BIS 3342 PAIR’S WORK

A REPORT ON CONSENSUS DECISION MAKING AND THE IMPORTANCE OF CHANGE MANAGEMENT IN THE STRATEGIC

MANAGEMENT PROCESS BY

SHARON KEKWE MOMIE - M00297277 DANIEL C OKOLI – M00478402

[Type the author name]

Thursday, 03 July, 2014

[Type the abstract of the document here. The abstract is typically a short summary of the contents of the document. Type the abstract of the document here. The abstract is typically a short summary of the contents of the document.]

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INTRODUCTION

Strategic management entails both strategic planning and implementation, and is ―the process

of identifying and executing the organization‘s strategic plan, by matching the company‘s

capabilities with the demands of its environment. (Gadiesh and Gilbert 2001)

There are several processes involved in how a company carries out strategic management and

the impact of these processes on organizational performance as well as the achievement of its

strategic objectives in order to remain competitive. However, the focus of this report is on

two strategic management processes including strategic decision making with particular

attention to the strategic consensus decision making process and the strategic management of

organisational changes (also known as change management) which is the result of decision-

making.

At the end of the report, the reader will gain an understanding of the importance of these two

strategic management processes and their significance to the strategic efforts of a business to

remain competitive.

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CONSENSUS DECISION MAKING

Consensus management is gaining ever more recognition in business as a success factor in

dealing with conflicts and creating personal responsibility. Here the selective application of

external moderation, individual and group discussions enhances the dialogue, cooperation

and structuring capacities of the conflicting partners. The direct recourse to moderated

methods makes for surprisingly quick and long term stable agreements and transfer.

Consensus decision making is a process used by organizations seeking to engender common

levels of involvement and harmony. (Hartnett 2014)

The process of group negotiation has many common elements that clearly define the process

of consensus decision making. These include:

Inclusive: As many stakeholders as possible are included in group deliberations.

Participatory: The environment encourages contribution from all group participants in the

deliberations.

Collaborative: The group constructs proposals with input from all interested group members.

Any individual authorship of a proposal is subsumed as the group modifies it to include the

concerns of all group members.

Agreement Seeking: The goal is to generate as much agreement as possible.

Regardless of how much agreement is required to finalize a decision, a group using a

consensus process makes a concerted attempt to reach full agreement.

Cooperative: Participants are encouraged to keep the good of the whole group in mind. Each

individual‘s preferences should be voiced so that the group can incorporate all concerns into

an emerging proposal. Individual preferences should not, however, obstructively impede the

progress of the group.

CONSENSUS DECISION MAKING AS AN ALTERNATIVE

Consensus decision making is an alternative to ―top-down‖ decision making, commonly

practiced in hierarchical groups. Top-down decision making occurs when leaders of a group

make decisions in a way that does not include the participation of all interested stakeholders.

The leaders may (or may not) gather input, but they do not open the deliberation process to

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the whole group. Proposals are not collaboratively developed, and full agreement is not a

primary objective.

Consensus decision making is an alternative to commonly practiced non-collaborative

decision making processes. Robert‘s Rule of Order, for instance, is a process used by many

organizations. The goal of Robert‘s Rules is to structure the debate and passage of proposals

that win approval through majority vote. This process does not emphasize the goal of full

agreement. Nor does it foster whole group collaboration and the inclusion of minority

concerns in resulting proposals. Critics of Robert‘s Rules believe that the process can involve

adversarial debate and the formation of competing factions. These dynamics may harm group

member relationships and undermine the ability of a group to cooperatively implement a

contentious decision.

THE IMPORTANCE OF CONSENSUS MANAGEMENT

Consensus decision making addresses the issues of both Robert‘s Rules of Order and top-

down models. The goals of the consensus process include:

Better Decisions: Through including the input of all stakeholders the resulting proposals can

best address all potential concerns.

