Page 681 - Business Principles and Management

Unit 7

IDENTIFYING THE NEED FOR CHANGE
The history of business is filled with stories of organizations that experienced
years of success, only to fall on hard times and ultimately fail. The causes of a
business failure may be that competitors were able to improve their products
and services, customers did not receive the service they expected, costs were
not controlled, or the organizational structure did not adjust to new conditions.
No matter what the specific cause, the reason for the failure of a previously
successful business is most likely the inability to change. It may be that the ex-
ecutives of the company did not recognize the need for change, believed the
company did not need to change, or were unable to plan and manage the
needed change.
Throughout this textbook, you have learned that the environment faced by
businesses today is very different from that in the past. The differences occur
both outside the business (the external environment) and inside the business (the
internal environment). Today, the external factors most likely to result in prob-
lems for an organization are changes in workforce demographics, the nature of
competition, customer expectations, and technology. Several important internal
factors that affect a company’s success are quite similar. They include changes in
the makeup of the company’s workforce, employee expectations, outdated work
processes and technology, ineffective organizational structure, and poor manage-
ment practices.
Figure 25-1 shows several key indicators that an organization may be experi-
encing problems requiring major change. Every organization should pay careful
attention to its external and internal environment to monitor those indicators.
Companies that do not pay attention often recognize problems too late to take
the necessary action. When sales and profits decline and the business has not
recognized the need for change or invested in new technology and procedures, it
is often too late.
When a business tries to solve a problem, it often discovers that the problem
results from a fundamental flaw in operations. Organizational development
programs must identify and resolve the underlying operational problem in order
to fix the original problem. For example, one company found that production
levels had declined significantly during
FIGURE 25-1 Important Indicators That an Organization Needs June, July, and August. When company
to Make Changes managers studied the problem, they
discovered that employee absences were
almost double on Mondays and Fridays
what they were on the other days of the
New competitors entering the market
week. Production was delayed on both of
Introduction of new technologies by other businesses
those days because work teams were not
Changes in laws and regulations affecting the business
full or temporary employees brought in on
Major changes in products and services offered or in markets served
those days were not as efficient. To solve
Rapid growth by the business
the production problem, the employee
Loss of market share
absence issue had to be resolved. Working
Increasing customer complaints
with employees, the managers learned that
Poor relationships with business partners
the way vacation days were scheduled en-
Increasing operating costs
couraged employees to take off Mondays
Decreasing revenues or profits
and Fridays to create short summer vaca-
Decline in employee morale and increasing employee turnover
tions. A revised policy allowed employees
Conflicts among departments or other work units
to schedule two- or three-day vacations
Participation in a merger or acquisition in the middle of the week. This change re-
duced Monday and Friday absences and
solved the production problem.
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