Change Management Best Practices:

Lessons Learned from Two Retail Enterprises: Ace Hardware and Home Depot

Abstract

 

This research is on the change management of organizations, the lessons gathered from the best practices that the Ace Hardware and the Home Depot are adapting and how these can aid other organizations in their management of change. Based on the dissertation proposal preparation, it was reflected that business analysis is performed after implementation of the change process in order to determine the degree of success or failure, significance to business, resources that may be required in the future, and business justification. Based on the impact indicators the relative success or failure of the change management process can be gauged. After the implementation of the change management process, the implementation conducted can be evaluated if the change management process followed a logical order and was controlled to ensure the logical evolution of effective enhancements to environments

 

Chapter I

Introduction

 

1.1  Introduction

The topic of change management has been widely discussed in the field of organizational behavior (Gilmore, Shea & Useem, 1997). The significance of change is evident in the context of raid technological advancements, globalization, an environment of competition between multinational companies, and an ever increasing diversity of customers and employees. Organizations deal with some form of change on an almost daily basis. Deloitte and Touche (1998) sponsored a survey of 409 senior executives of U.S.-based organizations with revenues of at least $1 billion. Among other questions the executives were asked to identify the issues that will present a challenge to American business in the year 2005. Seventy eight percent of the respondents stated that “keeping up with technological advancements” was a challenge. Seventy one percent stated that “adapting to rapid changes in market” was critical. The Harvard Business School found that change efforts in Fortune 100 companies cost each of those companies an average of $1 billion over the 15 years between 1980 and 1995 (referenced in Jacobs, 1998). With change initiatives being two of the four top concerns for 2005 captured in the Deloitte and Touche survey and having such an expensive price tag as reported by the Harvard Business School, researchers have an opportunity to provide strategies on how the management team can most effectively manage through the ever-changing environment.

Unmanaged change is one of the most common causes of disruption to the operation and business of an organization. Successful change management strategy is implanted in order to ensure the continuity and sustainability of business. Change management is the task of managing change from a reactive or a proactive posture (Nickols, 2006). An organization’s operational posture can be directly related to their operational sophistication. Most companies struggle with taking operations from a reactive to a proactive paradigm. The level of sophistication can be improved by moving beyond day-to-day reactive needs and looking at the operations holistically. This means taking a higher-level view of the lifecycle encompassing preparation, planning, design, implementation, operations, and optimization. This ensures that the entire lifecycle addresses people, processes, and technology and how they are combined to deliver products or services. The goal is to increase the organization’s responsiveness to business needs and maximize the business investments while ensuring that the products or services are delivered accurately and reliably. Process and technology are important but equally important are functional capabilities. It is the capabilities that make it possible for people and processes to operate efficiently.

Change management is an area of professional practice with considerable variation in competency and skill levels among practitioners. It encourages organizations to seek further data and information, develop practical skills and competencies and observe professional practice with the first-hand insight (Cadden, 2007)

Change management is a body of knowledge consisting of models, methods, techniques, and other tools. This body of knowledge includes statements of knowledge that can be used and developed by organisations or companies that need to define guidance or competencies for their quality professionals in the wake of change management.

Change management is a control mechanism consisting of requirements, standards, processes and procedures. Change management follows a structured process by which the organization assesses changes to a project plan or processes or procedures in the organization. A change management system can assist in defining a change, evaluate the impact of the change, determine the actions required to implement the change, and disseminate information about the change across the organization. It can also help track the changes you make across the organization. This allows you to keep the organizational environment under control as changes are made to it.

Affecting every area of the organization, effective change management is a combination of people, technology and the best practices. The strategy in change management should employ best practices and address planning through implementation and ease the impact of change. Without a comprehensive strategy employing best practice from the onset of change management, the organization may find difficult to treat each new change, react to change and adapt to change in order to support the operation and business with each change.

Change management reduces downtime in an organization caused by distress and disruptions as a result of change. Change management addresses the change occurring in the company recording the change(s) that occurred, then evaluate, authorize, prioritize, plan, test, implement, document and review the change in a controlled and consistent manner.

 

1.2  Problem Statement

Creswell (2003) stated that literature is used to frame the problem in an introduction to a study. Whereas there is a plethora of literature about organizational change and its effective implementation, research has indicated that up to 70% of change efforts do not yield the promised results. One can see how both a leader and his/her leadership team are critical for creating and sustaining a successful organization “Organizational change is an ongoing challenge in all organizations” (Lange & Coltham, 2005, pp. 34–35). Transformation was experiencing rapid rates of change, thus providing a fertile ground for a heuristic, descriptive, ethnographic case study exploring change management best practices in changing the culture of the organization. Wolcott (1994) wrote, “A researcher lacking a clear sense of purpose – the ability to set a problem cannot narrow the research focus sufficiently to achieve any purpose at all” (p. 402). This study evaluated the change management best practices through a case study of two business giants, Ace Hardware and Home Depot. The problem to be addressed by this research was to analyze and understand the change management, different theories and models and to see how the organizations of the case study put these theories of change management in practice. The transformation of an organization requires the transformation of the role of leaders (Ashkenas et al., 2002). “The new leader. . .is one who commits people to action, who converts followers into leaders, and who may convert leaders into agents of change”; this new leadership style is referred to as transformational leadership (Bennis & Nanus, 2003, p. 3).

