The only constant in this world, is change.

You-can-Change

For my final blog post, I have decided to gear away (a little) from the topics we have discussed during our OB seminars and to pen down some thoughts about Change. Every organization, in some point in time, would seek to improve itself (in various aspects) in order to be in a competitive position to out-perform their rivals. Many leaders, when appointed to plan and implement a change, often overlook the fact that being given such an opportunity puts them in a position to strengthen the togetherness of a company through its vision or culture. Instead, they often focus on their own performance and take a more task-oriented approach to achieving their goals, forgetting the fact that employees are the ones who make up the organization and their opinions are of great importance as well. This leads to increased chances of employees having a bad experience of change and hence greater resistance to future changes. Therefore, it is important that change be managed in a way that benefits both the organization and its employees.

Organization and Change

I hope this video gives you a good brief introduction to change and change management, as well as the various implications they entail.

There are usually two forces that cause change in an organization: external forces and internal forces. External forces are those outside of the organization that the organization has no direct control over (e.g. regulations, the economy, unemployment levels and inflation). Changes in these areas could have a direct bearing on an organization’s operations. Internal forces may cause change to occur and also reflect external forces upon the organization. (e.g. top management’s change in company strategy, increased productivity standards, and quality control standards). Understanding where external and internal changes come from is one of the keys to properly preparing for change.

How can an organization prepare for change? Planned change is by far the best method – it is designed and implemented in an orderly and timely manner through anticipation of future events. Reactive change is harder on the organization. Changes of this nature have a multitude of problems as it is usually put together within a short period of time and it increases the potential for further reactive change within a plan.

Why are changes important?

Changes are needed whenever the forces of an industry are altered.

  1. Keeping up with technology: If changes have not been made and communication methods have not been constantly updated, business leaders would still be wasting time on information being sent back and forth between different parties and productivity would not have been achieved
  2. Customer Needs: customer needs change and grow, creating new demand for new types of products and services
  3. The Economy: A strong or weak company can impact organizations in both positive and negative ways. The ability to manage both ends of the spectrum is critical.
  4. Growth opportunities: Change allows employees to learn new skills, explore new opportunities and exercise their knowledge in ways that are different and better than before.

Resistance to Change

The biggest challenge to carry out a change in an organization is the employees’ resistance to the change. Employees have been doing things a certain way and do not like to be told “You have to do things differently”. Change usually brings about the “10/80/10” rule: 10% of employees will actively embrace the change, 80% will be fence-sitters, and 10% will actively fight it. The 10% against the change will have the influence and ability to negatively infect the 80%. Therefore, the negative 10% is the threat to the change and efforts need to be focused on influencing this group of employees. Therefore, employees’ opinions are very important in implementing changes. Some usual reasons for their resistance are as follows:

  1. Uncertainty: employees usually become nervous and anxious about the change and are primarily concerned about their job security and ability to meet new job demands. Such internal emotional controls may not allow them to fully comprehend how the change will affect them.
  2. Threatened Self-Interests: employees with personal power and position power within the organization would not want to see their influence diminish within the organization, so they fight the change.
  3. Different Perceptions: everyone has their own idea about the change. Thus, they may not see the change as beneficial for them, their workgroup, or the customers that are served.
  4. Feelings of loss: change disrupts social networks develop within organizations. A relationship could be affected through a change in power or status.

The Change Process

The change process has to take into consideration both the technical aspects and relational aspects, to make sure that the change is successful and that employees are accepting towards the change.

The technical aspect: Here is a list of some generalized steps in which organizational leaders can use to carry out the planning and completion of change successfully:

  1. Recognition of the need for change: Identify the problem that is adversely affecting the organization, define parties that will be affected by the change and enlist them in change planning efforts
  2. Establish goals: Without an end goal, sub-goals cannot be established for attaining intermediate goals. Once a goal is formed, parties that will be affected by the change should be enlisted in the change planning efforts.
  3. Diagnose relevant variables: Establish variables that may have an influence on the change. For example, the external and internal forces.
  4. Select the appropriate change technique
  5. Plan for the implementation of the change: Communication is of utmost importance in this step. Everyone should be aware of the timeline.
  6. Implement the change
  7. Evaluate and follow-up

The relational aspect: Consideration for employees’ feelings and emotions during the change process is of paramount importance as employees are the ones who will be bringing about the change and who will be most affected by the change.

  1. Communicate the threat of NOT changing: keeping communications as wide open as possible reduces the anxiety and uncertainty about the change.
  2. Involve your team in decision making (when possible): when employees are given the chance to express their ideas and listen to others in the planning process, their own personal buy-in increases and makes the change easier for the organization.
  3. Minimize uncertainty for the employees
  4. Celebrate successes in moving towards the goal to motivate employees
  5. Keep explaining the reasons to change

Conclusion

In conclusion, even though change is often resisted by employees in organizations, change is essential and usually brings about more good than harm to the organization and its people, provided that the change process is carried out in a way that effective and sensitive to employees’ needs. In my opinion, knowing the steps to implementing a change is not sufficient, unless the change is implemented well. Even though the lists above are not exhaustive, they do give us an idea of how employees would feel more included in the change process. An organization is made up of its employees and understanding the reasons behind employees’ resistance to any ideas is important for any positive progress to be made. Any subjective negative feelings that employees experienced from the change process could snowball into greater ramifications that affect the organization negatively in the future. Therefore, leaders should look past any change process as being just a ‘task’ and consider further involvement of and discussion with employees for more positive effects of any changes in organizations.

 

Just FYI – here is another short clip on why change is so difficult, from a psychological perspective.

 

Thank you Prof. Audrey for the insightful seminar sessions and for being so lively and humorous during class, I have enjoyed myself throughout the course of this module! 🙂 lastly, good luck to everyone who has final exams!

 

References: 

http://www.emsvillage.com/articles/article.cfm?id=561

http://smallbusiness.chron.com/change-important-organization-728.html

 

Unethical Behavior

Unethical Definition: lacking moral principles, unwilling to adhere to proper rules of conduct, not in accord with the standards of a profession

Something that we discussed during the course MNO3301 was unethical behavior in the workplace. It occurs more often than one might think. Here are some examples of people in the business world who have made poor choices:

As seen in the video, there have been many unethical businessmen all over the world who suffered consequences for their choices. They were motivated by different outcomes, but they all made choices to act illegally for personal gain. There are a variety of ways one can act unethically (stealing, lying, insider trading, fraud, etc) It is very intriguing to think about the reasons why these individuals made the choices they did. What drove them to take these risks and why did they think they could get away with it? This topic is very interesting to me, and it is much more prominent in the business world today than most people believe it to be. I often ask myself the question: what motivates business people to act unethically and how do we stop it?

