Organizational Change analysis - Informatix case study.
ORGANIZATIONAL CHANGE ANALYSIS
INFORMATIX CASE STUDY
Laurentiu Stelea
. HISTORICAL VIEW
The company, which I choose to apply organizational change analysis, is named INFORMATIX and acting in the market of Information Services in Romania since 1993.
See the most important aspects of the company from a chronological point of view:
- 1994
o Registered as a company with limited liability partnership, INFORMATIX srl, Austrian capital 100 %, main area of the business was trading Hewlett Packard products and technology for Romanian market, technical support services;
o Corporate culture (in few words): - moving boxes on the channel
- 1995- 1997
o Become the main partner for HP/ UNIX products for Romanian market and developing serious Center for Support Services (first and second service level agreement) and Training Center for Customers and Partner. Staff recruiting was oriented through the IT specialists who resign from the Romanian Army;
o Corporate culture (in few words): strong product management, good and complete services quality in respect of products, training and maintenance
o Very strong functional structure of the organization;
- 1997-1999
o In the meantime, many of the initial specialists are immigrated or were appointed in management position for other HP partners in the market.
o Become partner with COMPAQ in respect of Alpha servers.
o The business was developed in South East Europe and the Informatix became part of the subsidiaries headquartered in Vienna, Austria
o New location - rent offices in new building
o Starting to act as System Integration company
o Corporate culture (in few words)- looking for new directions;
o Very strong functional structure of the organization;
- 1999
o Become partner with IBM in respect of UNIX servers.
o Merging a local SAP partner PLAVAX in order to develop ERP implementation services.
- 2000
o Aggressive presence in the market, trying to gain market share at any price
o The mother company being listed at Austrian stock Exchange www.wienerboerse.at
o No major project win
- 2001- 2002
o Winning first major IT complex project
o Starting to act as an equidistant software and hardware supplier
o Difficulties in customer responsiveness, internal communication, projects financing;
- 2003
o Announcement of merging the regional representatives of the well-known integration service provider FIDJUTSU Services
o 40 new people hired, three major projects bought from the FJS
o New location - rent offices in new building
o Major issues in the organization
At the end of 2003 INFORMATIX hired us as an independent consultant in order to diagnose the organization and to re-design the organizational processes, eliminate the causes that organization still not perform.
The organizational structures during the years was shown in Appendix 1
2. PROBLEM DEFINITION
The most difficult part of the consultant was to find the fundamental issue and the causal factors that generated it.
Seeing the development of the company INFORMATIX we can say at first sight that suffered in its development two major shocks that can affect his chemistry already structured:
- Two major acquisitions (1999, 2003);
- Changing their mission vision and strategy.
We will come back with these major events because of their importance.
Analyzing the economical data archived by the company we can affirm that in terms of revenue and market share the company seems to be on growth, but analyzing ARPE we will have surprises.
Average Revenue per Employee ARPE having a decreasing trend over the seven years and the stakeholders are very un-happy with this.
The symptoms, which was revealed through our assessment:
- Nobody feel that communicate with the top management;
- The departments feel that the level of the unproductive an un-efficient meetings are very high;
- Nobody see the "light" of ...
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Analyzing the economical data archived by the company we can affirm that in terms of revenue and market share the company seems to be on growth, but analyzing ARPE we will have surprises.
Average Revenue per Employee ARPE having a decreasing trend over the seven years and the stakeholders are very un-happy with this.
The symptoms, which was revealed through our assessment:
- Nobody feel that communicate with the top management;
- The departments feel that the level of the unproductive an un-efficient meetings are very high;
- Nobody see the "light" of the mission;
- Frequent head-on collisions of style and priorities among management.
The fundamental issue is decreasing ARPE and causal factors are job dissatisfaction as a result a poor communication caused by the non-functionalities in the organizational structure.
Reviewing ARPE (average return per employee) we can affirm that INFORMATIX having a problem. In addition, the stakeholders of the company are worried about the present and the future of the company because:
- Customers' responsiveness decreasing year by year;
- Quality of the services decreasing
The data was shown in Appendix 2
2.1 JUSTIFICATION
INFORMATIX had an evolutionary development starting as a piece of HP supply chain to one of the major system integration company.
Our opinion is that the business processes in organization don't follow the mission declared by the management. Much more the strategy in order to become System Integration Company is not defined as well as the mission.
However, these were an only guesses when we start to see the figures about company and his organizational structure evolution in the meantime.
In our opinion the reality of the change proposal stay in the thinking of the people who work for INFORMATIX and our mission is to reveal that.