Managers undertake projects to implement strategies. During the project life cycle, change may occur and cold affect strategy, project, or both leading to misalignment and thus to project failure. Researchers at Gartner and the Giga Group suggested that project failures cost business more than $450 billion in 2001 (Palmer, 2002). The high failure rate of project has been posited to result from managers not implementing projects that align with the business strategy (Business Improvement Architects, 2006).

The concept of change management continues to attract more attention in our ever changing, complex, and dynamic environment. The need for a better understanding the best practices to mange change within an organization, effective strategies and the role of top management in formulating policies in order to build and maintain durable business’ continuity, long-term viability, and sustainability, has been recognized by every organization. However, there is a paucity of the research focusing on some successful organizations as a case study to serve as a role model to implement change within an organization.

With the advent of numerous practices on change management, it is practical to study the best practices in the modern days. Hence, this study will conduct a meta-analysis of literature on the change management best practices, its data, information and lessons learned by two retail enterprises, Ace Hardware and Home Depot. Hence, this study will deal with change management of organizations, the implications of the best practices that two retail giants, the Ace Hardware and the Home Depot, are adapting and how these practices can inspire other companies in their change management.

 

1.3  Research Questions

For this research study, the researcher has endeavored to answer some of the very important and fundamental questions:

1. What is the scale of the effects the best practice that address change management in the organization?
2. What is the magnitude of the significant alterations in the organization as effected by the best practice?
3. What is the duration of the effectiveness of the best practice in the organization?
4. What is the strategic importance of the best practice in change management?

 

1.4  Objectives of the Study

The objectives of this study are to analyse the change management, the role of management for motivating their employees to learn new skills and the strategies being adopted by the organizations to bring about the change. For this purpose, the researcher will take up the methodology of meta-analysis of the available literature on change management best practices, its data, information and lessons learned by two retail enterprises. The basic components of the research design in order to arrange the conditions for collecting and analyzing the data utilized in the study are the collection of data and information through review of literature and the analysis of the data and information collected to arrive at a conclusion and recommendation. Thus, the objectives of this study would be:

1. To analyse the role of management to bring about the change
2. To analyze different strategies, theories and models of organizational change
3. To analyse the policies taken up by two business giants, Ace Hardware and Home Depot for brining about the organizational change and enhance their business perspectives.

 

1.5  Significance of the study

The need for developing employees to keep up with changes is growing as pressure is placed on the organizations for cost reductions. Given the current state of the recessionary economy, employees training and development are often the first costs to be cut in a downturn. The strategy that a corporation takes up for the change to take place depends upon how its employees are motivated and ready to acquaint themselves with the change. Besides, skilled workforce can yield better results and prove fruitful for the organization as compared with unskilled and low-qualified workers. Thus, enhancing learning skills not only improve the performance of the employees, but also help the organizations in easy work distribution among suitable employees according to their skills and qualifications. In this way, it is necessary for the organizations to motivate its employees for learning new skills and accepting changes of strategies, policies, and technology to improve the business perspectives of the company.

The results of this study will be beneficial to decision makers across corporate for effective implementation of strategic decisions in the context of change management. The change within an organization is an effective way to revise the strategies and policies from time to time and learn and adapt new business environment with rapid changes taking place in every filed of life.

 

1.6  Structure of the Study

In order to analyse the change management best practices, this study will review the current literature on the effectiveness and benefits of change management in corporate setting in the next chapter. For this purpose, in the literature review chapter, different theories relating to change management best practices, the role of leadership in motivating employees for the change to take place and the change management models and theories discussed so far. The methodology chapter will present philosophy and methods of research undertaken for this study. It will also describe the data collection tools of secondary and primary sources. The fourth chapter will present an exhaustive and comparative analysis of Ace Hardware and Home Depot change strategies and analyse how these business giants have successfully implemented strategies to bring about the change to compete with the changing business scenario. In the fifth chapter, conclusions will be made resulting from the data analysis. This researcher will offer recommendation to the industry with due consideration to the results of the primary data and the review of the literature.

 

1.7  Definition of Terms

Change management –     the use of systematic methods to ensure that a planned organizational change can be guided in the planned direction, conducted in a cost-effective and efficient manner, completed within the targeted time frame, and with the desired results.

