AUT UNIVERSITY

Change Management
468961/23 Assesment 2
Student Name: Shankar Natarajan ID No: 0428564 [Pick the date]

Executive Summary

Table of Contents
Executive Summary....................................................................................................................................... 1 Details of Change and Reasons for Change .................................................................................................. 3 Feasibility report ........................................................................................................................................... 5 Contract Manufacturing/Outsourcing benefits ............................................................................................ 5 Cost benefit analysis ..................................................................................................................................... 6 Scope for Change: .......................................................................................... Error! Bookmark not defined. Organizational Change Readiness ................................................................................................................. 6 Change Approach .......................................................................................................................................... 6 Rationale for the plan - Change in Business strategy ................................................................................... 8 Kotters 8 step model ................................................................................................................................... 8 Blue Print Thinking ........................................................................................................................................ 9 Evolutionary Theory ...................................................................................................................................... 9 Action research model ................................................................................................................................ 10 Issues with implementation ........................................................................................................................ 10 Bibliography ................................................................................................................................................ 12 Appendix ..................................................................................................................................................... 13 STRENGTHS ............................................................................................................................................. 13 WEAKNESSES........................................................................................................................................... 13 OPPORTUNITIES ...................................................................................................................................... 13 THREATS .................................................................................................................................................. 13

Introduction
The modern business organisation is a complex, highly competitive, constantly changing, economic uncertainty and frequent changes which have become a serious challenge for the organisation to adapt for survival. Business organisation needs to assess the situation on a constant basis, adapt and respond to the changes with a clear policy to avoid downturn or failure. So it is extremely dangerous for any business organisation to install and manage the change otherwise it can be scary and can affect business. Chateau Dax manufacturers in kauri/rimu wood furniture and trade in selected imported quality Italian leather and designer fabrics for wholesale customers and retail customers, interior designers. It has consequently produced quality sofas to that people appreciate decorative items. It was established around 40 years back when import restrictions were placed on furnitures which demanded by custom built design oriented furniture makers. The companys used it resources by utilised home-furnishing style and product development from fabric to leather & micro fibers was successful all over the world. Over the last few decades demand ultimately exceeded the capacity added with improved operation and technology in production increased due to growth and property boom across New Zealand. The company also expanded its manufacturing capacity. As the local demand was met, the company concentrated on its export markets in US and European markets by its retail distributor agreements. The company has done small incremental changes over the period. The primary achievements were due to good market, latest technology and highly technically skilled workforce. As a member of business process and review team, I have been assigned to help in the review of change management and implementation process. It comprises for details and reasons for change

Details of Change and Reasons for Change

Chateau Dax's products were at high end of the market segment, furniture industry is highly competitive in nature, which results in low barriers to entry with fast change in consumer preference on trendy products, new products have to be developed at regular intervals at a high cost for design, develop, research and test on new products (which sometime runs millions) and to establish the feedback from the consumers and as the marginal cost are high to achieve the economies of scale, the product has out fashioned with in few weeks. Chateau Dax had constantly focused on delivering efficiently and effectively by implementing incremental changes in manufacturing process. Over few decades Chateau Dax had massive investment in latest high tech machineries.

This has affected the supply chain process to run effectively and efficiently and to avoid the gap of time delay from the origination for the movement of procuring, storing raw materials, work in process and finished goods storage to the end of consumption and high cost of warehousing. Difficult in retaining high skilled workers had impact on high sourcing costs of labour with high health safety compliances is another reason for a high overhead cost. Chateau Daxs widening gap between supply and demand which had a huge impact on the liquidity of the company by holding high working capital and obsolete nonmoving inventories. Instead of tied with inventory, working capital, obsolete stocks, closing the manufacturing operation will save a huge cost and bring down economies of scale which relative time bounded which has to be quick, once relevant planning and issues are dealt with. The effect of global financial crisis & huge toxic debt of US and European markets, decline in housing market has effected many downturn resulted in lesser consumer spending, with uncertainty in demand, huge currency fluctuations on exports, and high fuel costs, with high competition driving down the market prices which had a big impact on eroding shareholder equity of firm. Certain part of business like manufacturing sector were underperforming due to insufficient capacities or uncertainty in demand which raised, high wage cost and overheads, unable to meet the debt service due to high cost of capital and covenant defaults. Trading in other suppliers has tremendous profits which absorbs the manufacturing loss. All the above factors have affected the company's financial returns like profitability, liquidity and unable to service its equity to debts which have failed ensure business continuity (downward ROI) has forced to look in to change. Constrained with time frame and fast changing external environment, these changes have been developed with consultation of team leaders, account managers, suppliers and customers and all other stakeholders. Due to falling demand and closure of factory there will be few job losses and there is a restructure of workforce plan has developed thru Human Resources.