Why do it? Here are some reasons commonly listed as causes of unethical behavior:

tunnelvision

Tunnel Vision – Workers become so focused on a goal that they will do anything to attain it. The line between ethical behavior and unethical behavior becomes blurred.

time

Time Pressure – Time is saved by acting unethically. If workers have demonstrated poor time management skills or feel they cannot adequately complete the job, they are more likely to act unethically.

do it again

Got Away With It Once, Why Not Do It Again – After workers have acted unethically one time, they are much more likely to do it again. Many believe if they have gotten away with it once, there will be no punishment for doing it again. From here, workers take more risks. Each action becomes a little more unethical. It is a downward spiral.

workenvironment

Environmental Influence – Despite a worker being ethical and valuing honest behavior, their mindset can become skewed upon entering an organization that ignores unethical actions.

conformity

Pressure to Conform – This accompanies environmental influences. If a worker is surrounded by others who accept unethical actions, they will feel pressure to conform. Many times, even if they know it is wrong, they will act unethically due to peer pressure.

fail

Unattainable Situations – If a worker is in a situation where they can’t attain a goal, they are more likely to act unethically. Whether they are out of time to complete something, feel they are less qualified for a position, or do not possess the skill set to complete a task, workers will compensate for this by acting unethically.

power

Power – Surprisingly, the higher workers are in an organization, the more often they practice unethical habits. People gain power and believe they can get away with anything because they are in charge.

money

Money – Money is the biggest factor driving unethical behavior. People will do anything for financial gain, even stray from their values and use dishonest tactics to attain that gain.

How do we stop it?

Now that we have an understanding of the driving factors for people who commit unethical crimes, we can discuss how to stop this from occuring. There is much debate over how to stop unethical behavior and many ideas on how to approach these situations, so I am going to discuss my opinion. I feel it is essential bosses and individuals stay true to their values. They should lead by example and serve as a role model for everyone within their organization. If individuals make it clear unethical behavior is not tolerated, there will be much less of it. Powerful people within the organization must reinforce potential consequences if unethical behavior occurs, and all workers should be aware of the possible outcomes of poor choices. Some workers are especially motivated to stay true to their word if they are forced to sign or commit to something. Organizations should have a code of conduct that all employees must sign saying they will be trustworthy and adhere to company policy. Workers should represent the company. When human resources is hiring new employees, they should keep that in mind. Employees should be hired because of their values, and values should be something that the human resource department analyses in all potential new hires. Pressure is a big factor in decision making. Organizations should create an atmosphere where workers feel they can turn to others for help. Also, no one individual should feel as if the success of an organization rides solely on their shoulders. Failure shouldn’t be regarded as the end of the world, and workers at all levels should be open to help one another reach their goals. Although some situations have potential for large financial gain, the fact that unethical behavior could result in much larger financial loss should be stressed. Success should be earned with hard work, which is something companies should constantly remind their employees.

Sources:

Brookins, Miranda. “Ways to Prevent Unethical Behavior in the Workplace.” Small Business. Chron, n.d. Web. 24 Apr. 2014.
DuBois, Shelley. “Cheating Business Minds: How to Break the Cycle – Fortune Management.” Fortune Management Career Blog RSS. CNNMoney, 20 July 2012. Web. 24 Apr. 2014.
Groth, Max Nisen and Aimee. “27 Psychological Reasons Why Good People Do Bad Things.” Business Insider. Business Insider, Inc, 27 Aug. 2012. Web. 24 Apr. 2014.
Reporter, Daily Mail. “What Makes Good People Do Bad Things? The Mere Smell of Money Can Make People Behave Unethically.” Mail Online. Associated Newspapers, 14 June 2013. Web. 24 Apr. 2014.

Work-Life Balance

Work-life balance is achieved when you strike a balance between job and personal responsibilities. This has been a continuous struggle for many, regardless of the age and has also been found that various age groups have different notions of work-life balance. Example, an undergraduate struggles on how to manage his time for school, tutorials and spending quality time with friends and family. A 30 year old career woman with a child faces the problem on how to spend more time with her family but not, sacrificing her work opportunities at the same time.

Despite being a struggle, it is still possible to come up with various solutions, from both organizational and personal, to achieve work-life balance such as having flexible work schedule where one could choose the working hours that they prefer as long as they clock sufficient weekly or monthly working hours, or adopting teleworking where one could work anywhere that he/she is comfortable with, as long as they are connected to their offices, colleagues and/or clients. A person can also achieve a balance with proper planning of the various important aspects of their lives. Having said that, proper planning does not mean listing every single thing down on a piece of paper and then allocate a fix amount of time for each of them. No. By proper planning, it is to understand what are the priorities that one should focus on and how to spend every single minute wisely on achieving the end result, e.g., to strengthen family bond by spending quality time with their family and not just sit and watch TV alone at home.

Recently, I came across this interesting video titled “Rethinking Work-Life Balance”. The title of this video intrigues me as it seems to be conveying a message that our notions of Work-Life Balance may not wrong. So I went ahead and listened to what different opinions that the narrator has on Work-Life Balance and below are various interesting points that he has mentioned:

1)   Work is not a separate entity from Life. Work is a component of Life and it is not possible to balance a part of something (Work) with a whole of something (Life).

2)   By spending so much time achieving Work-Life Balance, we are actually saying that Work is a bad thing and Life is a good thing.

3)   How are we going to divide our time well to achieve Work-Life Balance? 50% for Work and 50% for Life (other components)? But wait, there are many other components of Life, e.g., family, friends. Then how are we going to achieve a balance?

