Change Management And Offshore Outsourcing   Aom Conference
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Change Management And Offshore Outsourcing Aom Conference

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Presentation made at the Academy of Management 2008 Annual Meeting held in Anaheim, California.

Presentation made at the Academy of Management 2008 Annual Meeting held in Anaheim, California.

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  • Entire contents © 2003 Gartner, Inc. All rights reserved. Page Strategic Sourcing Trends & Strategies Sprint DayMonthYear
  • Entire contents © 2003 Gartner, Inc. All rights reserved. Page Strategic Sourcing Trends & Strategies Sprint DayMonthYear
  • Entire contents © 2003 Gartner, Inc. All rights reserved. Page Strategic Sourcing Trends & Strategies Sprint DayMonthYear
  • Entire contents © 2003 Gartner, Inc. All rights reserved. Page Strategic Sourcing Trends & Strategies Sprint DayMonthYear Processual approach, which is less prescriptive but more analytical in nature, aims to understand and explain rather than to direct and influence processes towards some preferred end point (Dawson, 2003). Process models focus more on the procedures involved in change rather than on the specific organizational development (OD) activities involved in the change. Examples include: Lewin (1951), Lippitt, et al. (1958), French (1969), and Connor and Lake (1994), all of which explain planned change from a general perspective. OD has also been defined as “a planned process of change in an organization's culture through the utilization of behavioral science technologies, research and theory.” (Bourke 1987, 11). Therefore, OD not only involves the element of planning, but it also clearly focuses on the use of behavioral and sociological methods, and even the planning aspect usually deals with the planning of behavioral interventions.
  • Entire contents © 2003 Gartner, Inc. All rights reserved. Page Strategic Sourcing Trends & Strategies Sprint DayMonthYear A multiple-case design requires a theory to be tested through replications of the findings in subsequent case(s), which will lead to analytical generalisation. While similar results explain the conditions under which a particular phenomenon is likely to be found, contrasting results explain the conditions when the phenomenon is not likely to be found.
  • Entire contents © 2003 Gartner, Inc. All rights reserved. Page Strategic Sourcing Trends & Strategies Sprint DayMonthYear
  • Entire contents © 2003 Gartner, Inc. All rights reserved. Page Strategic Sourcing Trends & Strategies Sprint DayMonthYear Contextual factors most commonly identified as driving the change
  • Entire contents © 2003 Gartner, Inc. All rights reserved. Page Strategic Sourcing Trends & Strategies Sprint DayMonthYear Organizational factors most commonly identified as contributing or preventing the diagnosis and planning of change .
  • Entire contents © 2003 Gartner, Inc. All rights reserved. Page Strategic Sourcing Trends & Strategies Sprint DayMonthYear Organizational factors most commonly identified as contributing or preventing change implementation .
  • Entire contents © 2003 Gartner, Inc. All rights reserved. Page Strategic Sourcing Trends & Strategies Sprint DayMonthYear Most frequently cited effects of the change .
  • Entire contents © 2003 Gartner, Inc. All rights reserved. Page Strategic Sourcing Trends & Strategies Sprint DayMonthYear
  • Entire contents © 2003 Gartner, Inc. All rights reserved. Page Strategic Sourcing Trends & Strategies Sprint DayMonthYear
  • Entire contents © 2003 Gartner, Inc. All rights reserved. Page Strategic Sourcing Trends & Strategies Sprint DayMonthYear
  • Entire contents © 2003 Gartner, Inc. All rights reserved. Page Strategic Sourcing Trends & Strategies Sprint DayMonthYear
  • Entire contents © 2003 Gartner, Inc. All rights reserved. Page Strategic Sourcing Trends & Strategies Sprint DayMonthYear
  • Entire contents © 2003 Gartner, Inc. All rights reserved. Page Strategic Sourcing Trends & Strategies Sprint DayMonthYear
  • Entire contents © 2003 Gartner, Inc. All rights reserved. Page Strategic Sourcing Trends & Strategies Sprint DayMonthYear
  • Entire contents © 2003 Gartner, Inc. All rights reserved. Page Strategic Sourcing Trends & Strategies Sprint DayMonthYear
  • Entire contents © 2003 Gartner, Inc. All rights reserved. Page Strategic Sourcing Trends & Strategies Sprint DayMonthYear

Change Management And Offshore Outsourcing   Aom Conference Change Management And Offshore Outsourcing Aom Conference Presentation Transcript