Our findings must be strongly related with people findings and must be objective based on our outsider position. In the same time we must use a sound methodology in the analysis.
We need to fundament our change proposal on facts and behind the figures anyway staying people. From our experience we know that the figures can be very well arranged to show "virtual reality".
As instruments for the assessment of the organization we are used:
- Interviews: top management, middle management, execution level;
- Observations: two weeks staying in "hot" departments of the organization;
- Questionnaires.
- Documentation.
Key Issues which was revealed from the assessment (interviews, questionnaires, etc.):
- Top management:
o "Feel" that in the actual organization the communication is very slow and the decisions are not implemented as they were taken.
o More than 80 % of their time are consumed in never ending meetings
o The rate of winning action in tenders and bids decreased surprisingly
- Middle management:
o The inter-departmental communication is very slow and the business processes become more complicated and very difficult to be managed.
- Execution level:
o Many decisions came in contradiction with normal flow of the business.
o 70 % percent of the people said that nobody in the organization is trying to discuss about their needs
o 60% percent of the people are not convinced about their roles and the responsibilities assigned in the "new" business processes.
Key Issues which was revealed from the assessment (observations):
- Actual structure contained a very serious abnormality - 9 middle managers reporting directly to General Manager. The majority of the middle management was maintained
- The actual business process is not aligned to the normal Bid Management processes as process of the elaboration an answer to the Request For Proposal.
- The actual organization maintained as separate entities of the business which was merged
- The mission of the company was defined as " system integration company" and the money must come from projects delivered to the customers but the organization don't give the maximum attention to the Project Management process
- The merger actions stipulated that " INFORMATIX must maintain for the next three years the personnel with same wage ", and this cause introduce frictions between old personnel which have lower wages and the level of productivity don't give enough room for the management to increase the wages for the older personnel.
- The sales team was designed in order to sell products and services associated to these products and the skills in order to sell solutions missing. Much more the sales personnel was not stimulated in order to extend their classic offering with the business merged
3. CHANGE PROPOSAL
We cannot implement the change without very well planning process and monitoring the status and the risks. In fact, we propose a project management approach in order to keep focus on all the major aspects involved in this process.
We proposing after the assessment of the organization the following actions:
Appoint the Change Management Board
Justification:
* The main role of this board will be the management of business process re-engineering. We suggest that this board must contain the stakeholders who are initiated the diagnose of the company
Dismissal of the actual General Manager
Justification:
* Remind that this study come from the initiative of the stakeholders or in our opinion a person appointed in this responsible position must be pro-active neither reactive or worst inactive till now
Dismissal of the actual Human Resources Manager
Justification:
* Bad management during the merging process (neglecting the implications of this shock in the two parts of the process, inadequate negotiations regarding the wages of the personnel, neglecting the aspects of melting organizational cultures between two parties, ignoring the new direction of the company)
- Appointing a new Human Resource Manager recruited with the support of the well known head hunting agency;
Justification:
* The re-designing of the new organization must be a professional work and we are suggested that INFORMATIX need a professional HRM. The management must take care with this action because we consider this as a basement for the new organization.
Make public the Change Implementation Plan
Justification:
* The program must be shared with the organization in order to be known and agreed . In the same time we suggest to the Board to collect the people opinions and make corrective actions if this opinions are justified.
Define and Implement of the Project Management Office. Define the Roles and the Responsibilities
Justification:
* According with the assumed mission the INFORMATIX is a "system integration company" and this new structure must manage the Bid Management process and the Project Management process. This must become the heart of the business in the re-designed business process.
Implement the proposed structure from the Appendix
Justification:
* The company must become more agile, the time consuming meetings must disappear and the communication process must be easier. In the new structure the major processes of the organization were addressed:
o Human Resource Processes- People Management Director
o Marketing and Corporate Affairs Processes- Marketing Director
o Sales processes- Sales Department directed by a Sales Director
o Financial and Logistic Processes-Financial Director
o Technical Processes- Concept and Consulting Services, Solutions Design, Maintenance- Technical Director
o Project & Bid Management Processes - Project Management Office - Project Management Director
The positions must be open to the actual personnel or for the outside candidates.
The project plan for this severe and major change was shown in Appendix 3.
4. CHANGE IMPLEMENTATION PLAN
We are using the Microsoft Project in order to schedule this ambitious Change Implementation Plan which was shown in Appendix 3 .
We are representing only the first phase of the process of change
Cherrington (2003) found that
"Some evidences of resistance to change are very overt, such as wildcat strikes, work stoppages, turnover, and protests about a proposed change. Resistance to change may also be very subtle and indirect, such as dissatisfaction, grievances, requests for transfers, absenteeism, and excessive damage to machines, and conflict among members of a work crew".