Best practice –         technique or methodology that through experience and research has been proven to reliably lead to the desired result.

Retail enterprise –   is a business entity involved in retail.

 

1.8  Summary

In this chapter, an overview of the research undertaken has been introduced. Further, the aims and objectives, intended research methodology and the questions of this study to be answered have also be been highlighted. The background study revealed the change management process and its relevance in organizations. The literature available on change management reveals a vast data and information on change management and the best practices in leading companies. The study design is created to cover various facets of change management. The methods are outlined in such a way that the study will come up with conclusions, generalizations and recommendations that will give valuable insights for change managers and organizations.

Organizational change is essential in order to revitalize and improve the performance of organization. To address this, there are numerous leading practices in change management. The management may have several tools and strategies at their disposal. However, the knowledge and skills on how, when and why use them can make or break a change management process.

 

Chapter II

Review of the Literature

2.1 Introduction

According to Legris and Colerette (2006) the low success rate for information technology projects could be increased by closely involving stakeholders, paying attention to social factors, and integrating better change management practices. According to Levinson (2006), researchers at A.G. Edwards measured project success as a combination of factors such as time, cost, and the project’s business values. Levinson argued that if a project is not completed on time but delivered the expected business value, the company still considered it a success. Internal or external customer business success was the real value that defined project success or failure. Customers had the final say on project success.

Lewis (2007) posited that for a change process to succeed there was a need for an involvement plan. He added that people accepted change that affected them positively and resisted change that was bad for them. He concluded that people would only embrace those changes that they controlled. Researchers at Prosci (2004) claimed that the  most important contributor to project success was active, strong, and visible sponsorship throughout the project from top management, managers and supervisors. Paul Underwood (2005), a senior manager in performance, claimed that realizing benefits and ensuring project success was largely a change management issue. Dharmarag, Lewlyn, Rodrigues, and Shrinivasa (2006) focused on change management as a tool to manage changes in project scope and analyzed the influence of the change in scope on time and cost. Edward (2000) posited that projects changed over time because business requirements change and that to be successful in business, one needs to include these changes in strategic projects. He added that an efficient change management process could make the difference between project success and failure. He claimed that an efficient change managements process required a well-defined project baseline, a work authorization system, a trend program, and a change control process. The baseline clearly defined what was in and what was out of the project. A work authorization system helped to reduce costs and increased effectiveness in resource management and performance. The main functionality of a trend program was to provide for early alarm of potential changes. Edward concluded that during the change control process employees identified, quantified, planned, and evaluated impacts of a change on project baseline. Fielden (2001) claimed that project managers managed all types of change requests including specification and documentation changes through the change management process. He added that change management software applications produced reports that project managers needed in order to track and analyze project performance. According to the Project Management Institute (2004), change may influence a project’s scope, time, and cost.

Green (2003) studied the use of a particular change management technique called configuration management techniques, management and employees increased their support to process improvement efforts and thus created a receptive environment for change. Moreover, the researcher added that communications issues were reduced and processes became less static and came under better organizational control.

According to Fuchs (2004), the functionality of change management should not be limited to managing variance in the project management tried but should include user adoption. Involving business users in the change management process was key to overall project success. Fuchs claimed that project managers failed in delivering their projects because even when change had no impact on any of the three projects constraints, it did impact business users. It was posited that business users should get involved during the start-up of the project, its development, and after its implementation. He argued that any new IT project implied changes in process, operations, policies, or business. Fuchs concluded that employees who were affected by the project needed to change to adapt to the new project technology, user-interface, or limitations. Change management could help in defining these changes, quantifying them, and planning for their execution.

Nadler and Nadler (1998) attributed changes in business to external factors. The authors claimed that companies changed because something outside the organization forced them to make a change. Nadler and Nadler discussed the change management practices. They named seven steps to drive and sustain change to include: owing, aligning, setting expectations, modelling, communicating, engaging, and rewarding. Goff (2000) claimed that change management tools and process were enough to make change management succeed; rather, it was people who made companies work. Gary Kissler, a partner at Deloitte Consulting Change Leadership practice, concluded that the three components critical to the project’s success and that form an integral part of change management were people, processes, and technology (Goff, 2000).