Better Implementation: A process that includes and respects all parties, and generates as

much agreement as possible sets the stage for greater cooperation in implementing the

resulting decisions.

Better Group Relationships: A cooperative, collaborative group atmosphere fosters greater

group cohesion and interpersonal connection.

Building consensus is a measured process, but it‘s essential to get everyone on board before

taking a decision. Or else, the execution will be postponed and automatically disrupted by

those who have not agreed or weren‘t involved. It‘s not just about structuring support for

your ideas. The consensus-building process seeks ideas and appraisal from everyone involved

so that the last thought is usually a lot stronger than the original. Consensus building is vital

in today's interconnected society for the reason that many problems exist that have an effect

on varied groups of people with dissimilar interests. As problems rises, the organisations that

bond with society's problems approach to depend on each other for assistance, they are

mutually dependent. The parties pretentious by decisions are often inter-reliant as well.

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Consequently, it is tremendously tricky and frequently unsuccessful for organisations to

attempt to resolve contentious problems on their own. Consensus presents a better

understanding and way for individuals and organisation to work in partnership on resolving

intricate problems in ways that are satisfactory to all.

Consensus-building processes also allows a variety of people to have a contribution into the

decision-making processes, somewhat than leaving contentious choices up to government

representatives or authorities. When government specialists make decisions on their own, one

or more of the stakeholder groups is more often than not happy, and the system in certain part

of the world like the US, commonly take legal action against the government, deliberately

slowing implementation of any decision significantly. While consensus does take time, it

slightly builds up solutions that are not held up.

Managers always attain a broad variety of understanding or insight of a problem. The

consensus-building process helps them to set up an extensive understanding and structure for

mounting an answer that works for everyone. The process also furthers the examination of

combined increase and integrative solutions and authorizes managers to contract with unified

matters in a solitary discussion. This allows them to make trade-offs between different

matters, and permit the expansion of solution that meet more peoples' needs more completely

than choices that are made with no such widespread contribution. (Gray, 1989)

The operational worlds of our businesses and organisations are becoming gradually more

complex. One of the instantaneous consequences is the acceleration of the change processes.

Level-headed fault open-mindedness, on the one hand, as well as rapid and constructive

problem solving measures, on the other will therefore be crucial for forward looking

management. Change leads to doubt and create confrontation, this can array from being short

of motivation up to an active barrier of the distinct objective. More often, it is the struggle of

the affected employees and management, which cause change processes to be unsuccessful. It

makes sense then, to surface the way to acceptance through well-organized communication.

Consensus management in change processes can only be competent and victorious when the

strategic objectives of the organisation and the wellbeing of the affected people are impartial.

Starting with the grounds of the confrontation and its clash potential, the ranges of

perspectives on the problem from all parties worried are honestly unveiled and made equally

understandable, and deviate interests discovered. (Zumtobel, 2013)

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STRATEGIC CONSENSUS AND PERFORMANCE

The strategic choice perspective (Child, 1972) asserts that managers have judgment and the

decisions they make are of fundamental significance for the accomplishment of the

firm/business. The reason for that is the top management team is frequently observed as

significantly concerned in devising and implementing strategies, there has been widespread

research about the work and performances of top managers over the past 10 years. As

Finkelstein and Hambrick (1996) note: ‗If we want to understand why organizations do the

things they do or why they perform the way they do, we must examine and understand top

executives.‘

One of the aspects of the Top Management Team (TMT) is that it is important for

efficient implementation of a strategy is the degree of accordance in the middle of them

relating to the strategy. In reconsidering the previous research on consensus, we must

consider the different types of consensus and performance implications of consensus. We

then reconsider related research on group composition. A number of studies have considered

different strategies, when looking at performance insinuation of consensus. Since it has been

shown that different strategies need different implementation methods examples included by

Porter 1985 and Govindarajan 1988 and reaching consensus is a tool of strategy

implementation (Floyd and Wooldridge, 1992), it pursues the need that consensus may be

added significantly for one sort of strategy than for an alternative.

