Change Management Strategies at IKEA

Change Management Strategies at IKEA IKEA is the worlds most successful mass-market retailer, selling Scandinavian-style home furnishings and other house goods in 230 stores in 33 countries and hosting 410 million shoppers per year. An acronym for founder Ingvar Kamprad and his boyhood home of Elmtaryd, Agunnaryd, IKEA began operating in Sweden in 1943 and continues its original ethos based upon cost obsession fused with design culture. No design, no matter how inspired, finds its way into the catalogue if it cannot be made affordable.As a means of expanding the business, the company considered change in its business in the form of selling 2nd hand furniture by reconditioning damaged or old furniture stocked in its warehouse and offering furniture reconditioning services to customers. In developing this kind of business, it expects to make this constitute fifty percent of its business. 2. Term of reference In this part of the section, we will list several aspect of theoretical approaches that we could apply in the company to plan and implement the change. 3. Planning and implementing the change 3.1. The need factor during the change Waste reduction and improvement in recycling wastes are the issues that are driving the need for change. IKEA incurs waste because of damaged furniture during transportation, handling or wear-and-tear when stocked for longer periods in the warehouse. Although the compa . Problem/Issues that Prompted the Need for Change Waste reduction and improvement in recycling practices are the issues that prompted the need for change. Eastern Furniture Company incurs waste because of damaged furniture during transportation, handling or wear-and-tear when stocked for long periods in the warehouse. Although the company takes its cue from the inflow and outflow of furniture from its warehouse for delivery to customers in determining which furniture to make in greater volume and which furniture to stop making or make in lesser volume, the company has to manage a bulk of damaged furniture that it cannot sell. These take up valuable warehouse space and comprise loss for the company. Overall, the issue is one of efficiency, which has two elements. One is the ability to maintain a good ratio between the input allocated or employed and the output generated. Ideally, there should be balance in the ratio to ensure break-even but to ensure positive returns the ratio should be greater in favor of output. (Thompson, Strickland Gamble, 2007, p. 93) Waste represents input not transformed into output. The company wanted to place greater weight on output by optimizing resources use. Another is the enhancement of the skills in avoiding or preventing wastage of resources and time. The company has to minimize waste of both resources and time to improve performance. 3. Identifying and Assessing the Causes of Change Understanding the change and clarifying the justifications for the change is an important management process. There are various diagnostic tools useful in assessing change. These clarify the change and points to compelling reasons that supports the decision to implement the change. One tool is the force field analysis, which refers to the process of listing down the pros and cons of the planned change and evaluating the merit or soundness of the decision as well as the viability of the change (Hurt, 1998, p. 55). The table below shows the forces supporting and discouraging the implementation of the planned change. Forces for Change -boost resource management efficiency -increase sales -control cost -enhance profitability address customer demand -add value for products and services to customers increase market share -ensure sustainable growth Planned Change (establish a 2nd hand furniture trading) Forces against Change -increase operating cost -pull or stretching of available resources -resistance from managers and employees -risks of incurring further losses A number of forces support change. These forces encompass different areas from the improvement of resource management practices by optimizing output from the input used, financial performance in terms of sales and profitability by controlling cost, and marketing outcomes by meeting new demand and adding value to customers. The occurrence of these forces of change could mean sustainable growth for the company. However, there are also important forces discouraging the change. These include increasing operating cost because of the expansion of the business, the pull of resources from the existing business to the new business that means the stretching of available resources. There could also be resistance from managers and employees because of the change in organizational structure. The risk of incurring further losses in case the company is unable to manage effectively the rigors of the change process is also an adverse factor. By balancing these forces, it appears that the forces supporting change weigh greater than the forces discouraging change. Achieving the benefits is viable given the stable financial situation of the company and the opportunities for expansion in the market. The company has sufficient resources to invest in the change and the expected returns are high because of the growing market for refurbished and environmentally friendly furniture products and services. The establishment of a 2nd hand furniture business also adds value to its product and service offering to customers by providing customers with the opportunity to help in conserving the environment by minimizing waste through recycling. However, the company needs to address the forces discouraging change by developing a sound resource management and investment plan, developing preventive and contingency plans for risks, and easing the resistance of managers and employees. By addressing these discouraging factors, the company can e nsure expected results from the change. Another tool is critical pathways, which refers to the use of directions and schedules in planning tasks and monitoring completion to ensure the achievement of the expected results. Using this tool determines the viability of the change and the areas requiring focus. (Thompson, Strickland Gamble, 