Looking at these points, it did came across to me that perhaps most of us have been referring to work as a bad thing in our lives, therefore we are always trying to achieve a balance between work and other personal commitments. Because if we don’t view work as a bad thing, we wouldn’t need to strike a clear distinction between work and life, isn’t it? And I believe all these boils down to our attitude towards work. Are we enjoying what we are working as of now? If one enjoys his work because it revolves around his passion, then he would see no need to define work and life clearly. But if one does not enjoy his work and is working for reasons like money, then after a period of time, he may start to burn out and would therefore want to have a clear boundary between work that is not enjoyable and other personal commitments that could bring about satisfactory enjoyment level.

We must also be aware that out of all the commitments that we think we have, there are definitely a few that are more important than the others (e.g., spending quality time with children as compared to hanging out with friends) and we have to plan our time well to prioritize the important ones. After all, we only have 24 hours a day and it’s not possible to focus on all the commitments given the amount of time that we have. Hence, it is super important if you could be more aware of your own priorities and balance your time well.

Barriers to commitment in an organization

I think that organizational commitment is what an organization should look for since it is what retain employees on the long run. Some -and fortunately most people- are to be committed to their job since it is what they do on a daily basis and therefore should be committed to it. The reason for this commitment is that it motivates individual to come back everyday at their workplace in order to actually do their job. However, I think that organizational commitment is also very important. One straightforward reason to believe this is that, as long as an individual like his/her job, he/she will keep doing it because this is what they decided to go for in the first place. Unfortunately for an organization, good performers are highly appreciated by other organizations -also called competitors. Therefore, an individual, at least a good element for an organization, will definitely be able to find something similar somewhere else. This is why this organizational commitment is an important factor to be considered by organizations. To consider it means identify what could possibly create barriers to it. One barrier to organizational commitment could possibly be career advancement. In this is meant opportunities to climb up the hierarchy of a company, since for many people it represents higher salaries, higher responsibilities and higher social status. Opportunities to get promoted is probably very important for a large majority of individual and therefore preventing or inability to provide such opportunities to employees may be detrimental for an organization. It would be hard to retain ambitious workers that are of very good quality to the firm, indeed they would tend to leave and profit from offering of competitors. On the other hand, if an organization is actually able to reward its employees in promoting when they deserve it, this would probably create stronger commitment to this particular organization which would increase the motivation and performance of the employees since they know that hard work is paying. Another barrier, which actually is linked to the first point, is employee empowerment. In this case, it is not specifically means being promoted as it is the suggestion of the first barrier, but simply the ability for an employee to have more freedom in his work. This means being able to set his own goals that he/she thinks are good for the organization to be achieved. Moreover, more responsibilities are also appreciated since it makes the work performed by the employee more interesting and diversified and therefore more motivating. And this is really fundamental, since it is linked to the job done by the employee but add some more value than the job itself, which is hard to find somewhere else than at the workplace that provides such empowerment. This prevents the employees from leaving as they become conscious that it will probably not be offered at another organization and further reinforce the commitment to the current organization. One interesting barrier would just be the company culture. Indeed, the relations with other employees or bosses are an important aspect to consider in order to build organizational commitment. Working in a good atmosphere is an aspect to take into account. Stress is something that usually impacts individual: too much stress is probably not good as it leads to greater pressures to perform well and fast, too little stress in some case is not good either as it may not motivate enough to produce something good. Therefore, the culture is another factor that, when not built the right way, may also hinder organizational commitment.

Women in the Workplace

the confidence gap

Throughout this course on Organizational Behavior we have covered a wide array of issues. In a general sense we have gotten a better understanding of office dynamics and coping in the workplace. We didn’t, however, cover an office issue that is extremely fascinating and also widely talked about. Gender. The age-old battle of the sexes. When I came across a piece about “The Confidence Gap” between men and women, I found myself completely captivated, and even a bit concerned.

As a future woman of the workplace, and a daughter of a respected female business professional, I have convinced myself that gender is no longer a factor. I have decided to believe that when I am asked about my sex on applications it has very little sway about my placement, or position. It seems, however, that we may be at part to blame for the separation that still exists.

Women are thriving in business, yes; women are thriving everywhere, as a matter of fact, proving that they are strong and capable. Still, regardless of our more then adequate abilities, the more we doubt and the more we question. Yes, every gender and individual has their doubts, but women as a whole are undeniably limiting themselves. My focus with this article is around one detail that Hewlett Packer, or HP, cited. HP retained information regarding women applying for Top management positions. They uncovered that the women wouldn’t apply for these jobs on a whim; they wanted to be an exact fit before submitting applications. Men, on the other hand, said why not apply, and went for it. I find this particularly interesting because I have applied for positions I am certainly less than qualified for. I wish I could say this is because of my extreme levels of confidence, but in fact, one of my male professors once said to me, what is there to lose? That forever changed me. I stopped questioning and starting submitting.

As the article seeks to prove, women lack the confidence, or rather seek to be closer to perfection. The gap that has been created is holding us back. Yet, a simple step to closing it is just awareness, just like in my case. If women become aware that they can apply for things they might not be qualified for, or that they deserve to take a risk now and again, they can make a conscious effort to slam this so called gap closed. Chalk it up to nature or nurture, either way, if women can understand this phenomenon and make a conscious effort to believe in themselves, to tell themselves every morning they are wonderful, or whatever it takes to boost their confidence things can shift in their favor. It all starts with awareness.

I understand I may be simplifying the situation drastically. Confidence may not be something that just appears over night. This gap may signal to a deeper cultural issue, but I also understand that after reading about the effects of confidence on performance I am going to go into every exam telling myself, “THIS IS MY TIME TO SHINE.” If I fail, at least I know it won’t be because a lack of confidence. So, women of the world, just be aware. You’re only as good as you think you are, and you will only push yourself as far as you think you can go. Maybe take some time to think about how much you truly deserve. You are always up against your biggest critic. Yourself. So tell that critic to pipe down, because you know you can do it. We all know we can do it.

