Chapter One
Introduction
1.0 Introduction
The forces acting upon organizations are drivers of change thereby forcing organisations to be involved in change programmes. Government laws and regulations, social and economic conditions; and technology developments are some of the factors driving change. According to Robbins (2011) “technology has created the need for change.” This is the case at NICO Holdings Limited, which has a number of commercial entities in different countries in Africa, SADC region in particular. Changes that have been initiated at NICO calls for effective management through people with skills in managing change so as to reduce resistance to change. This Chapter forms the introductory part of the paper which looks at issues of change by focusing on importance of change and causes of failures on change considering change at NICO Holdings Limited in attempt to explore the effects of change.
———————————————————————————————————————
1.1 NICO Holdings Limited
NICO Holdings Limited (formerly The National Insurance Company Limited) (NICO) is a financial services group in Malawi that offers services ranging from insurance, Banking, mortgage, Asset Management, Stock Broking, Corporate Finance and Information Technology service. The wide range of services NICO is offering presently is as a result of substantial reorganisation of the company. The National Insurance Company was incorporated in 1970 as a composite insurance company to transact both Life Assurance and General Insurance business. The company commenced operations in January, 1971.
The National Insurance Company was operating as a composite insurance company transacting both life insurance and general insurance business. The board of directors proposed that National Insurance Company Limited be restructured through the formation of Life insurance Company and General Insurance Company and also formation of NICO Information Technology (IT) Company Limited. The restructuring resulted into the establishment of a holding company, NICO Holdings Limited composing all the subsidiary operating companies, specialised in specific activities. This included NICO subsidiaries then, namely NICO Corporate Finance and NICO Insurance Zambia Company Limited, an evidence that a great change has occurred in the company. It is therefore, worth studying or exploring the effects change with a focus on NICO Holdings Limited.
Change implies altering, varying, modifying in the same way. Change is an alteration of a company’s strategy, organisation or culture (Passenheim, 2010). Passenheim (2010) points out that a complex structure like an organisation is driven by external and internal factors in regard to the need for change. A number of external factors create the explicit need for change which includes market situation, market place, technology, Government laws and regulations, and economic issues (Passenheim, 2010). Change is a strategy for improving organisational effectiveness by means of behavioral science approaches, involving the application of skills in response to challenges. The successful management of change helps in providing capability for economic performance and competitiveness. Passenheim (2010) argues “effective managers or leaders are able to manage change in the company’s environment. Such changes can be alterations in structure, technology as well as people. This research attempts to explore the positive and negative effects of implementing change at NICO Holdings Limited.
1.2 Background to the Study
Change is often said to be the only thing that remains constant in organisations (Armstrong, 2009). Therefore, change needs to be managed for effective results. To manage change, it should start with understanding of the types of change and how the process works. It’s of great essence for management to understand different types of models of change that have been developed; the factors that cause resistance to change; and how to minimise such resistance. Once these models and the phenomenon of resistance to change have been understood, leaders and change agents can strategise the way to tackle change in their organisations.
According to Armstrong (2009), “flexibility” is vital in change processes. As per Armstrong (2009) “change is incremental although it can be transformational. However, three types of change include strategic, operational and transformational; but Yukl (2013) points out that “Leading change is a challenging task for managers and administrators as it involves guiding, encouraging, and facilitating the collective efforts of members to adapt and survive in an uncertain and sometimes hostile environment”. Strategic change involves broad, long-term and organisational issues of strategic vision and scope” (Armastrong, 2009). Here the purpose and mission of the organisation, corporate philosophy relating to growth, quality, innovation and stakeholder value, competitive positioning and strategic goals for attainment and maintenance of competitive advantage and for product and market development are considered by top management.
However, strategic change is implemented in response to external competitive, economic and social environment, and the organisation’s internal resources, capabilities, culture, structure and systems (Armstrong, 2009). It is important to keep on analysing such factors in the planning, and implementing change. In order to achieve sustainable competitive, organisations need to have the capacity to identify and understand the competitive forces within the sector and how they change over time. This can be in relation to the competence of a business to mobilise and manage the resources for the alternative competitive strategy (Pettigrew and Whipp (1991).
An example of strategic change is the one that has occurred at NICO Holdings Limited in terms of shareholding, following the sale of its 25.1% shareholding by Sanlam Emerging Markets Limited to Batswana Insurance Holdings Limited (BIHL) in December 2015 (Osman, 2015). This resulted in transfer of Sanlam Emerging Markets Limited shareholding in NICO to BIHL.