As the years have progressed, more and more companies are heavily relying on

consensus, to once again influence very drastic decisions in their company. Japanese

companies especially use the consensus decision-making process to move one forward, this

meaning that everyone in the company is discussed with and consulted on each decision. This

maybe the reason why Japanese companies are quite successful financially and have

proceeded in influencing other countries around the world, like the UK to follow this

movement.

CONSENSUS AND THE NATIONAL HEALTH SERVICE (NHS)

The NHS relies on consensus, predominantly consensus between managers and clinicians. In

spite of the initiation of general management and the move away from a formal consensus

management structure from the 1980s onwards, NHS managers necessitate skills in

persuasion, finding the middle ground and influence to accomplish their goals perhaps further

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more than managers in other sectors. The tension amongst the wish for an obvious sequence

of authority and the professional independence of clinicians has been a continuing feature.

As the government's response to the 1983 Griffiths report states: 'we do not undervalue the

importance of consensus in a multi-professional organisation like the NHS. But we share the

Report's view that consensus, as a management style, will not alone secure effective and

timely management action, nor does it necessarily initiate the kind of dynamic approach

needed in the health service to ensure the best quality of care and value for money for

patients.'

Clinical management was emphasized in the 1983 Griffiths report, which recommended that

clinicians should be more closely occupied in the management process and partake in

decisions about main concerns in the use of resources. The clear involvement of hundreds of

clinicians in the process focused attention on the requirement for more clinical leadership and

engagement with management decisions.

TOYOTA AND CONSENSUS

Another example of individuals using consensus decision making successfully, are the

Japanese, most companies in Japan use this approach to better their company. This Japanese

consensus building approach before the meeting is called ―Nemawashi‖ in Japanese. In the

business world in Japan, Nemawashi means a process of ―laying the ground work‖ with

managers and colleagues internally and even sometimes externally (customers and suppliers)

as well. This is an essential requirement for the Japanese decision making process. (Kopp,

2010)

We will now have a look at a well-known Japanese company that specialises and dedicate

their time in using consensus decision-making to their fullest ability, which have now made

them renowned for their success in the car-manufacturing sector, internationally successful

and known as Toyota.

Toyota Way Principle 13 comprises the imperative process of Nemawashi: Making decisions

slowly by consensus, in detail bearing in mind all options; execute quickly. The process of

Nemawashi is frequently used to illustrate how people put together consensus by developing

a proposal and circulating it broadly for management approval. The process is used to

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develop a group consensus building process right through the stakeholders in the business or

organisation, consequently meaning that it takes time and attempts to construct the group

consensus. (Liker, 2004)

If for an example, the Nemawashi process has been successfully accomplished, 80 % of the

decision-making process has already taken place before the meeting date, which will then

mean that the remaining 20% will be consummated during the meeting to conclude the group

decisions. That is why typically there is not a lot of internal group deliberations or

suggestions of new ideas in a Japanese meeting. On the other hand, if the outstanding 20%

has major results to the overall decision, it may well be that complicated to come to some sort

of an agreement or consensus to make the final decision and may need returning to the roots

of the problem and by then reconsidering or re-negotiating circumstances and as a result, take

a longer time to come to a settled and completed decision.

There is a diversity of decision-making methods Toyota all use in different circumstances.

These ranges from the managers making a decision independently and announcing it to group

consensus with full power to put into practice the decision they agree to. The favoured

approach at Toyota is group consensus, however with management approval; although

management coffers the right to look for group effort, then making a decision and

announcing it.

