Challanges That Face The Change Management Business Essay

Challanges That Face The Change Management Business Essay Change management is a structured and strategic approach to initiate and manage the change process in the organization structure and culture as well as the individuals/teams behaviour and attitude towards the change transition in the field of the business processes, technology implementation or any other policies of an enterprise. Change management is about modifying or transforming organizations in order to maintain or improve their effectiveness. Change Management Models: There are several change management models that the enterprises follow while undertaking the change management process depending upon the ground realities and the organizational culture of the enterprise seeking the change processes. One of such models popularly known is described by John Kotter, who has set out an eight-step strategy for change management. These are as below 1. To establish a sense of urgency among the people in the organization. 2. To create a guiding coalition which will steer the reformation with the correct focus and aim to achieve the desired outcome. 3. To develop a clear vision and plan the strategy accordingly. 4. To communicate the change in vision to the people of the organization in a clear fashion. 5. To empower employees towards taking broad-based action to benefit the organization. 6. To generate short-term wins which in a whole would give the organization a long term winning result. 7. To consolidate all the gains of different volumes and ultimately produce desired changes. 8. To anchor new approaches in the culture and operation process of the organization. The above described model is designed keeping in focus on specific activities that will impact results. The benefits of using this model include evaluating employee resistance, help employees transition through the process, create employee specific action plans, and develop a change management plan keeping all the employees of the organization in mind and involve them in the entire process. Case Study Details: The Change Leader: In May 1996, K.V. Kamath replaced Narayan Vaghul as CEO of Indias leading financial services company Industrial Credit and Investment Corporation of India (ICICI). Immediately after taking charge, Kamath felt and understood that the organization needs to go through a change to shift its focus from just being a bank to create a difference and stand tall and different from all other competitors to create a brand name in the economic structure of India as well in entire south east Asia and introduced massive changes in the organizational structure and the emphasis of the organization changed ICIC from just a development bank mode to that of a market-driven financial conglomerate. The changes also brought in a lot of confusion among the employees, with media reports frequently carrying quotes from disgruntled ICICI employees. According to analysts, a large section of employees began feeling alienated. The discontentment among employees further increased, when Kamath formed specialist groups within ICICI like the structured projects and infrastructure group. Doubts were soon raised regarding whether Kamath had gone too fast too soon, and more importantly, whether he would be able to steer the employees and the organization through the changes he had initiated. Background: ICICI was established by the Government of India in 1955 as a public limited company to promote industrial development in India. The major institutional shareholders were the Unit Trust of India (UTI), the Life Insurance Corporation of India (LIC) and the General Insurance Corporation of India (GIC) and its subsidiaries. The equity of the corporation was supplemented by borrowings from the Government of India, the World Bank, the Development Loan Fund (now merged with the Agency for International Development), Kreditanstalt fur Wiederaufbau (an agency of the Government of Germany), the UK government and the Industrial Development Bank of India (IDBI). The basic objectives of the ICICI were to à ¢Ã¢â€š ¬Ã‚ ¢ Assist in creation, expansion and modernization of enterprises à ¢Ã¢â€š ¬Ã‚ ¢ Encourage and promote the participation of private capital, both internal and external à ¢Ã¢â€š ¬Ã‚ ¢ Take up the ownership of industrial investment; and à ¢Ã¢â€š ¬Ã‚ ¢ Expand the investment markets. In 1992 ICICI tied up with J P Morgan of the US to form an investment banking company, ICICI Securities Limited. In line with its vision of becoming a universal bank, ICICI restructured its business based on the recommendations of consultants McKinsey Co in 1998. In the late 1990s, ICICI concentrated on building up its retail business through acquisitions and mergers. It took over ITC Classic, Anagram Finance and merged the Shipping Credit Investment Corporation of India (SCICI) with itself. ICICI also entered the insurance business with Prudential plc of UK. ICICI was reported to be one of the few Indian companies known for its quick responsiveness to the changing circumstances. While its development bank counterpart IDBI was reportedly not doing very well in late 2001, ICICI had major plans of expanding on the anvil. This was expected to bring with it further challenges as well as potential change management issues. However, the organization did not seem to much perturbed by this, considering that it had successfully managed to handle the employee unrest following Kamaths appointment. Change Challenges Part I ICICI was a part of the club of 3 developmental finance institutions named ICICI, IDBI and IFCI, who were the sole providers of long-term funds to the Indian industry. When the requirement used to be large in volume, all three used to organize and raise the money for required funding and investment. However, the deregulation beginning in the early 1990s, allowed Indian corporate to raise long-term funds abroad, putting an end to the DFI monopoly. The government also stopped giving DFIs subsidized funds. Eventually in 1997, the practice of consortium lending by DFIs was phased out. It was amidst this newfound independent status that Kamath, who had been away from ICICI for eight years working abroad2, returned to the helm. At this point of time, ICICI had limited expertise, with its key activity being the disbursement of eight-year loans to big clients like Reliance Industries and Telco through its nine zonal offices. The change program was initiated within the organization, the first move being the creation of the Infrastructure Group (IIG), Oil