The other type of change according to Armstrong (2009) is operational change, for example, a change to new systems, procedures, structures or technology (as in most Malawian banks and NICO marketing systems) that will have an immediate effect on working procedures and processes in organisations and has great impact on people. This can be associated with “the role-centered approach,” described by Yukl (2013), who points out that “it involves changing a number of work elements such as work roles by reorganising the workflow, redesigning jobs to include different activities and responsibilities; and procedures for evaluation of work among others.” Transformation change concerned with major and comprehensive changes in structures, processes and behaviours that affect the company’s existing work patterns (Armstrong, 2009).
National Insurance Company restructuring resulted in establishment of companies, a change relating to strategic change. NICO’s life insurance business (the life business) is conducted by a NICO Life Insurance Company which was incorporated in Malawi. NICO’s short term General Insurance business (the general busines) is conducted by a NICO General Insurance Company (The General Insurance) which was incorporated in Malawi. The top company of the life company and the general company is NICO Holdings which hold all the shares of the life and general company. All the employees of NICO involved in respectively the life business and general business were transfered to the life company and general company while other were retrenched. In order to succeed, organisations have to manage change where human resource management plays a major role.
1.3 Problem Statement
There are different problems facing the company which is operating in the financial sector, insurance in particular. Competition is one of the challenges since there are other operators including Prime Insurance, United General Insurance, Old Mutual, ReUnion Insurance Company among others. Although there has been change at NICO Holdings, for instance a restructuring exercise, NICO Holdings is facing some challenges in the sector. These are problems that the company is facing now:
(a) High inflation rate and high lending rates in 2014 affected negatively economic growth in Malawi, a thing which is continuing (Mlusu, 2014).
(b) In addition, Malawi has a small and growing insurance sector regulated by the registrar of Reserve Bank of Malawi (RBM). RBM is responsible for exerting control over the insurance and other financial including reinsurance companies, insurance brokers, loss adjusters and intermediaries, while the Pension and Insurance Supervision (PISU) Department of Reserve Bank of Malawi was established to safeguard the interests of policyholders and pension fund members; fostering a competitive, cost effective environment (https://www.rbm.mw/stats_pisu.aspx).
(c) There are expected falling profitability and a low penetration rate which will be the major challenges faced by Malawian insurers (http://www.marketresearch.com/Timetric-v3917/Insurance-Malawi-Key-Trends-Opportunities-7477843/).
(d) Although the Insurance Act of 1957 regulates the insurance industry, the Act itself has not seen any significant modifications over the years (Kapanga, 2005). The outdated Act is a major preoccupation for the industry, as it opens up the market for abuse by unscrupulous players.
(e) According to Kapanga (2005), fraud is another issue affecting the insurance sector and the general insurance market has been grappling with fraudulent motor and other insurance claims that involve collusion, aiding and abetting in addition to credit control which is another source of worry for the industry, largely due to lack of either legislation or self-regulation although the Reserve Bank has recently stepped in to ensure that no company goes under.
(f) Malawi’s inefficient technologically backward and not in line with the country’s vision of becoming predominantly exporting nation due to lack of adequate extension and research services and Government’s related strategic choices (Mwale, 2015). According to Kapanga (2005), the current IT systems in the market are either outdated or underutilised and skills development in this area will be crucial for the future. There have been macro-economic challenges faced by Malawi, which are exacerbated mismanagement of public funds by the use of the Integrated Financial Management System (IFMIS), a thing commonly known as \”cash-gate\” which resulted in donors suspending budget support, leading to a widening of the fiscal gap (http://www.africaneconomicoutlook.org/en/countries/southern-africa/malawi/#).
The business environment in Malawi, face challenges including poor business environment, lack of skilled labour, weak financial sector, low agricultural technology adoption, and vulnerability in the macro-economic environment (ADB, 2012). There are key constraints to private sector development and competitiveness which include: red tape, poor infrastructure, limited access to finance and a weak skills base; and recent macroeconomic challenges have aggravated the difficult business environment: in particular high interest rates, inflation and shortage of foreign exchange where the weak environment for private investment indicates that the country’s reform effort has been inadequate (Mwanakatwe, 2014). Due to change in the company, all the employees of NICO involved in respective the life business and general business were transfered to the life company and general company while other were retrenched. Change was initiated in response to challenges that NICO was facing where the establishment of separate operational companies for the life business and general business was meant for greater accountability and more dedicated and efficient management focus.
