Case study: management of Innovation at Business Database Company.

• Employees need to feel appreciated and needed (Elton Mayo's Hawthorne experiments and Maslow's hierarchy of needs both highlight this fact) and redundancies typically have the opposite effect. So redundancies may lead to low morale and low levels of motivation among the workforce.
• The remaining employees may feel a sense of loss commitment for their job and career.
• In the short-term such a strategy can be a serious problem because the cost of pay-offs can be quite high.
• The rumours of redundancies which are likely to spread via informal communication may even lead to sabotage.

If BDC intend to adopt this approach I would suggest the following actions:

• Communicate with the workforce openly.
• Explain the objectives of the rationalisation, the scope and extent and timeframes involved.
• Treat the staff involved with dignity and respect.
• Provide counselling, support and job search services to the staff involved.
• Make the redundancy package reasonable and acceptable. Current government legislation allows 1 week per year of service. I propose that BDC offer a more enhanced redundancy package to make it more attractive for the targeted employees.

Adopting the above approach will have the effect of avoiding the 'rumour' issue, providing a reason for the actions and offering reasonable terms to those involved.

To understand the causes of these problems BDC may consider scanning their internal and external environments. In order to find out how their employees actually feel about introducing a new product and the current situation, a survey could be carried out. The managers can then take into account people's behaviour, motivations and attitudes when making decisions. Such an approach also has the benefits of communicating BDC's intentions and ensuring the involvement of the staff in this decision. Staff will feel more committed as they will begin to feel valued by the firm.

Analysis

 The aim of most businesses is to make a profit and sustain high revenues. Further with companies, in the software market, like BDC innovation and market leadership should be made a priority in order to achieve these revenues. Innovation requires change. However change allows for freedom of new ideas. Without changes in the workplace BDC would be stifled with old traditions and soon fall behind its competitors. As Winston Churchill once said "there is nothing wrong in change if it is in the right direction. To improve is to change, so to be perfect is to have changed often". The implementation of change may also highlight strengths and weaknesses of different departments.  

Resistance to change is expected. The hostile environment at BDC is not a good platform for such an important move. People's concerns must be acknowledged, listened and responded to. According to Kurt Lewin, a pioneer in the field of social sciences, one of the reasons why workers might find a change programme threatening is due to the fact that they don't have the skills and abilities required. This exactly what the problem is at BDC and some of the senior workers have already voiced their concerns regarding the new systems.  

The employees at BDC have not been consulted about the change and it seems the majority of long-term employees don't understand what is happening hence the resistance. This in turn leads to lower productivity and has adverse effects on customer service. "A survey has shown that increasing the levels of participation in innovation, training and personal development were ranked higher than financial motivators as a reward."(Tidd 1998,p.318)  

At the moment some senior workers do support this change. However what is clear is that staff needs to be properly informed and trained in order to be more productive and motivated. This is not a bad thing as increased flexibility and training could be presented as an opportunity to follow new career paths. Training has been proved to be a great motivator because it makes employees feel valued by the company.  

One of the founders of humanistic psychology, Abraham Maslow came up with something known as the Hierarchy of needs. This is a framework which consists of lower levels representing the lower needs such as food and shelter, and the higher levels representing the need for self-actualization.

Maslow believed that employees should be able to move through the needs to the highest level provided they are given training and education to promote this growth. In Maslow's terms this training would allow employees in different departments at BDC to move closer to a greater feeling of self worth. 

So by taking Maslow's theory into account one of the best ways to avoid staff resistance is to ensure that people are motivated, which would help in dealing with this situation. The employees need to be open to an innovative or different approach to the new business situation. However Cash and most other departments seem to be happy with a comfortable routine.  This complacency can cost the business a lot of money because it shows no concern for the future of the company.  

However there will always be people who disagree and ultimately you cannot please everyone. Those who disagree or who can't adjust must be treated with dignity and respect and every option must be explored to see if these staff can be used in alternative positions within the new organisational structure to make use of their knowledge and skills. 
 
 

Recommendations 

A meeting for all staff should be called to tell them about the future plans to avoid rumours that are likely to spread via informal communication.  

Managers should always examine their external environments and keep a close eye on the competition. If  BDC wants to ensure it has the competitive edge over its rivals it should make its employees aware that resistance to change and failure to constantly adapt to new markets can 'kill' the company.  

The organisation should not be afraid to make changes now while it is still successful and before changes become crucial for survival. The managers need to create a climate where the employees understand that change is a continuous process.  

A clear strategy and direction are required. Does the firm really want to change to a more customer-led and technology-driven approach?  

By having a more customer-led approach and encouraging innovation BDC can achieve a greater competitive advantage and higher revenue growth. On the facts given it can be seen that the new product is already making money and attracting new customers.  What is needed at BDC is corporate commitment from all departments.  

Without employee support no change will succeed. Hence it is imperative to gain the support of people in the organisation in order to bring about change.  After the reasons for change are agreed with the top management they should be explained to all employees so they feel part of the whole process.

The studies and experiments conducted by Elton Mayo proved that workers were affected by the degree of interest shown in them by their managers.  The influence of this upon motivation is known as "the Hawthorn effect". Hence I believe BDC needs to invest in their workforce by training and developing them and realize the long term benefits it can bring. This could break the resistance and actually motivate people.  

