Chapter 10 – Managing Change

Unit 4: Usually comes up in Q5 or Q6 Chapter 10 – Managing Change Ms. Marshall Leaving Cert Business

Syllabus Outcomes • By the end of this chapter you should be able to: • Explain the changing role of a manager from controller to facilitator; • Understand the importance of employee participation; • Understand how technology changes the role of management; • Identify the strategies for managing change (HL); • Discuss the importance of total quality management (HL); Ms. Marshall Leaving Cert Business

Causes of Change Technology Competition Consumers Economy Employees Laws Promoting Teamwork Controller to facilitator Empowerment Participation TQM Changing role of the manager Commitment Communication Consultation & Negotiation Funding Rewards Training Strategies to Manage Change Ms. Marshall Leaving Cert Business

What are the main causes of change? • 1. Changing Technology • 2. Competition • 3. Consumer Demand/Expectations • 4. Economic Environment • 5. Changing employee expectations • 6. Changing laws and regulations. Ms. Marshall Leaving Cert Business

1. Technology – business opportunities • The Impact of New Technologies on Business opportunities: • New products: Some new products owe their existence and success to technology e.g. reserving seats on airlines and making hotel reservations from any part of the world at any time. • Marketing: Many businesses now use the internet to market their goods and services. By creating a website a large number of potential customers can be reached at minimal cost/e-marketing/e-selling. • New business methods: Home banking; home insurance quotes; videoconferencing; home offices. • E-business: Many business functions can be carried out using the internet e.g. E.D.I. Electronic Data Interchange where goods can be ordered automatically from a supplier when stocks go below a certain level. Ms. Marshall Leaving Cert Business

Technology – impact on staff • Tele-Working: With the use of broadband it is not necessary for employees to work together in the same building. This leads to savings on office costs and allows a business to hold on to staff who may prefer to work from home. • Training: In many occupations the training of workers can be done by or with the help of computers and the different software packages available. • Redundancies: fewer employees needed due to technology. Some skills or industries becoming obsolete. • New opportunities: new types of jobs have been created, such as web developers and computer programmers. Ms. Marshall Leaving Cert Business

Technology – impact on management • Communications: Management & staff can be equipped with laptops, mobile phones and e-mail links which enable instant communication leading to increased business efficiency/global communications. • Spans of control can be widened. Ability to monitor larger groups or groups which are geographically apart. • Organisation size can be reduced: Fewer employees needed/lower costs and increases in efficiency. • Production: Managers can use applications such as computer aided design (CAD) make the design process easier and increase productivity. Computer aided manufacture (CAM) where all equipment can be computer controlled all add to the efficiency of production/fewer repetitive tasks. • Decision- Making: information on businesses, people, countries, products, in the world at the touch of a button. Leads to more informed decision making Ms. Marshall Leaving Cert Business

Technology – impact on costs • How introduction of technology affects an enterprise’s Business costs. • Capital Costs: There are huge capital costs associated with technology development. There is an increased risk to the enterprise because costly equipment has to be bought prior to selling the goods and creating cash flow e.g. robotics for example, is a very expensive process involving a very complex production line. • Labour Costs: Changing technology reduces the number of workers required, e.g. using robotic equipment instead of people in automated production facilities. The emphasis is on quality and a far higher level of skill is required of the personnel. Multi-skilling (where people have a wide variety of job skills) is common in technologically advanced enterprises, and can reduce costs as fewer staff are required. Ms. Marshall Leaving Cert Business

Technology – impact on costs • Training Costs: Decision-making at all levels, from top management down, is helped. Communications between the functions in the enterprise and between the people in the enterprise are improved. Training costs in the organisation must increase to help the process. • R&D Costs: Modern technology increases the speed of innovation and therefore shortens the life cycle of products, requiring new products or new developments/applications of old products. The associated research and development costs can be daunting. More personnel are required in this area. Ms. Marshall Leaving Cert Business

2. Competition • Competitors are changing by: • Updating their products or introducing new ones. • Introducing new and cheaper ways of doing business, e.g. Internet banking • Growing in size to avail of economies of scale and forcing less competitive firms out of business. Ms. Marshall Leaving Cert Business

