Company crisis situations - Case Study: Everyone Counts at Black and Decker

Furthermore, the successful organizational restructure of Black and Decker can also be explained by using Kurt Lewin's change model. This model divides change process into three steps. The first step is known as unfreezing, which involves developing the initial awareness of the need for change, whilst the second step is referred as changing, which focuses on learning the new required behaviors. The third and final step will be refreezing, that is, to reinforce and maintain the desired changes. (Bartol & Martin 1991) This change model has been thoroughly demonstrated in the introduction of the program called "Everyone Counts", which was designed to give groups throughout the company the opportunity to contribute money-saving ideas to management of Black and Decker.

The reasons that I do believe a radical change in leadership can turn a company around in a crisis situation

. When a company is in crisis, it requires decisive and bold leadership to identify, isolate and manage the crisis. Here, we refer the crisis identification as making an accurate diagnosis of the real problem, the crisis isolation as containing it so it will not contaminate anything else and crisis management as taking the necessary steps to resolve the crisis. (DuBrin 1989) And, as a leader who needs to turn the crisis situation around, his or her core strategy is to slash costs, including existing layers of management, in order to improve the firm's financial position. Turnaround leaders are therefore referred to as "slash and burn managers." (DuBrin 1989, pp.21).

This was certainly true about Black and Decker in the 1980s, when the company was struggling. At that time, profits were down, and expenses were high. Management was unproductive and was characterized by some analysts as lazy. Production budgets were bloated. When Nolan Archibald became the top management as well as a transformational leader of the company, he had quickly eliminated 2000 jobs, many from managerial ranks.

Why? Because Nolan had identified the root of the company crisis was the unproductive and costly management, unless he took action to against those management in order to isolate the crisis, or the crisis would never be resolved. Moreover, along with this trimming of staff levels, Archibald instituted a reorganization of a new emphasis on quality. Indeed, these efforts worked: one year, the company earned $100 million in profits on sales of $2.3 billion.

2. Moreover, transformational change of the company in crisis benefits from strong leadership that identifies new pathways for companies to follow, and builds the momentum for change even though the future state of the company remains undefined. It requires the creation of a vision which stretches the company beyond its current limits and capabilities, a holistic perspective, an implementation process that is sustained by organizational learning and the creation of resources to support the change (Chapman 2002).

As spoken in the case, after Nolan had eliminated the unproductive and costly management, he then instituted a reorganization of a new emphasis on quality. Further to the new vision with basis on quality, Black and Decker leaders realized that they needed to find ways to get employees involved in the decision-making process. Therefore, the rank-and-file workers would now have to contribute not only their labor but also their ideas and insights as well, if their company were to stay profitable. A program called "Everyone Counts" was then designed to give groups throughout the company the opportunity to contribute money-saving ideas to management.

Again, the Black and Decker leaders demonstrated that as being transformational leaders, they were not just simply articulated a vision, but also provided a plan for their staff to attain their vision. (Greenberg & Baron 1995). And, the leader's job is to support the team, provide coaching and resources, and patrol the boundaries within which the team can freely operate. (Kanter 1999)

3. Raising the consciousness of workers about the organization's mission and vision, and encouraging others in understanding and committing to the vision is a key facet of the transformational leadership style of inspirational motivation. Since everyone is really clear about the vision and values of the organization but in a practical way, so they can understand exactly what is their role in the business and what the business is trying to achieve and how they can make a contribution to it and achieve the success of the business. (Sarros & Santora 2001)

Take Black & Decker as an example, when the program began, more than 85 percent of the eligible workers volunteered for it. Employees from all departments were divided up into 39 teams, which were responsible for envisioning new money-saving ideas and examining their feasibility. These work teams were allowed to submit a maximum of five ideas every 12 weeks. By limiting the number of proposals, management could ensure that the teams were focused and concentrated. Each of the proposals the teams would present needed to be detailed and reflective of the entire cost of the project.

The case shows it is important for participants in team interaction to have a common goal in order to have successful achievement. Team members need a unity of direction if they are to pull together. Such goal should be known by and acceptable to all team members. (Harris 1976). A group that shares a belief that they can be successful at a particular task has much greater possibility of actually succeeding because of this efficacious belief. (Arnold, Barling & Kelloway 2001) In fact, transformational leadership has also been found to lead to higher levels of organizational commitment and is associated with business unit performance (Barling et al., 1996).

4. Mutual trust is required to bring confidence that the parties will support each other in the transitions which organization and individual must repeatedly make. The only way in which a degree a trust can be recovered in organizations is through the exercise of leadership. For unless a new leadership is forthcoming, people will not be willing to make the transitions necessary for the survival of organizations. (Herriot, Hirsh and Reilly, 1998)

This is definitely true about the case of Black & Decker. In the past, managers would usually take care of the details of an employee's idea, so it was rare that workers would be involved in further development of their ideas. Under "Everyone Counts", however, teams were forced to practise long-term planning. Employees now feel that they have say in the management of the organization. Access to upper executives has made workers more attentive to their jobs: instead of simply performing their duties, they now critically analyze how they work. Management's commitment to listening to and acting on their ideas is an empowering experience for Black and Decker employees.

An enriched job is one that has more variety, identity, significance, autonomy, and feedback. Job enrichment affects the critical psychological states of meaningfulness, felt responsibility, and knowledge of results and is theorized to result in higher job satisfaction, intrinsic motivation, and work quality and lower turnover and absenteeism feedback. (Ackoff 1999)

Using Lewin's change model to explain the successfulness of organizational restructure in the company of Black and Decker

Unfreezing

Lewin's first phase of change is known as Unfreezing. Unfreezing is referred to calls for an organization to realize that the old way of doing things is no longer acceptable and that the past must be separated from the future. In the case of Black and Decker, the unfreezing that have been identified for organizational restructure are:

. Management was unproductive and was characterized by some analysts as lazy.