Gomolski (2003) listed five actions that could help manage the behavioural implications and thus favour the implementation of a comprehensive change management program. The aforementioned actions listed by the author were to (a) identify the desperate need for change, (b) instigate and sustain change, (c) identify and implement levers, (d) identify and sustain affected agents, and (e) identify and use buoys and stabilizers. Jick and Peiperl (2002) claimed that on average 30% of project managers who were responsible to realize change initiatives succeeded. It is interesting to compare these results to those of the study by researchers at Price WaterhouseCoopers. These researchers concluded that only 2.5% of global business achieved 100% project success (PriceWaterhouseCoopers, 2005). While only 2.5% of global businesses achieved 100% project success, 30% of project mangers who were responsible to realize change initiatives succeeded. The evidence indicated that projects that implemented change had a better probability of success than those who did not. According to Laszlo (2004), if change was critical for a company’s success, then change management became crucial for the survival of the organization. He concluded that project managers should accompany change management by motivation through reasoning and then into implementation through planning and execution. The author highlighted how change champions used change management to improve an organization’s success.

Levinson (2006) claimed that researchers at A.G. Edwards found that  one of the main reasons for project failure was the lack of implanting a change management process, not just in IT but across the company. The author added that applying the change management process across the company improved project success by 50%. Researchers at Prosci (2004) conducted a benchmarking research on change management. The researchers found that there were varying levels of change management capabilities across organizations. They developed a model that they named the change management maturity model. The model had five levels or stages that ranged from no change management to organizational competency. These levels could be used as measurements of the change management maturity in organizations. Level 1-3 were the lower levels where change management was an ad-hoc process or at most a structured process localized to particular teams or areas in the organizations. Level 4-5 were the levels where change management was an integral part of the project management process and the organization. Eighty-five percent of the 160 companies ranked their change management processes between level one and three. It is asserted that the change management levels could be used to identify the type of change management used in an organization.  Level 1-3 included companies whose employee used a traditional change management process while levels 4-5 included companies whose employees used an integrated change management process.

Bin Sayeed and Prasad (2006) linked change orientation experienced with the qualitative differences perceived in the management practices of the company using a sample of 157 managers and supervisors. The researchers inferred that there was a critically higher level of linearity or correspondence between these two major constructs of the study that is, if individuals saw a change due to a change management program implementation or an ongoing organizational learning/maturation process within, there would be a qualitative difference in management practices (Bin Sayeed and Prasad, 2006).

The increasing global competition has concentrated management’s collective mind in most organizations on change. To effect change in the organization, it is important effectively work through such changes (Bridges, 1991). It is people who have to carry out the change in an organization.

In big transformations of organization, the organization’s stakeholders focus their attention on devising the best strategic and tactical plans. Likewise, they try to generate intimate understanding of the human side of change management. As a result of change management, the company’s culture, values, people, and behaviours are also tried to be aligned with the organizational change. This is done to generate the desired results. The organizational value is realized only through the sustained, collective actions of each of the stakeholders in the organization. These stakeholders are responsible for designing, executing, and living with the changed environment.

No single methodology fits every company in change management efforts. There is no specific sets of practices, tools, and techniques that can be adapted to all situations. The management may have many tools and strategies at their disposal, however, the knowledge and skills in determining how, when and why use them can make or break a change management process.

Best practice can be use in a change management process. This best practice tends to spread throughout a field or industry after a success has been demonstrated. There are, however, best practices that are slow to spread even within an organization. There are several barriers to adoption of a best practice. These include lack of knowledge about current best practices, absence of motivation to make changes involved in their adoption, and deficiency in the knowledge and skills required to do so.

In any change management, the major concerns are on the way the workforce will react on the change, on method on making the team work together, and the way to lead the people in the organization. Usually, what is done in most organizations is retaining their company’s unique values and sense of identity in dealing with change management.

It is important for the company to plan for the human side of change as a major component of the change management plan. It is important to address the human side of change management systematically. Any significant change creates issues on people. Dealing with issues on people on a reactive basis puts speed, morale, and results at risk. Open discussion of challenges and obstacles met in the organization fosters collaboration in the organization to resolve issues internally and externally. It will help in the efficient acceptance of change when involving impacted stakeholders early on the change management process and often. A great challenge in leading and sustaining change is building momentum early on. This is a critical time for any organization since during this time that it is most difficult to obtain buy in that change is necessary and agreement on what needs to be done.

Also, another practice is creating a culture of commitment and performance involving every layer of the organization, as part of change management. This type of culture should start at the top. The leaders are the ones expected to lead on showing a culture of commitment and performance through showing leadership giving strength, support, and direction to its workforce. The leaders must embrace the new approaches first, both to challenge and to motivate the rest of the institution. Leading and sustaining change is the best way to attain efficiency in the organization. Take the change(s) in the organization as opportunities.

 

2.2 Aspects of Organizational Change

In the following sections, five aspects of organizational change will be presented which are planned change, the evolution of schools of management, collaboration and cooperation, organizational culture and change, and the role and evolution of leadership.