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References

Chemaly, Soraya. “10 Ways Society Can Close the Confidence Gap.” HuffPost Women. 23 April 2014. Web. 24 April 2014 http://www.huffingtonpost.com/soraya-chemaly/10-ways-society-can-close-the-confidence-gap_b_5200419.html

Kay, Katty; Shipman, Claire. “The Confidence Gap.” The Atlantic. 14 April 2014. Web. 22 April 2014. http://www.theatlantic.com/features/archive/2014/04/the-confidence-gap/359815/

Valenti, Jessica. “The female ‘Confidence Gap’ Is a sham.” The Guardian. 23 April 2014. Web. 24 April 2014.  http://www.theguardian.com/commentisfree/2014/apr/23/female-confidence-gap-katty-kay-claire-shipman

 

Mergers and acquisitions – cultural integration should not be overlooked

Our merger and acquisition simulation in class was very engaging and it illustrated nicely that “marrying” two companies can be a long and tiring process that requires planning and preparation and the consent of various parties in the organization in order to make it a success. Nevertheless, due to increased competition, many corporations embarked on the journey of M&A’s since the 90s and failed badly, resulting in losses of billions of dollars. Mergers and acquisitions that involve big corporations that were unsuccessful, include eBay and Skype, as well as Sprint and Nextel, which all suffered from technical incompatibilities (Huffingtonpost, 2013). But more often than the integration of business systems, human factors, hence differing organizational behaviors and cultures, play a determining role in whether a merger or an acquisition succeeds or not. A negative example of colliding cultures is the acquisition of Chrysler by Daimler in 1998 for more than $35 billion. After the takeover the American Chrysler company could not cope with the German management style that involved immense cost-savings and rigid reporting (FT, 2014), which ultimately resulted in the divestment of Chrysler in 2007.

An illustration of how cultural (organizational) differences can possibly affect organizational effectiveness can be found in Figure 1 (FT, 2014). Cultural differences in combination with the level of integration and the degree of the friendliness of the merger can lead to tensions, as well as negative attitudes between managers and employees of the merging companies. Those can elicit decreased cooperation and cooperation on behalf of the employees of the newly acquired firm and consequently induce managers to leave the company, resulting in an impairment of organizational effectiveness.

Figure 1: Source: http://ptgmedia.pearsoncmg.com/images/chap1_9780133014150/elementLinks/01fig01_alt.jpg

But what can companies do in order to foresee problems, avoid misspending huge investments and retain key personnel of the acquired firm? In other words, how can they most optimally tap into the value they paid for? Many articles mention that pre-planning, implementation and evaluation is important, but in my opinion culture is a huge factor that is often overlooked when engaging in a merger or acquisition. But how can companies consolidate conflicting corporate cultures? In my opinion leaders, especially CEO’s and executive managers have to realize that it’s worth to invest more time and effort into the integration of organizational cultures right in the beginning, even with the result of a slower integration process, in order to secure the success of the merger. A perfect example of a successful merger is the acquisition of the Korean company Daewoo by the Indian Tata Motors company. I chose this example, due to the fact that increased globalization adds an even more intricate layer to differing organizational cultures, namely a conflicting national culture. But what can we learn from Tata?

When taking over Daewoo in 2004 Tata Motors did not act as if it was the great rescuer that saved Daewoo from the brink of bankruptcy, but rather acted in a humble way and spend half a year just learning from Daewoo instead of interfering in their business activities (Tata case study). Tata aspired to retain Daewoo as a Korean company in Korea and tried to interfere only minimally. Tata did not lay off key personnel, but kept most of Daewoo’s management in place and made them responsible for running Daewoo, instead of sending their own managers there. Apart from integrating both enterprise systems, in order to create a joint platform and merging the information and management style, Tata tried to preserve Daewoo’s identity by retaining their name, as well as Daewoo’s culture, which was characterized by creativity and prosperity for all parties in the value chain. Tata proceeded in a sensitive way and tried its best to show respect and commitment and involve Daewoo in all its decisions, by translating critical documents and improving communication, by teaching Indian executives Korean, holding meetings in both, English and Korean and initiating personnel exchanges. Another tool that helped to increase mutual understanding were company visits, where Daewoo’s executives were invited to visit Tata’s plant in India and the other way around, so that learning and best practices could be shared.

In conclusion it can be said that Tata, who invested hugely in the alignment of both companies, while always paying respect to the Koreans that were very proud of Daewoo, with its long history and culture, was successful in retaining key personnel and avoiding the negative consequences described earlier in Figure 1.

But the question remains, if multinational companies are ready and willing to invest time in learning and dealing with differing organizational, as well national cultures, in order to undertake successful acquisitions or mergers.

Huffingtonpost (February 23, 2013). 9 Mergers that epically failed. Retrieved from: http://www.huffingtonpost.com/2013/02/23/worst-mergers-of-all-time_n_2720121.html#slide=2126281 (accessed 23. April 2014).

FT press (January 16, 2014). The M&A Paradox: Factors of Success and Failure in Mergers and Acquisitions. Retrieved from: http://www.ftpress.com/articles/article.aspx?p=2164982&seqNum=3 (accessed 23. April 2014).

Tata Case study. Tata Motors’ integration of Daewoo commercial vehicle company. Retrieved from: https://cb.hbsp.harvard.edu/cb/pl/23704357/23704361/98e6f89366bf40be687592d14b04665d (accessed 23. April 2014).

The Effect of Performance Indicators on Employee Behavior

Managers tend to have that burning desire of measuring how effectively their employees are working – which seems normal since the company’s results depend on this! In order to measure employee productivity, managers use several types of “performance indicators” which have the goal of translating a certain amount of employee effort into a quantitative assessment of their performance. Usually, the employee salary is calculated after these performance indicators, the better the performance, the higher the salary. We could naively think that this procedure can only encourage employees to work the best they can in order to improve their salaries. However, many performance indicators actually have the opposite effect: they lower employee productivity and change employee behavior. Let’s go through some types of indicators and show how easy it is to worsen situations while trying to improve them.

The simplest type of indicator is the individual one. A manager’s expectation when using individual indicators is to boost employee productivity by measuring it and calculating employee salary following the indicator’s results.

However, according to Maya Beauvallet, exclusively focusing on individual productivity may not have the effect managers are seeking. Since individual indicators only assess individual performance, every employee has an interest in focusing exclusively on the evolution of his own performance. Put simply, individual indicators do not take teamwork into account. This means that employee cooperation inside the company is actually hindered by the indicator, which can be a catastrophe in sectors where high levels or teamwork are crucial. In the end, individual productivity might end up being improved, but the lack of cooperation between employees might also slower the company’s global activity. The lesson for the manager is simple; having a too narrow focus can make you forget the big picture.  Nevertheless, if the problem is employee cooperation, could collective indicators be a solution?

