Leadership & Change Management

11David Boddy, Management: An Introduction, 4th Edition © Pearson Education Limited 2008

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Leadership & Change ManagementLeadership & Change Management

Lecturers :-Lecturers :- Jim BowesJim Bowes

Reading Materials :- Reading Materials :- Bernard Burnes Bernard Burnes Managing ChangeManaging Change 5 5thth Edition. Pearson Edition. Pearson Senior & Fleming : Senior & Fleming : Organisational ChangeOrganisational Change 3 3rdrd Edition. Edition.

PearsonPearson David Boddy : Management An Introduction 4David Boddy : Management An Introduction 4thth Edition. Edition.

Prentice Hall Prentice Hall


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Lecture 1 Learning OutcomesLecture 1 Learning Outcomes

An appreciation of the factors driving globalisationAn appreciation of the factors driving globalisation The ability to utilise the PESTEL model in an The ability to utilise the PESTEL model in an

international contextinternational context Hofstede’s comparative analysis of National culturesHofstede’s comparative analysis of National cultures The importance of organisational structure and the The importance of organisational structure and the

various structural forms available to an organisationvarious structural forms available to an organisation The influence of contingencies on structureThe influence of contingencies on structure The learning organisationThe learning organisation


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GLOBALISATIONGLOBALISATIONManaging InternationallyManaging Internationally

The growth of international businessThe growth of international business Ways of doing business internationallyWays of doing business internationally An international PESTEL An international PESTEL Comparing national culturesComparing national cultures Globalisation – arguments for and againstGlobalisation – arguments for and against


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An overview of the themesAn overview of the themes


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Why study international aspects?Why study international aspects?

Growing value of business across national bordersGrowing value of business across national borders Raises management issues other than distanceRaises management issues other than distance

About inputs, transformation and outputsAbout inputs, transformation and outputs National contexts imply different ways of conducting National contexts imply different ways of conducting

management tasksmanagement tasks Planning, organising, leading, controllingPlanning, organising, leading, controlling

Management practices also affect nationsManagement practices also affect nations Globalisation debateGlobalisation debate


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Factors driving globalisation in an IndustryFactors driving globalisation in an Industry


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Exporting and importingExporting and importing Transporting goods or delivering services Transporting goods or delivering services

LicensingLicensing Gives right to make and sell products Gives right to make and sell products

Joint ventures and strategic alliancesJoint ventures and strategic alliances Firms share risks and resourcesFirms share risks and resources

Wholly-owned subsidiaries overseasWholly-owned subsidiaries overseas Costly, but retains controlCostly, but retains control

Ways of doing business Ways of doing business internationallyinternationally


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Alternative business structuresAlternative business structures

MultinationalsMultinationals Based in one country, operate in many (Intel)Based in one country, operate in many (Intel)

TransnationalsTransnationals Operate in many, but decentralise (while maintaining Operate in many, but decentralise (while maintaining

consistent image) (Coca-Cola)consistent image) (Coca-Cola) Global companiesGlobal companies

Closely integrated operations across many countries Closely integrated operations across many countries (Nestlé)(Nestlé)


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Using PESTEL internationallyUsing PESTEL internationally


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Political and economicPolitical and economic

PoliticalPolitical State involvement in business and its regulation?State involvement in business and its regulation? Firms in networks (Japan) or isolated units (US)?Firms in networks (Japan) or isolated units (US)? Corruption – arbitrary/pervasive Corruption – arbitrary/pervasive

EconomicEconomic Stage of development Stage of development

Poorer countries with cheap labour as sources of supply Poorer countries with cheap labour as sources of supply

MarketsMarkets Companies target countries with high demand for their products Companies target countries with high demand for their products

(tobacco, alcohol, media)(tobacco, alcohol, media) Differences in consumer preferences Differences in consumer preferences


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Social and technologicalSocial and technological

Social Social TechnologicalTechnological

Physical infrastructurePhysical infrastructure Ports, airports, local transportationPorts, airports, local transportation Communications technologiesCommunications technologies

wireless links, Internet accesswireless links, Internet access Poor infrastructure is also a business opportunityPoor infrastructure is also a business opportunity


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Environmental and legalEnvironmental and legal

Environmental (natural)Environmental (natural) Natural resources available in an economyNatural resources available in an economy

Renewable or notRenewable or not Pollution and its regulationPollution and its regulation Conflicts between business and communitiesConflicts between business and communities

LegalLegal Trade agreements and trade groupingsTrade agreements and trade groupings

WTO, European Union, Asean, Nafta …WTO, European Union, Asean, Nafta …


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Using PESTELUsing PESTEL

Focus NOT on drawing up a long list of factors, but Focus NOT on drawing up a long list of factors, but agreeing on critical ones that seem most relevant to agreeing on critical ones that seem most relevant to specific situationspecific situation

