Organisational Development

1. Assumptions

Poor communication is associated with poor production and increased conflicts

The different SBUs need to develop good communication networks across departments and from top to bottom as well as from bottom to top. This enhances flexibility and innovation. VRD lacks communication which has resulted in conflicts.

Poor leadership causes conflicts between manager and employees

This assumption is relevant because the employees accuse managers of deteriorating performance of the company while the management puts pressure on the employees while dismissing others as part of implementing change.

The same organisation practices cannot be upheld throughout the company’s existence

This assumption applies to VRD because the employees and managers got used to the old ways of the former manager and are trying to oppose changes. They need to understand that the company will not remain the same forever; it needs to change at the organisational level.

2. Growth and Change in VRD

Greiner (1972) suggests that the problems of growth and change in an organisation are based on past decisions rather than present events. For VRD, it is therefore clear that the conflicts and falling sales of the company are caused by the past management of Frank Delacy and not the current change events implemented by Lee and May Wong.

It is also clear that VRD’s growth requires a lot of changes because the past regime had caused conflicts among group leaders and SBU managers. Greiner (1972) suggests that the growth of an organisation can be enhanced by coordination and collaboration which reduce conflicts and confrontations.

3. Experiences of the company relate to incremental change

This statement by May Wong is true because the company started to experience a drop in sales when changes occurred in the market in terms of discontinuities and competition from China and Taiwan. These environmental changes caused the company to initiate organisational changes which led to resistance and problems in a team that had been led through unchanging processes and systems for many years. Greiner (1972) suggests that smooth evolution is common in organisations, and they may lead to upheaval management practices.

The solutions will gradually come to be realised. This is true as suggested by Brown and Eisenhardt (1997) who suggest that successful product portfolios should undergo constant change. Tushman and O’Reilly (1996) also argue that almost all successful organisations undergo incremental change in response to revolutionary and shifting environmental conditions.

4. Why is it difficult to implement change?

The company is finding it difficult to implement change because there is resistance to change at every phase of organisational change. Members of the organisation are reluctant to shift from the present processes and systems, especially if they have got used to them. For instance, managers of VRD had gotten used to Frank’s fine-tuning and collaborative style.

Tushman and O’Reilly (1996) suggest that the lack of congruence in implementing change is caused by the current performance problems of the organisation. It is difficult to link strategy, people, processes and organisational structure when implementing change. Lack of adaptability and flexibility in the current systems and processes may also impede change.

5. Identification of VRD issues using Open System Model

The issues and problems of VRD can be identified using the open system model of organisational change. An open system is a system that engages with the external environment. According to the model, an organisational system consists of external environment, inputs, processes (throughput), outputs, and feedback. The issues of VRD are identified in terms of problems identified in the case and other personal assumptions related to organisational change and the background of VRD case. The figure of an Open System Model shown below shows the issues of VRD.

The figure shows the issues of VRD summarised in terms of the environment, inputs, throughputs, output, and Feedback. The items in each category are relevant to VRD and indicate the company’s situation as it attempts to implement change.

As noted in the figure, one of the environmental issues of VRD is the growing market of China. This has an impact on implementing change in VRD because it puts pressure on the company to increase its productivity in order to get the products needed to export to GM in China. Discontinuities in the auto industry and competition from China and Taiwan has also caused challenges to change implementation because the team now needs to develop strategies in its organisational change that will help the company to meet the needs of suppliers and customers in the market and the auto industry.

The issues related to the company’s input include human capital issues and managerial competence. In VRD, managers and employees engage in conflicts which may impact negatively on their intellectual and skillful input contribution into the production process. After the exit of Frank, capital expenditure also reduced, causing difficulties for the implementation of change. Another challenge is that the company maintained the same staff for over 20 years.

In terms of Throughput, there have been minimal changes in the management team. As a result, it became difficult for the change implementation team to initiate changes. The survey of May Wong also indicates that there is a slow production process and old job designs in the company. The production team also engaged in conflicts constantly and their communications is fractured. The production team also receives pressure of efficiency from other divisions.

The above problems in the input and throughput section led to unrealistic delivery estimates given by the sales and marketing team. The sales also reduced, leading to low profitability and increasing costs of production as a result of the pressure on efficiency and change management.

As part of providing feedback to the external environment, Lee implemented some organisational change strategies. First, he appointed May Wong to lead the change implementation team. When things got difficult for May Wong, it also became necessary for Lee to appoint an external consultancy firm to assist Wong in the change implementation.