Collective indicators measure the effectiveness of groups of employees instead of measuring that of each employee individually. In this light, it can be thought that cooperation will be improved since helping each other benefits to every group member through the indicator.

However, collective indicators have a fragility: the “free-rider” phenomenon. Being a free-rider means doing nothing while benefiting of the others’ efforts. The free-rider theory applied to collective indicators, says that every employee has the incentive not to work while profiting of the other employee’s work. This will also improve the indicator for the free-riders even if they do not contribute to the work. If every employee had the same reasoning, the consequence would be dramatic for the company since nobody would work but would be waiting for the others to work instead. If this happened, the company’s global performance would be tragically affected and the indicator’s implementation would actually have an effect opposite to what was intended. For a collective indicator to work there must be at least some employees playing by the rules, and sometimes even playing harder in order to compensate for the free-riders’ bad performance.

Interestingly though, the free-rider problem is actually not such a big problem in practice, it tends to disappear after the experience is repeated several times. In the case of employee collective indicators, the free-rider who benefits from the other workers’ efforts ends up being identified, not by the hierarchy but by his peers. Once it is the case, these peers will pressure him to contribute to the team’s effort. The experience shows that the free-rider issues are actually settled quite fast and that free-riders do not tend to remain free-riders in the long term.

Relative indicators measure an employee’s productivity in comparison to its peers’. The idea is to organize a kind of sport tournament inside the company so that every employee gives the best of himself to achieve a better work than his peers. In the end, the tournament is supposed to enhance the company’s general performance. However, according to Maya Beauvallet “There are two ways of winning a race: the one is to run faster, and the other is to prevent the others from running. This is what companies trying to use relative indicators sometimes discover at their expenses.”

In practice, employees facing relative indicators, could have a fair attitude, meaning that they would try to be the best in order to get the best salary. But they could also systematically sabotage their peers’ work and still come to the same result. This last option is actually a much easier one than working hard in order to be the best.

In conclusion, this is a message to future managers, they should be cautious of the measures they implement since the smallest change can have the biggest difference. They must understand employees in order to anticipate their reactions and orient them towards the goals that are set.

(790 words without Bibliography)

Bibliography

  • Andrew Weiss, «  Incentives and worker behavior », Incentives, cooperation and risk sharing, edition Haig Nalbantian, Rowman and Littlefield, 1988.
  • Daniel Hansen, « Worker performance and group incentives : a case study », Industrial and labor relations review, vol. 51, 1, 1997.
  • Edward Lazear, « Pay equality and industrial politics », The Journal of Political Economy vol. 97, 3, 1989
  • Maya Beauvallet « The absurd strategies », Edition du Seuil, 2009

On Leadership: Transformational Leadership

Leadership is one of the key topics in Organizational Behavior and it has immense real-life applications. Clearly, there are many leadership models and types being practiced that we can observe in our daily lives. However, so far, the most well recognized and celebrated leadership model has been Transformational Leadership, which is one that inspires positive changes in those who follow (Cherry, n.d.).

This blog post shall discuss about transformational leader, Mr. Sam Walton, who in 1962 founded Wal-Mart, a small retailer shop, which has now turned into the world’s largest multinational retailer. The company operated under his long leadership and guidance all the way until 1992, although he had officially stepped down as CEO in 1988 (Walton, 2014).

SAM-WALTON

Let’s examine how Sam clearly demonstrated the 4Is of Transformational Leadership: Individual Consideration, Inspirational Motivation, Intellectual Stimulation, and Idealized Influence.

Firstly, Sam showed Individual Consideration through respecting and paying attention to each individual employee’s needs (Boundless, n.d.). For example, he always credited Wal-Mart’s success to the teamwork of his employees and referred to them as “associates” (Hayes, 1992). He led with the consultation tactics by implementing the “Grass Roots process” to promote more communication between the top executives, management and ground employee levels. Top and middle management were supposed to receive and work on the feedback from employees at all level, especially the ground “associates” where direct interaction with customers took place (Farfan, n.d.). Furthermore, he also strongly advocated servant leadership in Wal-Mart and requested his managers at all level to constantly monitor and improve their subordinates’ welfare (Farfan, n.d.). He also invented the “profit sharing plan” in 1970, which offered employees stock options so that they can enjoy the company’s profitability too (Galiano, n.d.).

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Secondly, Sam demonstrated Inspirational Motivation through his compelling vision which he always strove to convey to his employees in order to inspire and motivate them to work towards the goals set out by that vision (Cherry, n.d.). He founded Wal-Mart with the vision of “saving people money so they can live better” based on the revolutionary pricing strategy of Everyday Low Pricing (Walmart, n.d.). Besides the noble nature of his vision, he also managed to won people’s supports via his outstanding way of communicating it. He was described to be a gifted orator, barker, preacher, cheerleader and company visionary (Hayes, 1992). He was also well-known for his invention of the Wal-Mart Cheers with quotes such as “Whose Walmart is it? It’s my Walmart! Who’s number one? The customer! Always!”. Just like that cheer, Sam’s vision has been deeply instilled into the core values of the company’s culture as well as the minds and hearts of his stakeholders, e.g. employees, shareholders, business partners, etc.

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Thirdly, Sam exemplified Intellectual Stimulation by both personally challenging the status quo and also encouraging his employees to explore and innovate (Boundless, n.d.). For example, one of Sam’s rules of success for Wal-Mart stated: “Swim upstream. Go the other way. Ignore the conventional wisdom. If everybody else is doing it one way, there’s a good chance you can find your niche by going in exactly the opposite direction.” (Walton, n.d.) Indeed he started Wal-Mart by opening discount stores in rural areas of small populations, which might sound unprofitable based on conventional business wisdom (Walton, n.d.). Yet, it turned out to be successful. He was also the pioneer in employing the Everyday Low Pricing strategy as mentioned above. His innovative spirit also stimulated Wal-Mart to experiment with new technology to improve the company performance such as the Universal Product Code (barcodes) and a private satellite system which significantly enhanced Wal-Mart’s inventory and distribution management (Kennon, n.d.).

