Essay: Managing change in organization

Managing Change in Organization

Introduction

Change is the law of nature. Those who change, survive; those who don’t perish. Change in some way is the necessary aspect of human life. One of the few things of real permanence is change. “The process of continually renewing an organization’s direction, structure and capabilities to serve the ever changing needs of external and internal customers.” (Moran and Brighton, 2001)

The term change refers to an alteration in a system whether physical, biological, or social. Thus organization change is the alteration of work environment in organization. It implies a new equilibrium between different components of the organization i.e. technology, structural arrangement, job designs, and people. (Newstrom et al, 1997)

Royal Dutch Shell plc is mostly called as Shell, is a multinational company. Shell was listed as the world’s largest corporation for 2009 by Fortune and world’s second largest corporation by Forbes. Shell main business is the exploration for the production, transportation, processing and marketing of petroleum and its products. Shell operates in over 140 countries with offices in Netherlands, London, Nigeria and USA and on.

The purpose of this assignment is to explore the background to change affecting Shell, bureaucracy in Shell, alternative forms of organizational development, development of systems to involve appropriate shareholders, models for change and their implementation in Shell.

This assignment discusses the restructuring of Shell which involves laying of 5000 middle level managers to reduce the number of layers in hierarchy which will help in facilitating communication and saving cost. This change in structure is radical, managerially directed, change in strategy and structure occurring within a compressed time frame. (Hoskisson and Turk, 1990)

LO1 Background to change affecting Shell

1.1. Background to Change

Organizational changes are required to maintain equilibrium between various internal and external forces to achieve organizational goals. (Prasad, L.M., 2001) Therefore, various factors which may be important for necessitating organizational changes grouped into two categories: external and internal.

1.1. a. External Factors

Legal Factors

Legal factors broadly define the activities which an organization can undertake is and the methods which will be followed by it in accomplishing those activities. Any change in these legal factors may affect the organizational operation. In case of Shell, the problem in keeping more staff in developed countries is higher tax rates and various government regulations in terms of human resource policies.

Economic Factors

Due to recession and sensitivity of the current economic scenario where it has been very difficult for Shell to keep control on the prices of oil. The Anglo-Dutch group has been struggling as oil, gas and liquefied natural gas (LNG) prices tumble worldwide.

Social Factors

Increase in the rate of unemployment lead to strikes in Britain over plans by major oil companies to give jobs to other European Union counterparts. British job for British workers will have a huge impact on the human resource policies of Shell.

Technological Factors

Rapid growth in technology is one of the main factors affecting change in Shell or any other organization. With the advancement of technology and competition so intense in the oil industry Shell has to keep updated with recent technological advances.

1.1. b. Internal Factors

Cost Reduction

Cost efficiency involved two sets of initiatives: first, moving Shell towards efficiency frontier through eliminating management slack, reducing discretionary spending on perquisites and increasing efficiency; second, creating the conditions for dynamic efficiency.

Reductions of storage capacity

Although storage capacity reduction by Shell had continued throughout the late 1990’s restructuring will give new urgency to these efforts involving storage capacity and retail filling stations.

Operational Flexibility

Shell’s investment in plant and equipment was heavily focused upon flexible response capability. These investments will be at the refinery level with the objective of increasing the range of crude oils which could be refined and increasing flexibility in the output of different distillates. Shell’s major emphasis was on extending the ability of refineries to refine heavier, higher sulphur crude, and increasing the margin products such as unleaded gasoline. The biggest investments were in catalytic capacity.

Resource and capability based strategies

Responses to a more competitive environment involved a more fundamental reappraisal of strategy than the uniform pursuit of generic strategies in the form of cost reduction. Shell’s increased emphasis on competitive advantage pushed the organization away from their traditional imitative approach to strategy, and towards increased strategic differentiation based upon the exploitation of differential strengths in resources and capabilities.

Staff reduction

Although employment reduction is needed in all activities, the biggest cuts in percentage terms will be in headquarters staff. Shell’s main offices are in UK and Netherlands where the cost of running offices is high in terms of maintenance and salaries. Therefore it is necessary to cut some of staff from these offices and work can be easily outsourced.

1.2. Strengths and Weaknesses of Bureaucratic Organization

The term bureaucracy has been widely with invidious connotations directed at government and business. Bureaucracy is an administrative system designed to accomplish large-scale administrative tasks by systematically coordinating the work of many individuals. “An institutional method for applying general rules to specific cases, thereby making the actions of government fair and predictable.” (Max Weber, 1914)

Strengths of Bureaucracy

Well defined task

By adhering to the bureaucratic principles, Shell tends to achieve rational, systematic and structural coherence due to designation of positions and tasks. The division of labour is on the basis of functional specialization in Shell. Every employee is driven by well define task and responsibilities.

