Economics assignment essay on: Change in organizational culture

Introduction

Change is one such concept which in the current market scenario has emerged as a part of various organizational cultures. It is the innate need or the desire to be in vogue that has driven the organizations in adopting the initiative for change. However, not all such initiatives deliver fruitful results. In 1996 when the alliance of Renault and Nissan was formed, it was successful in delivering manifold benefits to both the parties. The success story nevertheless was reversed after 2007 as the companies started to witness constant dip in their profit margins. As globalization has revolutionized the business world, it has rubbed its effects upon the automotive industry as well. A cross country alliance which was considered a novel approach of business in 90s started becoming a widespread strategy in late globalization era. As a matter of fact globalization challenged the conventional approaches of doing business. The emphasis has shifted more towards designing and implementing a context sensitive approach of change which can address the previously neglected finer attributes of business management.

The objective of the report therefore is to understand the factors which failed to stand the test of time in the era of globalization and made Renault-Nissan lose its competitiveness and profitability. The focus of the report is to appreciate the need of change for an organization and assess the various options available for implementation while introducing change into the system. In the present context it has become indispensable for a manager to develop a diagnostic tool for managing change, which will conduct not just a scrupulous investigation of a given scenario but also evaluate the options available with the manager along with the preferable factors for change. At the same time it is also essential to develop a thorough understanding of the limitation existent in the process, thereby arriving upon the final decision of implementing change in a successful manner. 

Diagnosis of the organization

Business strategy is primarily concerned with the performance of a firm in a particular market, which is focused upon the place and means of serving the clients (Peters, 2007). Such that the chosen approach is capable of creating and maintaining the competitive advantage of a firm in any given area of business. Wright et al (1992, p3) have thus defined strategy as the top management’s plan in attainment of outcomes which are consistent with the organization’s missions and goals. The role of a strategic change manager is more than simultaneous handling of two opposing views, what is more essential is to synthesize them. Again some brilliant beliefs tend to fail post implementation even after witnessing an initial success phase as demands and behaviour of the broad market is time dependent (Mintzberg et al, 1998). It is for this reason that emphasizes the need of dynamism in any given strategy of change management.

Any strategy aimed at enhancing the existing performance of an organization needs to be chosen with care, for every strategy has the innate tendency of ending on a knife edge. Such that if on one hand it can reap in benefits for a firm, on the other hand it can very well expose the said firm to various dangers and potential pitfalls. As F. Scott Fitzgerald (1991) has pointed out, the ability of maintaining two opposing ideas in one’s mind while retaining the ability to function, is the litmus test of intelligence of an appropriate strategic approach in true sense. This is because in the due course of time while managing the strategy of an organization, this very aspect is tested time and again. The case became evident in the context of Renault-Nissan when increasing competition in the business market blew off its market share. The test of the time was so stringent that Renault became incapable of exploiting novel synergies with Nissan even for maintaining their market share at the least.

It is in order to prevent repetition of such incidence, the concept and practice of diagnosing the developments happening within an organization has been introduced which conducted a periodic evaluation of strategy (Rothwell & Sredl, 1992). The objectives of such approaches were for enhancing the effectiveness of an organization and its strategies and prevent cases like Renault-Nissan which despite being successful fails miserably after a point in time. This approach helps in directly focusing upon those attributes which are considered critical for smooth functioning of a company.

Models of Organizational Analysis: Renault-Nissan Through 7S model

 The 7S model from McKinsey is a model which is considered effective for conducting the diagnosis of an organization while planning the change initiative. The seven interrelated features of shared values, strategy, structure, systems, style, staff, and skills are said to provide the requisite guide for implementing an organizational change as it considers not just the rational attributes but also the emotional aspects of an organization (12Manage, 2007). However, one of the major drawbacks with the model is that some change in one of the attribute impacts the entire model. The organizations which have used this model for a period of five years at a stretch tend to fail at the end of certain period, which evidently is due to the inherent drawback of the model which fails to consider the differences which crops due to change in time.

From the perspective of Renault-Nissan case, the seven S can be assessed as discussed below to evaluate the problem area for the company.

Strategy: Irrespective of the challenges inherent in the alliance, it was seen advantageous bait for both the companies were complementing each other during the early phases of their alliances. However, with rising intensity of the competition what was seen as apt in the beginning was not being fruitful in sustaining the competitive pressure. Ever since the time of their collaboration, Renault made it clear that they do not intend to “take-over” Nissan, which was effective in turning around the case of Nissan. They maintained independent decision making body which impact the image of the company as a global brand for such an approach restricted the route of standardization. Also as the cost of energy and other commodities started rising it became difficult for the company in maintaining the level of profitability while adopting different strategic approaches. This difference starting hitting the bottomline as economic condition started to worsen.

