ETGS

Strategic Change Management

Prof. XXX
A.B.C 2/15/2011

Total number of words 4,600 excluding Cover page, Table of contents, conclusion and bibliography.

Table of Contents Particulars..Page Number Introduction4 Task 1 a Kubler Rosses 5 steps of transition cycle..4 ADKAR Model...6 The Burke Letwin Model...7 Task 1 b Kurt Lewins Model......8 Task 1 c Strategic HR intervention.9 Task 2 a Economic Downturn10 Increasing Competition10 Task 2 b Human Resources..11 Physical Resources11 Financial Resources..12 Task 3 a (Stake holders) Employees.12 Share holders.12

Customers.12 Environment.12 Task 3 b Advantages and Disadvantages........13 Task 3 c Strategic Marketing Management..14 Task 3 d Force field analysis.16 Task 4 a McKinseys 7S Model16 Task 4 b BPR18 Goal based evaluation.......18 Conclusion.19 Bibliography......19

British Airways Merges with Iberia Introduction British Airways (BA) is among the top five passenger carriers in the world. The Headquarter is based at Heathrow, London. They earn 4-star ranking for the product and services. The journey for British Airways has not been so smooth in the past(Sky Trax, 2011). BA its most difficult time during 1970s especially when British Overseas Airways and British European Airways merged in 1974. The problem was caused due to major cultural issues among the European employees and British employees. This led to poor customer service, with a huge impact on operations. (Emerge Education, 2011) Even in March 2010 with restrictive workers from United Union where pays were restricted, cabin crews were restricted and free travel benefits were taken off. Pre-tax losses were reported for 531million. 19Aircrafts were grounded in December2009 which reduced their capacity by 5%. Still this just reduced their losses by 22million a year with losses of 1million a day in operations (Taylor, 2009). The only solution which British Airways found was its merger with Spanish airlines Iberia on 9th April 2010 to create one of the worlds biggest airlines. This merger was provisionally agreed in November 2009 and was signed in 2010. BA says the merger would benefit shareholder, employees and the customers. It would save 350million (400million-euros) a year for BA. It will be called International Airlines Group(Travel Daily News, 2010). Task1a Kubler Ross 5stages of transaction cycle:

(Grant, 2002)

This model was initially developed to help patients who were dying cope with death and bereavement, it also provided insight and guidelines with the actual trauma and change and helped others to adjust emotionally(Busines balls, 2011). A change is set in an order for understanding and identifying the exact competencies for managing them efficiently. As per the book The Guru Guide 50-70% of corporate changes in 1980s and 1990s failed in achieving their objective. As per the survey in the mid of 1990s; 2/3rd of restructuring efforts in corporate environment failed, and the satisfaction among employees was low, with lack of trust among employees (Grant, 2002). Denial: Denial may be a conscious or an unconscious act of refusing to accept fact, information or truth in relation to the concerned situation. Some people just refuse to accept the change as they feel that they may be overlooked in the change process. Anger: People can express their anger in different ways. Some may be angry with themselves and some may be angry on others. It is the next step after denial. Anyone who may be in the way could be blamed. Most of the time management, colleagues or shareholders are blamed. Major part of the anger is towards the ones who are not affected. Bargaining: Once the anger subsides next stage is a big round of bargaining, to find a way to avoid incorrect things. In an organisation bargaining may be to do work with less salary, to be transferred in a different department or be demoted. Mostly bargaining goes in vain. False hope should not be offered while bargaining. Alternative practical things can be offered. (Changing minds, 2011) Depression: With initial denial, anger and bargaining eventually a person has to accept the change. The unacceptable change leads them into depression. A person can just see the end and ignore the solutions. People need support from the company. They need to be kept moving, with professional coaching and counselling. (changing minds, 2011) Acceptance: In this stage the individual agrees involve himself in the change process and moves to the next level. People eventually seem to be happier as they adjust with the change and move forward. (changing minds, 2011) Extended grief cycle

(Changing minds, 2011) To gain advantage from the change it has to be looked at as a challenge, mistakes should not be repeated in the future. Commitment has to be built with the help of goals. It should build self confidence among employees. The change should be optimistic way and should be communicated in an effective and an efficient way. (Grant, 2002) ADKAR Model Adkar model provides a framework which helps to understand change at an individual level. Five elements should be together for a change to take place successfully.

