Change Management 4

Abdella K., Department of
Entrepreneurship & Bus. Mgt, Kotebe
Metroplitan University

Questions!!!
 For you what is TQM? BPR? BSC?
ERP?
 Who do you think that develop BPR?
 Who develop BSC?

Types of change
There are mainly four ways to changes. These four ways are
defined in two dimensions – the extent of the change
and the speed with which the change is to be achieved.
• Transformation: entails changing an organization's
culture. It is a fundamental change that cannot be
handled within the existing organizational paradigm.
• Realignment: does not involve a fundamental reappraisal
of the central assumptions and beliefs.
• Incremental change: can take a long period of time, but
results in a fundamentally different organization once
completed.
• Big Bang: change is likely to be a forced, reactive
transformation using simultaneous initiatives on many
fronts, and often in a relatively short space of time.

Types …. Cont’d
• Change can be classified by the extent of the change required
and the speed with which the change is to be achieved:

Types …..Cont’d
• Stace and Dunphy (2002) distinguish a number of levels of
change on a continuum:
Level 1 – Fine tuning: Addressing and improving the fit
between strategy and the organizations people, processes
and structure, for example, policy and process changes;
continuous improvement teams. Refining, clarifying,
interpreting group norms and operating procedures.
Level 2 – Incremental adjustment: Relatively modest
changes around the organization in the light of external
drivers for change. Changes involving strategy, structure
and management process.
– Shifting the scale and scope of the operation; changing the
product or service mix; addressing production inefficiencies.

Types …..Cont’d
Level 3 – Modular transformation: Major restructuring
and realignment – focusing specific parts of the
organization rather than the organization in its
entirety. For example, a restructuring of the
marketing department around distribution channels
rather than product lines, or a decentralization of the
HR department into business units.
Level 4 – Corporate transformation: Fundamental shift
in organizational business strategy involving new
statement of vision, mission and/or values; major
restructuring that changes the power bases within
the organization; radical changes to structure,
systems and processes across the whole
organization; key appointments recruited from
outside the organization.Abdella K., Department of

4.1. Planned vs. unplanned change
• Planned changed: is an effort to move an
organization to a higher level.
• Occurs when deliberate decisions are made in an
organization.
• Occurs with successful implementation of a
Strategic Plan, plan for reorganization, or other
implementation of a change of this magnitude.
• Unplanned change: happens when pressures of
external factors are so overwhelming that resistance
to change is unavoidable. is a result of unforeseen
occurrences.
• Unplanned change might occur when significant
public relations problems occur, poor product
performance quickly results in loss of customers, or
other disruptive situations arise.Abdella K., Department of

4.1. Evolutionary and Revolutionary Change
4.1.1. Evolutionary Change
 Is gradual, incremental, and narrowly
focused.
 Is not dramatic or sudden but, rather, is
a constant attempt to improve, adapt,
and adjust strategy and structure
incrementally to accommodate to
changes taking place in the
environment.
Example: Total quality management
and organizational developmentAbdella K., Department of

Total Quality Management
Is a philosophy that involves every one in an
organization in a continual effort to improve quality,
drive down cost and achieve customer satisfaction.
Commitment to quality throughout organization
• Principles of TQM
– Customer-oriented
– Leadership
– Strategic planning
– Employee responsibility
– Continuous improvement
– Cooperation
– Statistical methods
– Training and education
Strategic implications of
TQM
• Strong leadership
• Goals, vision, or mission
• Operational plans and
policies
• Mechanism for feedback

Steps to Successfully Implement TQM
Build organizational commitment to quality.
Focus on customers: TQM see customers as the
starting point. It requires to identify what customers
want, what the company actually provides to
customers, quality gap, and formulate a plan for
closing the quality gap.
Find ways to measure quality
Set goals and create incentives
Solicit input from employees: Quality circle
Identify defects and trace them to their sources
Design for ease of production
Break down barriers between functionsAbdella K., Department of

TQM principles from the Japanese Kaizen
Technique
• Kaizen- defines the managements role in
continuously encouraging and implementing
small improvements in the individual &
organization.
• Break the complex process into sub-processes
and then improve the sub-processes.
• Continuous improvements in small increments
make the process more efficient ,controllable
and adaptable.
• Does not rely on more expense, or
sophisticated equipment and techniques.

Role of Employees in Quality Improvement
• Participative problem
solving
– employees involved in quality-
management
– every employee has
undergone extensive training
to provide quality service.
• Kaizen
– involves everyone in process
of continuous improvement

Quality Circles and QITs
• Quality circle: group
of workers and
supervisors from same
area who address
quality problems
• Process/Quality
improvement
teams (QITs): focus
attention on business
processes rather than
separate company
functions
Presentation
Implementation
Monitoring
Solution
Problem results
Problem
Analysis
Cause and
effect
Data collection
and analysis
Problem
Identification
List
alternatives
Consensus
Brainstorming
Training
Group
processes
Data collection
Problem
analysis
Organization
8-10 members
Same area
Supervisor/moderato
r

Quality Attributes in Services
• Principles of TQM apply
equally well to services and
manufacturing
• Timeliness
– how quickly a service is
provided?
• Benchmark
– “best” level of quality
achievement in one company
that other companies seek to
achieve
“quickest, friendliest, most
accurate service available.”

