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Understanding Organizations

INTRODUCTION
This essay looks at the critical issues which Scania faced while
implementing the change management strategies. It critically discuses
the issues like transformational change, organization strategy and
design, power and politics, span of control, culture and team work.
Scania is a leading manufacturer of heavy trucks and buses as well as
industrial and marine engines. In 2002 the 1,000,000th truck was
handed over when Scania Production Angers celebrated its 10th
anniversary at the same time as Scania France celebrated its 25 years
in business.
CHANGE MANAGEMENT
Scania is a highly technical production unit which needs to stay
up to date following the changes in the technological trends and the
market competition. To produce best quality cost effective products
Scania has to adopt new management strategies to make the work force
more efficient. To be highly competitive Scania has to adopt new ways
of doing things to be cost effective. Due to the effects of all these
factors old systems, procedures, rules, organization structures and
processes are no longer effective. These are the factors which acted like
a trigger of change for Scania.
Richard Whittington and Micheal Mayer (David and Andrzej,
2004) argue that adaptive reorganization the ability to redesign
structures frequently, is now critical to organizational performance. In
1994 the management of Scania decides to introduce a change in the
organization following which the Mission Statement of the organization
was also changed. First it was more of a production focused statement
and then it was changed into a customer focused statement. Such a
change gave the organization a new and more customer focused image.
According to The Dunphy Stace Scale of Change and Leadership
Style (David and Andrzej, 2004) this type of change is known as Type 2
Charismatic Transformational Change more specifically Scania has
introduced Corporate Transformational Change followed by a
Consultative Leadership Style. As we can see Scania Angers has
performed a strategic change throughout the organization by changing
the structure, systems, procedures, mission, culture and power
distribution.
TRANSFORMATIONAL CHANGE
Transformational change is different from other types of strategic
change because it considers the people side of the organization
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Understanding Organizations

(Thomas and Christopher, 2004). For a change to be known as


transformational change a majority of individuals in an organization
must change their behaviour. Further it can be defined as Empowering
people to transform who they are and reinvent themselves by helping
them to see how their frames of reference, thinking, and behaviour
produce unintended consequences. This work involves encouraging
people to surface and question the way they have framed their points of
view about themselves, others, or their circumstances with the idea of
creating a fundamental shift" (Mary R.Bast, 2004).
The change process in Scania Angers has shown positive effects
because the management has introduced the change process very
effectively, in a long period of time, by incrementalism which has
maintained and vindicated the status quo. Scania has followed the three
Phase Change Model and has successfully been through the Unfreeze,
Move and Refreeze Phase (David and Andrzej, 2004). The new
Managing Director has presented with clarity and effectiveness a
strategic vision for change, which has energized the organization to
become adaptive to the change.
SCANIA ANGERS STRATEGY AND DESIGN:
The Managing Director of the organization practices Charismatic
Authority. By the use of Charismatic Authoritative style of management
the Managing director conveyed his message from top to bottom of the
hierarchy. According to the work of Henri Fayol (1841 - 1925) the
management at Scania has successfully been through the six
managerial phases of the management i.e. Forecasting, Planning,
Organizing, Commanding, Co-ordinating and Controlling.
Scania Angers has a flat organization structure (David and
Andrzej, 2004), with only four levels of hierarchy in which the Swedish
Culture is dominating at the Senior Managerial positions. The
management of Scania shall take the domination of the Swedish culture
as a weakness for the organization.
INFORMATION PROCESSING ON STRUCTURE
In order to accomplish the organizations overall goals, vertical
and horizontal linkages play an important role in the hierarchy of the
organization. The vertical linkages are designed primarily for the
purpose of control and the horizontal are designed for coordination and
collaboration, which usually means reducing control. So if there is only
vertical linkage then there may be too little information and in case
horizontal linkages there may time processing information that is not
vital to their tasks thus, which can reduce the effectiveness. Scania has
a horizontal linkage consequently there is more coordination and
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Understanding Organizations

collaboration but at the same time the processing of information is slow,


which is a weakness for the organization.
POWER AND POLITICS:
Scania Angers is a Swedish organization operating in France and
French people are more inclined to value, recognition and admire, such
considerations shall be taken into account while shaping the
organization structure. As we can see at the senior managerial
positions there are mostly Swedish people. According to Hofstedes
(1980), French have a very low Power Distance Index which shows that
French people are reluctant to an unequal distribution of power. Even
though the management is sharply using the continuous cultural
vigilance, such issues can create en masse retreat of people to their
cultural homeland, in the long run.
MANAGEMENT PHILOSOPHY:
The management of Scania believes in training and educating
their employees to make them more adaptive to the change process in
the organization. Management at Scania believe in team work and team
work is involved in all the aspects of the organization as a central
mechanism. Scania Angers is using expectancy theory of Edward Chace
Tolman (1886 1961), by making the outcomes desirable for the
employees working in teams. The management is measuring the
performance of employees by the level of quality output which relates
the performance with the output which intern keep the employees
motivated, as we can see form the teamwork and the performance
equation at Scania Angers.
CLUSTER TEAM:
Clusters in Scania are described as the technical units of
productions made up of a team of 20 to 25 workers. These clusters
work as self directed teams and enjoy decentralized decision making.
According to Kenneth De Muse and David Futrell (1990) this type of
teams have low degree of differentiation from other work units, high
degree of co-ordination with other work units, high degree of technical
specialization. The creation of such teams in an organization with out a
formal hierarchy structure can have both threats and opportunities for
the performance of the organization.
MOTIVATION:
The performance of the cluster team is measured upon the quality
of output of the cluster, which in turn keeps the employees motivated.
Increasing number of volunteers for training in Scania also show the
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Ali Shan Hussain