(Hiatt, 2006)

Awareness: It shows individuals understanding towards understanding the change and what the risk may be if they dont change. It should have information about internal and external factors due to which a change has to be made. Desire: It is the willingness of an individual to involve in a change. Desire is a willingness of an individual to be involved in a change, it also depends upon the persons personal situations. Knowledge: It shows the information, training and education crucial for the change. It also represents information with regards to behaviour, process, tools, systems, skills, work profile and technique essential for implementing the change. Ability: It shows realisation or beginning of the change. It is also known as converting knowledge to action. The ability should be demonstrated for the change to be implemented. Reinforcement: After the change has occurred it should be reinforced for the change to be in place. It is a mechanism for the change to be in place. A change can be reinforced by recognition, reward, incentives and success. ADKAR model provides answer for why some changes fail and some succeed. It has been proved that the major reason is inadequate training or improper communication. (Hiatt, 2006) The Burke Litwin Model of Organisational Performance This model classifies social-behavioural factors which influence companies performance. The factors in this model are organised as casual relationships and there is hierarchical relationship between different factors. This model is not a manual of how a change should be implemented, but it links different factors casually. It focuses on the ripple effect among different factors. Proper use of the model helps to understand the importance of the change. It is a dynamic model the values are constantly refigured. The change mostly occurs in one or more variables; the variables in an organisation may be leadership, mission and strategy. The elements can be transactional and transformational and both are crucial for managing a change. This model shows difference between variables the once influenced by the climate and the once influenced by the culture. The other set emphasises on the concerned with the process of organisational

transformation which are the changes in the behaviour like the values. These demand for a strong change in the culture of the company. (Carr, Hard, & Trahant, 1996)

(Smet, 1998) The above diagram shows how the different factors and variables in the organisation are related and how do they contribute in organisational performance. Task1b. The driving factors for BA towards change were financial pressure, economics, transition of a new CEO and the need to be competitive. And the reasons for change were changes in customer expectations, increasing competition in airlines industry, the merger of British Overseas Airways and British European Airways and increasing employee expenditure.

Kurt Lewins Change management model This model focuses on the factors that influence them to change. According to him the three steps required for amending a change successfully are Unfreeze, Change and Refreeze. This theory has also been criticised for being too basic. Most of the things have been changed after the introduction of this theory since1947. Still this theory is very much relevant. Most of the recent changes are based on this model. Unfreeze: This stage gives us an understanding of the dynamic world. It is about getting prepared for the change. It shows the importance of the change. The necessity of the change determines the urgency. Unfreezing is motivating others and our own self for the change. Change: This is the transitional phase of the change. Kurt Lewin was aware that change is a continuous process not an event. Its a movement inside the company where the reactions occur. The reaction may be from the employees or from the management. It generally occurs when the required changes are needed. People should be made to unfreeze and moved in the required direction. This is the most difficult stage and the employees are afraid and unsure about the change process. This is a difficult time for people as they try to understand the changes, they need time to someone to be along with them to understand the change. Support and guidance is crucial at this stage and it can be provided by training, coaching and accepting the mistakes as a part of the change process. Role models can be used so that employees can find their own solutions. A clear picture should constantly be communicated to employees, so that they know in which direction are they moving. Refreeze: This stage is about achieving stability after the changes have been made. In this stage are accepted and it becomes a routine. Employees build new relationships and it becomes a part of their usual business. Now-a-days changes occur really quick, the next change in an organisation could be in a matter of weeks or months. So the refreezing process may not be accepted, the change process may be chaotic and higher level of flexibility is demanded. (change management coach, 2011)

Task1c Strategic intervention holds a huge value to a company especially during the process of change. HR intervention can be in the area of policy formulation and personnel manuals which provide guiding lines to the employees so that course of action can be decided. Here the policies are mentioned in a simple way. Manual can be a book which holds information about the companies objectives, different authorities and responsibilities. It also clarifies procedures to be followed. HR intervention also deals with training programmes so that improvements can be made in longterm. HR team makes sure that training programmes are conducted effectively. Performance appraisal is conducted in a timely manner for judging the ability of employees with regards to their role in an organisation. It helps in determining increase in wages, transfers and promotions, identifying best performer and requirement of training and development need. (HR Connsultation Services, 2011) Task2a The Generic background to change with BA is the economic downturn and the increasing competition in the airlines industry. Economic Downturn: The current time has been against airlines industry. The entire industry is facing worst time ever and it is very unlikely for the changes to change shortly. Different marketing strategies are being adopted by airlines around the world. Airlines are bringing their fairs down. In the following years the situations would be even more difficult as the fuel prices are raising steadily. (Brentster, 2011) Back in 2008 the CEO of BA even said that the fares would increase by 4% as the airlines would be spending 1billion extra on fuel. Willie Welsh the CEO also said that the rise in ticket price was inevitable as the cost for fuel would exceed 3billion. Martin Broughton the chairman, informed shareholders in an annual meeting that higher cost and economic downturn meant that it would be an achievement if BA broke even in current financial year. He informed BA and its peers were up to our necks in the biggest crisis the aviation industry has ever known. BA also is planning to reduce its capacity by 5%. Mr.

