Assignment One - Change Management
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The article by Hofstede (1993) on frequent-flier games: the problem of employee abuse discusses how employees in airline industry abused the frequent flier bonus that was introduced by American Airlines in 1981. Airlines gave both employees and customer bonus points if they enrolled in frequent-flier program and they would benefit by getting a free flight or receiving an upgrade in their account (Petersen & Winship, 2005). However, employees started abusing it and it led to the rise of self-interests, goal conflicts, information and control problems. Organizations started formulating policies that aimed at preventing employees from misusing their bonus schemes (Hephaestus Books, 2011). This article recommended that organizations should abandon their efforts of tracking the awards given to employees’ mileage and making the goals of employees and management compatible. The article of Mumford on corporate governance and financial distress gives reasons why most companies face financial distress (Scherr, 2003). It tries to explain why corporate governance could contribute to an organization facing financial distress. This article then shows the five main procedures that companies may adopt when faced with financial distress as defined by the United Kingdom law. These procedures are administration by the court, company voluntary arrangements, receivership by an insolvency practitioner, liquidation and dissolution (Jostarndt, Rudolph & Bernd, 2007). Moreover, it shows measures that companies put in order to protect their stakeholders in case a company faces financial distress and it is under the risk of liquidation. It then explains why some of the accounting rules fail in protecting companies from facing a financial distress. The author also uses the literature by Leuz et al. to explain how the use of financial instruments affects insolvency laws. The paper by Danny Miller on Icurus Paradox tries to explain why big companies in America have contributed to their own downfall. This is because most managers in American companies are not sensitive to the market demands and they only set short-term goals (Altman & Hotchkiss, 2010). Miller gave three trajectories that made big companies lose their competitive edge in America (Miller, 1990). These trajectories were the focusing trajectory, the venturing trajectory, inventing trajectories and decoupling trajectory. The focusing trajectory turned craftsmen to tinkers while the venturing trajectory turned builders to imperialists. The inventing trajectory turns pioneers to escapists while the decoupling trajectory turned salesmen to drifters. In addition to this, it explains how leadership traps, monolithic cultures and skills can contribute to organization failure (Hawawini, 2010).
The three papers have several similar ideas. They have explained how corporate governance can contribute to organization failure. According to the research, the ownership structure of a company greatly influences whether a company will succeed or fail in the market (Finch, 2012). Companies can either be owned by the state, privately owned or be multinational enterprises. The owner manages most privately owned companies. The owner may not have the necessary managerial skills to run the company and, thus, the company may fail due to the poor management skills by the owner. A public company is mainly owned by shareholders. Conflict of interest between the management team and the shareholders may arise since the shareholders would be expecting to earn high returns in the form of dividends while the management may concentrate on making long-term investments (DePamphilis, 2011). The conflict between management and the shareholders may result in organizational failure since they all have different goals and it may lead to some shareholders withdrawing their investments from the publicly traded company. The financial structure of a company can also lead to organization failure. The proportion of debt and equity that the firm holds in its capital structure mainly determines this. If a company mainly sources its funds from debts, there is a risk that it may face liquidity problems (Zinkin, 2011). These papers also showed how a conflict between management and employees might lead to the failure of an organization. Conflicts between employees and management may arise due to the several reasons. One of the reasons is where management assigns unrealistic deadlines and expects the employees to finish tasks before the deadline lapses (Birgham & Ehrhardt, 2010). Furthermore, some companies do not involve the employees while making changes in an organization. Due to this, the employees resist these changes since some of the changes may reduce their span of control in addition to affecting their skills. Management may also conflict employees since in some instances the employees misuse the resources and benefits offered to them (Solomon, 2011). Some organizations give their employees free cars to travel by as a way of motivating. Despite being given these incentives, the employees may misuse this car by renting it to other people in exchange for money. These papers also showed how a manager or a leader in an organization could contribute to the failure of an organization. Some managers only concentrate on their own personal success without considering the consumers’ welfare. It makes them concentrate on the achievement of their own personal goals. Due to this, they fail to formulate policies that will add value to consumer’s brand and thus it reduces the level of consumer satisfaction. Some managers also concentrate on their previous success and, thus, they fail to formulate strategic plans that will ensure an organization increases its profitability. Competitors may take advantage of this fact and create new ideas leading to the production of new goods that increase market competition (Knell, 2006). All the three papers also showed how organization culture could contribute to the failure of an organization. Some organizations have a culture of adhering to strict organization policies despite the situation that an employee may be faced with. Due to this, the employees are not allowed to come up with creative ideas that will help to solve organizational crisis.
Effective management in organizational change is important due to several reasons. It helps in setting clear goals and objectives during the change and it helps in ensuring that these goals are in line with the vision of the organization (Paton & MCCalman, 2008). Furthermore, an effective management helps in ensuring the formulation of plans that are achievable and will help the organization to benefit from the process of organizational change. Effective management during organizational change also helps in improving communication during the process of change. Communication is important during the process of change. This is because it helps the management monitor the progress of a particular change and, thus, they are able to know if the strategy adopted was effective (Hiatt & Creasey, 2003). It will help in preventing organizational failure and, thus, ensuring the success of managing changes. Good management of change also helps in ensuring the motivation of workers during the change process. Employees become motivated if they are involved in the formulation of the plan of a particular change process. Due to this, they will dedicate their efforts in the implementation of a particular change and, thus, ensuring the success of this change. Effective management of change also helps in the development the employees’ skills (Macey, 2010). This is because managers will concentrate on training the employees in order to improve their skills so that they are able to implement a particular change.
To conclude, this assignment was really important since it showed me how some of the management policies may contribute to organization failure. I came to learn how success of a particular company might contribute to the failure of this company since managers start living in a comfort zone without considering the market needs. I also learnt the importance of restructuring or changing corporate governance in order to ensure the success of any company. I also got a clear picture of why effective management was important for any change to be successful.
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