• Structure: The alliance of Renault-Nissan led to formation of a new organizational form which did not fit into the contemporary organizational structure of automobile industry. Two defined forms were of GM and Toyota and the other was of Daimler and Chrysler. Considering the dynamic nature of the industry environment, the third form also offered growth prospects, had Renault-Nissan rendered their focused in extending their market share in the North American market with innovative product designs.
• Systems: The approach of the companies in focusing their attention towards development of vehicles which are less dependent upon gasoline was one aspect which aimed at coping the challenges of time. However, the eccentricities of the companies in maintaining their separate R&D added to the difficulties.
• Style: The adopted style of the alliance led each of its executive belief that they are not functioning as a whole but as two different identities, maintaining their strategic differences under the same umbrella. In this context the concept of brand image still remained a sensitive area for the duo. The focus of management in seeking balance while maintaining their respective independence made sustaining difficult as economy became challenging in nature.
• Staff: Role of employee was considered critical to success of an organization, one aspect which has been repeatedly stated by Renault-Nissan CEO Carlos Ghosn. The emphasis was laid upon open communication so that the employees are aware of what company intends to achieve and what their role is. However, the staffs were not exploiting their best potential which failed to provide the alliance with the requisite support for combating future challenge.
• Skills: The idea of sharing of knowledge between each other and also across the border was one aspect which has the capability of strengthening the performance of the company even during uncertain economic environment.
• Shared Value: The sense of unity was essentially missing in the organization for Nissan continued to function in its compartmentalized manner.

In the Renault-Nissan case, the problem area for Nissan was rightly identified as the ‘culture of blame’. The alliance partnership with Renault seemingly worked in the scenario when Nissan was going desperate for survival. However, the culture of blame which was so intricately associated with the value system of the company was not eroded once the alliance was formed. Though lack of accountability and responsibility were identified as some of the factors which pulled the company backward, alliance formation managed to overshadow the same. Further the decision of the companies in maintaining their respective identity even after the deal gradually started impacting the entire value chain in a negative manner as cultural singularity started surfacing.

Issues of Which Changeable and Non Changeable Nature

Notwithstanding the series of challenge the companies had to confront with the passage of time, there were certain issues which could have been diluted in their effect had rightly handled. One such changeable area was managing the diversity prevailing in the organization. In Renault-Nissan, the diversity existent amongst the workforce was much wider than the broad difference of the two cultures. However, by considering the basic element of various subcultures can ease the process. Diversity is also useful in exploiting potential and traversing on the route of innovation, a trait which is considered indispensable in contemporary environment.

Again it was significantly difficult for the management to design an approach which can fit into any given scenario. CFT (Cross Functional Teams) emerged as an integral part of management team for Nissan which is another aspect of changeable nature for models chosen can be of less homogenous type to cater to difference of two companies. Apart from this the ability of designing an effective and efficient model of communication within the organization posed great challenge. Yet considering their ability to be changed and mouled as per the required provided the silver lining.

Another major challenge was to bridge the cultural difference of two countries, which though is of non changeable natures, can be significantly bridged in a manner that the difference is almost negligible. At the same time it was also required that the behaviour of the employees of two different organizations is aligned in accordance the new business strategy. One of the major constraints for culturally different organization emerges in the form of readiness for change adaption and preservation of respective company’s individual culture as well as the talent pool. It is interesting to note that most of the time complacency for change is due to lack of awareness rather than rigidity of employees’ attitude. Though it is difficult to influence a human minds each belonging to radically different culture, choosing the right way can at least dilute the differences if not merge them together.

Notwithstanding the fact that adopting the kaleidoscopic approach of change management eases the process of recognizing the complexity involved in the change process while strengthening the importance of context sensitiveness, the inherent limitation poses a challenge. One of the major challenges is that the approach of contextual change provides the basic outline for designing the state of transition but at the same time it lacks the detail which is essential to plan the change order for a synchronized transition. Furthermore this approach is more focused towards a planned process of change hence is not significantly applicable for the scenarios which are considered evolving or open-ended.

Stakeholders and Their Interest

In order to successfully implement a change model in an organization the element of power also is considered critical. The management which initiate change needs to be powerful enough, as any weakness on their part is easily challenged by the resistance posed by the stakeholders. It thereby is critical for the management in rightly identifying the powerful groups within the companies who are closely associated with the core beliefs (Johnson and Scholes, 2002). The key stakeholders for Nissan were categorized as their customers, business partners, shareholders, employees and communities.