 

2.3 Planned Change Theories

Planned change is usually a solution to a problem, or a result of dissatisfaction with the status quo. Planned change is usually triggered by the failure of people to create continuously adaptive organizations (Dunphy, 1996). Oftentimes, planned change initiatives focus on just surface-level changes, essentially leaving organizational assumptions, values, and beliefs unexplored (Argyris & Schon, 1978). There are many change models that are used to aid practitioners in implementing change. These models can be broken into two types of change theories or approaches that organizations can use: radical and incremental. Within each of these approaches there are various models and/or processes.

Radical change approaches include, but are not limited to, six sigma, quality function deployment, and re-engineering. Radical change models are used to jump-start an organization and are also used when a culture change is required. In a traditionally Midwestern family business atmosphere, change is likely to be more heavily resisted than in other organizations because the feelings surrounding the change tend to be deeper and more intense, and previous research shows that family values, goals, and relations deeply influence strategic change in family-oriented firms (Dyer, 1994).

Incremental change approaches include, but are not limited to, Kurt Lewin’s model (1951), Beckhard’s change model (1997), Kotter’s transformation model (1998), and the Bridges transition model (1980). Incremental change models are concerned with improving the existing system and operate within the current business model. All these models have a stage of unfreezing of the current behavior, a change being introduced, and a stage of refreezing the new behavior, or else they begin with the identification of the current state, the desired state, and the blocks and barriers that exist between the two.

John Kotter (1996) suggests that certain conditions need to be met in order to bring about effective change. He bases these conditions on what is known to contribute to the failure of change efforts. Kotter also states that producing change is about 80% leadership (establishing direction, aligning, and motivating and inspiring people) and about 20% management (planning, budgeting, organizing, and problem-solving). In most change efforts he has studied, the percentages have been reversed! While there are some examples of successful change efforts, CEOs report in recent surveys that up to 75% of their organizational change efforts do not yield the promised results (Wheatley, 1998). Numerous studies indicate that as many as two-thirds of all change efforts fail in some way (Trahant, Burke, & Koonce, 1997). These efforts not only fail to yield desired results, but they produce a stream of unintended consequences. This means that leadership spends its time managing the unwanted impact rather than the planned results (Wheatley, 1998). Research also shows that resistance derails most change efforts, with the most notable obstacle being management behaviors not supportive of the change (O’Dononvan, 2003). In a planned change effort, change agents are professionals who influence and implement the change; they are critical to the success of a change effort (Vago, 1999).

Recent studies indicate that static change models are being replaced with dynamic change models that reflect the discontinuous nature of organizational change. In other words, change does not occur at a steady rate even though in the past organizational theory has written about steady or static models. A review of the literature (Mintzberg, 1979; Senge, 1990) reflects the need for organizations to be able to continuously adjust as well as to allow for learning to take place. “Culture change inevitably involves unlearning as well as relearning and is therefore, by definition, transformative” (Schein, 2004, p. 335), thus:

 

Learning leaders must be well connected to those parts of the organization that are themselves well connected to the environment—the sales organization, purchasing, marketing, public relations, legal, finance, and R&D. . .must be able to listen to disconfirming information coming from these sources and to assess the implications for the future of the organization. (Schein, 2004, p. 410)

 

2.4 The Evolution of Schools of Management

There are numerous management theories and schools of thought about systems management identified in the literature. Scott (2003) identified three main schools of thought: rational, natural, and open; also referred to in the literature as rationalistic and humanistic schools. Scott (2003) presented definitions associated with rational systems and natural systems perspectives: “Organizations are collectivities oriented to the pursuit of relatively specific goals and exhibiting relatively highly formalized social structures” (p. 27) and

Organizations are collectivities whose participants are pursuing multiple interests, both disparate and common, but who recognize the value of perpetuating the organization as an important resource. The informal structure of relations that develops among participants is more influential in guiding the behavior of participants than is the formal structure, respectively. (p. 28)

 

2.5 Collaboration and Cooperation

Collaboration as a value is a cornerstone upon which many successful organizations are being rebuilt. During a review of the literature on collaboration and cooperation, the researcher found that although these two terms are often used interchangeably, many authors identified a meaningful difference between the two. The researcher is using the terms collaboration and cooperation interchangeably or synonymously.

Cooperative learning refers to learning environments in which group members work together to achieve a common goal; however, the members of the group may choose to take responsibility for subtasks and work cooperatively, or they may collaborate and work together on all parts of the problem (Underwood, 2003). Cooperative learning occurs when individuals work together to maximize both their own as well as other’s learning experiences. In business organizations today, teams are a popular form of job design, and work teams represent a major change in the management of organizations. Cooperative or team-based learning has gained in popularity (Siciliano, 2001). “Team learning is the process of aligning and developing the capacity of a team to create the results its members truly desire. It builds upon the discipline of developing a shared vision” (Senge, 1990, p. 236).