In 2002, Toyota was in scenario in which they became alert that a planned mega-

development near its Arizona Proving Ground endangered the long-standing water supply of

the whole surrounding area. Toyota took legal action to end the developers and worked to get

a citizens committee prearranged to protest the plan. However, instead of taking an opposing

approach, Toyota attempted to organize and obtain consensus from all the parties that were

involved—the developer, the surrounding towns, and their local governments, in which they

explored other regions and solutions that could benefit them all. In the end, the developers

settled to place aside 200 acres and disburse more than a few million dollars in

communications costs to create a groundwater replenishment site. Mallery, who led the

consensus-building process, explained:

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The Mayor, the developers, and the citizens‘ committee—all of the contending parties agreed

that Toyota had served each of them well and had satisfied all of the parties from each of

their perspectives. The town ended up with a more responsible, long-term solution to

groundwater subsidence concerns, the problem was solved for the developers, who would

have had to address it eventually—maybe 30 years from now. And it helped the surrounding

communities that are concerned about irresponsible growth. Everyone came away with

greater respect for Toyota—not only what Toyota did but how Toyota did it. It is, what it is

and the how that makes the difference—protecting the land for the next 50-100 years, not just

for the short term.

In simple terms, instead of turning this issue into a big major problem and it turning into

some sort of disagreement, Toyota used the power of the consensus to crush out any sort of

trouble. Through this decision making process, both parties had come out winning. The

complete development within Toyota in terms of the preparation, getting to the bottom of

problems and decision-making is very vigilant to every detail.

For managers, how they arrive at the decision is just as significant as the quality of the

decision. Taking the time and effort to do it correctly and accurately is compulsory. In fact,

management will pardon a decision that does not work out as predicted, if the procedure used

was the correct and accurate one. Mallery enlightens us by saying: ―Achieving consensus…it

is a belief in reason”. This is a powerful statement and the secret is simple, in order for the

effortlessness and faultless implementation of new initiatives is vigilant and frank planning

by managers who are able to lead. The philosophy is to look for the utmost involvement with

management appropriate for each circumstance.

ORGANIZATIONAL CHANGE MANAGEMENT

After strategic decision making comes the implementation of the decisions. The changes

required to implement strategy coming from decision making validate the need for change

management.

The pace of advancement has never been faster than in the present business environment.

(Balogun and Hope Hailey, 2004; Burnes, 2004; Carnall, 2003; Kotter, 1996; Luecke, 2003;

Moran and Brightman, 2001; Okumus and Hemmington, 1998; Paton and McCalman, 2000;

Senior, 2002).

Therefore the demand for change management has equally escalated.

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Change is a persistent feature at the strategic (and operational) level of every organisation

(Burnes 2004). Businesses are required to constantly adapt to the changing business

environment in order to maintain their position in the market and especially if they must

expand organisational capacity. The motive for growing organisational capacity is to increase

the ability of the business to perform and out-perform competition (Biedenbacha and

Soumlderholma, 2008) (Booth 2010).

Therefore, it is crucial that an organisation decide where it needs to be in the future, and how

to manage the changes required getting there. Consequently, organisational change goes hand

in hand with organisational strategy, or vice versa (Burnes, 2004; Rieley and Clarkson,

2001). Change management is therefore a highly coveted managerial skill in the light of the

strategic importance of organisational change (Senior, 2002).

Graetz (2000: 550) specifically says ‗Against a backdrop of increasing globalisation

deregulation, the rapid pace of technological innovation, a growing knowledge workforce,

and shifting social and demographic trends, few would dispute that the primary task for

management today is the leadership of organisational change.‘

Change management is therefore said to be a structured approach to transitioning individuals,

teams, and organizations from a current state to a desired future state. (Balogun 2004)

Change management has also been defined as 'the procedure of continually renewing an

organisation's direction, structure, and abilities to meet the ever-varying needs of customers.'

(Moran and Brightman, 2001: 111).

Change agents are people or groups who take responsibility for the change of behaviours and

existing patterns in a supportive manner (Wood et al, 2010). The perceived risks however,

are the responsibility of the organisation‘s leader who decides on the direction of the change

(Oakland & Tanner, 2007).