The problems which called for some changes at NICO Holdings can be summarised as macroeconomic forces. Although some changes have occurred, there are problems faced by the company resulting from change. This has motivated the researcher to carry out a study on effects of change to provide valuable and useful information on how NICO managed the change; and obstacles that NICO faced in addition to assisting understanding the advantages and disadvantages of restructuring.
1.4 Study Objectives
1.4.1 General Objective
With reference to the above background and problem statement, the study aims “To explore the positive and negative effects of change at NICO Holdings Limited, originally known as National Insurance Company.
1.4.2. Specific Objectives
i. To assess whether the purpose of changes has been achieved since 2001 to date at NICO Holdings.
ii. To identify and assess the current performance of individuals affected with change at NICO Holdings Limited.
iii. To identify appropriate change management programmes for positive impact of change for NICO Holdings Limited.
1.5 Research Questions
The study will be conducted based on the following research questions:
(i) To what extent is the purpose of change has been achieved since 2001 to date at NICO Holdings?
(ii) What is the current performance of individuals affected with change at NICO Holdings Limited?
(iii) What are the various change management approaches for positive impact in NICO Holdings Limited?
1.6 Research Hypotheses
The purpose of change at NICO Holdings is greatly achieved. The high team performance is achieved at NICO Holdings Limited. There are various change management approaches that can be selected and utilised for positive impact in NICO Holdings Limited.
1.7 Scope of the Study
The study focused on effects of change at NICO Holdings Limited in Malawi. The company operates through a central control office in NICO House in the commercial city of Blantyre, where the executive team is with three regional offices in the main cities of Mzuzu, Lilongwe and Blantyre. The study shall consider all three main locations.
1.7 Significance of the Study
The study is expected to provide information about the positive and negative effects of change where the results of the findings will: (1) Assist management on how to manage change for the success of the organization; (2) Help to contribute positively in improving of strategic management of the conglomerate in question for effective performance; (3) Will also provide insight on how local and similar organisations can embrace change in an effective way; and (3) Add on existing knowledge relating to change management.
1.9 Conclusion
The study therefore has enabled the researcher in giving recommendations to NICO Holding Limited in its process of responding to change by utilising appropriate change management techniques. This will help in taking advantage of opportunities in Malawi since the country is a unique and rewarding place to invest and work, as it provides transparent and tangible options to contribute directly to the country’s economic growth, and its priority sectors offer high growth potential that can be achieved through increased investment (MITC, 2012).
Chapter Two
Literature Review
2.0 Introduction
Chapter Two provides a Literature Review which is a detailed review of salient literature on the various theories and important aspects of the change and change management. The Chapter is based on the background, theoretical framework, relevant literature, business cases, changes that have taken place at NICO Holdings Limited and conclusion made. The literature has enabled the researcher to make vital recommendations relating to managing change in the company which is operating in an environment faced with factors requiring change. According to Saunders et al (2009) the main purpose of a literature review is to ‘help one develop a good understanding and insights into relevant previous research and the trends that have emerged.
—————————————————————————————————————-
2.1 Types and the Meaning of Change
Cole (1996) describes change as altering, varying or modifying something and he also described it as a process which is rarely contained by functional of specialists boundaries. Bennett (1997) identified cultural , political, economic, technical and legal frameworks within which organisations operate as liable to rapid and far-reaching change. Yukl (2013) provides types of change which can be initiated by leaders in organisations which may involve roles, attitudes, technology, strategy, economics, or people. These are explained according to Yukl (2013) in that: (a) Attitude-centered approach to change is after changing attitudes and values by persuasive appeals, training programs, team-building activities, or a culture change program; and (b) Technical or interpersonal skills may be reinforced with a training program due to an assumption that new attitudes and skills lead to behavioural change in a positive way. Managers or leaders can instill effective behavior is by the new role requirements and reinforced by the evaluation and reward system (Yukl, 2013). Both role-centered and attitude-centred program can be used together for successful performance in managing change though the two approaches are not incompatible, but they will be complements (Beer et al., 1990). This will help to deal with resistance by personnel as Riley (2000) argue “change normally involves real or perceived threat in terms of personal loss for those involved, job security and the disturbance of an existing system.” Cole (1996) said there are two categories of factors that trigger change in an organisation. These are external and internal factors. External factors that trigger change according to Cole (1996) are: (1) Changes in demands for the orgnisations products or services as a result of changing consumer preference; (2) Take over of business by a more powerful enterprise as what has happended at NICO Holdings; (3) Merger of business with another organisation; and (4) Threatening tactics of competitors and policitical changes which change labour laws, company law, taxation among others. Internal factors that trigger change include a need to improve productive efficiency; improve quality of products or services; respond to development of potential new products/services; improve standards/systems for dealing with suppliers; and deploy people where they are most effective among others.