  • Processual View of Managing Change Related to Offshore IT Outsourcing Implementation 2008 Annual Meeting of the Academy of Management, Anaheim, CA T.R. Ramanathan, DBA Newcastle Business School Northumbria University August 8-13, 2008
  • Agenda
    • Introduction
    • Theoretical Perspective
    • Methodology
    • Findings
    • Conclusion
  • Introduction
  • Business Problem and Strategy
    • Large pharma business environment has changed
      • Drug development costs have increased ~3.5 times to $802M in 15 years ( DiMasi, Hansen & Grabowski, 2003)
      • Declining R&D productivity - from 53 new drugs in 1996 to 17 in 2002 (WSJ, 2004)
      • Blockbuster business model is expected to deliver just 5% return on investment, lower than the industry’s risk-adjusted cost of capital (Gilbert, Henske & Singh, 2003)
    • Two main challenges for generating growth
      • Controlling costs
      • Improving R&D productivity
    • Various change initiatives to address these issues
      • Companies recognize offshore outsourcing as a key trend in IT
      • PharmaCom (pseudonym), a global company, initiated a company-wide offshore initiative in 2003 targeting the IT departments of the different business units
  • Research Question and Study Propositions
    • How do IT organizations manage change associated with offshore outsourcing of information technology services, and what lessons can be learned from their experiences?
      • To explore the environmental forces (internal and external) that either foster or hinder the adoption and use of offshore outsourcing
      • To identify the organisational factors that either contribute to or prevent successful change management
      • To understand the effects associated with offshore outsourcing, as perceived by the organisational members involved in this change
      • To contribute to a better understanding of the problems and possible solutions related to managing change for offshore outsourcing with a view to improve professional practice
  • Theoretical Perspective
  • Social Systems Theory
    • Open systems view of organization (Scott, 1992)
      • Organization is in constant interaction with the environment, processing inputs into outputs
      • System maintains itself through a process of exchange with its environment
      • Organizational survival depends on being able to adapt to the environment
      • Notion that there is no “one best way” to organize is central to this approach
    • In the open systems view, organizational change is
      • A rational formulation of long-term goals based on a strategic analysis of the environment
      • Used to propel growth and development
      • Something human agents are able to bring about in a predictable and controlled manner
      • A process that unfolds over time
      • One needs to look at both inside and outside the system to understand the process of change
  • Theoretical Framework
    • The processual approach (Dawson, 2003) is a useful method for explaining this organizational phenomenon
      • Represents movement over time from present to future state of organization
      • It deals with the scale or scope of change
    • Generic process model proposed to understand the change process
      • It is based on the significance of four components (Context, Diagnosis & Planning, Implementation, and Institutionalization)
      • It enables data organization and empirical analysis of the characteristics of the change process components
      • Used only as a starting point for the inquiry
    Context : External Factors Internal Factors Diagnosis & Planning Implementation Institutionalization
  • Methodology
  • Research Methodology
    • Research Strategy
      • Qualitative Case Study
      • Multiple Case Design (replication logic)
    • Data Collection
      • Semi-structured Interviews (taped and transcribed)
      • Direct Observation (recorded as field notes)
      • Document Analysis
    • Unit of Analysis
      • 3 IT Departments of PharmaCom (R&D, Sales & Marketing, Corporate)
      • 3 embedded levels analyzed within each case: Sr. Managers (5), Middle Managers (5) and Non-Managerial Employees (11)
    • Purposive Sampling
      • Case organizations, Study Participants
  • Research Methodology contd.
    • Analysis Strategy
      • Template Analysis (King,1998)
        • Combines deductive and inductive approaches
        • A priori template of codes is first derived based on literature
        • Template is subsequently modified as analysis proceeds
        • Ensures critical issues are covered in the analysis
      • Coding Tool: EZ-Text Software
      • Within-Case Analysis (Miles & Huberman, 1994)
      • Cross-Case Synthesis (Yin, 2003)
    • Validity and Reliability
      • Multiple Cases
      • Analytical Generalization (Yin, 2003)
        • Results generalized to broader theory
      • Data Triangulation, Peer Consultations
      • Case Study Protocol, Case Study Database
    • Ethical Considerations
      • Informed Consent
      • Pseudonyms used for case organisations and the study participants
      • Non-release of data that may potentially cause harm to participants
  • Findings
  • Context
    • Interviewee Perspectives
      • [The pharma] Industry is under economic and financial pressures…
      • [It is driven by the] Lack of internal resources to complete the tasks, high costs associated with [local] contractors, budget constraints together with the demand for increased productivity, and the need to disengage from low-value tasks such as maintenance and monitoring…