2007, p. 93) The table below shows the tasks required in the implementation of the change, the commencement period, the period for completion, type of activity, and the relative depends on the tasks necessary for completion. Task Commencement Completion Type Task Interdependence 1. marketing study Month 1 1 month Sequential 2. consultation of managers and employees Month 1 2 month Parallel 3. brainstorming and preliminary planning Month 2 2 months Parallel 2 4. expansion strategy implementation (i.e. mergers and acquisitions, joint venture, takeover, etc.) Month 4 2 months Sequential 1-3 5. restructuring and hiring of new employees Month 4 3 months Parallel 4 6. preliminary marketing activities Month 7 6 months Sequential 1-5 7. preliminary evaluation Month 10 1 month Sequential 1-6 8. final evaluation Month 12 1 month Sequential 1-7 The entire change process happens in a twelve-month period. The identified tasks support the viability of the change. The tasks distinguish the preparatory activities, implementation proper activities, and post-implementation activities that the company needs to complete the change process. The tasks also coincide with the issues requiring consideration such as resistance during the restructuring process relative to the results of the consultation with managers and employees and the development of the appropriate marketing activities coinciding with the results of the marketing study. The determination of the sequencing of tasks and interdependence of the tasks also supports the viability of the change by determining priorities during a particular period to ensure due preparation and evaluation of implementation. Overall, the critical pathways analysis supports the commencement of the change and identifies the tasks for completion to achieve the change. 3. Stakeholder Analysis The change process is organization-wide, which means various parties likely affected by the change involving the development of a 2nd hand furniture service. Stakeholders pertain to the parties linked to the business firm who stand to experience benefits or adverse effects from the change (Friedmand, 2007, p. 172). Identifying the stakeholders and the respective interests is important to develop ways of wining over these various stakeholders who are likely to contribute to the success of the planned change. Determining stakeholders or the parties affected by the change together with the impact of the change to these parties is also important in prioritizing stakeholder interests as well as the resolution of issues faced by the stakeholders. (French Delahaye, 1996, p. 22) There are a number of stakeholders in the planned change falling under either internal or external stakeholders. First is top management of the organization who decide on the change, direct strategy implementation, and carry accountability for the outcomes of the change. Second are middle managers affected by the change and comprise implementers of the tasks constituting change. Third are employees also affected by the change and serve as movers in the change process. These three stakeholders also constitute internal stakeholders as they form part of the organization and directly experience and participate in the change process. Fourth are suppliers of furniture retailed by the company who could be affected by the expansion. Fifth are investors and investment parts providing capital needed in the change process. Sixth are customers for whom the change is directed and from whom the impact of change is assessed. These last three stakeholders comprise external stakeholders by not being part of the organization. These stakeholders influence the change indirectly but could influence the success of the change management activity. There are a number of tools in analyzing these stakeholders. The application of these tools identifies stakeholder interests and clarifies the prioritization of stakeholder interests, in case of conflict. This is necessary to ensure that the intended impact for stakeholders and the expected response from these stakeholders ensure the achievement of objectives for the planned change. One analytical tool is the power model, which classifies stakeholders according to their relative power or influence in swaying the change process. There are four classifications of stakeholders relative to power, which are promoters, defenders, latents or apathetics. These classifications vary according to the interest in achieving the change and the influence on the change process. The model also determines the stakeholders included in the decision-making over the change process depending on the relationship with the company and the influence on the operations of the company. (Cooper, 2004, p. 13) Stakeholder Classification Prioritization of Change Influence on the Change Internal Stakeholders External Stakeholders Promoters High High Top Management Investors or Investment Partners Defenders High Low Middle Manager Latents Low High Employees Customers Apathethics Low Low Suppliers In implementing this analytical tool, the identified stakeholders fall under different classifications. This determines differences in interest and the means of managing these interests. In achieving the planned change via policy support, there should be strong support from the top management and middle managers. It is important achieve strong support from top company officers as well as middle managers to ensure the development and implementation of policies towards the planner change. To ensure successful implementation, it is important to consider and integrate the interests of investors to gain capital that supports the change process, employees who would implement tasks comprising the change process, and customers whose acceptance determine the marketability of the new business. Another analytical tool is the resource dependence theory (Frooman, 1999, p. 191) that classified the relationship between the firm and stakeholders into four types, which are 1) firm power, 2) high interdependence, 3) low interdependence, and 4) stakeholder power. The nature of the relationship determines the issues requiring resolution to manage effectively stakeholders. The core idea of this analytical tool is the