Scope for Change:

When considered stopping manufacturing and start outsourcing which can be cheaper and avoid fixed cost, internal production process which can improve the organisation value and can meet challenges in the business environment for want of products and services and able to increase customer value & satisfaction and increase shareholders wealth. The organisation can improve on operating performance, management control, introduce new innovative ideas, reduce investments in nonproductive assets, and utilize those funds in to faster moving products and services. Management can concentrate on different markets, expand business through opportunities. As there is no sunk cost that can turn around from fixed to variable cost and by applying Just in Time,

the capital is freed which can turn employees in different career path and participate in different non-core areas like marketing, logistics So the future state will be contract manufacturing or outsourced from China, Vietnam, Canada and Denmark and the goods will sold through wholesale and retail agents in respective countries.

Feasibility report
During the feasibility study conducted within the organisation by external change practitioner, the following drivers needed to be focused upon: Organisational drivers: Focusing on the best synergies to enhance effectiveness Flexibility to meet changing business conditions Demand for latest products with chaning consumer tastes Increase shareholders value by increasing customer satisfaction

Improvement drivers Improving on risk management and management control Improve credibility image Bringing innovative ideas

Financial Driven Generating cash by non-performing assets recently acquired in the manufacturing plant. Reduce investments Better stock management

Revenue driven Focus on new business growth opportunities, market access in developing countries Improving on process and systems in latest technology

Cost driven Reduce huge costs on labour

The advantages are based upon freeing working capital, operational efficiency and performance, procurement and supply chain process.

Contract Manufacturing/Outsourcing benefits

Reduced costs for manufacturing Improving of the companys focus

Gain the access to the world class capacity Available resources for other purposes Shared risks availability of better technology Avoid huge capitlisastion of assets and avoidance of long term debt Better stock management

Cost benefit analysis

In the recent analysis the outcome weighs towards contract manufacturing or outsourcing rather manufacturing locally as the cost is very high towards labour, compliance and overhead cost. (workings not attached in appendix)

Organizational Change Readiness

The organisation requires training team leaders, account managers and suppliers. As there total shift to outsourcing instead of manufacturing there will be resistance from the employees. Some of the leaders will be involved in the new process and likely to educating them who will in quality assessment.

Change Approach
Stakeholder Analysis has been identified with level of impact of change with regard to internal stakeholders.

Resistance to Change
Resistance is a natural and unavoidable part of any change process. Many reasons could be attributed for resistance to change; so it is very important to understand the root cause for the resistance so as to develop appropriate strategies to address them. The root cause analysis for resistance can be carried out based on employee feedback, project team discussions and compliance audits. In Chateau Dax, each of the above mentioned stakeholders will be asked to complete a questionnaire, the outcome of the exercise will be used to determine the root cause and thus develop strategies to address their concerns. As main concern to close down manufacturing operation, the employees restructuring will be done value-based restructuring 1. Organizational efficiency assessment (ability to make best use of profits based on upon capital assimilated through equity and debt) 2. Strategic talent assessment (it ensures right people in the right jobs at a right time. It also helps to understand current state, forecast for the gaps and take adequare measures to fill those gaps) 3. Staff selection and deployment (job analysis and description, selecting and recuriting staff; and induction and deployment of new staff and training) Stakeholders will be asked to complete a questionnaire (copy not attached herewith) based on set tailored reduction targets for businesses through organizational efficiency assessments that measure such factors as span of control, layers of management and redundant roles. Depending on what the data reveal regarding the baseline efficiency of a unit, it may make sense to cut more or fewer, people. Therefore, its beyond merely analyzing the financial data to look at the following metrics, thereby gaining a holistic view of your talent through the lens of companys strategy.