The role of shareholders and investors is considered critical for building the image of the company. The prime interest of shareholder and investors is maximization of their value which gets impacted which the stock prices slide downward. Similarly for the customers the area of interest lies within the boundary of product offering and innovation. For satisfying and retaining their interest it becomes critical for the company in focusing upon delivering the wow factors through innovation.

For understanding the power play of an organization, it is critical to develop the knowledge of the organizational structure. For Nissan which follows a different organizational structure it is essential that values of the company are retained which an employee’s readily identifies. Unlike Renault, Nissan is not open which calls for careful designing of effective strategies so as to maintain the interest of the employee in the long term vision of the company. Again in an event of resistance it is through use of effective channel of communication which can overcome the challenges and assist in accomplishing the ultimate objective of the firm (Nadler and Tushman, 1989).

 In case of Nissan, its shareholding pattern was insufficient to render any kind of managerial advantage upon the organization. The company practiced a cross-shareholding relationship with various companies in Japan. Apart from this the typical Japanese approach of promoting the employee on the basis of his tenure rather than performance was another problem area which was addressed by means of a cross functional team. Also an organization is broadly divided into three sub-systems viz. technical, cultural and political. For ensuring success of a model it is imperative that the alignment happens across all the three levels while moulding both the hard and the softer aspects of organizational structure.

The very basis of strategy is to identify the core competency of the organization and then harness it in a manner that it yields the competitive advantage to the firm. Some of the cautionary steps that the change manager needs to carefully consider certain aspects as given:

• Checking the suitability of the chosen strategy with the business line of the organization, such that there is no disconnect between the vision and mission of the firm and the adopted route for accomplishing the same.
• Maintain the initiative for innovation amongst the employees such that the company is able to reap the advantage of the growing market and expand the competitive positioning.
• Identifying the area of core competence of a business and then target the market which is likely to support the growth with the chosen competency.

Designing the change

One of the biggest ironies of organizational change is that despite the crying need of organizations for change, it is met with stubborn resistance from the sources inherent to the system. Irrespective of drivers of change and resistance the initiative of change can be effectively designed by the manager when he develops the ability of anticipating the change rather than adopting change of events as a response during emergency. Anticipation helps in careful consideration of the various alternatives by weighing their respective pros and cons. The process of designing the change management matrix thereby has become very critical in determining the probability of success for an organization.

Pugh Matrix and Organizational Development

One of the most popular strategies of organizational development is known as Pugh Matrix. This matrix provides the requisite cues in identifying the type of change which is required by the company and the manner in which it needs to be drawn for arriving at success. Three basic aspects which forms a part of this matrix is behaviour, structure and context. These three aspects are then tested at different levels categorized as organizational level, inter-group level, group level and the individual level. Application of two dimensional Pugh Matrix helps in level wise analysis of the change problem thereby emerging as an effective approach of designing the change plan for an organization (Pugh and Mayle, 2009).

The problem of Renault-Nissan can also be assessed by use of this matrix. By breaking down the resistive element existent in the change process into four levels it becomes easier for the management to assess each level at a time. Each level is then tested on the three aspects aligned at the horizontal axis which answers the three elementary questions of what is happening, what needs to be done and what is the scenario. The below table is a sample structure of how attributes can be applied for assessing the case of Renault-Nissan.

The below table provides various rates to the alliance on the basis of various parameters which helps in designing the strategy in an effective manner.

Applying the Pugh Matrix with some of the attributes reveal that behaviour emerges as one attribute which demands serious consideration as it is featured equally in all the groups. The column designated for capturing the behaviour across various defined level is tackled by the management directly. Considering the minimal degree of fundamental relevance attached with this column, from the perspective of change this category can be as simple as overcoming of some difficulties in an existing system.

What demands attention at this stage is the degree of intervention by the management. Simple issues when ignored can majorly impact the big picture, hence timely intervention is required for resolving such issues which can ensure the transition of the change process in a smooth manner. From the above table it becomes clear that applying the matrix has eased the process of identifying the issue with the group which failed to understand what was required from them post formation of alliance. The focus of the management thereby should be upon the second column of the matrix. The intervention can led to proper flow of communication and allocation of responsibilities which can make every group understand the ultimate vision of the company in the new form. Similarly when the problem falls in the third column the degree of intervention required is even greater. Using the Pugh Matrix for designing the appropriate model of change is thus considered effective as it guides the manager about the degree and nature of intervention basis the nature of problem.