Higher Productivity

Every employee in Shell knows his place and area of contribution, so just manager has to do is to coordinate the specified tasks to achieve a unified organizational output. After repeatedly doing the same job for number of years or times it speeds up the process of work and employee is specialized in that particular tasks.

Rules and Regulations to create discipline

Due to adherence to strict rules on position qualifications and codes of conduct, Shell achieves efficiency in both upward and downward, and horizontal flow of information within the organization.

Clarity

In Shell jobs are well defined and every employee knows what is expected of them it makes the process of work visible. Apart from that every other process which includes promotions and pay are clearly visible and can be achieved by following Shell rules and guidelines.

Impersonal Relationships

A notable feature of Shell is that relationships among employees are governed through the system of official authority and rules. Official positions are free from personal involvement, emotions and sentiments. Thus, decisions are governed by rational factors rather than personal factors.

Official Record

Shell is characterized by maintenance of proper official records. The decision and activities of Shell are formally recorded and preserved for future reference. This is made possible by extensive use of filing system in the organization.

Weaknesses of Bureaucracy

Inflexible and Rigid

Due to adherence to rules and regulations there is no inflexibility at certain levels in Shell which make the structure rigid. Rules are normally provided for guidelines but often they become source of inefficiency because of too much emphasis on rules, their misuse, and people’s apathy from rules.

Organizational Structure

Rigid organizational hierarchy works against efficiency. It emphasizes necessary superior-subordinates relationships which are detrimental to congenial organizational climate. This rigid organizational is not suitable for organization like Shell.

Human and Social Processes

In Shell while dealing with people, total impersonal approach cannot be adopted because people have feelings, emotions, and sentiments which affect decision-making. Thus, people cannot work totally according to rules and prescriptions.

Decision Making

In multicultural organization like Shell, decision making has to be fast. There is a lot of competition in oil industry and with the bureaucratic procedure where there is too much paperwork and resistance to change does not exist it will be difficult for Shell to make quick decision in order to survive competitive market.

1.3. Alternative forms of Organizational Development

“Organizational development is an effort planned organization-wide, and managed from the top to increase organizational effectiveness and health through planned interventions in the organization’s processes using behavioral-science knowledge.” (Beckhard, Richard, 1984)

Kaizen (Continuous Improvement)

Kaizen is about continual improvement of people, processes, procedures, and any other factors that affect quality. An effective way to identify problems that represent opportunities for improvement is to use as a checklists that draws attention to those factors that are more likely in need of improvement. Five foundations of the kaizen consist of team work, personal discipline, improved morale, quality circle and suggestions for improvement. It is also called never-ending efforts for improvement involving everyone in an organization.

In Shell, the objective of kaizen is to maintain current technological, managerial and operating standards. The improvement function is aimed at improving current standards. Under the maintenance function, Shell must establish policies, rules, directives and standard operating procedures (SOPs) and then work towards ensuring that everybody follows SOP. The latter is achieved through a combination of discipline and human resource development measures. Under improvement methods, Shell works continuously towards revising the current standards, once they have been mastered and establishing higher ones.

Learning Organization

Organizations where people continually expand their capacity to create the results they truly desire, where new and expansive patterns of thinking are nurtured, where collective aspiration is set free, and where people are continually learning to learn together. “A model of strategic change in which everyone is engaged in identifying and solving problems so that the organization is continuously changing, experimenting and improving, thus increasing its capacity to grow and achieve its purpose.” (Rowden R.W. 2001)

Shell continuously expand its capacity to encourage learning in the organization, it also promote access to learning. Shell has developed models where they share their information on new products and services through the company intranet. Training and development is done through various learning programmes held over intranet. Shell brings its employees together to share a common vision thus promoting a good work relationship among the employees.

Organizational Transformation

Organizational transformation results in a major structural and fundamental impact on the entire organization. Shell’s structure is complex and chaotic in nature or will constitute a radical departure from the current state, and is so complex that desired outcomes and approaches to achieve may be unclear. The scale of change in Shell is large and will result in a significantly different enterprise. Shell’s organizational transformation will take years to complete, with multiple phases and stages of major changes.

LO2 Systems for understanding and involving others in the process of change

2.1. Develop systems to involve appropriate stakeholders

“A system is a collection of parts that interact with one another to function as a whole” (Maani & Cavana, 2002, p.6). A system has a sequence in the way its parts interact. Shell’s decision to cut 5000 jobs in its massive cost cutting drive due to disappointing profits in 2009 and gloomy outlook for 2010. Due to restructuring of Shell which affects everyone that is related to the organization in one or more ways the most appropriate stakeholders will be employee, management, shareholders, suppliers and government.