Gas Group (OG), Planning and Treasury Department (PTD) and the Structured Products Group (SPG), as the lending practices were quite different for all of these different segment of industries. Kamath picked up people from various departments, who he was told were good, for these groups. The approach towards creating these new skill sets, however, led to one unintended consequence. As these new groups took on the key tasks, a majority of the work, along with a lot of good talent, shifted to the corporate center. While the zonal offices continued to do the same work disbursing loans to corporates in the same region their importance within the organization seemed to have diminished. An ex-employee remarked, The way to get noticed inside ICICI after 1996 has been to attach yourself to people who were heading these (IIG, PTD, SPG, OG) departments. These groups were seen as the thrust areas and if you worked in the zones it was difficult to be noticed. Refuting this, Kamath remarked, This may be said by people who did not make it and there will always be such people. Some of the people who did not fit in this set-up were quick to leave the organization. However, this was just the beginning of change-resistance at ICICI. In the major client group, a staff of about 30-40 people handled the needs of the top 100 customers of ICICI. On the other hand, about 60 people manned the growth client group, which looked after the needs of mid-size companies. Obviously, the bigger clients required more diverse kinds of services. So working in MCG offered better exposure and bigger orders. The net effect was that the MCG executive ended up doing more business than the GCG executive. A middle-level manager at ICICI commented, The bosses may call it handling growth clients but the GCG manager is actually chasing non-performing assets (NPA)4 and Board of Industrial and Financial Restructuring (BIFR)5 cases. Kamath was quick to deny this allegation as well, Just because somebody is within the MCG does not guarantee him success. And these assignments are not permanent. Todays MCG man could easily by tomorrows GCG person and vice-versa. Complaints against these changes put in continued and ICICI was blamed for not putting in adequate systems in place to develop the right people. The manner, which ICICI recognized an individuals efforts the feedback process was also questioned. A manager remarked, Last year the bonuses varied from Rs 30,000 to Rs 250,000 depending on the performance. In many cases the appraisal scores were same but the bonus amount was not. And we were not told why. While Kamaths comments in the media seemed to dismiss many of the employee complaints, ICICI was in fact, putting in place a host of measures to check this unrest. One of the first initiatives was regarding imparting new skills to existing employees. Training programmes and seminars were conducted for around 257 officers by external agencies, covering different areas. In addition, in-house training programmes were conducted in Pune and Mumbai. During 1995-96, around 35 officers were nominated for overseas training programmes organized by universities in the US and Europe. ICICI also introduced a two-year Graduates Management Training Programme (GMTP) for officers in the Junior Management grades. Along with the training to the employees, management also took steps to set right the reward system. To avoid the negative impact of profit center approach, wherein pressure to show profits might affect standards of integrity within an organization, management ensured that rewards were related to group performance and not individual performances. To reward individual star performers, the method of selecting a star performer was made transparent. This made it clear, that there would be closer relationship between performance and reward. However, it was reported that pressure on accountability triggered off some levels of anxiety within ICICI which resulted in a lot of stress in human relationships. By 2000, ICICI had emerged as the second largest financial institution in India with assets worth Rs 582 billion. The company had eight subsidiaries providing various financial services and was present in almost all the areas of financial services: medium and long term lending, investment and commercial banking, venture capital financing, consultancy and advisory services, debenture trusteeship and custodial services. Change Challenges Part II ICICI had to face change resistance once again in December 2000, when ICICI Bank was merged with Bank of Madura (BOM). Though ICICI Bank was nearly three times the size of BOM, its staff strength was only 1,400 as against BOMs 2,500. Half of BOMs personnel were clerks and around 350 were subordinate staff. There were large differences in profiles, grades, designations and salaries of personnel in the two entities. It was also reported that there was uneasiness among the staff of BOM as they felt that ICICI would push up the productivity per employee, to match the levels of ICICI7. BOM employees feared that their positions would come in for a closer scrutiny. They were not sure whether the rural branches would continue or not as ICICIs business was largely urban-oriented. The apprehensions of the BOM employees seemed to be justified as the working culture at ICICI and BOM were quite different and the emphasis of the respective management was also different. TABLE I POST-MERGER EMPLOYEE BEHAVIORAL PATTERN PERIOD EMPLOYEE BEHAVIOR Day 1 Denial, fear, no improvement After a month Sadness, slight improvement After a Year Acceptance, significant improvement After 2 Years Relief, liking, enjoyment, business development activities Based on the above findings, ICICI established systems to take care of the employee resistance with action rather than words. The fear of the unknown was tackled with adept communication and the fear of inability to function was addressed by adequate training. The company also formulated a HR blue print to ensure smooth integration of the human resources. (Refer Table II). TABLE II MANAGING HR DURING THE ICICI-BOM MERGER THE HR BLUEPRINT AREAS OF HR INTEGRATION FOCUSSED ON à ¢Ã¢â€š ¬Ã‚ ¢ A data base of the entire HR structure à ¢Ã¢â€š ¬Ã‚ ¢ Road map of career à ¢Ã¢â€š ¬Ã‚ ¢ Determining the blue print of HR moves à ¢Ã¢â€š ¬Ã‚ ¢ Communication of milestones à ¢Ã¢â€š ¬Ã‚ ¢ IT Integration People Integration -Business Integration. à ¢Ã¢â€š ¬Ã‚ ¢ Employee communication à ¢Ã¢â€š ¬Ã‚ ¢ Cultural integration à ¢Ã¢â€š ¬Ã‚ ¢ Organization structuring à ¢Ã¢â€š ¬Ã‚ ¢ Recruitment Compensation à ¢Ã¢â€š ¬Ã‚ ¢ Performance management à ¢Ã¢â€š ¬Ã‚ ¢ Training à ¢Ã¢â€š ¬Ã‚ ¢ Employee relations ICICI transferred around 450 BOM employees to ICICI Bank, while 300 ICICI employees were shifted to BOM branches. Promotion schemes for BOM employees were initiated and around 800 BOM officers were found to be eligible for the promotions. By the end of the year, ICICI seemed to have successfully handled the HR aspects of the BOM merger. Learnings From the Case Study: 1. Change Identification Awareness of necessity for organizational renewal created in the life cycle of company to preserve local competitive market and being capable to take global market in future. 