Communities of practice (CoPs) have been identified as playing a critical role in the promotion of learning and innovation in organizations. Communities of practice have been defined as any social group whose members share a mutual engagement, who negotiate a joint enterprise, and who have developed a shared vision (Machles, 2003). Lave and Wenger (as cited by Wenger & Snyder, 2000) wrote that a defining feature of CoP is that they are seen to emerge spontaneously from the (largely informal) networking among groups of individuals who have similar work-related activities and interests. Lesser and Everest (as cited by Wenger & Snyder, 2000) wrote that communities of practice help provided an environment where knowledge could be both created and shared to improve the following three areas: effectiveness, efficiency, and innovation. Perry and Zender (2004) found that in 1999 the phrase “communities of practice” was just beginning to appear in business literature and that it was used to refer to a new organizational form that complemented existing structures by facilitating knowledge sharing, learning, and change.

 

2.6 Organizational Culture and Change

A survey of the literature on organizational culture produced many definitions on culture. Organizational culture – an organization’s values, beliefs and rules about how things get done – influences every aspect of life in corporate America (Bierma, 1996). Many referred to culture as being commonly held beliefs, attitudes, values, expectations, and norms that exist within the organization that have been derived from both its history and the external environment (Glensor & Peak, 1996; Pratt & Margaritis, 1999; Schein, 1992), while others described corporate culture as the personality of an organization (Larson, 2002). Any organization can do a quick test of its corporate culture by looking at what it measures and what it celebrates (Larson, 2002). Culture is important when looking at continuous change because it acts as the glue for holding the multiple changes in place.

Mallak (2001) identified strong cultures as having a set of core values or key principles that are not only understood by all employees, but also followed. One must recognize that effective cultural change is a long-term process and does not happen overnight. While the desired culture can be captured on paper, it takes time for it to exist in reality. The challenge comes in shifting the culture of the organization. McManus (2003) stated that cultural change is possible and necessary, but argues that it is essential for people to understand and appreciate the reasons for the desired changes. McManus (2003) mentioned that both the current beliefs and mental models, which make up the current collective culture, must be shifted for a change to occur. He explained that while training will provide an awareness of the new culture, it alone will not shift beliefs.

Larson (2002) defines the culture of an organization as nothing more that its personality as defined by the individuals that work there. Just as it is difficult for individuals to modify or change their personality, it is the same for an organization. In fact, it is compounded when looking at an organization due to all the systems, processes, and people. Schein (1992) defined organizational culture as the pattern of basic assumptions, values, norms, beliefs, and artifacts that are shared by organizational members that allows them to derive sense and meaning. Schein (2004) saw culture as a result of three sources: “The beliefs, values, and assumptions of founders of organizations; the learning experiences of group members as their organization evolves; and new beliefs, values, and assumptions brought in by new members and leaders” (p. 225).

Jick (1999) wrote, “No organization can institute change if its employees will not, at the very least, accept the change. No change will work if employees don’t help in the effort. And, change is not possible without people changing themselves” (p. 1). Jick (1999) also stated that while change can be managed externally, it would only be implemented when employees accept the change internally. Dotlich and Noel (1998) asserted, “The ability of organizations to change has become inextricably linked to the ability of individual employees to change” (p. 149). Changing the culture is not a quick process as culture is a network of embedded practices and representations that shapes every aspect of social life (Frow & Morris, 2000). Changing an organization’s culture will affect the micro (individual) and macro (organization) levels (Vago, 1999).

A majority of the literature stated that one must identify the current culture before one can determine how to change it, and that this can be accomplished by utilizing various types of culture assessment instruments (Maher, 2000). Ultimately, “The bottom line for leaders is that if they do not become conscious of the cultures in which they are embedded, those cultures will manage them” (Schein, 2004, p. 23). Cameron and Quinn (2000) noted that most organizations do not operate within a single culture. This presents a unique dynamic when attempting to change an organization’s culture. Some of literature mentioned that when referring to an organization’s culture, the dominant culture, which represents the core values that are shared by most of the members, is what was being referred to (Simpson, 2001). All the literature agrees that a change only occurs when both the organization as a whole and all of its individuals are committed to the change process.

Schneider, Gunnarson, and Niles-Jolley (1994) suggest that because an organizational culture cannot be changed directly, it changes slowly. They propose that the organizational environment and climate must first have its practices, procedures, and behaviors modified before a change in culture can occur. Schein (2004) expounded upon this basis for changing an organizational culture by stating that “building an effective organization is ultimately a matter of meshing the different subcultures by encouraging the evolution of common goals, common language, and common procedures for solving problems” (p. 289).

Baker (2004) quoted Kotter from an interview: “Leadership, as much as anything, creates the culture, and culture helps shape the leadership. It’s a chicken-and-egg thing” (So how do you get these changes done? section, ¶ 2). Leaders have the responsibility to both reinforce and reshape an organization’s culture (Kotter & Heskett, 1992; Schein, 2004).