Cole (1996) catigorised change in two ways in that: (a) changes can be in response to external environment and is called reactive change; and (b) changes can occur because management has decided to change which is called proactive change and is deliberate. Another type of change is in the technology in connection to work processes by using decision support systems, for example including as networked workstations, human resource information systems, inventory and order processing systems, and sales tracking systems (Yukl , 2013). However, such changes are not fruitful as they fail to achieve the desired benefits since new technology will not be accepted and used in an effective way if organisations have not considered the issues of changes in work roles, attitudes, and skills (Yukl, 2013).
Internal changes in an organisation, as those which happened at NICO may be based on the need to achieve economic or people goals (Beer and Nohria, 2000). The economic aspect is after improving financial performance involving downsising, restructuring, and adjustments in compensation and incentives while people approach is for improving human capability, commitment, and creativity by increasing individual and organisational learning, strengthening cultural values that support flexibility of people to initiate improvements. According to Yukl (2013) “large-scale change mostly involves some aspects of both approaches, but incompatible factors can hinder the change effort at hand if not well managed.
2.2 Some Core Theories of Change from Other Disciplines
2.2.1 Theories of Change
Process theory looks at reactions to changes imposed upon people and it builds on observations about the typical sequence of reactions to sudden, traumatic events (Lazarus, 1991). The reaction may be in four stages including denial, anger, mourning, and adaptation where: (1) the reaction is to deny that change will be necessary; (2) to get angry and look for someone to blame and resisting leaving usual ways of doing things; (3) people stop denying that change is inevitable, acknowledge what has been lost, and mourn it; and (4) to accept the need to change (Yukl, 2013).
Yukl (2013) advises that “change leaders should understand these stages of change and must be patient and helpful for successful change programme as many people need help without becoming severely depressed, and have optimism about adjusting successfully”. “The way how a person reacts to change partly is based on the person’s general confidence about coping with change successfully due to his or her prior experience with change and by traits, such as self-confidence, risk tolerance, and openness to new experiences,” (Erwin and Garman, 2010).
The three schools of thought that form the central points on which change management theory stands are the Individual Perspective school, the Group Dynamics school and the Open Systems school (Burnes, 2009:322-327). The individual perspective school’s supporters are split into two camps: Behaviouralists and the Gestalt-Field pyschologists where the former view behavior as resulting from and individual’s interaction with the environment while Gestalt-Field pyschologists argue that an individual’s behavior is the product of environment and reason.
One of the basic principles of behaviourists is that human actions are conditioned by their expected consequences and behavior that is rewarded tends to be repeated, and the behavior that is ignored tends not to be. Therefore in order to change behavior, it is necessary to change the conditions that cause it (Skinner, 1974). Watzlawick et al (1974) found that most of the theories of change were philosophical and had been derived from mathematics and physics where they selected two theories from the field of mathematical logic thereby building their beliefs about change: (a) the theory of groups and (b) the theory of logical types with a goal to explain the accelerated phenomenon of change experienced. This according to Riley (2000) resulted in a conclusion that the earlier theories explained first-order and second-order changes: (1) First-order change is about processes and procedures change relating to variations of processes and procedures in a particular system, leaving the system itself relatively unchanged; and (2) Second-order change is about changing the system and mostly occurs due to strategic change or a major crisis. Kurt Lewin (1951) focused on motivation and the motivational concepts. As a result, he developed ‘Field Force Analysis’ for analysing change by means of the restraining or driving forces. Lewin’s Force Field Analysis Figure 2.1 below.
Figure 2.1: Lewin’s Force Field Analysis
2.2.2 Stakeholder theory and change
Stakeholder theory offers a number of perspectives and thus expectations that stakeholders have (Gibson, 2000). A stakeholder is someone with an interest in the running of an organisation and is affected by organisational operations. Instrumental stakeholder theory holds that stakeholders and managers work together (Donaldson and Preston, 1995). This is why organisations are called upon to consider offering training relating to change to key stakeholders who may be affected by change, employees of an organisationion particular.