4.1.2. Revolutionary Change
 Is a rapid, dramatic, and broadly focused
change.
 It involves a bold attempt to quickly find new
ways to be effective.
 Is a radical shift in ways of doing things, new
goals, and new structure for the organization.
Example: Reengineering, restructuring, and
quantum innovation

4.2. Business Process Reengineering
 Is the fundamental rethinking and radical redesign of
business process to achieve dramatic improvements in
critical, contemporary measures of performance, such as
cost, quality, service, and speed.
Fundamental Rethinking: Why do we do what we do?
Why do we do it the way we do it?
Radical redesign: Throwing the existing system and starting
with a clean slate and redesign.
Dramatic improvement: It is about achieving quantum
performance growth.
 Business process: An organized group of related activities
that together create value to customers.
 Reengineering is not downsizing, not restructuring, not
automation, and not outsourcingAbdella K., Department of

Why Reengineering?
Customers
- Demanding
- Sophistication
- Changing Needs
Competition
- Global
- Local
Change
- Technology
- customer preferences
Resistance
New developments
Fear of failure Abdella K., Department of

Aspects TQM BPR
Level of change Incremental Dramatic and Radical
Starting points Existing process Clean slate
Frequency of
change
Continuous One-time
Time required Long Short
Risk Moderate High
Participation Bottom-up Top-down
Typical scope Narrow, within
functions
Broad, cross
functional
TQM vs. BPR

Who need BPR?
 Companies that find themselves in deep trouble.
E.g. costs are higher than business sales and
competitors;…..
 Organizations that are not yet in trouble, but
whose management has the foresight to see trouble
coming.
 Organizations in peak condition. They have no
discernible difficulty, either now or in the horizon,
but their management is ambitious and aggressive.

4.2.1. Stages to Reengineering
Stage One: Preparation For Change/Planning
Stages/
Stage Two: Understanding the Current Business
Process (As-Is)
Stage Three: Redesigning the Business Process
Phase Four: Successful Implementation and
Building Process Centered Organization

Preparation For Change/Planning Stages/
Reengineering in this phase requires the following:
 Assessing the preconditions for change: There must be
real pain, either current or anticipated.
 Leadership commitment: Strong, committed, executive
leadership is the absolute since essential condition for
reengineering.
 Identifying the business process: The major criterion of
choosing this process are: Dysfunctional-processes,
Important processes, and Feasibility.
 Forming organizational structure: include: Design team,
Team leader or facilitator, Subject matter experts, Steering
team, Process owner.
 Preparing TOR (terms of reference): specify the objective
and methodology of the reengineering, and Have concrete
action plan indicating what to do, when, how and by whom.

Understanding the Current Business Process (As-Is)
The goal is to get a high level view of the existing
process in order to produce superior business process
from a clean sheet of paper.
In this stage, the reengineering team should be able to:
Understand the customers’ need with the processes
output.
Show where the process begins and ends.
Describe the specific inputs and outcomes of the
process.
Map the current process-gives a picture of how work
flows through the organization.
Show sub-process (if there is): when a process is too
large or complex to compute, sub-process is needed.

Redesigning the Business Process
 Establish the desired outcomes:
 Identify the key customers and/or stakeholders:
Choose a way of learning about
customers/stakeholders’ needs and expectations.
Interview or survey customers/stakeholders to
determine desired outcomes.
Compare and analyzed data from
customers/stakeholders, synthesizing desired
outcomes.
 Decide whether you are ready to move on to
the next design step.

Redesigning......Cont’d
Setting stretched objectives: Reach far beyond what
process currently produces.
 Review customers/stakeholders needs and expectation.
 Identify the needs and expectations that form the
foundations of stretch objectives.
 Brainstorm possible stretched objectives:
Decide whether you are ready to move on to the next
design step
 Breaking old assumptions
 Design from clean sheet: The purpose of designing
the new process from a clean sheet is to help the team
come up with ideas that lead to a dramatically
improved process. Abdella K., Department of

Successful Implementation and Building Process
Centered Organization
 The business system diamond will be realized.
Business process
Job and structure values and belief
Management and measurement systemsAbdella K., Department of

Successful Implementation.....Cont’d
 Effective implementation of the newly redesigned
process requires the following:
Prepare implementation plan: spells out the work
that needs to be done with time frames,
milestones, training, workforce issues…..
 Pilot testing:
 Evaluate the soundness of the proposed process
 Identify and correct problems with the new process
 Refine performance measures and generate support
 Adjust goals and develop improvement plan
 Implement and monitor the progress

4.3.1. Balanced scorecard (BSC)
• Traditionally, performance management systems were uni-
dimensional – focused entirely on financial measures such
as: return on capital, economic value added, earnings per
share and price/earnings ratio etc.
• They are insufficient in modern organizations where it is
recognized that relationships with employees, customers,
suppliers and other stakeholders are crucial aspects of how
the organization is performing.
• They cannot evaluate factors such as; Innovation,
Employee engagement, Employee relations,
Levels of customer satisfaction and employee satisfaction.
• They are lagging indicators because they reflect past
results.