Walsh BA would slow their recruitments or even stop them for a while. Previous year BA had hired 3,000 new employees. (Stiff & Costello, 2008) Increasing competition: Airlines industry as always faced huge competition and it is increasing at a steady rate in the recent years. New airlines are constantly reducing their cost to attract more flyers. The competition depends upon the route, the most popular route where BA flies is London Heathrow to New York JFK and the competitors on this route are Virgin Atlantic, American Airline and Delta Airlines. Today BAs major competitor is Ryanair International

carrier established in 1985 in Dublin with just 57employees with primary route from east Ireland to London Gatwick airport. And now it is one of the largest low cost airlines in Europe. As the goodwill and the capital with Ryanair was increased the number of passengers also increased the following graph shows the increasing number of passengers from 2006 to 2009.

(Fliiby, 2011)

Task2b The resource implications for change may be Human Resources, Physical Resources and Financial Resources. Implications of Human resources for change would require restructuring the system, interviewing new recruits and hiring new people in the process of change.

Redundancies should be avoided and proper training programme should be conducted. Implications in terms of physical resources may require purchase of brand new equipments and tools required for operations, new vehicles and buildings as well. The most important heavy financial resources would be required to cover the cost of recruitment and training of the new employees. Redundancy cost is involves and if the firm requires relocation finance is required for the transportation and setting up new infrastructure. If the business requires the existing system to change cost is involved in refurbishing the building. Human Resources: With BA back in 1981 staff number was reduced from 52,000 to 43,000 which was a decrease. In 1982 another 7,000 staff members were laid off and the number of staff was left with approximately 35,000. (Emerge Education, 2011) Even recently BA has cut 1,200 jobs so by March 2010 they reduced the employees by the total of 4,900. BA has been bearing losses of 29million by the end of September 2009. (BBC, 2009) If BA fails to respond to this change it may not be able to reduce its losses. Physical Resources: BA is already working really hard to reduce its cost on fuel. Recently they have also grounded some of their inefficient carriers. If BA would still continue to use their old carriers, it would huge expenses in terms of fuel cost and maintenance. It will be difficult for BA to compete against other airlines. Financial Resources: BA has reported pre-tax losses of 164million between April-June2010 where it was 148million in the same period 2009. The losses in 2010 were due to employees strike. The entire impact in the quarter was 250million. Even the ash cloud from ice-land in April was a major reason for losses were the airspace had to be closed for six-days. However the major cause for the loss was when BA cabin crew the members of United Union went for the strike for 22days. Fifteen days of strike in May and June was worth 142million and rest of seven days the losses were worth 6 and 7million per-day. So the overall cost of the strike was around 184million to 191million. (BBC, 2010)

Task3a Key stake holders can be defined as a stakeholder (either individual or organisation) that has power to kill the project. (circle & Bourne, 2001) The key stakeholders with BA are the shareholders, customers, employees and the environment. Employees: Employees are one of the key stake holders for BA as service is the major part of their business and they have a huge influence on the service being provided. When the strike was announced at BA on 14th December 2009 by United Union members against the pension scheme, it affected a million BA passengers. The strike was called when BA was already on the course of loosing 600million and it was due to pension deficit of 3.7bn one of the largest in private sectors. Strike of 12,500 Cabin crew impacted 910,000 passengers where the losses were around 300million. This shows that the employees have a huge influence on the working of the company and BA needs to involve the employees and the union and consult them about the future changes. (Gurdian, 2009) Employees can be kept involved in the change process by providing them with all relevant information about the merger. They should be informed about the importance of the change and how will it help them. They should be adequately trained for their future roles. Shareholders: The merger has received an overwhelming response from shareholders in Britain and Spain. In a meeting in London on 29th November 2010 the merger deal was backed-up by 99% shareholders. BAs shareholders will hold 56% of the shares for International Airlines Group where as Iberias shareholders will receive 44%. (Moore, 2010) The shareholders have to be kept informed about the financial structure of the company. They should be involved in the decision making for the change. They should be supplied with all the necessary documents involved in the change. Customers: Customer satisfaction is a major factor for success for any airlines and with BA health and wellbeing is considered very important. Customer opinion towards the change process is considered crucial for future development. The surveys are monitored through global performance monitor so that the future change can be made effective. (British Airways, 2011)