System A: Meetings

Shell restructuring programme is crucial in bringing change to the organization. Shell has to deal with every stakeholder in isolation and through conducting meetings for employees, management, shareholders and government representatives it would be easy to explain why this change is necessary for the growth of employees, how it is profitable for the shareholders and the welfare of the state for the government agencies.

The meetings will be held for agenda for every group of stakeholder. Department managers will take the position of the chairman and it will be conducted in their offices in the conference rooms starting with employees, management, shareholders, suppliers and government representatives. It would be an open meeting where discussions would take place and everyone is welcome to present their views on this restructuring programme and changes would be made by keeping in mind the minutes of the meetings.

System B: Training and Development

Another system to cope with the change is to train and develop employees to achieve organizational goals. Training is concerned with imparting and developing specific skills of an employee for doing particular job. Thus, Shell training would help employee in learning sequence of programmed behaviour. Apart from training Shell has to develop its employee in multitasking so that they can perform various jobs at the same time and from the same position. Management development is all those activities and programmes when recognised and controlled, have substantial influence in changing the capacity of the individual to perform their jobs better. Thus, training and development is essential for coping up with the change.

Firstly the need for training in every employee would be identified and training would be imparted in as per employee convenience. Trainer would be various senior managers having a good experience in their department so that training can be easily imparted. Development of training programmes would be different for different departments as to cope up with increasing pressure of work.

2.2. Analysis and Evaluation of the Systems

Merits of the system A: Meetings are follows:

Increase in confidence

A meeting plays an active role in increasing efficiency of employees in Shell. It increases confidence for doing a job in a better way. Due to change in the structure they have to understand what is needed to be done.

Better Human Relations

Shell by conducting this meeting with employees will help in increasing the quality of human relations in Shell. Due to restructuring in Shell there would be growing complexity of human problems like alienation, inter-personal and inter-group problems. With meetings it will give a chance to develop better relations between employees and management.

Sharing of Opinions

With the help of this meetings Shell will have lot of opinions from there employees and will help them in bringing the change better and effective and this will be there with the help of their employee.

Demerits of the systems A: Meetings:

Cost efficiency

Meetings are not very cost efficient and involve a lot human resources. Meetings are conducted at various venues and it occurs a cost in conducting such meetings.

Lost of Track

Meetings can go on for long and can lose track in most cases and it is possible that the very first option available can be taken.

Avoiding responsibility

In meetings people try to avoid the responsibilities. Roles can be defined in meetings and people might have to take responsibility to achieve possible outcomes.

Merits of the system B: Training and Development (T & D) are follows:

Increase in efficiency

T & D plays an active role in increasing efficiency of employees in Shell. It increases confidence for doing a job in a better way. Though an employee can only learn while he actually perform task accurately on a regular basis.

Increase in morale of employees

Shell restructuring will put more responsibilities on employees and with this responsibility they will have more authority to make decisions on their own. This power in Shell will help increase morale of employees. High morale is evidenced by employee enthusiasm, voluntary conformation with regulations, and willingness to cooperate with others to achieve Shell objectives.

Reduced Supervision

Employees need to work in more autonomy and freedom in Shell. Due to Shell’s restructuring employees will be given more responsibility and there jobs will be redefine. For this new define roles employees need to be trained. Trained employees need less supervision. Shell can save cost on supervision if the employees are trained properly to handle their jobs without the help of supervision.

Demerits of the systems B: T & D is as follows:

1. There is a discrepancy between ideal and real situations. T & D tries to achieve ideal without taking into account real.
2. No system can work if people have low motivation. Employees should have some kind of motivation to try and cooperate with the change and the systems.
3. Shell’s top management should genuinely support T & D in order to make it work efficiently.
4. T & D is very costly and there is no surety of its being successful.

LO3 Plan to implement models for ensuring ongoing change in Shell

3.1. Develop and Adapt appropriate models

Business Process Reengineering

”The fundamental rethinking and radical redesign of business processes to achieve dramatic improvements in critical contemporary measures of performance, such as cost, quality, service, and speed.” (Hammer and Champy, 1993) Business process engineering in management, an approach aimed at elevating efficiency and effectiveness of business process that exist within and across organizations. The key to BPR is for organizations to look at their business processes from a clean state.

The objectives of BPR and its adoption in Shell are as follows:

Reduce costs

The purpose of Shell’s restructuring is to reduce costs and profit maximisation. With these restructuring Shell is trying to reduce costs in terms of pay and office running expenses.

Reduce Time

With these restructuring programmes Shell is taking off one layer from hierarchy which will help flow of communication efficiently and shorten decision making time.

Customer Service

With quick decision making due to restructuring and reduce costs will also give an advantage to customer in terms of costs and better services.