recognition of the limited self-sufficiency of business firms so that they have to rely on their environment to address difficulties. Firm-Stakeholder Relationship Stakeholders Firm Power Middle Managers, Employees, Stakeholder Power Customers, Top Management High Interdependence Investors and Investment Parties Low Interdependence Suppliers The implementation of this analytical tool shows the stakeholder priority of the organization in achieving the planned change in the context of resource accumulation. Since the company has strong dependence on investors and investment parties as source of capital and investors also rely on the company to experience returns. This means that the company should develop mutual positive relationship with investors and investment parties. Since the power of stakeholder is high in the case of customers and top management, which means that the company should consider the important roles of top management in directing change policy and customers in justifying the area of change. 4. Change Implementation Strategy Determining the appropriate and effective change implementation strategy is an important part of the management of the planned change. The change implementation strategy determines points to the viability of the change by identifying the nature and direction of the intended change together with the corresponding roles of the parties involved and the activities requiring completion. There are two considerations in developing the change implementation strategy. One is the direction of the change, which is either top-down or starting from the front line. Another is the source of the factors for change, which is either internal or external. A top-down change implementation refers to planned change because change emanates from the implementation of change policy from the top management. This means that change occurs through directives from the top expressed through change in the attitudes and behavior of employees as well as work processes and output. Top-down change implementation strategy is also similar to the hierarchical model of change, which places stress on the manner of utilizing the firm structure, compensation and incentive system, and other control systems to facilitate the achievement of the intended change. As such, senior management serves as architects of the change and manages the organization to achieve the desired change. The hierarchical model usually applies in changes involving the change in structure, staff, compensation systems, incentives, performance measures, and other similar change. Control serves as the means of ensuring the change. Rational connection between the planners and doers also ens ures change implementation, which means that the intended change should be rational in terms of firms and stakeholder benefits to be accepted by the doers, which is made up of the front line employees. However, this also has limitations such as the use of inaccurate information to support decisions over the change process and problems in motivating change at the lower levels of the organizational structure. In addition, this aligns with the economic perspective of organizational change. (DeWit Meyer, 2004, p. 297) Change commencing from the front line refers to the encouragement of creativity and innovation at the bottom level of the organization. The creation of an innovative working environment and implementation of incentives for innovative outputs encourage employees to determine solutions to problems they experience in the delivery of products and services and dealings with customers. The implementation of these solutions comprises the change. This has relation to the cultural model of change implementation, which emphasize on the participation of employees at the lower level in the formulation and implementation of strategy in terms of information feedback to their immediate managers or supervisors. As such, there is a fusion between the roles of thinkers and doers because managers participating in doing while employees also take the role of thinkers. Because of this, the change focuses on the infusion of organizational culture across the firm. Top management provides broad guidance in i nnovation. (Goold Quinn, 1990, p. 176) This works well for decentralized business firms. However, this also limitations including the assumption that the managers and employees are well-informed and able to make informed decisions on areas of change and sound solutions to front line problems. Focus is difficult to maintain in using this model. The change process would also likely involve costs and involves a certain period. Not all organizations can afford the high price for change from the grassroots or culture-based change or have the luxury of time to wait for protracted change. (Parsa, 1999, p. 73) There is also an alternative change implementation perspective, the collaborative model, which requires the participation of senior managers in the process of strategy formulation. This means that top management facilitates brainstorming, consensus building and other collaborative methods in planning the change so that top management also comprises the bridge for change implementation on the part of middle managers and employees. (Goold Quinn, 1990, p.176) As an integrative model, this addresses the problem of information inaccuracy likely to occur in the implementation of top-down change as well as the assumption of complete information at the grassroots in applying the cultural model (Parsa, 1999, p. 73). The distinction between thinkers and doers blurs but this does not completely disappear because of the assumption of the parties of dual roles. Based on the understanding of the planned change, which is expansion by establishing a 2nd hand furniture business and requiring prioritization of the interests of investors and customers, the appropriate change implementation strategy is the collaborative model. The change involves the acquisition of business units, restructuring of the organizational structure, and hiring of new employees. The acquisition of new business units is a strategic issue for resolution at the level of top management with feedback from senior managers to support sound