Every organization makes minor structural adjustments in reaction to changes in its direct action and indirect action environments. A sales form is revised to eliminate customer confusion. Or, the human resources department may create a training program on OSHA-mandated safety programs. What distinguishes planned change from these routine changes is its scope and magnitude. Planned change aims to prepare the entire organization, or a major part of it, to adapt to significant changes in the organization’s goals and direction. A detailed definition of planned change is ‘the deliberate design and implementation of a structural innovation a new policy or goal or a change in operating philosophy climate or style.
Change programs are necessary today precisely because of the shift in time and relationships that we have seen throughout the organizational world. The sophistication of information processing technology, together with the increase in the globalization of organizations, means that managers are bombarded with more new ideas new products, new challenges than ever before. To handle such an increase in information accompanied by a decrease in the decision making time managers can afford to take, managers must improve their ability to manage change. Many large organizations have explicit change management programs to increase the ability of people throughout the organization to anticipate and learn from the changes that are occurring.
Some of the largest, most successful and most venerable firms are victims of their own success. Over the years they have built up highly stable, bureaucratic, and tall organizational structures that are very efficient at achieving certain goals in a given environment. Decision making though is methodical even sluggish and new ideas and opportunities for competitive advantages tend it get strangled by red tape. Many organizations are experimenting with flatter organizational structures that encourage teamwork and faster communication. The idea is that these leaner organizations will be more flexible, creative and innovative in reacting to environmental changes of every type. At AT&T business unit managers are encouraged to adopt these approaches.
Recession and new European business opportunities have prompted Asean Brown Boveri (ABB) the Swedish Swiss electrical engineering company, to reorganize. In the first big shake up since the merger that created the company in 1988, ABB underwent a major restructuring effort. While the goal is to maintain the matrix structure, the company’s executive committee was reduced by a third. According to CEO Percy Barnevik, this slimmed down executive committee clarifies responsibility and expedites transnational decision making. The purpose of the reorganization is to facilitate integrated system thinking, encourage teamwork by eliminating order lines and thus concentrate more effectively on the needs of customers and markets. However, with one reinforced product segments and new regional structure the idea will be to become more effective in dealing with the challenges of the 1990s. The new organization will strengthen the operating advantages of the matrix and enable them to react even faster to market developments.
Cooking up Change at Campbell Soup:
When David Johnson took over as CEO of Campbell Soup, simple restructuring wasn’t enough. By the time he arrived crisis has set in. Crisis was inevitable. Johnson pointed out. There were too many inefficiencies. There were decisions that were overdue in. That is an opportunity for the new man coming in. But you’ve got to be bold. You’ve got to believe that fortune rewards the bold. And bold he was. Indeed he set about the task of rebuilding the American institution, piece. At times this entailed departing from what the company had become to answer the question. Who are we?
Johnson left no stone unturned. He questioned every budget and forced employees to rethink their spending. He looked for areas where employees had become sloppy as a result of too much comfort. For example, he discovered that soup executives were wasting 10 percent of the marketing budget on an annual tomato soup promotion timed to coincide with the tomato harvest. This would have made sense, except that years ago Campbell had stopped using fresh tomatoes in soup.
In addition, Johnson introduced an incentive plan that base 20 percent of a manager’s bonus on overall corporate performance, instead of only on operating unit results. And Johnson has also initiated a comprehensive appraisal system to let each employee know how much he or she is valued within the organization. Quality has improved significantly as a result of Johnson’s efforts. He really turned this place on remarked Fred George vice president of manufacturing referring particularly to plant in Maxton, North Carolina. Work teams, statistical process control and total quality had been introduced at Maxton under the former CEO, but under Johnson they took effect. The plant’s operating efficiency soared and manufacturing costs were driven below 50 percent of the retail price of products.