Change

To transform Shell change must effectively be placed in skills, shared values, measurement systems and information technology.

Efficiency

In Shell efficiency refers to work faster and often at measurable lower cost. Mere automation of manual tasks, resulting in efficiency gains. It helps Shell employees to work faster and quality of work.

Total Quality Management

Total quality management is the integration of all functions and processes within an organization in order to achieved continuous improvement of the quality of goods and services. The goal is customer satisfaction. (Ross, Joel E, 1999) TQM is a set of management practices throughout the organization consistently meets or exceeds organizational requirements. TQM places strong focus on process measurement and control as means of continuous improvement.

In Shell, TQM is the management process used to make continuous improvements to all functions. Shell’s TQM represents an ongoing, continuous commitment to improvement. The foundation of TQM in Shell is a philosophy that supports meeting customer requirement through customer requirement. To apply TQM successfully top management in Shell must provide leadership and support throughout restructuring programme. In Shell goals are moving targets thereby a requirement a commitment toward continuous improvement. In Shell TQM is based upon data and facts and not opinions.

In Shell tools, techniques and training is used for analyzing, understanding and solving quality problems. Customer’s requirement is one of the factors for restructuring for Shell. Shared values and beliefs expressed by employees help in successful restructuring of Shell.

3.2. Implementation of Models

Kurt Lewin (1947) has proposed a three stage theory change commonly known as unfreeze, moving and refreezing. In Shell implementing this model of change through Business Process Engineering (BPR) and Total Quality Management (TQM) can be seen as follows:

Unfreezing

Unfreezing is the process in which an organization casts aside his old behavior which might be inappropriate, irrelevant or inadequate to the changing demands of the situation. In this process Shell will layoff 5000 employees from there various offices all over the world. The BPR technique is determined by business vision which involves Shell aims such as decrease in time, improve in production quality, cost saving, etc. Shell mostly accept the high-impact approach which emphasis on the most vital processes or those conflict which is most with the organization vision. Limited firms accept exhaustive approach which attempt to identified all the processes within the firm and then prioritize them in order to restore on the urgency.

Try to recognize and avoid the repeating of previous error and build better baseline for future prospects. Shell will realize the measures by redefining the roles of employees in the organization. Consciousness of IT competence can and should induce business process reengineering. Shell being a global organization has to maintain high level of IT levers for sharing of information throughout organization.

Moving

This is the stage at which organizations being change learn new methods of working, new thinking, perception of new roles etc, there are variety of ways through which all these can be uncalculated. The definite plan should not be viewed as the conclusion of the BPR process. But it viewed as a model with success. The symbol of model support business process reengineering approach with immediate results, and customer’s satisfaction and involvement in Shell. Recognise that the primary purpose of change is to improve performance results. Encourage improvisation, team performance and coordinated initiatives in Shell. Encourage learning by doing and provide just-in-time training for performance.

Refreezing

Refreezing means that what has been learned is integrated into actual practice. At this stage, Shell internalize new beliefs, feelings, and behaviors learned during the changing phase. This would be the monitoring process and where the restructuring has been successful or not. Work performance of various individuals will be measured. The success of training and development will be seen in this stage.

Outcomes

• Restructuring in Shell will lead to cost saving
• Profit maximization is the motive behind restructuring
• Improving quality process in Shell
• Continuous improvement
• Restructuring will help in flow of communication
• Quick decision making
• Better customer service

Conclusion

Oil giant Royal Dutch Shell restructuring was cutting 5000 jobs in a massive cost cutting drive as the profit for 2009 was disappointing and it has gloomy outlook for the coming years. Shell restructuring will have an effect on 50000 employees worldwide. The Anglo Dutch group has been struggling as oil, gas and liquefied natural gas (LNG) prices tumble worldwide.

Restructuring programmed will help Shell in saving cost and profit maximization. It will have an impact on strategy and impact on structure. Shell restructuring will have effect on flow of communication among the company, apart from the communication it will also facilitate quick decision making.

Shell restructuring is due to the current economic scenario where there is only the best will survive. Shell restructuring will help motivate employees in terms where they would have more responsibilities and decision making power.

Bibliography

• John W. Newstrom and Keith Davis, 1997, Organizational Behaviour: human behaviour at work, new York: McGraw-hill, pp. 398-399
• Joel E. Ross, 1999, Information Systems for Modern Management, Prentice Hall.
• Kambiz E. Maani and M. Cavana, 2002, System Thinking and Modelling, Prentice Hall.
• L. M. Prasad, 2001, Principles and Practice of Management, Sultan Chand and Sons, New Delhi.
• Max Weber, 1914, Capitalism, Bureaucracy and Religion, HarperCollins Publishers.
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