SamWaltonreeeeeallyexcited

Lastly, Sam performed Idealized Influence by serving as a role model for his employees, whom in return emulate him and internalize his ideals (Boundless, n.d.).  For example, Sam was especially admired for his determination. During the early days of Wal-Mart, his “ridiculous” retail business idea rendered him lack of financing options but he fought on with his “never-say-die determination” and eventually succeeded (Bergdahl, 2006). Even after Wal-Mart already grew strong, his determination for the company to excel never decreased. For instance, he often started working at 4 am in order to review the previous day’s sales reports before the rest of his executives arrived (Bergdahl, 2006). Such idealized attribute managed to influence and gain his employees’ strong support for his “Sundown Rule” which required all employees to deal with inquiries and feedback from colleagues, customers and suppliers on the same day of receipt before leaving work (Farfan, n.d.).

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All in all, it is evident that we can learn a lot about transformational leadership from Mr. Sam Walton. However, on a wider and more critical contemplation, some may also wonder whether such form of leadership will be effectively applicable to the military setting, which is often a very hierarchical organization. At such place where orders from above are meant to be executed without any questions, the Intellectual Stimulation aspect of Transformational Leadership may be much more constrained.

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References:

Bergdahl M. (2006). The 10 Rules of Sam Walton. Retrieved Apr 23, 2014, from http://www.dmmserver.com/DialABook/978/047/174/9780471748120.html

Boundless (n.d.) Key Behaviors of Transformational Leaders Retrieved Apr 21, 2014, from https://www.boundless.com/management/leadership/full-range-approach/key-behaviors-of-transformational-leaders/

Cherry K. (n.d.). What Is Transformational Leadership? Retrieved Apr 23, 2014, from http://psychology.about.com/od/leadership/a/transformational.htm

Farfan B. (n.d.). Wal-Mart Stores’ Mission Statement – People, Saving Money, Living a Better Live. Retrieved Apr 21, 2014, from http://retailindustry.about.com/od/retailbestpractices/ig/Company-Mission-Statements/Wal-Mart-Mission-Statement.htm

Galiano A. (n.d.). Sam Walton & Wal-mart. Retrieved Apr 21, 2014, from http://littlerock.about.com/cs/homeliving/a/aasamwalton.htm

Hayes C. T. (1992). Sam Walton Is Dead At 74; the Founder Of Wal-Mart Stores. Retrieved Apr 24, 2014, from http://www.nytimes.com/1992/04/06/us/sam-walton-is-dead-at-74-the-founder-of-wal-mart-stores.html?pagewanted=all&src=pm

Kennon J. (n.d.). Sam Walton (aka Samuel Moore Walton). Retrieved Apr 21, 2014, from http://beginnersinvest.about.com/od/samwalton/p/aasamwalton.htm

Walmart (n.d.). Sam Walton. Retrieved Apr 24, 2014, from http://corporate.walmart.com/our-story/history/sam-walton

Walton S. (n.d.). 10 Rules for Building a Successful Business. Retrieved Apr 21, 2014, from http://www.1000ventures.com/business_guide/business_success_10rules_walton.html

Walton M. S. (2014). The Biography.com website. Retrieved Apr 24, 2014, from http://www.biography.com/people/sam-walton-9523270.

 

 

Managing Organizational Change and Diversity in Workplace: The Case of Chohung Bank during the merger with Shinhan Bank

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Companies nowadays exist within the environment that is not particulary stable. And as such, one of the most sought after trait of any organization nowadays is ‘adaptability’. The ability to anticipate and embrace uncertainties and changes can, most of the time, becomes the key to the sustainability of the business. However, despite knowing the importance of it, many organizations, such as Chohung Bank, could not fully embrace the change, and even resisted it. Hence, it is interesting to analyze and understand what are the possible reasons to their resistance. In the textbook, Robbins & Judge (2013) posit the major forces for resistance to change, categorized by the sources to the resistance. The author proposed two key sources of resistance: Individual and organizational (Robbins & Judge, 2013). ‘Individual sources’ refers to barriers caused by human characteristics, such as perceptions, personalities and needs (Robbins & Judge, 2013). On the other hand, ‘organizational sources’ refers to barriers stem from the structural makeup of the organizations themselves (Robbins & Judge, 2013).

 

Background

Chohung Bank, one of the longest standing commercial banking institutions in South Korea with 107 years of heritage, was bought over by Shinhan Bank, the then up and rising bank in South Korea, after the financial crisis (Kanter & Raffaelli, 2008). Despite its long-standing in South Korea, the bank was, in fact, weak even before the financial crisis hits South Korea (Kanter & Raffaelli, 2008). As such, they could not handle the hit, and had no choice but to receive financial assistance from Korean government, which became its largest shareholder (Kanter & Raffaelli, 2008). During the post crisis, in 2001, H&CB and Kookmin Bank merged to form a new Kookmin Bank that almost dominated the industry with a market share in excess of 30% in loans and deposit (Kanter & Raffaelli, 2008). Shinhan did not want to remain in competing with other small and medium sized enterprise banking institution (Kanter & Raffaelli, 2008). And in order to compete directly with Kookmin bank, there is a need to form a merger bank (Kanter & Raffaelli, 2008). This propelled them to make the strategic decision of acquiring Chohung Bank when the government began to entertain offers to sell off the shares it purchased from insolvent banks (Kanter & Raffaelli, 2008). When the news of the bought over was announced, about 3,500 Chohung Bank’s employees went in front of the main building of Shinhan Bank to shave their heads as a last-ditch attempt to forestall the sale of the bailed-out bank (Kanter & Raffaelli, 2008). In attempt to appease the angered protestors and allow a smooth merger, Shinhan signed an agreement with Chohung’s union, on which they agreed to raise wages, promise no layoffs, have equal representation of both banks on key committees, and wait three years for full integration (Kanter & Raffaelli, 2008). This agreement has proven to generate a significant payoff for the Shinhan Financial Group (Kanter, 2013). Within a year, shareholder value had increased and employees from both banks were informally integrated, and the union was neutralized. Within three years, Shinhan Financial Group was outperforming not only the industry but also the entire South Korean stock market (Kanter, 2013).

 

Reasons they resisted

Using the model proposed by Robbins & Judge (2013), there can be several reasons behind the resistance of Chohung’s Employees.