Understanding Organizations

high motivation level in the employees. Also the reduction in staff


turnover indicates that the employees are motivated and are satisfied
with their working environment.
Team work has also produced multi skilled work force which has
proven very helpful in increasing the output of the organization. All
such factors are a result of team work further the employees develop
strong coordination with their co-workers which makes the work place
more relaxed and friendly for the workers thus reducing the
absenteeism.
CLUSTER TEAM CONFLICT:
The size of the cluster team is large and they are in competition
with the other cluster teams working in the organization, which will
produce an intense competition, which can lead to Inter-team Conflict.
As the cluster teams are decentralized and are self-directed such teams
can easily end up in a team conflict. Team conflict occurs when team
members argue over alternatives related to the team task (Ming Hui
Chen, 2006). Strong cohesive groups may develop a critical or even
hostile attitude towards people outside the group or members of the
other groups (Mullins, 2005), which definitely is a threat for Scania
Angers.
There are no official titles for the workers in the clusters due to
which issues like engineers not willing to work alongside technicians
are raised. Also there is employee confusion over hierarchical grade,
pay and status differential. Plus involvement in teamwork is not an
option for the employees they have to work as part of the team despite
the fact that French are not natural team players.
SPAN OF CONTROL:
There are 20 to 25 employees working in a cluster under a cluster
manager hence the managers have a broad span of control (David and
Andrzej, 2004). Scania is facing the opposition from the cluster
manager while adding new clusters to work, because cluster managers
feel adding new clusters to the work force will reduce their span of
control by reducing the cluster size. Such issues are the result of a
Broad Span of Control as the cluster managers develop a relationship
with their subordinates. The cluster managers are mostly French and
their subordinates are also French but the senior management is
Swedish. In such conditions making decentralized self directed clusters
of 20 to 25 will raise further issues in the future, which is a weakness
for Scania Angers.
CULTURE:
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Ali Shan Hussain

Understanding Organizations

Organizational Culture exists at two levels. The visible artifacts


on the surface include the observable behavior the ways people dress
up and act and the symbols, stories and ceremonies organizations
share. These visible elements reflect the deeper values that exist in the
minds of the people making up the organization. The attributes of
culture display themselves in many ways but typically evolve into a
patterned set of activities carried out through social interaction.
Values can be communicated in a number of ways speeches,
company publications, policy statements, and especially personal
actions. Top leaders are responsible for creating and sustaining a
culture that emphasizes the importance of ethical behavior for all
employees every day. When the CEO engages in unethical practices or
fails to take firm and decisive action in response to the unethical
practices of others. This attitude filters down through the organization.
Formal ethics codes and training programs are worthless if leaders do
not set and live up to high standards of ethical conduct. Therefore,
however the leader behaves or interacts with his subordinates, the
whole organization will gradually follow in the footsteps of that person.
Thus psychology of CEO has a deep impact on the culture of the
organization.
Culture is one of the most critical issues at Scania Angers. The
cultural characteristics of French people according to Geert Hofstede
(1928) should be taken into account before making any decision for the
organization. The managers should think first culturally and then
international, which will help them in future decision making. Following
are some of the strengths, opportunities and threats for Scania Angers:
According to the Geert Hofstede, French are ranked relatively
lower than Swedish on Power Distance Index. The Power Distance
Index depicts that French are more concerned with the hierarchical
structure of the organization, while Swedish are less concerned. Thats
why the organization has a flat structure with only four levels of
hierarchy. Employees are working in the form of large cluster teams,
which acts as a trigger for issues like engineers are not willing to work
alongside technicians. All these factors clearly show the domination of
Swedish culture over the French. According to the GLOBE Country
Rankings of (Javidan and House, 2001) French are ranked medium on
the Power-distance showing that the French are more concerned with
the power being equally shared. The management of Scania should take
this as a Threat for the organization and should have a proactive
approach to these cultural issues.
At uncertainty avoidance index French are ranked relatively lower
then the Swedish. This shows that the in Swedish Culture masculine
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Ali Shan Hussain