Once the matrix is designed the matrix is designed, every criterion is identified weighing the parameters and ranking them can help in deriving a composite score which will for the basis of business decision making process. The approach of Pugh Matrix is thus considered an effective means of designing change in an objective manner.

Effective Management of Change

Once the decision is made with the help of Pugh Matrix about change a manager needs to abide by certain rule which are as given below (Pugh and Mayle, 2009):

• The management needs to infuse the idea of need for change. Since management is involved in initiating the process, the reason for change is palpable for them. However it is essential that every employee is able to appreciate this need which can help in successful transition. It becomes imperative for the management to reason out the need for change for every functional department of the company.
• Rather than calculating the benefits from the proposed change it is effective in making a conscious and systematic understanding of how the same will be viewed from the perspective of a third party. Benefits and gains become apparent once the downside is assessed and calculated in advance.
• Considering the views and feedback from others is an equally important process that eases the process of acceptance and generates desired benefit. The concept of change thereby needs to be treated as a participatory process wherein it gets initiated through informal means of discussion.
• Rather than pushing the decision for change forward, the change agent can draw in favorable results by encouraging the group which objects in the most positive manner. This is considered one of the critical stage as improper handling of objection can lead to rigidity of attitude which further complicates the process of initiating any change.
• Even the manager initiating the change needs to be prepared to change his ideas and perception so as to avoid falling into rigid approach.
• Constant vigilance is the key word for being successful even in an environment of change management. Every change post its implementation needs to be evaluated from time to time so as to ensure that it is working well and is not deviating from the prime objective of the firm.

Mapping Stakeholder for Designing Change

The process of evaluating the power of shareholders is equally imperative when it comes to business decision making cases, as interest of different shareholders tend to differ. Also as resources are limited it is essential that a balance is maintained in managing the needs of shareholders. Mapping the shareholders helps in identification of those key people who can influence the process of change management. For instance when the need of investors is kept in mind in tandem with customers and employees the focus of the company is a step further than mere profit making.

Understanding the stakeholders is thus important for it helps in directing the strategic vision of the company. Mapping the need of stakeholders with the organizational strategy can help an organization in meeting the challenges of uncertain future.

There also exists another group of shareholders who is considered invisible as it is the category of those individual who consider themselves to be impacted by the effects of any initiative or project undertaken. The support from this group of invisible shareholder is considered critical in delivering success and strengthening the network of change management department.

Understanding the types of shareholder is of vital importance for the change manager as their influence tend to impact the process of not just designing the change but also critical for impacting the actions of the projects undertaken. The process of mapping them with the change design is an effective approach which helps in the attributes that tends to motivate this group and the step by step approach which a manager needs to consider for winning over them and accomplish the ultimate goal implementing the change plan successfully.

Implementing the change plan

Once the change plan is designed, the various available alternatives need to be considered for achieving desired results from the action plan. At this stage the case of crucial importance is how to implement the change which was so strategically designed and meticulously planned. One of the critical considerations during the implementation stage is that of style. The importance of style has been repeatedly stated by various analysts and change agents in overcoming the basic hurdle of resistance towards change. The nature and type of style will also differ depending upon degree of resistance, necessity of change as well as the influencing power of the change initiator. The four widely identified style of implementing change are intervening, participating, persuasive and edict (Nutt, 2002). For delivering the best from the proposed plan it becomes imperative for the manager in carefully choosing the style on the basis of the identified organizational need.

While implementing the change plan it is also important that a contingency model is followed which can absorb certain minimal resistance towards change. One of the popular contingency models is proposed by Stace and Dunphy (1994), which is designed with the combination of style and type of change that ranges from minimal fine tuning of the existent scenarios to major transformation of the entire process. At the same time it is interesting to note that transformation or transition process is directly dependent upon the level of support received from the various organizational groups along with the time in which the change is desired. Drawing cue from the Renault-Nissan case the relevance of time factor is heightened, as the successful initiative started heading for loss after a certain period in time.

As discussed in the previous sections the organization is broadly classified into three sub-systems comprising the technical, political and the cultural elements. For successful implementation of the change plan it is essential that these three layers of sub-systems are impacted in the right manner, each with the use of a specific mechanism. The implementation process hence needs to consider the cultural web which is the primary bone of contention in case of cross country alliances. Even during the initial stages of Renault and Nissan alliance, the attributes prevailing in the differing cultures of the two countries was a major challenge. It is very important to assess the options available for implementation of change, for it is not just a complex process but also critical. Avoiding the process owing to its innate complexity of nature can increase the risk of limiting the actual potential of the chosen model for initiating change.

