Changes at Scout Mortgage Page | 0

Komlan Ezunkpe BUS 520: Leadership and Organizational Behavior Dr. Alan R. Tillquist, Professor Strayer University Winter 2010

Changes at Scout Mortgage Page | 1

Abstract This paper is a reflection on the case study Changes at Scout Mortgage. It discusses six aspects of organizational behavior. First, it considers the nature of change in the work environment of the 21st century. Second, it discusses the typical reaction of employees to change. Third, it reflects on the typical reaction of employees to change. Fourth, it discusses personal assessment of the ethical intensity of the changes made by Walsh and Mangels in the case study. Fifth, it describes the decision-making model or models that were used by Walsh and Mangels to dismiss employees and make the other changes. Finally, it discusses the approach to change as illustrated in the case.

Changes at Scout Mortgage Page | 2 The 21st century is an era where organizations are becoming fluid and more flexible, where the market is shifting to a competitive and global one. More than a half century ago, Peter Drucker argued that drastic changes will occur in organizations. The new organization will differ from the traditional modern industry. In that industry, managers will employ predominantly knowledge workers rather than manual workers (Peter Drucker, 1969). The author describes these knowledge workers as educated individuals and their characteristics include formal education, training, and development. This change predicted years ago is apparent in todays organizations. An example is the knowledge management model (Hellriegel and Slocum, 2010). Hellriegel and Slocum (2010, p.407) define knowledge management as the art of adding or creating value by systematically capitalizing on the know-how, experience, and judgment found both within and outside an organization. To be more explicit, Hellriegel and Slocum (2010, p.407) stipulate that in the contemporary era knowledge is based on information, but it is systematically gathered, organized, and communicated. Therefore, IT (Information Technology) occupies a pivotal place within the work environment in the 21st century. Before we discuss the importance of IT in contemporary work environment, lets stress other changes in organizations, such as structures, nature of work, task definitions and requirements, environment design, globalization, demographics and capabilities, culture, ethical and ecological issues. In terms of organizational structures, businesses manage to function across borders. Their environments are becoming fluid and focusing more on enterprise-wide production environment. As mentioned, IT has a tremendous impact on business as well as on globalization. Information technology allows mobility extending business applications and solutions through customization and wireless technology. More

Changes at Scout Mortgage Page | 3 and more, organizations are becoming virtual where employees no longer are confined to physical spaces. Consequently, the workplace design is changing. Also the nature of work and their requirement are changing. Tasks are no longer rigid; tasks are becoming flexible putting more responsibility on employees. With this fluidity in tasks, employees are shifting roles quickly. Thomas Friedman (2005) demonstrates that efforts have been made to facilitate the interaction between countries, regions, continents, and businesses. For Friedman, IT applications where not related before, but can be shared today from distance and becomes an important accomplishment of Technology. Friedman considers only one side of the coin which is the globalization provided by IT, but does not see its imperialistic side. Technology can easily overcome cultural barriers. In other terms, it is because information infrastructure mostly comes from the developed countries, they easily alienate other economically weak cultures. Although two people of different cultures can share the same application from different points in space, IT fails to reconcile the cultural dimensions of both the developing context and the application domain. Thus, to create and maintain a viable socioeconomic environment in the new millennium, ethical and ecological issues come into play. Organizations should create rewards and development systems to adjust to the conditions of their employees across the globe. They should also take responsibility for recycling waist and control pollution. At this end, it is important to discuss the typical reaction of employees to change. The typical reaction of employees to change is resistance. They resist change because it is like transitioning from the specific to the unspecific where future is unpredictable in terms of careers and salaries. Hellriegel and Slocum (2010) discuss six