Understanding Organizations

values predominate and Swedish are less concerned with the welfare
and quality of life of others. The management of Scania shall take this
into account as a threat for the organization.
Also there are exclusively male workers in the organization,
which shows that there is gender discrimination. And according to
Geert Hofstede French culture is relatively lower on Masculinity
Femininity Index. Over the past the studies have shown that the gender
discrimination reduces the long term economic development. Gender
equality strengthens long-term economic development Jaumotte,
Florence (2005). Despite the fact that in France gender discrimination
is not considered as a serious concern (Ledwith and Manfredi, 2000).
The management should take this into account as a weakness for
Scania Angers.
Also French are ranked low on Humane Orientation (GLOBE
Country Rankings of Javidan and House, 2001), which means French
are not very fair, altruistic, generous, caring and kind to others and all
these qualities are essential to work in a team. The organization might
show high performance in the short run because the performance of the
employees is attached to the level of output but in the long run such
factors like Moderate power distance and low humane Orientation can
easily raise issues, which is a threat as well as a weakness for Scania
Angers.
STAKEHOLDERS:
Anyone who is concerned with the operations of an organization
and who is going to be affected by a change in the organization is the
stakeholder for the organization. A stakeholder can be an employee of
the organization or some one outside the organization like distributors,
suppliers, senior managers, shop floor personnel etc. After the
introduction of the change process there were positive effects on the
stake holder as the employees are motivated. The reducing minimised
number of distributor turnover depicts that the distributors are also
satisfied by the service of Scania. The development of new customer
indices shows that the organization is more focused to the customers.
Scania has developed new ways to keep in touch with their suppliers as
well.
CONCLUSIONS
The organization does not have to face many difficulties in
overcoming the defensive routines of employees because the change
strategies were introduced over a long period of time. Also the
employees were given special training programs to help them in
adopting the new system. There was some resistance shown by the
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Ali Shan Hussain

Understanding Organizations

employees of Scania against the change but they were overcome


because of the long period of change process and plus the imposition of
the change strategies e.g. choosing to work in teams or not was not an
option for the employees at Scania. Working in teams was a compulsion
for all the employees.
The employees working in the cluster teams should be given
formal titles, which will reduce the employee confusion over
hierarchical grade and status differentials, because there are people
with different skill levels and experiences working in the same cluster.
For example the engineers should be given a formal title as French
people are more inclined to value and recognition. This will build
employee recognition in the employees and will ease the conflicts like
engineers not working along side the technicians.
Also different employees should be paid according to their level of
skill and experience. This will act as a motivator for the employees to
work more efficiently and also it will provide job security to the
employees. As they know that their pay will increase with their
experience in the organization.
Further the management should introduce a frequent job
rotation, which will help to reduce issues like managers supporting
their subordinates. In Scania Angers employees are working in cluster
teams of 20 to 25 employees each. If there is no frequent job rotation
the employees working in one group develop strong ties with each
other, which act as a trigger for such issues.
The organization shall introduce quality audit. The quality audit
can be performed by an external or internal group of people. Quality
Circles are a good example of internal quality audit group. Quality
Circles are groups of shop floor employees from the same department,
who meet for a few hours each week to discuss ways of improving their
work environment (David and Andrzej, 2004). Third-party Auditor
Certification is an effective way of doing an external audit. Such quality
measures should be introduced to have check on the quality of the
production. Scania has a highly technical assembly line which should be
monitored regularly to avoid quality issues. The internal quality circle
can also be used to find out the cultural or other problems the
employees are having at the assembly plant.
As a whole the organization has shown rapid growth after the
implementation of change strategies. After the implementation of these
strategies the organization is in position to face the tough competition
in the market. These strategies have also increased customer
satisfaction. The number of employees volunteering for training and
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Ali Shan Hussain

Understanding Organizations

development opportunities is continuously increasing which shows the


high level of motivation in the staff to welcome the change. The
development of new strategies to stay in touch with the stakeholders
makes the organization more competitive. The significant increase in
the output of trucks per day also depicts the motivation of the
specialized labour and their involvement in the new optimal work
conditions.
If we examine the history of Scania, the organization has shown
rapid increase in the growth after 1994, which are after the
introduction of the change management strategies.
In 1996 Scania was listed on the stock exchange in Stockholm and New
York. In 1998 the change over to the new truck and bus generation, the
4-series, was completed. In 1999 Scania also launched a complete
range of Euro 3 low-emission engines for distributions, construction
and normal long-haulage operation. Eleven factories in five countries
were in 2000 involved in the manufacture of Scania number 1,000,000.
In 2000 the legendary power unit V8 was succeeded by an even more
impressive 16-litre V8. For a long-term development and reinforcement
of the companys bus business, it is during 2002 coordinated with the
truck business. In 2002 the 1,000,000th truck was handed over when
Scania Production Angers celebrated its 10th anniversary at the same
time as Scania France celebrated its 25 years in business (Scania
Website, 25 Oct 2006). All these achievements show that the
organizations performance is increasing very rapidly and the
management has been successful in introducing a transformational
change in the organization.

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Ali Shan Hussain

Understanding Organizations

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Ali Shan Hussain