The implementation process can be carried out in the top-down or bottom-up approach basis the organizational need and the type of change required. In this case it is essential for building teams such that the production is not hampered. Also as two different entities need to function with the single objective it is also essential that the role of the respective responsible individual is negotiated in the most effective manner. Hence a combination of style and bottom-up and top-down approach needs to be used which can positively impact the people involved in the process while winning their confidence for adapting the change. The adopted approach has the chances of being successful, as both the organization has witnessed a greatest degree of cultural diversity. Managing the difference existent in culture is not an easy approach but a very sensitively complex process. In such a case no single approach can deliver the required results for the company, but a combination of various models and approaches needs to be used which can lead to achieving the ultimate objective. Again, this alliance is not a fresh change; hence the approach which was tried and tested not necessarily needs to be repeated. As the challenge was faced in sustaining the change rather than initiating it, the current focus needs to shift towards influencing the power groups which can imbibe the true objective of the organization.

As suggested in the previous section, apart from the diagnostic model of assessing the organizational health, the Pugh Matrix of organizational development is used for identifying the problem in its actual place. Once the root cause is defined the change plan can be designed keeping in consideration the primary issues. Maintaining a holistic approach and understanding the need of different groups, including the shareholders implies that a combination approach is more rightly suited for Renault-Nissan change management process. The challenge of change initiative is not just limited to overcoming the resistance posed by an organizational segment but more from sustaining the change in a successful manner. Implementation process will yield successful results once every leading stage is considered with equal consideration. Also it is important to bear in mind that no single approach can deliver fruitful results, for one approach is tested with only a given set of scenario in a controlled environment. As Mintzberg has stated the practical field differs drastically from the boardroom discussion, a combined approach can easily complement for the downside of the other and collectively help in delivering the optimal results. Furthermore, a collective approach also provides room for designing short term wins, which can be monitored for testing the effectiveness of the plan. In case of any challenge or deviation from the ultimate objective, the plan can be reoriented as per the different available approach. This flexibility of live testing scenario in short term is beneficial for sustaining the challenges in the long term. At the same time it is interesting to note that such option of flexibility is not provided when a single way approach is adopted hence magnifies the risk associated with implementation of change initiative.

Conclusion

Any event of merger or corporate alliance is attached with the symbol of synergized benefit. The tale however is not always true when tested on practical field. There are cases when success favors the alliance for some time and gradually meets a sad fate as witnessed in the case of Renault-Nissan. The traditional approach of sticking to the strategy of growth, in the environment which demanded more innovation derailed the growth of the company and pushed the company towards a negative trend of growth. For any strategy chosen is very crucial in deciding the growth pattern of an organization. If in any given case the strategist is not able to focus upon the vision of the company and positioning the same with the customer need, the company is on the path of establishing its doom. One of the major challenge existent in the alliance of Renault-Nissan was the elemental difference in the cultures of France and Japan, which though was overlooked while Nissan was desperately struggling to survive, surfaced strongly once the company flourished through alliance.

In order to understand the flaw which led to such a failure of once successful alliance of the companies it is important to adopt the approach of organizational diagnosis which views the company from the critical lens of a physician. It is through implementation of the diagnostic approach that the constraints and enablers inherent in every model are understood. Developing an understanding of the true potential of these diagnostic models is critical for the management in making the appropriate selection depending on the basis of the contextual requirement. Once the assessment of the company is done in the most objective manner the next step is to sketch the layout of change initiative. Adhering to the step by step approach presents various alternatives which a manager can consider to make the project successful.

It was interesting to note that though change has emerged as a way of life for successful functioning of an organization in an age of cut-throat competition, the event is always resisted whenever proposed. The management tactics has been capable of overcoming certain difference in the initial stage, however in the long run without monitoring the effects of change can lead towards repetition of cases like Renault-Nissan. In order to identify the problem correctly when there is still time, it is essential that the management undertakes an objective approach of assessing any given scenario through prescribed matrix. One such approach is Pugh Matrix which eases the process of identifying the challenge occurring at different level and guiding the manager for intervening in due time.

Once the right model for managing the change is designed and implemented while adhering to the rule of caution the probability of success for an organization increases manifold. Also developing sensitivity towards any given context of an organization has emerged as the critical differentiator in ensuring success for a change initiative. So much so a manager initiating the change process needs to consider not just the retrospect analysis of the proposed event but also develop a thorough understanding of the outcomes of the anticipated events. Such an approach then aids the manager in structuring the changes implementation tactics for any future initiatives undertaken by the organization

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