equilibrium that had been existing in the company earlier and the employees were used to functioning in the condition. Any organizational change brings with it certain presumptions and assumptions and fears that results in the manifestation of impediments and resistance to organizational change. Te primary barriers to change are:
Resistance to Change
People like to exist in a status quo and resist change. In business it is an accepted fact that many employees agree to accept the lower payments as opposed to accepting change. People would prefer to work in an organization that is more stable and does not change. This prompts employees to resist change. Employees feel that a change process would bring with it a host of uncertainties which are not acceptable to the employees who prefer a status quo. Therefore there is resistance to change. Employees feel that a change in their organization would make their lives worse and that they would lose their jobs. Therefore the employees tend to rise up in protest against change. This resistance to change is however a gradual process that builds up with time and news about a change and with some support of unionized labor force (Cameron and Green, 2004).
Unknown Current State
Changes are often met with resistance when organizations attempt to make changes I the current situation without making proper assessment of the current situation. It may often turn out that small changes and innovations could have done the work that an elaborate organizational change would accomplish.
Integration
The problem with organizational change in large organizations and the one primarily faced by Toyota is the integration of the change process. A change process is affected when the company is functioning and change process essentially changes the way the company functions. Therefore a number of departments and business aspects are liable to be affected by the change (Senior and Fleming, 2006). This was exactly the casein Toyota when the change was large and so was the organization. To maintain the same level of production and quality an integration of the change processes is necessary. If this is not done then the system of the organization would itself resists the change by become un-operational. It has also been seen that change process has resulted in employee turnover as they cannot accept the change.
Competitive Forces
False reading of the external environment, which are usually the triggers for organizational changes, may be interpreted in a wrong way. For example the economic situation forecast might be wrong or an organization might be reacting to a competitive product that has used far advanced technologies that are not readily available with the company. In such cases there can be resistance to change. This was however not the case in Toyota as the company had the latest in technology to support the change process (Floyd, 2002).
Complexity
Toyota faced another barrier that was related to the already existing complex process of systems and products. The existing processes were world class and the quite complex. Therefore changing the complex processes caused further resistance to the immediate change in the company. As organizations develop more complex processes, systems and products — change becomes more challenging. Complexity of change is a fundamental barrier. The company demanded that the change process be accompanied by effective project, risk, quality, knowledge and change management. The requisite maturity to tackle a complex change is sometimes lacking in some organizations. However this expertise was available with Toyota (Murthy, 2007).
Managing Change
The change process in Toyota met with some hurdles. The first was from the employees who resisted change. This was tackled by a series of quick consultations and the imparting of the message that the company needed the change to survive the management managed to impress upon the employees that it was in their interest and the interest of the company in the long run that the change should take place. If the company suffered so would the employees. The integration problem was solved by creating a uniform strategy for change that was applicable for every department where change was happening there was complete integration of the change process and the change process was monitored so that the change was applied in a synergy and that every department reacted to the change in the other departments (Senior and Fleming, 2006).
Conclusion
Bringing in a change in the organization is a matter of choice of the company. Toyota had to decide whether to bring in the change or not. The environmental factors were not in favor of the company. There was wide spread competition in the industry. The profit margins were reducing due to the competition as the competitors were offering products at a lower price. Moreover the general economic condition of the market had gone from bad to worse due to the global financial crisis. The company was losing out not only on its profit margins but also on the resources as the car market was very badly hit by the economic recession. Therefore the company had to take measures to implement a change so that the situation could be tackled.
The changes being brought about were rapid and massive. A large number of departments had their roles changed and the responsibilities of many employees were changed. The company followed the Mckinsey’s 7S model for implementation of the change. The changes were met with some resistance especially form the employees who preferred to maintain a status quo. However the company managed to convince the employees that it was necessary to bring in changes in the organization to sustain the environmental pressure. This was how the resistance and the barriers to change were tackled and the change was implemented.
References
Cameron, E. And Green, M. (2004). Making sense of change management. London: Kogan Page.
Floyd, P. (2002). Organizational change. Oxford [England]: Capstone Pub.
Green, M. (2007). Change management masterclass. London: Kogan Page.
Murthy, C. (2007). Change management. Mumbai [India]: Himalaya Pub. House Pvt. Ltd.
Pugh, D. And Mayle, D. (2009). Change management. Los Angeles: SAGE.
Senior, B. And Fleming, J. (2006). Organizational change. Harlow, England: Prentice Hall/Financial Times.
Toyota-global.com, (2015). Toyota Global Site | Vision & Philosophy. [online] Available at: http://www.toyota-global.com/company/vision_philosophy / [Accessed 26 Apr. 2015].
Toyota-global.com, (2015). TOYOTA MOTOR CORPORATION GLOBAL WEBSITE | 75 Years of TOYOTA | Management | Organizational Changes. [online] Available at: http://www.toyota-global.com/company/history_of_toyota/75years/data/company_information/management_and_finances/management/organizational/index.html [Accessed 26 Apr. 2015].
www.toyota.co.jp, (2015). Toyota Global Site | Sustainability. [online] Available at: http://www.toyota-global.com/sustainability/index.html [Accessed 26 Apr. 2015].
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