For the merger customers need to be continuously informed about how will the change effect them, what will be the ticket rates, the service improvements and the changes in the routes and destinations. They need to be convinced that the merger would benefit them to suit their needs. Environment: BA is a leader with regards to CO2 emission with carbon per-capita of 367.7t. They have saved 28,055tonns of fuel in 2009 which remarkable and exceeds all other estimates. As per the published data BA meets the standards of being the leader in airlines industry. BA has also shown keen interest in the fuel the use while using Auxiliary Power Units which are small jet engines located at the end of the airplane and provide power for ground operations. (EcoDesk Beta, 2011) In the process of merger it is necessary for both the airlines to consider the environment to meet the government regulations. Environmental factors for either of the countries should be taken into consideration so that the change should go smoothly. Task3b Advantages Stakeholder analysis gives a better understanding of the behaviour of stakeholders behaviour, so that they can be managed in a better way. Stakeholder analysis helps in better strategic decision making for future. It helps in building relationship with stakeholders. Analysis helps to prioritise stakeholders.

Disadvantages The analysis has to be done at regular intervals as the situations are dynamic. The analysis could be subjective at times as the management has access to the position of each stakeholder. Most f the times the actual cooperation with stakeholders is missing.

It is not possible to satisfy all the demands of the stakeholders. (12 Manage, 2011) Task3c For developing the change management strategy in consideration to the key stakeholders should involve all of them in a proper way in the change process.

Like all firms BA has a stake in how the stakeholders behave. BA operating environment includes relationship with their stake holders as a part of their management. Proper stakeholder management holds a lot of value for BA. The reason for stakeholder management is to achieve market success. Stakeholder management assures profit, revenue and gives returns to stakeholders. Consideration of stakeholders in decision making helps to avoid dissatisfaction of stakeholders towards the company. (12 Manage, 2011) For involving stakeholders in the strategy of change management we can use six step stakeholders circle. Stakeholders can be internal, external, social and environmental. The six

steps are applicable to five project phases; identification, programming, appraisal, implementation and to facilitate management. Identification phase: It is done when the project is conceived in the project identification phase. It includes studies which are pre-feasible which may be utilised for identifying, investigating, selecting or prioritising an idea. This idea may later be used for considering cost, benefits, environmental or stakeholders parameters. Social and ethical issues can be brought forward for the consideration. The knowledge gained in the identification phase can be used forecast and manage their behaviours and activities. (Chinyio, 2010) Prioritising: As per the identification, stakeholders can be prioritised as per their influence on the organisation. Programming phase: This phase gives the guiding lines and principles which should be followed whole running the project. Internal stakeholders can be managed through procurement method. Procurement method shows the limits between participating companies and shows how risk and responsibilities can be allocated. This tool is designed to manage project activities and the stakeholders. It helps to identify potential conflicts which may arise among internal and external stakeholders. (Chinyio, 2010) Appraisal phase: In this phase projects key factors are assessed. The factors may be regarding finance, implementation and quality. This is also known as make-or-break point which decides if the project is viable or not. Shareholders could determine if they could get adequate returns or not. External stakeholders reaction can be measured and the final decision of continuing or abandoning the project may be taken. (Chinyio, 2010) Implementation phase: Different professionals in supply-chain are brought together. In this phase the actual work of designing the company, managing organisation, contracting companies, financial institutions and others come together. It was seen that high end of scale, client or their representatives provide major inputs and influence to determine the work relationship. (Chinyio, 2010)

Monitoring changes: After the changes have been implemented they have to be monitored to check if the changes are effective enough or not. Monitoring is the most important phase of the change. Task3d Resistance does occur in an organisation during a change, it is considered as a process of change. Resistance may be from different areas. It may be an individual resistance or from a group of employees. It can be passive or even active, direct or indirect. The resistance may be seen in the behaviour of the employees or in their attitude. Resistance can be major or even minor change, it depends upon the nature of change. (EThames Graduate School, 2010) Force Field analysis approach is one good way of managing resistance to change. It is based on the concept of driving forces and restraining forces. As per this approach reducing the resisting force is preferred as increase in driving force may result in increase in restraining force.