In conclusion in our change implementation plan we must address the resistance to change of the individuals and organization, too. We must be very sure that successful changing of the each member of the organization don't means that we are changing the organization as a whole. Resuming in few words the most used methods to overcome the resistance of change:
- Education and Communication
* Each change must be announced to the organization in order to benefit in full from its advantages : eliminating the ambiguous situation , offer to the people convincement in the changing measures in order to become supportive.
Must be used in our case because of the lack of information and high level of uncertainty.
- Reinforcement
* Incentives
Must be used in negotiating new positions, roles and responsibilities in order to increase the employees perceiving of the fair exchange.
* Coercion
Must be used in the execution of our Change Implementation Plan because we need maximum speed in the achieving objectives
- Peer Group Influence
Must be used in the phase where the draft change implementation plan need recommendations or creative ideas
ID
Task_Name
Duration
Who Does
Overcoming Resistance to Change
Appoint the Change Management Board (CMB)
0 days
Board of Directors HQ
2
Recruit new HRM
40 days
CMB
3
Recruit new Country Operating Officer
40 days
CMB
4
Prepare the General Assembly of the Personnel
0 days
CMB
5
Financial Statement Preparation
0 days
Financial Manager
6
Draft Change Implementation Plan
0 days
Consultant
7
General Assembly of the Personnel
day
Personnel
8
Communicate Dismissal of the actual GM
day
CMB, Regional Manager
Education Communication
9
Communicate the temporary GM
day
CMB, Regional Manager
Education Communication
0
Communicate the Dismissal of the actual HRM
day
CMB, Regional Manager
Education Communication
1
Communicate Draft Change Implementation Plan
day
CMB, Regional Manager
Education Communication
2
Collect the proposals and feedback from the organization
20 days
Education, Communication, Peer Influence Group
3
Appoint the new HR
day
CMB
4
Agree the Change Implementation Plan with COO, HRM
20 days
CMB
5
Agree the new structure of the organization
5 days
CMB, HRM, COO
Peer Influence Group
6
Agree the new business processes
0 days
CMB, HRM, COO
Peer Influence Group
7
Define the Roles and Responsibilities of the positions
5 days
CMB, HRM, COO
Peer Influence Group
8
Define the Payment Scheme
5 days
CMB, HRM, COO
Peer Influence Group
9
Appoint the new COO
day
CMB, HRM, COO
20
General Assembly with the Personnel
3 days
Personnel
Education Communication
21
Appoint new COO, HRM
2 days
CMB
Education Communication
22
Make public Change Implementation Plan
2 days
Education Communication
23
Make public the new structure of the organization
2 days
Education Communication, Reinforcement
24
Make public the new business processes
2 days
Education Communication, Reinforcement
25
Make public the new Roles and the Responsibilities
day
Education Communication, Reinforcement
26
Starting Internal Recruitment Process
day
27
Starting External Recruitment Process
day
28
Recruitment Process
20 days
29
Going live with re-designed organization
day?
Reference
Tesauro Management Counselors (2004), Mergers and Acquisitions Business Integration,
Retrieved March, 10, 2004 from http://www.tesauromc.com/whitepapers/mergers.htm
David J. Cherrington. OB 320 Introduction to Organizational Behavior , Organization change and development.Retrieved March, 10, 2004 from http://prince.byu.edu/so_courses/so_convert/OrgB320/Lesson%2017/ch17.pdf
Short Guide for Organizational Assessment. .Retrieved March, 10, 2004 from
http://www.universalia.com/files/samples/QABrochure.pdf
APPENDIX 1
Organizational Structure 1994-1998 INFORMATIX srl
Organizational structure 1998 INFORMATIX srl
Organizational structure 1999-2002 INFORMATIX srl
Organizational structure 2003 INFORMATIX srl
CHANGE PROPOSAL
APPENDIX 2
997
998
999
2000
2001
2002
2003
Revenue
$9,000,000
$10,800,000
$12,000,000
$12,000,000
$12,000,000
$14,000,000
$15,000,000
Employees
30
32
33
30
40
40
80
ARPE
$300,000
$337,500
$363,636
$400,000
$300,000
$350,000
$187,500
Market Share
0.00%
1.00%
2.00%
2.00%
20.00%
22.00%
22.00%
Average time Inquiry to Order
5
7
9
9
2
4
24
Complains
36
39
42
40
45
60
90
Initial employees medium wage
250
300
400
450
450
500
525
First merger employees medium wage
600
600
600
Second merger employees medium wage
800
APPENDIX 3
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