 

2.7 The Role and Evolution of Leadership

The concept of leadership has evolved over time and can be grouped into several themes – beginning with the leaders’ traits or who they are, moving to the leaders’ behavior or what they do, next to the leadership situation, and lastly to leaders’ character or everything for which they stand. The great man and trait theories (Daft, 2002) assumed that leaders were born not made – that leadership qualities were inherent in one’s personality. In other words, one was born to lead. In the behavioral approach, behaviors could be learned. If individuals adopt the right behaviors, then they could become good leaders. Environmental leadership approaches assumed that everyone was born with a blank slate; thus leaders were a result of events that provided opportunities and could be made – the nature versus nurture paradigm. Situational approaches were based upon the premise that there was not one best way, but rather that effective leadership was based upon many situational variables. Contingency approaches linked leadership style and follower attributes, stating that effective leadership was dependent upon the situation, while contemporary leadership approaches are character-based and focus on a leader doing the right thing.

“Read More about Directive Leadership”

Today, leadership is understood to be a much more complex phenomenon than either the great man or great event approaches considered (Rost, 1991). Schein (2004) alleged that it was not the leader’s personality, but rather the leader’s learning capacity that was critical for cultural transformation. Two leadership approaches still have merit today and are widely used: situational and contemporary. “The effectiveness of leader behavior is contingent upon organizational situations. Aptly called contingency approaches, these theories explain the relationship between leadership styles and effectiveness in specific situations” (Daft, 2002, p. 79). There are several theories that fall under the broad heading contingency approaches including:

 

1. Fiedler’s contingency model – designed to enable leaders to diagnose both leadership style and organizational situation with a leaders effectiveness dependent upon how well the leaders style fits the situation
2. Hersey and Blanchard’s situational theory – premise that subordinates vary in readiness level and thus need different leadership styles, and based upon directive and supportive dimensions
3. Goal-path theory – premise that the leader’s responsibility is to increase subordinates motivation to attain personal and organizational goals by emphasizing the relationship between the leader’s style, the subordinate’s style, and the work environment
4. Vroom-Jago model – development-driven model that permits leaders to adopt a participation style by answering diagnostic questions in sequence

These contingency approach models assumed that there was no one best approach to leadership, but rather that a leader could identify the appropriate leadership style by reflecting upon the subordinates’ capability and willingness (Daft, 2002). This was supported by Blanchard and Blanchard (2005) when they proposed, “Great leaders know how to tailor management styles to individual employees. They realize that they must understand their people well enough to give them the direction and support they need to succeed” (p. 54). In other words, leadership effectiveness must be determined by the adaptability of the leader to the follower’s situation, specifically to the skill and maturity level being displayed.

Contemporary leadership approaches tend to focus on the whole person. Several approaches fall into contemporary leadership: servant leadership, transactional leadership, and charismatic or transformational leadership. Servant leadership was based on a premise by Robert Greenleaf that servant leaders put others’ interests and needs before their own. Transactional and transformational leadership approaches have been considered to be on opposite sides of a spectrum. Transactional typically refers to an exchange process between leaders and followers in which the leader essentially manages and maintains the organization, whereas transformational refers to leaders who attempt to engage the whole person toward a shared goal whereby promoting fundamental changes that aid the organization in remaining competitive in a rapidly changing environment.

A review of the literature on leadership has shown that trait leadership has not disappeared as it can be seen in contemporary leadership approaches today (Northouse, 2004). Transformational leadership assumes a leader has influence that results in followers and ultimately an organization exceeding performance expectations (Northouse, 2004). Conger (1999) found that transformational leadership’s focus was on change and empowerment that typically consisted of several components: leaders possess charisma or a strong ability to influence others; leadership is capable of inspiring others to action; leaders have strong mental or intellectual capabilities; and leaders have the ability to understand individuals and their needs. In fact, Conger (1999) explained, “At the heart of the [transformational] model is the notion that transformational leaders motivate their followers to commit to and to realize performance outcomes that exceed their expectations” (p. 149). Transformational leadership is characterized by a leader’s ability to bring about significant change (Daft, 2002).

A review of the literature showed another description of leadership—adaptive versus operational. Pascale et al. (2000) defined operational leadership as occurring when a leader appropriately exercises authority during times of equilibrium, while describing adaptive leadership as one who “makes happen what isn’t going to happen otherwise” (p. 39), with the caveat being that successful leaders will effectively balance both of these leadership styles.

Rost (1991) and Daft (2002) saw leadership as an influence relationship resulting in a mutually desired change.