STRATEGIC IMPORTANCE OF CHANGE MANAGEMENT

From what has been stated so far, it can be deduced that organisational change not handled

properly can sabotage organisational strategy and ruin a company‘s performance in the

market.

There are several other reasons why change must be managed:

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1. Change becomes a planned and managed process. The benefits of the change are known

before implementation and serve as motivators and assessment of progress (Kotter 1996;

Senior, 2002).

2. Employee performance increases when staff feel supported and understand the change

process. Change is a process that can be chaotic for people and exerts profound effect on their

feelings, thinking, performance, and physiology. (Satir 1978)

Kubler-Ross corroborates on this humanistic view of change in saying that people go through

a process of grief when faced with change.

Poorly managed change results in speculations and resistance to change, exaggerating the

negative aspects of the change (DiFonzo et al., 1994; Smelzer and Zener, 1992).

The most common reasons employees are resistant to change are:

It creates uncertainty about their future or the future of the organization

The status-quo mentality which is an intrinsic nature of individuals makes their

resistance to change natural

Change threatens security

New people, processes and systems are not trusted

They don't understand the reason for the change

Mostly it is the hard-headed resistance of affected employees and management which cause

change processes to fail (Zumtobel 2002).

So the change process must be driven by empathy – the ability of a change leader to identify

with this human tendency when confronted with change.

A congruency in some models (Satir, and Kubler Ross) on change seems to be the emphasis

on the negative aspects and difficult management with employees resisting change. However,

as Wood et al (2010) asserts, by questioning the change management process – not the

attitude of employees as people do not resist change itself but aspects of the change that

affects them personally such as fear of the unknown, status, remuneration and comfort –

better results can be achieved with change management. Resistance to these changes is a

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healthy reaction, and can be managed effectively in the beginning by ensuring

communication and certain other key processes (Balogun 1999).

TRUELOCAL AND CHANGE MANAGEMENT

This is exemplified in this instance where a major change occurred in Truelocal when almost

the entire senior management staff level was replaced including the CEO some years ago.

TrueLocal.com.au is one of the fastest growing online business directory services website in

Australia.

Truelocal needed to align its culture, values and structure with the parent company NDM in

order to meet strategic growth goals not long after it was founded. Not long after this

decision, Truelocal began flattening out the company structure lead by a new management

team and CEO.

When management at Truelocal uplifted existing management and reporting structures, staff

were initially left without direction, reporting channels, processes and goals were not clearly

communicated causing a lot of uncertainty. Consequently many staff resigned as they felt

upset and confused about what was happening.

Truelocal however, retained some of the more experienced staff with new career

development propositions and new managers were encouraging and open about future

improvements that were to take place within the organisation.

Managers know that the more planning they do to implement drastic change, the more willing

employees will be to accept change. It also means that change in processes and systems will

be quicker.

New managers were recruited by Truelocal and these managers were expected to manage the

entire change process themselves. Planned changes took place in structure, tasks and human

resource; for instance

These changes were managed by senior staff using a combination of change strategy

approaches as explained by Wood et al (2010) that include a forced approach of top down

command, one way communication, coercive reward and punishment approach,

rationalisation approach and shared decision making, empowered approach.

From this perspective Truelocal management took the right approach by varying the way they

managed the change.

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CHANGE RESULTS

The facilitation of clearer and faster communication channels enabled staff to work more

efficiently and get things done faster, along with improved technology. Further benefits of

this structure were people collaborating in teams, using initiative and increased spontaneous

communication while rules, procedures and close supervision were reduced as described in

(Tushman, Anderson & O‘Reilly, 1997).

Since the change occurred, Truelocal‘s sales department recorded a growth rate of 15% per

full time employee (FTE).

This approach not only demonstrated that processes not people are often the hindrance to

organisational change but that the organisation changes only when employees‘ behaviour

changes (Goodman and Dean, 1982; Tannenbaum, 1971).

