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Learn more about the main concepts of managing change with our guide and related essays.
Leadership within a business is about having a vision for where the business should be heading, i.e. its objectives and having the personal qualities and skills necessary to ensure that the other people in the business carry it out. This makes leadership very important in change management as the driver and enforcer of change and few other business topics have been as widely discussed. Change cannot just be imposed by a leader. Generally, people must understand the need for a change, understand what the change will involve and be motivated to carry it out. The style of the leader may have a big effect on how successful they are in implementing change. Most leaders will have a preferred style but will recognise when they need to adapt their style and be able to do it. The four main categories of leadership style are autocratic, paternalistic, democratic and laissez-faire. The fundamental difference between them relates to the amount of control and responsibility they give to their team. An autocratic leader makes all the decisions and expects them to be carried out, while a laissez-faire leadership style means that managers and staff are left to get on with their job in a way that they think best. The paternalistic style is similar to autocratic but with the leader making decisions in the best interest of the team and explaining things to them. The democratic style encourages input from team members but the final decision remains with the leader. Tannenbaum and Schmidt identified a continuum of leadership styles with at one end the leader making all the decisions and telling people what to do to the other end where the leader hands over responsibility to the team. There is a range of leadership style in the middle according to how much the leader involves the team. There has been a movement away from the more autocratic leadership in recent years as it is seen that this is not a good way to get team commitment. More successful leaders tend to get more commitment from their teams by involving them more in the change process. At times of crisis a more autocratic approach with its fast decision making may be required however.
The external business environment
A business must analyse the external business environment to understand how to maintain sales or grow. It must be able to recognise changes in the market place if it is to change to meet the changing needs of customers. A common tool for doing this is PEST analysis. PEST analysis examines the political, economic, social and technological factors affecting a business and using it enables a business to systematically break down the effect the business environment is having on it and can potentially have on it. Political factors include legislation that may affect the business e.g. new environmental laws that mean production processes must change or will open up new business opportunities. It includes regulation of an industry. The trend towards deregulation has also lead to new opportunities and restrictions. Employment law, consumer protection and competition law also impact on businesses and must be analysed to ensure that a business can adapt. Economic factors affecting business include the effects of the growth rate, inflation, unemployment, exchange rate, oil prices and taxation on a particular business. It might be wise for a business to cut back on production and the introduction of new lines during a recession unless they are more likely to appeal to poorer customers. Social factors include demographic changes e.g. an increasingly ageing population might mean more opportunities in care than education, changes in tastes and fashions, consumer attitudes and lifestyle changes. Technological factors include new technology applied to products and processes. Consider the impact of the internet on businesses in the past 20 years enabling businesses to connect directly with their customers in a way that few would have imagined possible. The growth of home shopping can be seen as a social trend.