3. Consumer Demand/Expectations • Consumers tastes and fashions are constantly changing due to the impact of mass communications such as the internet, television and other media. • Rising levels of education are making consumers increasingly quality conscious. • Increasing competition and choice is leading to fewer loyal customers. • Ethical and green issues are becoming more important to many consumers. Ms. Marshall Leaving Cert Business

4. Economic Environment • External changes such as interest rates, taxation, oil prices and market deregulation make markets more unpredictable and dynamic. • The global credit crunch and domestic banking crisis have resulted in a collapse of the housing market in Ireland, directly resulting in thousands of lost jobs in construction, auctioneering, architecture and solicitors firms. This has affected most firms in Ireland, directly or indirectly, as consumers have less access to credit and less disposable income. Ms. Marshall Leaving Cert Business

5. Changing employee expectations • Employees: • Have a higher level of education and skills to bring to the job • Want jobs that are interesting and well paid, with good working conditions. • Want more flexible and family friendly working conditions • Are becoming more diverse (women in the workplace, immigration). • Want their workplace to be ethical Ms. Marshall Leaving Cert Business

6. Changing laws and regulations. • Irish and EU laws have affected businesses in a number of areas, e.g. updated consumer law – the consumer protection act 2007, or the Competition policy restricts certain mergers and takeovers. Ms. Marshall Leaving Cert Business

Changes in the Role of Manager How the role of the manager has changed Ms. Marshall Leaving Cert Business

Controller to Facilitator • Teamwork is discussed in chapter nine, it is also relevant as a way of managing change. • Controller managers are the type of boss who tell employees what to do and expect it done without question. Opinions are not sought from employees. • Facilitator managers believe staff can enjoy work, have ambition and are open to change. Ms. Marshall Leaving Cert Business

Controller to Facilitator Ms. Marshall Leaving Cert Business

Empowerment of Employees • The empowerment of workers means placing real power, which includes decision-making, and full responsibility in the hands of those workers where it is most effective, i.e. as close as possible to the customer. Empowerment is far more than delegation. • Workers who deal with the organisation’s customers every day are given great influence over the operation of the enterprise. Decision-making and control is in the hands of workers who use their skills and knowledge in the interests of the organisation. Ms. Marshall Leaving Cert Business

Empowerment of Employees The management skills that help to achieve and support the empowerment of workers in effective groups are: • 1. Enabling. Enabling involves making sure that all the resources necessary for empowerment, e.g. time, money, training, personnel, etc. are made available. Staff must feel competent and have the skills and knowledge to be effective team members. • 2. Facilitating. Facilitating involves the removal of all blocks, hurdles, restrictions, rules, systems procedures, indeed anything that prevents staff from achieving what they are capable of. • 3.Consulting. The manager consults staff regularly, as often as is necessary, on all issues concerning the job. Suggestions and recommendations are taken seriously. The knowledge and experience of the staff are recognised as valuable and useful to the enterprise. • 4. Collaborating. Staff are encouraged to hold meetings and chair or facilitate the conduct of business. Their work must be shown to be important to the organisation as a whole and discussions must be open, honest and constructive to allow for successful change to take place. • 5. Mentoring. Mentoring involves the widely experienced manager working through others rather than directly applying personal skill and knowledge to a particular situation. Being a mentor is being in a role of influence and advice. It involves acting as a role model and coach to colleagues and staff. Ms. Marshall Leaving Cert Business

Empowerment of Employees • Benefits of Empowerment in Organisations • Improved service: to customers as employees can deal with their problems or queries. • Improved morale – workers have control over how they work. • Improved skills – gives the workers the opportunity to improve existing skills and develop new skills. • Improved motivation – allows staff to influence business decisions. • Improved productivity – makes the working of the organisation more effective because employees are using their own initiative. Ms. Marshall Leaving Cert Business

Encouraging Employee Participation • This means involving employees to a greater extent in decision-making and the running of the business. It is also known as industrial democracy. • It can be achieved in the following ways: • Works councils • Worker directors • Share ownership Ms. Marshall Leaving Cert Business

Employee Participation Ms. Marshall Leaving Cert Business

Benefits of Employee Participation • Increased motivation: employee’s esteem needs are satisfied because they feel more important as they are involved in decision making in the business. • Intrapreneurship: the business benefits from the employees input into the business, often offering solutions to problems and suggestions for improvement. • Improved Communication: works councils and worker directors facilitate better communication between employees and managers. This leads to better industrial relations, reducing the chance of strike. Ms. Marshall Leaving Cert Business