2. Bloated production budgets caused decreasing profits.

3. High operating expenses also caused the decrease in company's profits.

4. No staff involvement in the decision-making process or practising long-term business planning.

5. No continue quality improvement on the production process caused cost-ineffective.

Thus, at Lewin's unfreezing stage of change model, old ideals and processes must be tossed aside, so that new ones may be learned. (Lewin 1951)

Changing

Lewin's second step of Changing involves taking the visions and changes identified in the unfreezing stage and devoting the time and resources necessary to accomplish them. In the company of Black & Decker, the changing tools that could be identified for successful organizational restructure are:

. The trimming of staff levels - 2000 jobs were eliminated and many from managerial ranks.

2. Emphasis on continuous quality improvement so as to increase profits.

3. Develop the "Everyone Counts" program for staff involvement in contributing of money saving-ideas to management so as to reduce operating expenses.

4. Staff involvement in decision-making process - 39 work teams were formed for envisioning new cost-saving ideas and examining their feasibility.

These work teams were allowed to submit a maximum of five ideas every 12 weeks. Each of the proposals the teams would present needed to be detailed and reflective of the entire cost of the project.

5. Streamline of the production process - under new program, most of the money-saving proposal submitted dealt with improving the production process, which helped the company to save up its cost. For instance, a proposal of using a new type of material in several product lines helped the company saved up to $700,000.

Therefore, the steps to the new ideals are learned by practicing in accordance with Lewin's Changing stage.

Refreezing

Lewin's last step is Refreezing, which calls for an organization to reinforce and reward the new behaviors that employees have been conditioned to learn. By refreezing them, the organization is making them part of the corporate culture in term of policies and norms. In the company of Black & Decker, the refreezing that could be identified for successful organizational restructure are:

. Staff empowerment - under "Everyone Counts", teams were encouraged to practise long-term business planning, so that their contributed ideas could be further developed by themselves.

2. Enhanced communication throughout the company - employees now feel that they have say in the management of the organization. With access to upper executives has made workers more attentive to their hobs: instead of simply performing their duties, they now critically analyze how they work.

3. Management's commitment and recognition - Management's commitment to listening to and acting on their ideas is a kind of recognition to the employees.

4. Effective management - well organized and detailed proposals enabled the management more time- and cost-effective in reviewing them. Also, the thoroughness of the "Everyone Counts" presentations helped keep the number of managers low while tapping a source of new ideas inside the organization.

5. Continue quality improvement - employees were made aware of company's emphasis on quality as well as their quality improvement ideas on cost-savings.

Per Kurt Lewin at this stage, the new processes are now intellectually and emotionally accepted by staff. And, what has been learned is now actually being practiced on the job.

Conclusion

In a company crisis situation, I do believe that with the change of transformational and visionary leaders can successfully turn the company around. When there is a realization that the old ways no longer work, such leaders may undertake the task of developing an appealing vision of the future. A good vision provides both a strategic and a motivational focus. It provides a clear statement of the purpose of the organization and is, at the same time, a source of inspiration and commitment. Just like those leaders who turned the Black & Decker to one of the world's largest producers of power tools and household products from a crisis situation in 1980s.

Indeed a transformational leader would be a good facilitator of the change process per Kurt Lewin, namely unfreezing, changing and refreezing, by promoting the creation of a culture that encourages team-decision making and behavioral control. The leaders must work at getting large number of people in the organization involved in the transformation process in order to make the change succeeded. Just like the "Everyone Counts" program, there was more than 85 percent of eligible workers volunteered for it.

Nevertheless, although it never clearly indicated in the case of Black & Decker regarding any resistance to change has ever been encountered, an individualized consideration of leaders (that is, the leaders provide support, coaching and guidance to employees) would indeed play a role in neutralizing the inevitable resistance that is bound to accompany the transformational process.

References:

Ackoff, Russell L. (1999). 'Transformational leadership', Strategy and Leadership, volume 27, issue 1, pp.20-25

Arnold, Kara A., Julian Barling & Kelloway, Kevin E. (2001). 'Transformational leadership or the iron cage: which predicts trust, commitment and team efficacy?', Leadership and Organization Development Journal, volume 22, number 7, pp.315-320

Barling, J, Weber, T. & Kelloway, E.K, (1996). 'Effects of transformational leadership training on attitudinal and fiscal outcomes: a field experiment', Journal of Applied Psychology, volume 81, pp.827-32.

Bartol, Katherine M. & Martin, David C. (1991). Management, Third Edition, McGraw-Hill

Chapman, Judith Ann. (2002). 'A framework for transformational change in organisations', Leadership and Organization Development Journal, volume 23, number 1, pp.16-25

DuBrin, Andrew J. (1989). Instructors Manual to accompany Contemporary Applied Management, Third Edition, BPI/IRWIN

Greenberg, Jerald & Baron, Robert A. (1995). Behavior in organizations: Understanding and managing the human side of work, Fifth Edition, Prentice-Hall

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Kanter, Rosabeth Moss. (1999). 'The Enduring Skills of Change Leaders", Leader to Leader, Number 13, pp.1-9

Lewin, K. (1951). Field theory in social science. New York: Harper & Row

Peter Herriot, Wendy Hirsh and Peter Reily ; wuth Stephen Bevan ...[et al.], 1998, 'Leadership, trust and transitions', in Trust and Transition Managing Today's Employment Relationship, U.K.: John Wiley & Sons, pp.163-178

Sarros, James C. & Santora, Joseph C. (2001). 'The transformational-transactional leadership model in practice', Leadership and Organization Development Journal, volume 22, number 8, pp.383-394

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