(EThames Graduate School, 2010)

My strategy to managing change with BA and Iberia would be to communicate the reason for change to all the stakeholders of the company so they would be aware of the change in advance and immediate news will not shock them. A clear vision should be communicated to them as the company is already making huge losses and the merger would make BA one of the biggest airlines in the world. If BA would continue to work in the same way it would be difficult to survive for even 10years. Stakeholders should be involved in the process of change so that they would know and understand the process of change. Their involvement would include their keen interest in the process of change. Employees would prefer to be a part of change rather than being spectator. There should be someone to listen to them their input and feedback should be appreciated as it may prove to be valuable. Support should be taken from all the key power players as they would provide important insights about their departments. Task4a For the merger of British Airways and Iberia McKinseys 7S model would be appropriate as it provides emphasis on 7of the crucial factors of an organisation during the process of change. McKinseys 7S model is generally not considered as pure strategic model, however it is thought about remodelling an organisation. It is named from its 7factors which McKinsey discovered for the development of an organisation i.e. strategy, skills, shared values, structure, staff and style. Generally when a firm moves to change its organisation the 7S are to be followed in the sequence. The strategy should be determined first and the following step defines in which area is organisation good in where the strategy can be used. Finally it is to be decided which changes are required in 5other factors so that the change can be effective. Strategy: It shows which area should be focused and what actions can be taken to achieve a good competitive edge. Strategy shows where should the firm compete and how. Structure: It shows how different sections in an organisation relate to each other i.e. centralised, functional division, matrix, network, holding, etc.

(Value Based Management, 2011) System: It is the daily process of the company; it involves employees for identifying crucial issues to get things done. System has big influence on what actually is done in a firm. It is considered as a powerful tool for changing a firm. Staff: It deals with what kind of employees is required by the organisation. It is not a question of a single person as of total know-how possessed by the employees in an organisation. Style: Style has 2elemants personal style and symbolic actions. So management is not about personal style; however it is about what people do in a firm. Style is about how people use their personal skills. Skills: These are the distinct capabilities of an individual or a company as a whole. Shared values: Values provide as a guiding line for the organisation. These are things which everyone is aware of and is very important for an organisation to survive and succeed. (Karlf, 1993) Task4b Business Process Re-engineering is a powerful tool which helps an organisation in most of difficult situations. It has created interest in organisational circles. This tool is designed

specifically to help in situations where huge improvements are required which cannot be brought about with the existing structure of the process being used currently. BPR does not replace continuous improvement. Once the business has been reengineered, it requires techniques of continuous improvement. This process is applied so that decay can be avoided (Robson & Ullah, 1996). Five step approaches to BPR would be: Developing business and process objectives: Vision drives BPR and is implied on specific business issues like reducing cost, reducing time, improving quality. Identifying business to be redesigned: Many companies use high-impact approach which prioritises important processes or the once which come across companies vision. Some companies also use exhaustive approach which checks all the processes in a company and depending upon the urgency they are prioritised. Measuring: For avoiding old-mistakes to be repeated it is important to understand and measure the existing process. It gives a baseline for improvements in the future. IT levers: BPR is influenced by IT capabilities. Prototypes of new process: Design is not the end of BPR process, but it is a prototype with iterations. (12 Manage, 2011) Goal-based evaluation Inappropriate attention on goal-based model caused difficulties for decision making in an organisation, so that the decisions makers find it difficult to guide the organisation through social and political environment. These evaluation of performance may show that the organisation is performing effectively while, at the same time it may under attack from many quarters of performing ineffectively. The decision makers who are trying t resolve the issue would use the evaluated information to fix the deficiencies in performance. Changes in the preference of managers are shown in goal-based evaluation (Zammuto, 1982).

Conclusion The report shows how different models and theories can help in the process of change in an organisation. I learnt that every theory gas a unique nature, where some points could really help a company to make changes easily in a particular situation. I was able to understand the factors which are important to drive a change. It shows that HR intervention can make a huge difference in the working of an organisation. Implications of human, physical and financial resources have been clarified. Importance of stakeholders and stakeholder analysis to the firm is shown. It also shows how resistance to change can be managed with few easy and effective steps. Bibliography
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