Commitment to Quality • TQM is a process which tries to ensure quality in all aspects of a firm’s operations, it strives for 100% perfection 100% of the time. TQM puts the efforts of the firm into meeting the present and future needs of its customers. • Employees are given responsibility to ensure that the products meet the requirements of consumer. Quality assurance and teamwork are central to the TQM approach. • 4 basic principles of TQM are: • 1) Focus on Customers • 2) Continuous Improvement • 3) Teamwork (Total Company Involvement). • 4) Empowerment Ms. Marshall Leaving Cert Business

Principles of TQM • 1. Focus on the Customer: The business conducts market research to find out what the customer wants and makes exactly that product for them. • 2. Continuous Improvement: the business strives for 100% perfection. Each time they produce a product they want to do better than the last time. This involves improving processes, products and quality and reducing costs. Ms. Marshall Leaving Cert Business

Principles of TQM • 3. Teamwork: employees working in teams to achieve a common goal, e.g. improvement in a specific are. Brainstorming leads to more ideas and solutions to problems for the business. Employees are motivated as teamwork satisfies their social needs and they do not want to let their team mates down. • 4. Empowerment: workers means placing real power, which includes decision-making, and full responsibility in the hands of those workers where it is most effective, i.e. as close as possible to the customer. Empowerment is far more than delegation. Ms. Marshall Leaving Cert Business

TQM • The benefits of TQM to a manufacturing business • Improved Quality: There should be an improvement in the quality of products produced. • Reduction in Cost: There will be less waste. • Meet the Requirements of Legislation; Sale of Goods and Supply of Services Act 1980. • Workers are better motivated: Because they see management are committed to quality. • Job satisfaction: Workers feel a sense of achievement. • Increased Sales: The firm will develop a reputation for providing quality goods which will Ms. Marshall Leaving Cert Business

Benefits of TQM • Improved Quality – employees, managers work together to make perfect products. The emphasis on continuous improvement leads to better quality, which will in turn lead to increased sales and profits. • Reduced Costs – products are now made perfectly. This leads to lower costs because the business does not waste money on repairing or giving refunds on faulty products. • Increased Motivation – employees are more motivated and committed because they feel valued. Empowerment satisfies their esteem needs and teamwork their social needs. • Increased Customer Satisfaction – focusing on the customer means you are providing them with what they want. The reliable quality will lead to customers trusting the brand and hence, increase sales and profits. • E.g. Guinness Quality Team (see p181 for full Guinness example – well done in your textbook). Ms. Marshall Leaving Cert Business

Resistance to Change • Fear of losing their jobs – technology replacing people, making skills obsolete • Fear of losing power • Fear of failure • Laziness Ms. Marshall Leaving Cert Business

Strategies to Manage Change • 1.Management commitment: to the change process. Leading by example is one way of showing this commitment to change. • 2.Communication: between all parties throughout the change process. This will reduce uncertainty and tensions. • 3. Funding: for the proposed changes/ funding of new technologies and staff involvement/training. • 4. Consultation & Negotiation –consultation with trade unions and employee representatives regarding the proposed changes/involve all in the decision making process. Negotiation will be needed to determine remuneration packages, productivity agreements, changes in work practices etc. • 5. Reward: reward employees for accepting and adopting change. E.g. bonus. • 6. Train Employees: in order to overcome their fear of failure employees must be retrained to ensure they can still do their job to the best of their ability. Ms. Marshall Leaving Cert Business

Recent Exam Questions 2012 Q6 • Discuss the benefits and risks of empowering employees within a business. (20 marks). 2008 Q5 (2011 Short Question/ 2013 mock) • Discuss two strategies a business organisation can use to manage change. Use examples to support your answer. (20 marks). Ms. Marshall Leaving Cert Business

Recent Exam Questions • 2007 Q5 • Explain the term TQM and describe how it can be of benefit to an organisation. (20 marks). • 2004 Q5 • Explain how Empowerment of Workers and TQM have changed the role of managers. (20 marks). • Illustrate how the introduction of technology affects an enterprise’s (i) Business costs and (ii) Business Opportunities. (20 marks). Ms. Marshall Leaving Cert Business

Chapter 10 – Managing Change