Change Management Team

The change management team will comprise of the General Manager (ultimately responsible), team leaders, account managers, suppliers, human resources and process improvement consultant. The General Manager will be the change owner and sponsor who has developed the plan with clear roles and responsibilities with risk assessment and plans to execute and manage.. The General Manager has the powers and influence and born leader to drive the change process and tine team represents different disciplines, which can make judgmental decision and have gained respect and credibility in the organisation.

Risk Management

In the process of considering the different aspects of the change we need to consider when implementing the change as well as what may be the unintended consequences of the change. The risks and their likelihood are identified; subsequently their impact and strategies to mitigate them are developed. Resistance from stakeholders is identified as high impact. Organize meetings and clearly communicate to stakeholders the change and the importance of the change. State the opportunities that could arise from the change Set milestones for development with deadlines Provide necessary resources Assess the work force and determine competency gaps. Acquire resources externally if required. Set up more than one communication channels as back up. Use the established stable communication system Ensure that there are back up personnel for all functions of the change process. Develop a test plan and audit the new system for compliance before implementation.

Rationale for the plan - Change in Business strategy

Following approaches have been considered Kotters 8 steps Leading the change, Evolutionary Theory, Blue Print Thinking comparing with action based research.

Kotters 8 step model leading the change:

Globalisation had affected Chateau Dax which is facing uncertain business continuity due heavy loss in the manufacturing sector which as everyone is aware from the internal performance meetings of the past 4 years due to uncertain demand, high cost of production and other the overheads the company is incurring a huge loss, which is already eroded the equity of the firm. This crisis has come to a time bounded action. The new team has excellent leadership role. The changes have been developed with consultation of production purchase, quality control team, team leaders, account managers, suppliers and customers and all other stakeholders. Continuing with Chateau Daxs vision the company is looking in to implement on feasibility reports and cost benefit analysis which aligns with the company strategy and vision. This process led to discussion with change management plan from the manager informing to stakeholders, including suppliers, customers, employees with regular meetings across each team in the organisation and the how the

implementation plan will take place and the time frame and what changes it will expect to reach the goal with creating the performance is measured and evaluated. These changes will recognize at the end level with suitable awards and rewards, hiring, promoting right people. Training will be provided with regards to new structures, policies, and employee and customer inputs will be collected at regular intervals. Performance is monitored and it ignores human consideration. (Kotter J.,1996)

Blue Print Thinking

Chateau Daxs aim to be cut down the losses, therefore, according to the Blue Print thinking approach, the change is initiated by the need to achieve this goal, which in turn leads to planning to the specific detail the process and procedures that would enable the firm achieve to its goal. According to change agent approach are results oriented, decisive, accurate and dedicated. The process does not let peoples individual ideas and preferences interfere. (Caluwe & Vermaak, 2004). Rationale behind applying Blue Print Thinking is because, due to rapid globalisation, with external changes to fluctuating change in consumers demand and Chateau Dax's, high capital cost, lower productivity, high labour and health and safety compliance cost, diseconomies of scale which has made more losses in that last 2 years which has led to business model to the specific detail the process and procedures that would enable the firm achieve to its goal which were result oriented, decisive, accurate and dedicated. The changes to close down the manufacturing, saving a huge labour cost, selling the plant space, and disposing the fixed assets are the hard aspects of the organization ignoring the individual preferences of the people but achieve goal of economies of scale. The change are planned and organized to the minutest detail to achieve the predetermined outcomes in fixed time scales. Chateau Dax' goals are triggered by the external environment as in the case of the evolutionary approach or green print thinking. However, the foremost consideration is the planning and organization of the change process rationally based on empirical data. The continuous monitoring also acts to direct the process towards achieving the goals. Caluwe & Vermaak (2004) suggest that the Chateau Daxs approach is rational and focuses on creating the best solution. The task force performed a feasibility analysis; cost benefit analysis, risk analysis & management. The individual preferences of people were not taken into consideration. The overall benefit to the organization was the main driving force for the change agents. How does this discussion relate to your action plan?