2.4 Managing Change in Organisations
Managing change requires empowered change agents with change plans in place where the effective strategies and programs are drawn to enable those change agents to achieve the new vision (Riley, 2000).
2.4.1 Stages in the change process
According to Hill and Jones (2001) there are four stages in the change process: (1) determining the need for change, (2) determining the obstacles to change, (3) change implementation and (4) evaluating. The first step in the change process is determining the need for change. The second step is identifying the barriers of implementing change. The barriers are obstacles to change which are found at corporate, divisional, functional and individual levels. Important obstacles include the inertia produced by an organisation’s present strategy, structure, culture and differences in divisional and functional goals and interest. The third step in the change process is implementing the change involving evaluating alternative courses of action and choosing a new strategic direction that often affect personal functional or divisional interest. The fourth step in the change process is evaluation of change. These steps can be illustrated by the Figure 2.2 below.
Figure 2.2 Steps to achieving change
Beer et al (1990) propose steps of change that include: (1) Gaining commitment to change through the joint analysis of problems; (2) establishing a shared vision of how to organise and manage to achieve goals such as competitiveness; (3) enhancing consensus and cohesion; (4) communicating revitalisation to all departments without pushing it from the top; (5) institutionalising revitalisation through formal policies, systems and structures; and monitoring and adjusting strategies in response to problems in the revitalisation process.
2.4.2 Models in Managing Change
2.4.2.1 Gap Model
The Gap Model asserts that in change situation there is a current situation, and desired future situation as illustrated in the Figure 2.3.
Figure 2.3 Transition Model
Source: http://www.lindsay-sherwin.co.uk/guide_managing_change/html_change_strategy/01_gap_model.htm
In this model a change strategy encompasses focusing on the future and need to plans and strategies to tackle them. It focuses on the people as well as the technical/business aspects with three roles: Change Sponsors, Agents, and Targets (http://www.lindsay-sherwin.co.uk/guide_managing_change/html_change_strategy/01_gap_model.htm).
2.4.2.2 Jacob’s Ladder
This relates to a change process that is unexpected and unforeseen events that arise as illustrated.
Figure 2.4 Jacob’s ladder model
Source: http://www.lindsay-sherwin.co.uk/guide_managing_change/html_change_strategy/01_gap_model.htm [EDITOR’S NOTE – I have left this in for referencing but please do NOT visit this link as it is no longer the original source, nor a safe link]
2.4.2.3 Models by Lewin (1951) and Beckhard (1969)
The other best change models are those developed by Lewin (1951) and Beckhard (1969).
(a) The Lewin (1951) Model: The model encompasses: (i) Unfreezing– altering the present stable equilibrium that supports existing behaviours and attitudes, a process which needs to take into account the inherent threats change presents to people and the need to motivate those affected; (ii) Changing, which is concerned with developing new responses based on new information; (iii) Refreezing, which about stabilising the change by introducing the new responses into the personalities of those concerned.
(b) The Beckhard (1969) Model: A change programme should incorporate the following processes: (i) Setting of goals and defining the future organisational conditions desired after the change; (ii) Diagnosing the current state in relation to the goals set; (iii) Defining the transition state activities and commitments to meet the future state; and (iv) Developing alternative strategies and action plans for managing change.
Johnson et al (2005) state that “managing change is depends on the role of a strategic leader”. Guidelines on implementing change by Nadler and Tushman (1980) includes motivation in order to achieve changes in behavior; managing the transition; shaping the political dynamics of change; building stability of structures and processes for people work on them. The successful change programme is based on the presence of a transformational leader who influence people to achieve viable goals rather than merely short-term interest”.
2.5 Culture and Change
According to Burnes (2009:198), managers and employees do not perform their duties in a value-free vacuum, but their work and the way it is done are governed, directed and tempered by an organisation’s culture. If these functions are not well done, culture may reduce the efficiency of an organisation. Since change will affect culture that may change too, it is important for an organisation to consider the impact of cultural elements illustrated by Schein (1985) in Figure 2.5 below.
Figure 2.5: Edgar Schein’s Layers of Culture
Most of the variables, according to Cole (2005:260-261), which relate to internal affairs of the organisation and are important to be given attention in organisational change are illustrated in the Figure 2.6 below.
2016-10-13-1476351906