 

Individual Source: Habits

Chohung

Chohung Bank was easily one of the commercial banks with the longest heritage in South Korea (Kanter, 2013). As such, most of their employees had probably spent more than half of the life with Chohung. This made it tough for them to embrace the change in their habits. Due to the differences in operation and system between Chohung and Shinhan, there might be a need for them to change their routined and familarized working habits.

 

Individual Source: Security

To the Chohung’s employees, being acquired was seen as a sign that their bank was the weaker bank between the two. This is especially so in the context of Korea, where it is deeply rooted with Confucius teaching and Chinese values. In the cases of other mergers that happened during the time, many were laid off after the mergers. Hence, many Chohung’s employees resisted the merger due to the fear of their job security.

 

Individual Source: Economic Factors

As mentioned earlier, many Chohung’s employees had the perception that by being bought over, they are the weaker party. Hence, the feared that this can very much affect their pay and also their promotion opportunities. In addition, the post crisis environment made everyone worried about his or her livelihood.

 

Organizational Source: Group Inertia

Group norms can act as a constraint. The emotional attachment to Chohung Bank is one of the main reasons that underlay the resistance of this merger. The sense of pride towards Chohung Bank was the norm for the employees, and especially so for those who have spent many years with the bank.  This merger was deemed as demeaning to the 107 years old long-standing bank by many of its loyal workers.

 

Organizational Source: Threat to established power relationships

According to Robbins & Judge (2013), one reason for the resistance can be due to the fear of the threat on the long-established power relationships within the organization. Besides being the bank that has more than a hundred years of heritage, Chohung is the only commercial bank where the CEO had been with the bank for 37 years (Irvine & DiBiasio, 2001). This can implicate that the same people may had fulfilled certain positions in Chohung for a long time, and it would be hard for them to give up the long-established power relationship within the organization.

 

Other Restraining Force: Culture

chohungbank

In my opinion, besides the suggested individual organizational sources of resistance that possibly impeded the change, there could be other restraining forces (if we look at this using Lewin’s Three Step Model) that hindered the change. One of such forces is Culture. With reference to Hofestede’s Cultural Dimensions of South Korea at Figure 1, we can see that South Korea has relatively high uncertainty avoidance. This can imply that, generally, South Koreans are unable to embrace uncertainties and can be resistant towards change. Hence, on a macro-level, we can understand that in it is in the culture of Chohung’s employees to avoid change and want to remain the status quo.

 

And when we look at this in a micro-perspective, we can see a deeply entrenched South Korea traditional conservative culture in Chohung’s organizational culture. For instance, despite suffering from several years of poor leadership (Kanter & Raffaelli, 2008), insisted on keeping its CEO for more than 37 years, can be a sign of high uncertainty avoidance. On whole there are differences in organizational culture between Chohung and Shinhan. According to Kanter & Raffaelli (2008), Chohung and Shinhan has a disparate corporate culture. For instance, the brand image of Shinhan tries to appeal to primarily middle market customers by locating branches at metropolitan areas, while Chohung, with its long heritage and prestige, appeals mainly to higher end consumers by locating at some of the most prestigious area in Seoul (Kanter & Raffaelli, 2008).

 

overcome

Besides understanding the underlying reasons behind the resistance, we can also learn a thing or two on how Shinhan Bank tried to overcome the resistance towards establishing the merger. In the textbook, Robbins & Judge (2013) proposed eight tactics that can help change agents to deal with the resistance to changes. We can use some of the tactics to undercover how Shinhan Bank managed to overcome this resistance.

 

With the aim of integrating Chohung and Shinhan business processes and disparate organizational cultures, Shinhan used an unconventional post-merger integration strategy, which spanned across two to three years, that emphasized on integrating the traditional operation and, at the same time, “emotionally’ integrates the employees too.

 

Education and Communication

According to Robbins & Judge (2013), effective communication of the change to the employees helps to reduce employees’ resistance. After the head shaving incident, Shinhan Bank did not simply ignore the incident and carried out the merger. Instead, the explained the situations and allowed the Chohung employees to voice out their concerns. Their concerns were then taken into consideration when Shinhan was drafting the integration plan. This act was unprecedented and unconventional in the other mergers in South Korea. In my opinion, this helped to reduce the negative emotions of the Chohung’s employees about the merger, as they felt that their voices were being taken into consideration.

 

Participation

Participation of members of the change can not only reduce resistance, but also increase members’ commitment to change and might increase the quality of the change (Robbins & Judge, 2013). Shinhan insisted that, instead of the perspective of Chohung being acquired by Shinhan, this merger is for the development of a new bank under the Shinhan Financial Group umbrella of service (Kanter & Raffaelli, 2008). As such, on a bigger picture, there’s an equal participation from both Shinhan and Chohung. Additionally, in attempt to achieve an equal participation from both banks to achieve the ultimate goal of establishing a new bank, Shinhan Financial Group leadership created twenty upgrade program teams that include members from both the banks (Kanter & Raffaelli, 2008). This allowed employees from the same department within each bank to work together on what the new combined model should be like (Kanter & Raffaelli, 2008). As mentioned earlier, Chohung employees saw this merger as an insult because it signified that Chohung, the long-standing prestigious brand, was weak since it was being bought over by the ‘rookie’ in the industry. Hence, by emphasizing that this merger aims to establish a new bank helped to lessen the sense of loss in pride. It also helped to foster commitment when Chohung employees felt that they are part of the team and felt the sense of importance.

 

Implementing Changes Fairly

Transparency and fairness were two things Shinhan tried to establish during the integration process. They established a ‘Joint Management Committee’ that were acting as the decision making body during the integration. To ensure fairness to both banks, the eight members of the committee were selected from both Shinhan and Chohung (Kanter & Raffaelli, 2008). They were tasked to approve all integration activities (Kanter & Raffaelli, 2008). This is to reassure employees from both the banks that neither of their welfare would be at any disadvantages. As mentioned earlier, some sources of resistance were stemmed from Chohung’s employees’ worries about their well-being, and this helped to remove that barrier.

 

Develop Positive Relationship

            A bulk of the integration activities placed emphasis on integrating the employees from both banks emotionally. This was because Shinhan understood that the disparity between both banks’ culture can be the very issue that impedes the success of establishing an efficient working environment. As such, they tasked the Strategy Team to come up with emotional integration events, with the key idea of developing and forging positive relationship between employees of both the banks. For instance, in 2003, more than 1300 executives and managers from both banks were invited to the Seorabol Summit, where they did bonding activities such as climbing the mountain together and drinking and dining together. According to Kanter & Raffaelli (2008), these programmes aimed to allow employees from both banks to begin to stand in the same direction and understand each other better.