Changes at Scout Mortgage Page | 4 reasons for individual resistance including perceptions, personality, habits, threats to power and influence, fear of the unknown and economic reasons. Employees resist change because of their established worldview. First, as change involves the unknown, say Hellriegel and Slocum (2010, p.79), workers have the tendency to protect themselves against ideas, objects, or situations that are threatening them. This perceptual defense could prevent the individual ability to see the need of change. Second, there are two personality characteristics which prevent employees to resist change: low-self esteem and adjustment. Generally, low-self esteem individuals perceive things negatively and are reluctant to accept change. Those who are hesitant may adjust to the change when they see proof that the change is working. Third, a habit is a sort of comfort zone where individuals can easily manage their survival in the known environment. In this environment, actions are routines and safe. Fourth, when employees are at positions where they feel like having control over others, they feel threatened when change comes in perspective. They resist change because they think this will disable them to exercise their power. Fifth, employees are anxious when they are uncertain of change. For them, the future carries unknown factors which make them worry. Sixth, economic reasons, safety, and stability are crucial in any decisions involving change. According to Hellriegel and Slocum (2010, pp.503-504), employees may resist change when they know that the transformation is going to negatively affect their incomes. At this point, it is crucial to assess the ethical intensity of the changes made by Walsh and Mangels. Hellriegel and Slocum (2010) enumerate six factors which determine ethical intensity. They are magnitude of consequences, probability of effect, social consensus, temporal immediacy, proximity, and concentration of effect. Walsh and Mangels applied

Changes at Scout Mortgage Page | 5 all these ethical intensity factors in their decision. In terms of magnitude of consequences, the decision affected a great number of employees at Scout Mortgage. Also it was likely that the decision affected a great number of employees in the company. The social impact involving social consensus and proximity was evident because there were personal ties in the company. Hellriegel and Slocum (2010, p.533) were clear that the employees families were friends and socialize outside their work environment; consequently the emotional impact was remarkable. When Walsh and Mangels made the decision to change their pay system to a salaried staff, they intentionally leaked the news to lessen the shock. However, the concentration of the effect was that firing five commissioned loan officers and three support staff members is less damaging that firing the entire employees. At this phase, it is essential to describe the decision-making model or models that were used by Walsh and Mangels to dismiss employees and make the other changes. The rational decision-making model was dominant in Walsh and Mangels process of making changes made at Scout Mortgage. In this process, the ethical dilemmas do not exist. The mean-end and utilitarian principles often overlook other considerations. Walsh and Mangels thus selected the alternative which will maximize the company profits. At this end, it is fundamental to take a look at the approach to change as illustrated in the case. First, Walsh and Mangels tried to avoid layoffs with a halfway measure. Second, they began hiring salaried loan officers and keep the existing staff members. When they realize that this approach was not working, third they made the decision to change their entire pay system to a salaried system. Fourth, they fired five commissioned loan officers

Changes at Scout Mortgage Page | 6 and three support staff members. Also the mortgage officers will earn $100 flat commission for closing a loan. Later, they created a website to allow customers to compare mortgages. Furthermore, the company rolled out an ad campaign. Finally, they lay out a goal to be licensed in all 50 states. Indeed, the six aspects of leadership stressed through Changes at Scout Mortgage case study reveal the complexity of ethical and decision making issues in organization. Every decision depends on several factors, such as the nature of work, the corporate strategy, and the workforce or human capital.

Changes at Scout Mortgage Page | 7

References Baltzan, P., & Philip, A. (2009). CIS500: Business Driven Information Systems. Custom Edition. (2nd ed.). New York: McGraw-Hill Irwin. Drucker, P. (1969). The Age of Discontinuity. London, UK: Heinemann Friedman, T. (2005). The World is Flat2005: A brief History of the 21st Century. Union Square West, New York: Farrar, Straus & Giroux. Hellriegel, D., & Slocum, J W, Jr. (2010). BUS520: Organizational Behavior. Custom edition (12th ed.). Mason, OH: South-Western Centrage Learning. Kelly M., & McGowen J. (2009). Business. Custom edition. Ohio: Cengage Learning.