Term Paper on "Organizational Change in the Past, Many Organizations"

Term Paper 11 pages (3484 words) Sources: 9 Style: MLA

[EXCERPT] . . . .

Organizational Change

In the past, many organizations with a huge potential for success failed because they feared change. Instead, some of these organizations remained committed to the types of behavior that initially brought them success, refusing to change with their growing business demands. However, while many organizations have been hampered, or even destroyed, by a failure to make those changes necessary to cope with today's rapidly changing corporate environment, other companies have thrived because of a willingness to embrace modern corporate changes. A brief overview of recent examples of companies that have embraced change in the recent past, demonstrates the importance of corporate flexibility and organizational change. In addition, examining successful change highlighted the fact that internal corporate change, while responsive to external factors, could also help shape external factors; allowing a company to benefit from the type of external changes that are presenting challenges to its competitors. Furthermore, experience has demonstrated that those companies that most actively resist change are the companies that actively resist long-term success:

Long-term success demands constant reinvention. Research done by Mackey and others shows that most fast-growing companies hit a point somewhere over $50 billion in revenue at which they falter. By then, growing apace demands billions of new sales every year. Rarely is the original, unchanged business model up to the job. The only way around the challenge: Nurture the next growth platform long before it's needed.

One of the secrets of expansion in the business world has been for existing companies to meet expanding customer demand. For years McDonald's was the world's fast food leader. At one point in time it opened a new location somewhere in the world every few hours. For a long time McDonald's strategy worked; it outpaced all of its competition in the fast food market in both number of locations and profitability. However, as one might expect, McDonald's eventually reached a saturation point in the market. "While overall revenue kept climbing, the new sites stole customers from existing locations." The result was an unacceptable decline in same-store sales, which had the effect of reducing the profit potential of each additional location. The era of endless expansion was over. However, it took new leadership to recognize that McDonald's had to change its focus. In 2004, James Skinner became McDonald's new CEO and he ushered in a new era of expansion for McDonald's, which focused on increasing the company's responsiveness to customer need rather than simply expansion. Instead of looking for new business locations, Skinner focused on finding new business opportunities in existing locations, by looking for unmet need in the fast-food market.

One of the interesting aspects of McDonald's change depended upon the nature of a franchise-based corporation. In order to institute organization-wide change, McDonald's had to convince thousands of small business owners to embrace organizational change. One of the first things that McDonald's recognized was that there were several unmet needs in the fast-food market. First, they realized that there was a market for food that existed outside of traditional meal hours. Therefore, one of the first pushes that McDonald's corporate office made was to encourage its individual restaurant owners to expand business hours. Mere expansion of hours was not the goal; the corporate office wanted the individual business owners to go 24/7. The problem with that strategy was that each restaurant that went to a 24/7 business day had to reorganize its individual business. Payroll, utilities, staffing, and management all had to undergo significant changes in order for these individual businesses to move to 24-hour service. Not surprisingly, the corporate decision was met with some hesitation by individual business owners. These doubts seem founded when the initial move to 24/7 did not result in an immediate increase in profits. However, owners who hung in through the transition period saw an increase in profits.

Of course, McDonald's new business strategy was not focused solely on expanding business hours. Instead, it focused on four different areas, all of which required a change in corporate mentality. For a while McDonald's was innovative about foods, but did not do thorough market testing, almost as if they believed that consumers would purchase almost anything. However, after the failure of several ideas, such as the McSalad Shaker, McDonald's realized that new foods had to be easy to eat, easy to prepare because of high turnover, and quick. In addition, while McDonald's has continued to search for new products; it also turned to other ways to meet customer demands, which included changing restaurant design and style and incorporating elements like coffee bars into some restaurants. These changes, while difficult for some of the individual restaurant owners to embrace, have brought a significant upswing in corporate image and profitability, demonstrating the importance of flexibility in the corporate world.

Like McDonald's, Disney had incredible brand recognition and a history, though not a recent one, of tremendous corporate success and growth. However, recently Disney's troubled corporate culture had made it less and less successful. While many have sought to credit Michael Eisner's successor Bob Iger with the corporate turnaround, Iger has given a tremendous amount of credit to Eisner, by acknowledging that Eisner laid the groundwork for Disney's recent remarkable profits. However much respect Iger may have had for Eisner, that respect did not extend to Eisner's corporate structure:

Behind the scenes he has upended Eisner's centrally planned company, hacking away at the bureaucracy and unshackling a group of veteran executives to plot their own courses. Putting Disney movies and ABC shows on the iPod is not just groundbreaking. it's a reflection of a faster-moving and more aggressive Disney.

However, Iger has refrained from some of the changes that promote the most fear in management. He did not replace Eisner's team of executives, but merely unleashed them from Eisner's central control. In fact, the reduction of centralized control has become a hallmark of the new Disney, and may become a hallmark of Hollywood CEOs. What Iger seemed to realize was that it was not the personalities involved in Disney that made the environment toxic, but the environment itself:

One of the first things Iger did was make the Monday morning meetings less autocratic.

Where Eisner held court, Iger encourages a conversation. Even his office is more inviting. Out went the drabness of the Eisner years. In came airiness, family photos, and a cigar store Indian Iger found in the basement of the ABC building in New York. He hangs his suit jacket in it.

These changes were not merely superficial, for example, Iger took steps to encourage visits from his people and also made the efforts to get out and talk to his employees. In addition, he has taken the bold step of talking to former Disney executives who may have the ability to give him insight into how to run Disney successfully without Eisner. These changes have made an incredible difference in the corporate environment, infusing people with a positive attitude that seems to bode well for future success.

However, neither McDonald's nor Disney have embraced the same type of change as some of the more innovative and successful companies, because their approaches to business have always focused on the financial bottom line. Today corporate change is as likely to involve concerns other than profit; and these concerns have actually been shown to boost profitability. For example, Unilever made the environment and social concerns a main part of its corporate strategy, which has helped its bottom line. Unilever was not the only company to recently shift towards a more eco-friendly approach. On the contrary, companies as diverse as Dow Chemical, Nintendo, Toyota, GlaxoSmithKline, and Target have all concentrated on environmental and social concerns, which have paid off for those companies. One need only look at the history of corporate polluting in America and workforce exploitation worldwide to realize that focusing on real sustainability presented a major change for these corporations. However, more and more CEOs have been embracing sustainability, and have recognized that doing so "can help avert costly setbacks from environmental disasters, political protests, and human rights or workplace abuses."

However, even when changes have been successful, they have not always been welcomed. One important example of this truism was Klaus Kleinfeld's being named the CEO of Siemens. Prior to Kleinfeld joining Siemens, the company was well-respected for its "engineering prowess but derided for its sluggishness." Kleinfeld's entry as CEO changed that image: "just two years after Kleinfeld took over the Munich electronics and engineering behemoth, Siemens is on track to hit its aggressive internal earnings targets for the first time since 2000." However, workers at Siemens have not celebrated Kleinfeld's success; on the contrary, his efforts have been met by internal discontent and protest. Some discontent was to be expected; in order to change Siemens' performance; Kleinfeld had to restructure the organization. For example, "he spun off underperforming telecommunications-gear businesses and simplified the company's structure. And when one group of managers failed to deliver, he broke up an entire division." In fact, Kleinfeld's… READ MORE

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