6. Evidence

It is important to apply the Open System approach to the issues of VRD because an open system is essential to organisational change and enhance a smooth integration of technology and innovation (Negandhi, 1975). It also improves communication enhances adaptability of the company.

The connecting systems that influence change as identified in the Open System Model above can be explained using theory. An important theory is the theory of evolution and revolution provided by Greiner (1972). The theory provides an evidence-based approach to the identification of key forces of development. Greiner (1972) contends that any model of development (including the Open Systems Model) takes into consideration the lifespan of an organisation. Using evidence from historical data, Greiner (1972) argues that “management problems are rooted in time” p. 39.

This statement can be applied in VRD case. The problems of VRD are rooted in the past management problems during the leadership of Frank Delacy. The Open System Model in section 5 indicates that VRD’s change implementation is influenced by rigid management practices which do not adapt to the changing environment. These practices including human resource management, communication, job design and production processes were initiated by the past management many years ago. These practices involved inflexibilities and slow production which led to conflicts and poor communications across departments. Past management also failed to foresee future changes in the market and industry. The appointment a new manager in VRD coincided with the changes that occurred in the market, including increased competition and discontinuities.

According to Greiner (1972), passage of time also leads to the institutionalization of managerial attitudes. In this regard, the behaviour of employees becomes predictable and difficult to change when they become outdated. In the case of VRD, 30 years of Frank’s management resulted in institutionalization of certain managerial attitudes and competences which were difficult to change when the new CEO was appointed. The senior managers of the company had established long standing relationship with junior managers and employees. Therefore, when Lee wanted to reduce staff by 10%, he faced management rigidity because managers had developed strong relationships with each other.

Brown and Eisenhardt (1997) also suggest communication enhances effective product portfolios while organic structure does not. VRD’s past and current structure can be termed as organic because it does not involve well defined job design and specification. This organic structure in VRD has led to poor communication strategy and increased conflicts within Strategic Business Units. Organic structures offer strong resistance to change (Brown and Eisenhardt, 1997). The company can implement changes effectively by providing clear managerial responsibilities and project priorities.

Brown and Eisenhardt (1997) demonstrated the effectiveness of good communication using Cruising Company. The researchers observed that the cross-project communication in Cruising enabled its managers to borrow ideas from each other in a short cycle and increase pressure on efficiency. This is the approach that Lee, the new manager, is trying to implement. The poor communication structure in VRD and conflict among its managers has caused an organic system in which communication is not given special attention. The company operates in a system whereby responsibilities overlap and managers accuse each other for the problems of low production and sales in the company.

Given the evidence of the importance of communication as provided by Brown and Eisenhardt (1997), it is clear that lack of communication in VRD is one of the leading causes of failed implementation of change. Therefore, the new manager’s approach to increase communication and address issues that cause conflicts is an important step towards organisational change and successful production and distribution.

Theory also shows that actual design process needs to be well structured so that everyone understands his/her responsibilities in production (Murray, 2003). One of the issues facing VRD in terms of throughput is the presence of an old job design process. This leads to rigidity and unclear responsibilities. In order to adapt to the changing environment and industry needs, the company needs to develop a flexible job design process which can change from time to time (Tushman and O’Reilly, 1996). This will ensure that the design process can keep up with the pace of the overall industry and meet the needs of the markets. Brown and Eisenhardt (1997) evidently suggest that this can be achieved by adopting a cross-functional project management so that each SBU is involved in decision making regarding the changed being implemented in the company.

However, engagement in cross functional projects and communication requires a collaborative system. Greiner (1972) argues that collaboration eliminates red tapes which could cause resistance to change. According to Greiner, this reflects phase 5 of evolution. This phase of evolution or organisational change enhances management through teams and skillful elimination of interpersonal differences and conflicts. This enhances the improvement of human capital input into the production process.

Collaboration involves problem-solving by team action, combination of teams across functions, reduction of headquarters staff, development of matrix structure and simplification of previous formal systems (Stacey, 2003). These characteristics of collaboration are relevant to VRD because the company also needs collaborative change implementation to avoid managerial conflicts, complex rigid systems, poor communication and unrealistic delivery estimates.

Lefter et al (2008) also suggests uses the theory of organisational learning to explain the importance of intellectual capital in organisational change. They suggest that intellectual capital in form human capital, structural capital, and client capital can be used to create value in production (Murray and Donegan, 2003). This shows the importance of human capital as indicated in the input section of the Open System Model provided in section 5.

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