decision-making. The hiring of new employees and restructuring of the organizational structures are management issues for resolution at the senior management level obtaining policy guidance and confirmation from top management while at the same time obtaining feedback from middle managers and employees on emerging problems and effective solutions. Senior managers serve as the fulcrum balancing or bridging change implementation and the change process. Successful change ensures the interests of investors and customers. Change implementation strategy could also be internal and external. Internal change implementation means that the parties involved in the change are members of the organization and the achievement of change depends on internal competencies. External change means that the parties facilitating change do not form part of the organization and infuse external competencies into the change process. However, these are not conflicting, which means change implementation could involve both internal and external factors, with the extent of combination depending on the requirements of change implementation. (Grant, 2002, pp. 132-133) The change implementation strategy for the planned establishment of a 2nd hand furniture business involves the combination of internal and external factors. The internal factors refer to top management directives or guidance, consensus building and feedback from senior managers, and feedback from middle managers and employees over issues and solutions emerging from the front line. The external factors include capital infusion from investors, feedback from external consultants, and acquisition of business units. 5. Addressing Resistance Key to the success of the change implementation strategy is the identification and understanding of the factors blocking the implementation of change. Kotter (1996, p. 3) described blocks as the entirety of the hindrances and issues experienced by business firms in the course of implementing change. This requires resolution to ensure the successful implementation of change. An impending block to change implementation is resistance or disagreement, disapproval or opposition to some aspects or all of the planned change. If unaddressed, resistance could lead to delays, accumulation of additional costs or even the failure of change implementation. Resistance finds explanation through the transition curve (Fisher, 2001, n.p.) [See Figure 1 below] that explains the response of parties to the change as a process. Upon learning of the planned change, the affected parties experience anxiety because of concerns over whether they can cope with the change. This could lead to happiness because of the realization that change, which could be anticipated, could happen or denial because of the inability to accept the change. However, this could immediately turn into fear because of concerns over the expectations of their role and the impact on them that could develop into depression when in the stage of uncertainty. This could then lead to two directions. One is towards gradual acceptance and moving forward as the affected parties develop confidence in the change and their roles in the implementation of change. Another is towards hostility and absolute resistance because of the inability to find their place and role in the expected change. Recognizing the adjustment to change as a process implies that business firms should address the fears and threats faced by the parties affected by the change to ensure that the attitudes and behaviors of stakeholders lead to acceptance and moving on. Based on the transition curve, resistance to the planned establishment of a 2nd hand furniture business would likely come managers and employees. The change involved the acquisition of new business units to comprise 50 percent of the business. The different nature of the business means change in existing practices and norms. The change also involves the restructuring of the organization, which means the removal of some positions and creation of new one and the removal or reassignment of people. These situations build fear among managers and employees. The change also involves the hiring of new personnel, which could be perceived as threats by existing employees. Specifically, there could be several sources of resistance to the planned change. One is the concern of employees over the changes in their employment status after the implementation of the change. The initial response to threats on employment status is resistance by fighting against the change to prevent the cancellation of positions and removal of personnel. Another is the concern over possible changes in their tasks if they remain employed with the company after the establishment of the new business. Employees experience security by developing knowledge and skills necessary to accomplish their work effectively. The change requires the accumulation of new knowledge and skills that challenge the security of employees. Still another is the different perspectives of managers and employees towards the purpose and impact of the planned change. The different in opinion could divide support for the change. Last is the adverse perception towards the change because of lack of consultation. The implementation of change without sufficient consultation, based on the perspective of managers and employees, could develop negative regard towards the change. Addressing the problems of resistance that develop in a process could also be through a process that requires strong leadership. Addressing resistance is a three-stage process [See Figure 2 below] that commences with the unfreezing of the present status of the organization, followed by the guided movement towards the new position, and concluding with the freezing of organizational life at the new position. This means top management, with feedback from senior managers, should determine the existing position of the company, articulate the new position, and implement policies or activities that move the organization from the current to the new position. This finds further explanation by the parallel three-step process. The first step is defrosting of the status quo, followed by the taking of actions that usher change, and