2. Goal Setting Positive consequences of change process were listed to make better sense about changes. This list components including: a) Better quality of services to client b) Achieve much more income c) Go ahead of rivals d) Prepare and set modern standards in the banking and investing industry e) Better management for referred projects 3. Current State Evaluation In the ICICI there are some potentialities such as skills, knowledge, financial resources and human resources which are elements to support change process, but these were not utilized with management methods. In addition, considering capability of company and its target it was needed to engage some new specialties and also there was not any procedure for communication between employees. 4. Implementation In a change process, the most important points to start up are those which have maximum problems, so in order to solve these problems some improvement projects were defined as below: a) Promotion of human resources Prepare and modify organization structure to modern matrix structure instead of hierarchy structure. Execute evaluation systems based on 360 degree evaluation. Employing centralized experts instead of outsourcing. b) Improving coordination procedures by management information systems. In the Current State Evaluation stage it was recognized that the most problematic thing is method of communication between different departments, so responsibility matrix and information flow diagram prepared for design and build units. After that, by utilizing information systems to integrate activities in each unit, employees could simply share their needs or basic data and also managers could extract reports from reliable and integrated system. c) Managing projects by using project management standards and finally implementing enterprise project management. First of all project charter was created for each project, then responsibilities matrix applied, after it scheduling and checklists prepared for both phases design and construction. This led to control quality by filling out the checklists and clarify inspection points through every process. According to defined information systems, all of the members of project team could use their own required information by online accessible project charter. Finally project book as a document which has characteristic of lessons learned prepared for projects. 5. Oppose to Halted Factors The common problem which occurres during the implementing change process is resistance, so for an organization which wants to prevent problems it is extensively important to response to employees (internal customer). In order to oppose to negative factors and reduce resistance, below activities performed: a) Interior design with suitable work environment ergonomics b) Training self management, appropriate communications and teamwork to employees which lead to increase professional capability of personnel c) Arranging coordination meetings and clarify management strategies to middle managers and also to employees d) Encouraging employees to cooperate in improvement projects e) Exactly making known for employees the whole processes in the field of their own 6. Continues Improvement and Control 6. Continues Improvement and Control By the above study we know the actual performance of the change management process and what the process is capable of doing if it is operated according to established procedures. A system measurement of the performance is actually needed during the all steps of implementation change management in order to being capable to compare achievements and the objectives. This helps leadership to manage change process with systematic well-timed feedbacks. Although the feedbacks might be positive or negative but in the negative cases some efforts will be used to understand what the mistake is. For instance in ICICI there were some evaluation forms which was must to be filled out by clients to modify or complete execution experiments and all of that will be used to improve processes of the project execution team Conclusion: The above study provides us with the conclusion that the actual performance of the change management process and what the process is capable of doing, if it is operated according to established procedures. A system measurement of the performance is actually needed during the all steps of implementation change management in order to being capable to compare achievements and the objectives. This helps leadership to manage change process with systematic well-timed feedbacks. Although the feedbacks might be positive or negative but in the negative cases some efforts will be used to understand what the mistake is. For instance in the ICICI there are some evaluation forms which must fill out by clients to modify or complete execution experiments and all of that will be used to improve processes of the project execution team. The purpose of this paper is to develop a method that will help companies recognize weak points in their change management process and improve it, to measure quantity of success in the change management process, a procedure which was defined in ICICI. ICICI had the well laid planning in effect. They first involved them in leading to predetermined quality and time, including client satisfaction, improving standards and diversifying in business requirements. The last criterias were employees satisfaction and cost reduction. With applying this procedure it helped them to recognize that how much of the objectives were achieved by implementing change management, so a questionnaire had been prepared to evaluate the results of implementing change management. Questions: The below listed questions refer to all phases of the change management process and require answers that are required to be answered for assessment. 1. Client Satisfaction. 2. Employees Satisfaction. 3. Improving Working Standards. 4. Information Systems. 5. Cost Reduction