• Balanced: The task of developing a comprehensive
strategy demands systematic consideration and integration
of various perspectives. We have to balance between
Financial versus Non-financial measures
Tangible versus Intangible assets
Long-term versus Short-term Goals
Internal versus External Perspective
Lagging & leading indicators
• Scorecards : Scorecards record performance related to a
set of Key Performance Indicators (KPIs). In effect, they
are report cards on the organization’s performance. For
example, they can show sales per square meter in a
store, comparing actual with targets and analyzing
trends.

• Introduced by Robert Kaplan & David Norton
(1992) is a conceptual framework for translating
the strategic plan into a set of performance
indicators distributed among four perspectives:
Financial, Customer, Internal business process, Learning
and growth
• BSC is a performance management system that
can be used in any size organization to:
– Align vision and mission with customer
requirements and day to day work,
– Manage strategy,
– Monitor operational efficiency,
– Build organization capacity, and
– Communicate progress to all employees.

MISSION
VISION
STRATEGY
Learning
and
Growth
FINANCIAL
Internal
Business
Processes
To succeed financially,
how should we appear
to our shareholders?
To satisfy our share
holders and
customers, what
business processes
must we excel at?
Do we continue to
improve and create
value?
To achieve our vision,
how should we appear
to our customers?
Customer
BSC Strategic Perspectives

Four Perspectives
1. Financial: The strategy for growth, profitability, and
risk viewed from the perspective of the shareholder.
2. Customer: The strategy for creating value and
differentiation from the perspective of the customer.
Enables companies to align their core customer
outcomes such as loyalty, retention, acquisition, and
profitability- to targeted customers and market
segment
3. Internal Processes: The values added to customers,
such as delivery, production, distribution, etc. The
strategic priorities for various business processes,
which create customer and shareholder satisfaction.
4. Learning & Growth: The people, systems, and
organization that enable processes. The priorities to
create a climate that supports organizational change,
innovation, and growthAbdella K., Department of

Connecting the Four Perspectives
• A strategy map provides a visual representation of the linkages
in the four perspectives of the BSC.
Financial Perspective Return on Investment
Customer
Perspective
Customer Loyalty
On-Time Delivery
Internal Perspective
Learning & Growth
Perspective
Process Quality Cycle Time
Employees’ Process Improvement Skills

4.3.2. Enterprise resource planning (ERP)
• ERP: attempts to integrate all data and processes of an
organization into a unified system using multiple
components of computer software and hardware to
achieve the integration.
• A key ingredient of most ERP systems is the use of a unified
database to store data for the various system modules.
• Some organizations choose to only implement portions of
an ERP system and develop an external interface to other.
• This is very common in the retail sector, where even a mid-
sized retailer will have a discrete Point-of-Sale (POS)
product and financials application.
• ERPs are cross-functional and enterprise wide. All
functional departments that are involved in operations or
production are integrated in one system.Abdella K., Department of

Ideally, ERP delivers a single database that contains all
data for the software modules, which would
include:
Manufacturing: Engineering, Bills of Material,
Scheduling, Capacity, Workflow Management,
Quality Control, Cost Management, Manufacturing
Process, Manufacturing Projects, Manufacturing
Flow.
Supply Chain Management: Inventory, Order Entry,
Purchasing, Product Configurator, Supply Chain
Planning, Supplier Scheduling, Inspection of goods,
Claim Processing, Commission Calculation.
Data Warehouse: and various Self-Service
interfaces for Customers, Suppliers, and Employees.
4.3.2. Enterprise resource planning (ERP)

Advantages
• People in different departments all see the same
information and can update it.
• Computer security is included within an ERP system to
protect against both outsider and insider crime.
• ERP systems tie together varied processes using data
from across the company.
• It standardized and reduced the number of software
specialties previously required.
• ERP systems allow companies to replace multiple
complex computer applications with a single integrated
system.
• Eliminate the need for external interfaces previously
required between systems and provide additional
benefits that range from standardization and lower
maintenance to make reporting capabilities easier.Abdella K., Department of

Disadvantages
Cost
Implementing ERP is very expensive.
ERP vendors can charge a license renewal fee annually.
Consultants may need to be used for installation or to
maintain.
Employees may need to be trained, which takes time and
cost.
Expertise
Success of ERP depends on the skill level, experience and
training of the work force.
Enterprises view cutting training funds as a way to cut costs.
This means their ERP system is often operated by personnel
with inadequate education in ERP and the ERP vendor package
being used.
New employees must be trained before they can properly start
working because of the ERP system

Disadvantages
• Flexibility
– ERP’s can be very rigid and may not fit the business
flow of the company trying to use it.
– Company’s may need to customize their ERP package
which isn’t allowed by most ERP vendors.
• Change
– Employees may be needed to change the way they
work to become more efficient. They may feel
resistant to change which can be a negative.
• Bugs!

Change Management 4

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