concluding with the anchoring of the achieved changes using corporate culture. This also highlights the importance of leadership and adds the incorporation of the chan ge in the corporate culture as the means of ensuring that the organization remains at the new position. (Lewin, 1997, pp. 330-334) These three-step processes address resistance in a number of ways. Completing the first step means that the company has identified a rational justification for the change by understanding problems in the present status of the company and developing a vision of the outcome of the required change to address these problems and gain benefits. Implementing the second step requires the identification of activities and processes that encourage the intended behavior or action from all stakeholders. These behaviors and actions comprise movement towards the new position. The application of the third process through activities that secure the comfort and satisfaction of the organization towards change should ensure the stability of the organization in its new position. (Lewin, 1997, pp. 330-334) Specific actions or activities that could help the organization address resistance. First is the establishment of a sense of urgency over the need for change. It is common for people to require a reason for agreeing and participating in change. Leaders or top management has to provide an acceptable justification to expect change from managers and employees. Second is the development of the vision for change and communicating this to the parties affected. People also expect to make changes when they know where they are going. This means that leaders need to clarify where the change would lead the organization to expect managers and employees to understand the importance of their role in the change process and the impact of the change on them. Third is the establishment of a guiding coalition made-up of a team nurturing and supporting the change. The team has to exert influence because of their qualifications and other forms of influence towards managers and employees. Fourth is the em powerment of employees to participate in the change process with confidence. This means that leaders should provide room for the development of ideas on the part of managers and employees. This environment develops flexibility, which supports change. Fifth is the establishment of short-term goals that is realizable in a short period because people are not likely to cooperate in change without seeing positive results, no matter how minute, in the short-term. Sixth is the encouragement of additional changes to secure long-term or sustainable change to take advantage of the momentum of change by encouraging open communication and innovation. Seventh is the reinforcement of change through positive developments in the organization that justifies the better position of the company after the change. (Kotter, 1996, pp. 33-145) 6. Project Evaluation The evaluation of the project constitutes another important aspect of change management. Evaluating the project ensures the resolution of problems as well as the prevention of issues. One project evaluation model is the lifecycle of change management. The implementation of this mode commences with modifications at the model level and then the translation of these changes at the implementation level. This minimizes rework at the implementation level while at the same time developing a model for use in the assessment of the outcomes of change implementation. (Singh Shoura, 2006, p. 25) Simulation is a means of considering possible modification at the model level. In application to the establishment of a 2nd hand furniture business, simulation could apply to the assessment of different modes of mergers and acquisitions to determine the best means of achieving the desired change. The selected option is subject to implementation and expected outcomes, based on the model as the point of r eference. Another situation implementing the lifecycle model is the consideration of the role of leadership in the change implementation process. Ideally, leadership should develop the vision for change and guide movement towards the change through activities that comprise the change such as the assumption of new tasks by managers and employees. This ideal serves as the means of evaluating the role of leadership in actual practice. Managers should also facilitate consultations and feedback sharing within and across the different levels of the organization. This ideal comprises the point of reference in assessing the role of managers in the change process. Overall, the intention of the lifecycle model of change is that the organization should remain operational after the implementation of change but placed at a better position compared to the previous state before the change. The comparison of the difference between the old and present status in terms of strategic objectives tells so mething about the merit of the change and the effectiveness of the change implementation strategy. (Singh Shoura, 2006, p. 25) 7. Conclusion Change management is important in achieving strategic objectives. There are a number of elements for consideration in implementing change management. One is the clarification of the change by determining the problem or issue underlying the planned change. This is important to rationalize and justify the change. Another is the assessment of the change by weighing the forces that persuade and dissuade the change. The persuading factors should outweigh the dissuading factors to support the change. Still another is the identification of the stakeholders or the parties affected by the change together with the interests for purposes of the prioritization of interests in case of conflict. The development of the change implementation plan is also important because this determines the activities comprising change and the role of the parties in achieving the change. Understanding the blocks to change, particularly resistance is also important to ensure a smooth change process. Lastly, designin g a project evaluation is also an important element because this determines the extent of achievement of the change and areas for improvement in the course of implementation.