Evolutionary Theory
The theory of evolution postulates that cumulative changes in structural forms of populations of organizational entities across communities, industries, or society at large occur through a continuous cycle of variation, selection and retention. (Van de Ven & Poole, 1995). As per this theory it considers the organization on the whole and ignores the dynamics of change at the employee level, discard the time line as the change is gradual, the driving force is by the relative market position and not by competition for the scarce resources is what drives the change process is driven by the need to survive which has derived from adaptation from the biological evolution of

organisms as postulated by Darwin, so Evolutionary Theory was not considered as totally contradictory to Chateau dax's blue print thinking approach. Due to globalisation and economic slowdown Chateau Dax has changed and the options to close down manufacturing operations or the worst case to file insolvency. The resistance to change were employees at the manufacturing plant and were aware of the situation for the past 3 years which were communicated over the past were they were doing operational maintenance and the employees were waiting for the company's best retrenchment package.

Action research model is a blend of changing attitudes and behavior with the ultimate goal
is to change to happen with trying different frameworks. The process like Identify Problem(s), Consult with Behavioral Science (OD) Expert, gathering data and the diagnosis, feedback from the diagnosis to client, OD expert and client diagnose problem and joint plan of actions, taking action and gathering data after action, measuring and evaluating the results and re-diagnosing and new action if necessary which requires time and resources. The plan was considered but due to Chateau Daxs constrain for the time and resources and that is the reason this approach was not considered at this crucial event. As there are many approaches to change, it mostly depends on attitudes of the management, time and cost were in constraint, so it is a top down approach and management were totally unreceptive to human consideration.

Issues with implementation

Chateau Dax had issues with implementation like resistance with work force especially in manufacturing, as any change which occurs. Chateau Dax had adequate risk management plan the situation lies towards managing the risk and addressing the issues from resistance. The above changes are based on Kotters 8 steps Leading the change, Evolutionary Theory, Blue Print Thinking, and Green Print Thinking where the change management plans aims to implement based on the external threats which realigns the internal cost cutting structure and which should be on a continuous basis on evaluating and monitoring. Change implementation plan is based on how effectively implemented on a time structure with less implementing issues and addressing human attributes problem.

Bibliography
Caluwe, L. d., & Vermaak, H. (2004). Change Paradigms: An Overview. Organization Development Journal Volume 22 Number 4 . Furniture industry in restructuring: System and tools (2006). Retrieved on 20 April, 2012 from http://www.ueanet.com/first/guidelines/first_managing_process.pdf Kotter J. (1996) Leading Change Harvard Business Review Understanding Organisational Change (2009) Leading Change, Transition & Transformation. Retrieved on 20 April, 2012 from http://www.adelaide.edu.au/hr/strategic/leading_change_toolit.pdf Van de Ven, A. H., & Poole, M. S. (1995, July). Explaining Development and Change in Organizations. Academy of Management Review Vol.20 No.3 , pp. 510-540. Wadell et al (2011) Organisational Change Development and transformation 4th edition

Appendix SWOT analysis of the furniture with Outsourcing

STRENGTHS Close to your market(s) Specific furniture and customised furniture Training structure Flexibility Mutually profitable network New product development (solution-minded approach)

WEAKNESSES Acquisitions/marketing Supply chain management oriented Lower specialisation / too high profile Lower profits Product development (materials/ technology/development) Automation & communication Limited contacts with end users Limited orders in case of huge industrial capacities To develop a new internal Image

OPPORTUNITIES Buying approach Develop new export markets Automation of production (what is kept) New materials and technology Strong image among developers designers, architects Outsource production abroad/import THREATS Customers always ask for more offers Power of interior decorators and architects increases Personnel skills may decrease Business climate

Poor Health & safety and environment can affect our company's reputation Aggressive competition in foreign countries Competition with other sectors in the manufacturing industry High cost of fuel Volatile exchange rates and undervaluation of foreign currency Political, economic risks