Further evidence of the importance of change management is highlighted from the Truelocal

example:

3. Truelocal, through change management, experienced Increased return on investment

(ROI)

4. The possibility of unsuccessful change was reduced when experts were brought in to

manage the change process

5. Careful planning helped to ensure that the change process was started and managed

by the right people at the right time

6. Planned change management allows you to include specific tasks and events that are

appropriate for each stage in the change process. In Truelocal, most jobs were

redesigned including more responsibility for staff in management roles and multi-

functional tasks for other staff.

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KODAK AND ITS FAILURE IN CHANGE MANAGEMENT

Kodak was, as the Economist writes, the Google of its days. Highly inventive, highly

innovative and successfully rolling out new, sustaining innovations. This led to a 90% market

share in film and 85% of camera sales in the US. Well into the 1990′s, Kodak was rated as

one of the world‘s most valuable brands.

―By 1976 Kodak accounted for 90% of film and 85% of camera sales in America. Until the

1990s it was regularly rated one of the world‘s five most valuable brands‖. In fact, in 1996,

Kodak was ranked the world‘s fourth most-valuable brand behind Disney, Coca-Cola and

McDonald‘s.

Then came the digital revolution. This is believed to be a blow that took Kodak by surprise.

But in reality, Kodak had been sitting on the Digital Camera and digital technology since

1973. Only they were afraid of the consequences.

Kodak engineer, Steven Sasson is credited with inventing the first digital camera in 1975

(first prototypes in 1973) but only to put it away for years. When the company started

developing its digital strategies, it was too little, too half-hearted and eventually too late.

Starting 2000, the speed and size of the digital shift increased to the point of driving Kodak

into a death spiral. Yet, Kodak was attempting to innovate. Using the framework of the

Innovation Pyramid, Kodak did innovate on level one (Design and marketing) and level two

(Products). The company failed, however, in level eight (business model innovation). So

despite its launch of digital products, the lack of change transformation on the business model

level led to the eventual death of Kodak.

The company´s success and downturn makes for a world class case study in the failures of

leading change.

At its peak Kodak employed 144.000 people. Today it has less than 14.000. Soon, only a

handful. Its experience holds a series of truths valid for all companies across all industries:

successful innovation requires successful change management. (The Economist, 2012)

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CONSIDERATIONS IN LEADING CHANGE

Of all the approaches to change management, no single approach was concluded best by

researchers on organisational change and it is advised that more commonly a combination

will occur, however guidelines are offered to change agents and managers (Wood et al,

2010);

- The use of expert consultants

- Communication of the need for change

- Feedback from employees

- Avoiding change for the sake of change

- studying organisational change and structures

There is a general consensus that to properly implement change, management must take a

number of steps: involving key people, developing a plan, supporting the plan, and

communicating often.

The first step in implementing change is involving the key people; this typically means

upper-level management and other executives whose processes and employees will be

affected by the change.

After key personnel have been identified and properly involved, the second step in

implementing change is to develop a plan for effective transformation. The plan should help

to define the responsibilities of the key people involved while also laying out short-term and

long-term objectives for the changes. Because change can be unpredictable, the plan should

also be flexible enough to accommodate new occurrences.

The third step in implementing change is to support the plan; this means that management

follows through on the plan it created. Key to this step is enabling employees to adapt to the

change. Employees may need training, reward systems may need to be adapted, or hiring may

be required. If the organization does not provide the support necessary for the plan to take

effect, it is unlikely to succeed.

The final step in successful change implementation should occur throughout the change

process. Communicating with employees about what is occurring, why the changes are being

made, and how they will develop is critical. Because change can create a lot of fear, increased

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communication can be used to calm employees and encourage their continued support. In

addition to downward communication, managers should pay attention to any upward

communication that occurs. They should be available to take suggestions or answer questions

that employees might have. Creating opportunities for employee feedback, such is holding

meetings or having an open-door management policy, may facilitate change more

successfully.

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