People interpret factors subjectively, as well as People interpret factors subjectively, as well as noting objective realitiesnoting objective realities

Many pay particular attention to socio-cultural Many pay particular attention to socio-cultural factors, and how they differ between nationsfactors, and how they differ between nations


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The socio-cultural context (1)The socio-cultural context (1)

Meaning of cultureMeaning of culture Patterns of basic assumptions and ways of behaving Patterns of basic assumptions and ways of behaving

that groups (including nations) develop and transmit that groups (including nations) develop and transmit to new membersto new members

Context and cultureContext and culture Low-context – meaning is clear and explicitLow-context – meaning is clear and explicit

E.g. US, Germany, ScandinaviaE.g. US, Germany, Scandinavia

High-context – meaning depends on shared High-context – meaning depends on shared experience and understandingexperience and understanding

E.g. Japan, Arab countries, Southern EuropeE.g. Japan, Arab countries, Southern Europe


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The socio-cultural context (2)The socio-cultural context (2)

Attitude to conflict Attitude to conflict Some countries see dissent as normal and healthy, and expect Some countries see dissent as normal and healthy, and expect

people to discuss conflicts (The Netherlands)people to discuss conflicts (The Netherlands) Others value harmony, especially that junior staff accept Others value harmony, especially that junior staff accept

views of seniors (East Asia) views of seniors (East Asia) Attitude to changeAttitude to change

The result of positive human action, or of events beyond The result of positive human action, or of events beyond human influence? human influence?

Attitude to timeAttitude to time An infinite resource or a scarce resource to manage?An infinite resource or a scarce resource to manage?


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Hofstede’s comparative analysis Hofstede’s comparative analysis (1)(1)

Distinguished five dimensionsDistinguished five dimensions Power distance (high or low)Power distance (high or low)

High – accept inequality of wealth and power:High – accept inequality of wealth and power:e.g. France, Brazile.g. France, Brazil

Low – do not accept inequality – e.g. Sweden, UKLow – do not accept inequality – e.g. Sweden, UK Uncertainty avoidanceUncertainty avoidance

High – tolerate ambiguity - e.g. US, AustraliaHigh – tolerate ambiguity - e.g. US, Australia Low – uncomfortable with uncertainty, prefer clarity – Low – uncomfortable with uncertainty, prefer clarity –

e.g. Latin America, southern Europee.g. Latin America, southern Europe


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Individual/collectivismIndividual/collectivism Individualist societies stress individual responsibility Individualist societies stress individual responsibility

and success – e.g. US, UKand success – e.g. US, UK Collectivist societies stress loyalty to group in return Collectivist societies stress loyalty to group in return

for support – South America, Asiafor support – South America, Asia Masculinity/femininityMasculinity/femininity

M. societies show assertive behaviour,M. societies show assertive behaviour,e.g. Japan, Italy, Arab countriese.g. Japan, Italy, Arab countries

F. societies show modest behaviour, interest in quality F. societies show modest behaviour, interest in quality of life – e.g. Sweden, Norway, Denmarkof life – e.g. Sweden, Norway, Denmark



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Long-term/short-term orientationLong-term/short-term orientation High LTO societies value rewards that will come far High LTO societies value rewards that will come far

into the future, e.g. China, Taiwan, Hong Kong, into the future, e.g. China, Taiwan, Hong Kong, JapanJapan

Low LTO societies value the past and the present, a Low LTO societies value the past and the present, a respect for tradition, e.g. UK, Australia, US, Canadarespect for tradition, e.g. UK, Australia, US, Canada



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Globalisation Globalisation

Globalisation of markets (Levitt, 1983) Globalisation of markets (Levitt, 1983) ““needs and desires irrevocably homogenised”needs and desires irrevocably homogenised” Implied standard production and marketingImplied standard production and marketing

Or going local?Or going local? Local tastes vary, local brands outsell globalLocal tastes vary, local brands outsell global Much variation to suit diverse tastesMuch variation to suit diverse tastes

(e.g. Starbucks, Coke, Nestlé)(e.g. Starbucks, Coke, Nestlé) Globalisation of productionGlobalisation of production

High-wage countries outsourcing supply to cheaper High-wage countries outsourcing supply to cheaper sources – India, China, Eastern Europesources – India, China, Eastern Europe


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The globalisation debateThe globalisation debate

BenefitsBenefits Growth in trade brings wealth, wider choice and Growth in trade brings wealth, wider choice and

probably better valueprobably better value• CostsCosts

Trade liberalisation supports rich countriesTrade liberalisation supports rich countries May disadvantage small producers, leading to social May disadvantage small producers, leading to social

unrestunrest Perception of multinational political dominationPerception of multinational political domination

in some areasin some areas


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Organisation structureOrganisation structure

Structure and performanceStructure and performance Elements in structure: the design optionsElements in structure: the design options Dividing work into functions and divisionsDividing work into functions and divisions Coordinating work: alternative waysCoordinating work: alternative ways Mechanistic and organic structuresMechanistic and organic structures Learning organisationsLearning organisations


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Structure and performanceStructure and performance

Figure 10.1 Alternative structures and performance


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Why study structure?Why study structure?