Initially, it doesn't necessarily take too many committed employees to make the change. Simon Hodges is deeply involved in the project. However he hasn't got the organisational power to get the project going ahead. I recommend that BDC senior management authorise the organisational and project changes suggested by Mr Hodges and place him with initial responsibility for implementing the same. This could help to remove some of the obstacles to innovation.  

The company also needs a more flexible structure to enable it to respond rapidly. One way this could be achieved is by changing the leadership style. At the moment this is autocratic in its nature. Everything is done according to procedure and policy and managers manage 'by the book'. This results in employees developing work habits that are hard to break, especially if they are no longer useful.  

So I believe that BDC needs to adapt a more participative style that actually encourages employees to be part of the decision making process. Douglass McGregor identified this style of management as Theory Y managers. Theory Y assumes that employees are naturally creative and desire responsibility. The case study shows that that is the case with Simon Hodges and the task force team. They are eager to take control and make a success of the new potentially profitable product. In the long run this approach management may increase motivation within the workplace and consequently increase efficiency.  

NUMMI is a Toyota plant in America which has developed a system whereby people who give suggestions are given the power and responsibility to carry them out. A lean approach is used to achieve efficiency. This sort of management would also go in line with Theory Y management. Perhaps by benchmarking against NUMMI and other similar organisations BDC could learn how to do things better and discover solutions for its own problems. 

Alternatives

In the future, BDC needs to spot problems and resolve them quickly and to take proactive measures in order to be able to manage their rapid growth.  

In order to be leaner and more efficient BDC has to improve its internal communication network. It is clearly a problem at the moment and should not be overlooked because it can make the difference between business success and business failure. I suggest that employees are encouraged and trained to use new technology so that they can make better-informed decisions.  

At present employees are too cautious and focused mainly on paper work and not concerned about creating something better. Job enrichment could be a method of motivating people. BDC's bureaucratic, inward-looking environment is partly to blame. Instead of doing things in the same repetitive way, employees should be offered a little challenge. The managers at BDC need to think of a way to provide more variety to the work. As Herzberg pointed out: "The more a person can do, the more you can motivate them." 

Staff should be empowered at all levels in the organisation. This means that BDC should encourage staff (and management) to take direct responsibility for trying to improve their job. This could be done by allocating new roles and responsibilities. In the long-run all would benefit and the working lives can become more interesting as workers have more power and control.  

Plan of action

At the beginning of the report I stated that the four main problems were; organisational inflexibility, resistance to change, company culture and the leadership style. These have been discussed in the body of the report. Below is a plan of action to address these problems. 

• Before any action can be taken consent from the General Board is required.

• A business plan has to be composed which describes what changes are going to be introduced and what the company intends to do.

• The business plan needs to include details of costs and planned/potential revenue.

• If BDC chooses to adopt a more flexible leadership style it would also be required to review and update their business plan in order to synchronise one with the other. BDC would carry out the restructuring of the organisation and rationalising in line with the business plan. The business plan would provide a clear set of goals for the management and staff to target and to be measured by.

• A number of factors should be considered such as: the roles of individual employees and the amount of capital required to introduce the technological change.

• Conduct a meeting with staff representatives and then an 'all hands' meeting with all staff to explain BDC's strategy, business plan and proposed changes.

• Conduct a survey / staff interviews to obtain staff viewpoints and suggestions.

• Where possible and practicable, incorporate these suggestions into the strategic plan.

• Start small. It may be wise to lead the majority by example and by implementing the initial changes in a small area. The obvious candidate for this area is Simon Hodges.

• The managers could review the current departments and employees should be interviewed to identify some of the problems in the internal environment.

• Training. Selected BDC management should receive training regarding the use and practise of McGregor's Theory Y approach which is more democratic in its nature. It may help the company to overcome the problems of change and motivate employees at the same time.

 This report has highlighted areas where there are concerns and changes are required. If implemented, these changes will help BDC adjust and transform their business and help them achieve the flexibility required by such a business.  

Bibliography:

• Marcoise, I. (1999), Business Studies, London: Hodder & Stoughton.

• Huczynski, A. (2001), Organisational Behaviour, London: FT Prentice Hall.

• Tichy, N. (1983), Managing Strategic Change. Chichester: Wiley.

• Belbin, R.M. (1993), Team Roles at work. Oxford: Butterworth Heinemann.

• Mouzelis, N. (1975), Organisation and Bureaucracy, London: Routledge & Kegan Paul.

•  Tidd, J. (1998), Managing Innovation, New York: Wiley.

• Kanfer, R. (1994), Work motivation: New directions in theory and research, Chichester: Wiley.

References:

• Finney, R. (1999 – Copyright date), “Creating Interest and Overcoming Resistance to Change” (The itmWEB Site), Available:  (Accessed: 2003, February 25 )

• “The vital nature of the effective management of change”, Available:  ( Accessed: 2003, February 28 )

• (2000 – Copyright date), “Change management: Force Field Analysis” ( Accel-Team.com), Available:                                                                   ( Accessed: 2003, March 8 )

FOB Case Study:                                                                                                              

Management of Innovation at Business Database Company

Library card number: 0217871

Number of words: 2565