      • [It is driven by a] Decrease in willingness to spend on technology…
  • Diagnosis & Planning
    • Interviewee Perspectives
      • … you need strong leadership and vision to implement changes of this kind.
      • … we should have a clear, long-term oriented offshore strategy.
      • Our ability to get our internal business partners ready for this change is also critical…
      • We have created a [Change Management Team]...if [senior managers of the IT departments] are on board as evangelists, there is a better chance of success.
  • Implementation
    • Interviewee Perspectives
      • A continuous focus on communication [is needed]…
      • … people need time to work through the emotions [i.e. transition] required from this change.
      • It is better to start small [i.e. pilot projects] and then move on to bigger projects so that the organization gets assimilated successfully.
      • Resistance should be expected and addressed…
      • … offshoring is all about change in culture.
  • Institutionalization
    • Interviewee Perspectives
      • … unclear roles and responsibilities, unclear statement of work, and too much dependence on the [offshore vendor’s] onsite coordinator.
      • People have gained new skills (e.g. vendor management)…have more interesting jobs…those who cannot reschool themselves into the more business-facing roles, will have a tough time being successful in the company.
      • … a lot of learning in the mid-term…i.e. how to better use operational processes and procedures to ensure that the changes really do deliver on the cost savings.
      • Change management ends when the group [i.e. internal staff and offshore personnel] works as a cohesive unit…
  • Conclusion
  • Summary and Study Limitations
      • Summary
        • Adopting a processual view helped to examine the influence of the company’s history and internal and external environments on the events and activities that led to offshoring
        • Combination of internal and external pressures for change created an environment receptive to the adoption and use of offshoring
          • Internal context, especially resource constraints, provided an important incentive to support the adoption of offshoring
          • Further study is needed of the internal characteristics motivating change in organizations
        • Several organizational factors in combination are necessary for positive outcomes with offshoring
          • Success depends on change strategy adequately addressing these factors
          • Taking these factors into account during planning helps to minimize employee resistance
        • To be successful, senior management must make every effort to maintain high employee morale during offshoring
        • With services globalization emerging as an inevitable trend in today’s world economy, effective change management can positively impact the firm’s profitability and shareholder value
      • Limitations
        • Results are informed by a small sample that was purposively chosen
        • The findings represent only one pharma company and may not be generalized across the pharma industry
  • What Lessons can be Learned?
      • Process Model of Offshore Outsourcing Implementation
        • A way of conceptualising the change process related to offshore outsourcing implementation
        • Model represents what employees and the management perceived how the change related to offshoring was managed
        • This model is similar to the generic process model of change shown earlier
          • Difference is in the emphasis on corporate vision and organisation in the proposed model
          • Corporate vision appeared to be a key feature because it allowed the organisation to adapt to dramatic changes in contextual conditions
          • Another feature is the alignment of the organisation with the corporate vision - the top management leveraged the vision as a tool to align the organisation with the corporate goals
  • References
    • Dawson, P. (2003) Understanding Organisational Change: The Contemporary Experience of People at Work . Thousand Oaks, CA: Sage .
    • DiMasi, J.A., Hansen, R.W., & Grabowski, H.G. (2003). The price of innovation: New estimates of drug development costs. Journal of Health Economics, 22 , 151-185.
    • Gilbert, J., Henske, P., & Singh, A. (2003). Rebuilding big pharma’s business model. In Vivo: The Business and Medicine Report , 21 (10): 1-10. Norwalk, CT: Windhover Information, Inc.
    • King, N. (1998). Template analysis. In Qualitative Methods and Analysis in Organisational Research, G. Symon and C. Cassell (Eds.), 118-134. Thousand Oaks, CA: Sage.
    • Miles, M. B. & Huberman, A. M. (1994). Qualitative Data Analysis (2nd ed.). Thousand Oaks, CA: Sage Publications .
    • Scott, W.R. (1992). Organisations: Rational, Natural and Open Systems . Englewood Cliffs, NJ: Prentice-Hall.
    • The Wall Street Journal. (2004). Researchers try to cut new path to pharmacy. January 12.
    • Yin, R.K. (2003). Case Study Research: Design and Methods (3 rd ed.). Thousand Oaks, CA: Sage.
  • Backup Slides
  • Drug Development Costs
  • Product Failure in Late Stage Development Source: PharmaCom, 2003
  • R&D Expenditures as Percentage of Sales - 1970-2004 Source: PhRMA, PhRMA Annual Membership Survey, 2005
  • Global Pharmaceutical Sales - 1970-2004 Source: PhRMA, PhRMA Annual Membership Survey, 2005
  • 2003 R&D Expenditures by Geographical Regions Source: PhRMA, PhRMA Annual Membership Survey, 2005
  • Annual Growth in Prescription Drug Spending - 1997-2002 Source: IMS Health, Retail and Provider Perspective, 2002