Evidence that a company’s structure affects Evidence that a company’s structure affects whether it adds value to resources whether it adds value to resources e.g. how to divide and coordinate taskse.g. how to divide and coordinate tasks

Current structure reflects assumptions Current structure reflects assumptions Knowledge enables us to questionKnowledge enables us to question

assumptions in a structure, and its contextassumptions in a structure, and its context alternatives availablealternatives available limitations of any structurelimitations of any structure


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Structure and performance?Structure and performance? As a business grows, those running it As a business grows, those running it dividedivide the the

work and work and coordinatecoordinate the parts – they create a the parts – they create a structure within which people workstructure within which people work

When an organisation is not performing well, When an organisation is not performing well, managers often change the structuremanagers often change the structure

Reflect the belief that structure affects performanceReflect the belief that structure affects performance Clarifies expectations and enables monitoringClarifies expectations and enables monitoring Avoids confusion and waste of poor structureAvoids confusion and waste of poor structure

What kind of structure works best?What kind of structure works best?


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5 Types of Structure5 Types of Structure


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Strategies and structuresStrategies and structures

Figure 10.9 Relationship between strategies and structural types


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Influences on structure ( Senior & Fleming)Influences on structure ( Senior & Fleming)

Stability/TurbulencePEST

Environment

StrategyTechnology

Size

CultureCreativityPolitics

Leadership

Structure


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Contingencies Contingencies STRATEGYSTRATEGY

e.g. cost leadership or differentiation – what structure to e.g. cost leadership or differentiation – what structure to encourage relevant behaviour? Cost leadership requires encourage relevant behaviour? Cost leadership requires efficiency . Differentiation needs innovation efficiency . Differentiation needs innovation

TECHNOLOGYTECHNOLOGY What structure best supports technologies used to What structure best supports technologies used to

transform inputs, in manufacturing or services?transform inputs, in manufacturing or services? BUSINESS ENVIRONMENTBUSINESS ENVIRONMENT

What structure best supports people as theyWhat structure best supports people as theycope with different environments?cope with different environments? ` `

SIZE & LIFE CYCLE SIZE & LIFE CYCLE What structure best supports an organisationWhat structure best supports an organisation

as it grows as it grows


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Contingencies orContingencies ormanagement choice?management choice?

ContingencyContingency Effective performance depends on managers adoptingEffective performance depends on managers adopting

a structure suited to the key contingencies of the a structure suited to the key contingencies of the environment in which it is operatingenvironment in which it is operating

Management choiceManagement choice Managers have greater degree of choice over the Managers have greater degree of choice over the

structures they adoptstructures they adopt Standards of performance not always rigorousStandards of performance not always rigorous Preferred choices may have limited effect on performancePreferred choices may have limited effect on performance Political interests and ambitions shape choicePolitical interests and ambitions shape choice

Implications for role of managers?Implications for role of managers?


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Consequences of deficient Consequences of deficient organizational structures – Child 1988organizational structures – Child 1988

Motivation and morale may be depressedMotivation and morale may be depressed

Decision making may be delayed and lacking in qualityDecision making may be delayed and lacking in quality

There may be conflict and lack of coordinationThere may be conflict and lack of coordination

An organization may not respond innovatively to changing An organization may not respond innovatively to changing circumstancescircumstances

Costs may rise rapidly, particularly in the administrative areaCosts may rise rapidly, particularly in the administrative area


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Learning organisation FeaturesLearning organisation Features


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Organizational structure and changeOrganizational structure and change( Senior & Fleming)( Senior & Fleming)

There are many influences on the way an organization might There are many influences on the way an organization might structure for successful performance and to cope with changestructure for successful performance and to cope with change

Organizations do need to consider the internal and external Organizations do need to consider the internal and external environments in relation to the need for change, whether it was environments in relation to the need for change, whether it was structured along strict bureaucratic, mechanistic lines or as one structured along strict bureaucratic, mechanistic lines or as one of the newer network formsof the newer network forms

If organizations are able, to some extent, to manipulate their If organizations are able, to some extent, to manipulate their environments to suit their strategies and structures, this will environments to suit their strategies and structures, this will enable them to preserve existing structures and operational enable them to preserve existing structures and operational arrangementsarrangements