 

Conclusion:

Besides the eight tactics suggested by Robbins & Judge (2013) in the textbook, I feel that there are other factors that helped to remove the resistance from Chohung’s employees and eased them into the integration successfully. One of these factors is ‘Time’. One key reason to the successful integration was the fact that they set aside a buffer time that allows a ‘non-pressured’ change. The same logic goes to asking a normal person to change his or her habits. Many of times, gradual change can ease employees or organization into the change.

 

Although they had successfully integrated both banks, I feel that there are other issues that should also be addressed. For instance, the subcultures that can exist even within the organization. And what about establishing a new organizational culture for the new bank? On one hand, we have Chohung that was deeply entrenched with the conservative traditional South Korean culture, on the other, we have Shinhan with the culture that focuses on performance and driven by individualism. As such, what will be the “new” organizational culture for this ‘new bank’? And would the newly established organizational culture be sustainable?

To wrap this up, I would like to share the current corporate video of the Shinhan Financial Group.

References

Kanter , R. M. (2013, February 26). Great leaders know when to forgive [Web log message]. Retrieved from http://blogs.hbr.org/2013/02/great-leaders-know-when-to/

Robbins, S. P., & Judge, T. A. (2013). Organizational behavior. (15 ed., pp. 511-525). United States of America: Pearson Education, Inc.

Kanter, R. M., & Raffaelli, R. L. (2008). Shinhan financial group (A). Harvard Business Review, 9, 305-075.

 

 

Decentralization: Moving Towards a Leaderless Organization

I would like to share on the interesting classifications of organizations based on a book I had read, “The Starfish and the Spider”. The author classifies organizations into two categories – they are either spiders, with a traditional hierarchy and top-down organization, or they are revolutionary starfish, which rely on the power of peer relationships. With centralized systems, we know who is in charge, and these leaders make decisions in a specific place. In decentralized organizations, there is no leader, no hierarchy, and no headquarters; it is an open system. These systems are not complete anarchy, however. Rules and norms do exist, but they are not enforced by any one person. Rather, the power is distributed among all the people involved across any number of geographical regions.

This classification got me thinking about the fundamentals: what does “leadership” entail – is the existence of leadership beneficial for society? What happens when no one is in charge in an organization? Would instead a “leaderless” organization, as encapsulated in the trend of decentralized organizations, be better?

Through studies, researchers have concluded that leadership could be either good or bad, depending on the leadership style. For example, transformational leadership is good, whereas command and control tend to be ineffective and hence classified under the bad side of things. However, fundamentally, the myth of leadership creates the belief that only a relatively few “gifted” individuals can be anointed leaders and so trusted to make the decisions and do the commanding and controlling of everyone else. It makes assumptions about both leaders and followers – with detrimental consequences for both. A dichotomy is created, two categories: one of leaders – a select and privileged few; and the second of followers – the vast majority. So you get secrecy, distrust, overindulgence, and the inevitable sacrifice of those below for the benefit of those above. When we use the word “leadership,” we immediately create a ranked division of people in ways that do not serve healthy organizational relationships.

Contrary to leadership whereby its existence creates negative division within the organization, a decentralized and leaderless organization brings about numerous benefits. Fore mostly, improved motivation. A decentralized organisation structure is one which facilitates delegation, communication and participation, hence providing greater motivation to its managers for higher productivity. Secondly, decentralization encourages personnel development. Capable personnel are developed by empowering and delegating individuals the authority to make important decisions. Such wide exposure gives them opportunity to grow and have self-development, hence reinforcing this self-sustaining loop of developing quality individuals for the leaderless ecosystem. Thirdly, decentralization makes decision-making quicker and better since decisions do not have to be referred up through the hierarchy, hence allowing for quicker and better decisions at lower levels to be taken. Therefore it comes as no surprise then that decentralized starfish organizations can sneak up on spiders – centralized organizations – because starfish are nimble; they mutate and grow quickly.

Despite the discussed move towards decentralized and leaderless organizations, it would be useful to consider its potential pitfalls. Firstly, the difficulties of according blame. As a society we want to point our fingers at someone – an individual. The murkiness of pointing our fingers at a leaderless group makes it difficult to find a target for our energy (either positive or negative) and it is somewhat unsatisfying to the public to get angry at a faceless corporation when it comes to a specific issue. Secondly, decentralisation may lead to inconsistencies (i.e. absence of uniformity) at the organisation level. For example, uniform policies or procedures may not be followed for the same type of work in different divisions. Given these cons of embarking on a decentralized structure, just to list a few, organizations ought to carefully weigh the benefits and costs prior to embarking on the leaderless path.

Part of the concept of peer thinking is that inherent in every organization is the wisdom and competence to make this happen and to apply the assumptions, logic, and practices of peer thinking to each unique situation. However, are all organizations indeed suited for decentralization/ leaderless-ness? On top of the cost-benefit analysis of embarking on a decentralized model, companies should ascertain the nature of the organization to evaluate and hence determine whether a fit with a decentralized culture exists, and is necessarily compelling. I personally feel that certain characteristics of an organization will make it more inclined towards the adoption of leaderless-ness, and benefit to a greater extent from decentralization than other organizations. Basically, decentralized structures work best when a company’s main point of differentiation is innovation. Organizations that are competing in a rapidly evolving industry, and working with short product life cycles would be inclined to adopt the discussed model. In such cases, organizational teams need to be nimble to respond to a rapidly changing environment; internal alignment with the fast-changing external environment. From e-commerce retailers like Zappos to tech companies like Valve (famous for having no bosses), flat and decentralized organizations are prospering.

In conclusion, it ought to be noted that in bringing across “cons” of leadership within an organization, the positive effects that emerge from good leadership styles as described in present literature are real and should not be ignored. Instead, they serve merely to propel us into thinking about alternatives such as leaderless-ness and decentralization, as well as their benefits. Furthermore, in light of the costs, and benefits being contingent upon the nature of an organization, the choice of embarking towards decentralization should be carefully thought through.