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ConclusionConclusion PESTEL model enables analysis of the potential PESTEL model enables analysis of the potential

issues when managing across national bordersissues when managing across national borders These may affect the way managers choose to These may affect the way managers choose to

structure international operationsstructure international operations Research on national cultures implies Research on national cultures implies

recognising differences, while balancing these recognising differences, while balancing these with company cultureswith company cultures

Management practices will affect the outcomes Management practices will affect the outcomes of the globalisation debate and hence the future of the globalisation debate and hence the future contextcontext


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Conclusion (Cont’d)Conclusion (Cont’d)

Organizational structure can be likened to the skeleton Organizational structure can be likened to the skeleton of the organization supporting the implementation of of the organization supporting the implementation of strategic decision making and operational processesstrategic decision making and operational processes

Redesigning an organization’s structure has to be Redesigning an organization’s structure has to be carefully planned with change taking place as current carefully planned with change taking place as current business performance has to be sustained. This implies business performance has to be sustained. This implies a mixture of incremental and transformational changea mixture of incremental and transformational change


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Supplementary MaterialSupplementary Material


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Mechanistic and organic structuresMechanistic and organic structures

Table 10.3 Characteristics of mechanistic and organic systemsSource: Based on Burns and Stalker (1961)


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Contrasting forms Contrasting forms

Burns and Stalker identified alternative formsBurns and Stalker identified alternative forms Each appropriate to certain conditionsEach appropriate to certain conditions

mechanistic – stable mechanistic – stable organic – unstableorganic – unstable

Fit with conditions led to high performanceFit with conditions led to high performance Later work (Lawrence and Lorsch 1967) focused Later work (Lawrence and Lorsch 1967) focused

on differences between units within the same on differences between units within the same organisationorganisation

Related differences to contingenciesRelated differences to contingencies


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Contingencies – strategyContingencies – strategy

e.g. cost leadership or differentiation – what structure e.g. cost leadership or differentiation – what structure to encourage relevant behaviour?to encourage relevant behaviour?

cost leadership requires efficiency – a functional structure?cost leadership requires efficiency – a functional structure? differentiation needs innovation – matrix or team-based?differentiation needs innovation – matrix or team-based?

GSK example of a new structure to support strategy – GSK example of a new structure to support strategy – Fig. 10.8Fig. 10.8


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Contingencies – technologyContingencies – technology

What structure best supports technologies used to What structure best supports technologies used to transform inputs, in manufacturing or services?transform inputs, in manufacturing or services?

e.g. production line or custom-made?e.g. production line or custom-made? e.g. information systems enable different ways of e.g. information systems enable different ways of

delivering services – new structures to support delivering services – new structures to support relevant behaviour? relevant behaviour? see MIP on centralised manufacturing at RBS see MIP on centralised manufacturing at RBS


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Contingencies – business Contingencies – business environmentenvironment

What structure best supports people as theyWhat structure best supports people as theycope with different environments?cope with different environments?

Burns and Stalker (1961) contrastedBurns and Stalker (1961) contrasted rayon plant (stable market, few changes) rayon plant (stable market, few changes)

with with small electronics companies (volatile, uncertain market, small electronics companies (volatile, uncertain market,

many changes)many changes) Lawrence and Lorsch (1967) showed that firms face Lawrence and Lorsch (1967) showed that firms face

many environments with different needsmany environments with different needs How to link differently structured departments? How to link differently structured departments?


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Environment and structureEnvironment and structure

Figure 10.10 The relationship between environment and structure


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Contingencies – sizeContingencies – sizeand life cycleand life cycle

What structure best supports an organisationWhat structure best supports an organisationas it grows (number of staff)?as it grows (number of staff)?

Birth – informal, little division of labour, organicBirth – informal, little division of labour, organic Youth – decisions shared more widely, specialists Youth – decisions shared more widely, specialists

employedemployed Mid-life – extensive division of responsibility, with Mid-life – extensive division of responsibility, with

rules for coordinationrules for coordination Maturity – mechanistic, perhaps divisions,Maturity – mechanistic, perhaps divisions,

selling some units that no longer fitselling some units that no longer fit

Problem of managing the transitionsProblem of managing the transitions


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ActivityActivity

Consider your own organization, or one you know well Consider your own organization, or one you know well or, if the organization is large, a particular section of it. or, if the organization is large, a particular section of it. Do any of the five proposed consequences of structural Do any of the five proposed consequences of structural deficiencies listed apply to the prevailing situation?deficiencies listed apply to the prevailing situation?

If the answer is yes to any of the points, what does this If the answer is yes to any of the points, what does this imply for the way the organization is structured? What imply for the way the organization is structured? What changes could be made? Justify your conclusions with changes could be made? Justify your conclusions with reference to the discussions of different structural reference to the discussions of different structural forms.forms.

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Leadership & Change Management