You can’t get people to make an exceptional commitment to sustained great performance out of fear. . . . The only way to get people to achieve remarkable results is by being willing to show them that you genuinely and personally care about them. (Webber, 1999, p. xii)

 

2.8 Model for Leadership of an Organizational Cultural Intervention

Kotter’s eight-step approach to organizational change (1996) was based upon years of evaluating failed change efforts, and addresses many of the problems identified by Beer and Nohria (as cited by Vakola, Tsausis, & Nikolaou, 2004). These eight steps include:

1. Establish a sense of urgency – Create a burning platform.
2. Create a guiding coalition – Individuals who are well-respected and who are committed to the change initiative that have the power and influence to drive this change through the organization.
3. Develop the vision and strategy – This must be a relevant vision that can be clearly articulated by every employee within the organization.
4. Communicate the vision – This must be done to gain buy-in.
5. Empower employees to action – Organizations must remove barriers that prevent employees from achieving the organization’s vision.
6. Create short-term wins – So as to energize employees and build momentum necessary for the change initiative.
7. Do not let up – Change must be embedded within the organization in order to make the vision a reality.
8. Make change stick by anchoring these new approaches in the culture – Create supporting systems, processes, and structures that strengthen the culture.

 

Kouzes and Posner (2002) expressed that leadership was about practice, not personality. They identified the common themes and created a model of leadership in which they identified successful leadership practices (taken from the followers’ perspective):

 

1. Challenge the process – Constantly ask, “Why are things being done this way?”
2. Inspire a shared vision – Share the vision so as to provide direction and meaning to engage others in its pursuit.
3. Enable others to act – Foster environments that enable others to act to produce both high task and high results accomplishments.
4. Model the way – Lead by example.
5. Encourage the heart – Recognize individuality as well as hard work and success.

 

As indicated by DeSimone, Werner, and Harris (2002), “Cultural changes involve a complex process of replacing an existing paradigm or way of thinking with another” (p. 594) resulting in a new set of values, systems, and processes, which can only be accomplished through effective leadership. Kotter and Heskett (1992) asserted that producing change is the primary role of leadership within an organization and that competent leadership is the primary driver of successful organizational change, thus “Without leadership, purposeful change of any magnitude is almost impossible” (p. 99). That being said, this researcher sees no value in creating a new model for leadership of an organizational cultural intervention when several successful models are in existence today that have been built based upon failed change efforts and are fully supported by the literature. This researcher reviewed many models, with a strong focus on Kotter’s eight-step approach and Kouzes and Posner’s five practices of effective leadership. This review showed a strong similarity between the two as both models include inspiring a shared vision, enabling others to act, and creating short-term wins. Thus either model by itself would be effective.

Kotter’s eight steps might appear to be relatively simple, but that is far from the case as can be seen by the magnitude of the number of failed change efforts depicted in the literature! Schein (1992) posited that the roles of leadership and organizational culture are linked: “Change then occurs through cognitive redefinition of key concepts, and the resulting behavioral changes become frozen in the personality of the individuals and in the norms and routines of the group” (p. 312). Organizational culture is a result of an organization successfully managing these eight steps and inculcating the change.

Dotlich and Noel (1988) stated, “The ability to turn on a dime, to create new organizational structures, cultures and mind-sets that thrive on a diet of rapid-fire change, has become critical to ongoing business success”. After reviewing the current literature on change and organizational change, one must come to the realization that change is no easy feat, especially as the research indicated that up to 75% of change efforts do not yield the promised results (Wheatley, 1998). The research indicated that the success of a change effort boils down to three essential ingredients: planning, communication, and participation. In order for a cultural change to be successful, one must ensure (a) active participation in each step of the process, (b) that one has the ability to accurately assess the existing culture while defining the desired culture, (c) that one can define the gap between the two and create an effective action plan, and last but not least (d) that there is a leader who can clearly communicate and create passion around the desired change.

Chapter III

Methodology

3.1 Introduction

The research methodology is the set of processes used to collect and analyze data (Leedy & Omrod, 2001).This chapter presents details about the methodology adopted and elaborates the chosen research philosophy, approach and strategy used and the reasons for their selection. Further, this chapter describes the sample population and how the primary data was collected and processed. It also describes the secondary data collection for the literature review.  This chapter further explains the data collection tool and highlights validity, authenticity and reliability of the data collected.

 

The specific goals of this case study research work:

1. Examine various strategies of two business tycoons, Ace Hardware and the Home Depot in the context of change management. For this purpose, the study used academic research, organization’s information available from the website and other reports from the business information sources to identify the organizations’ benchmarking and performance evaluation.
2. Examine the theories and models of change management best practices available from the books, journals and peer reviewed articles. The study compared the constructs and relationships of these theories and models with the performance and strategies of the two organizations.

In order to meet these requirements of this case study, following steps were followed.

1. Selected 2 case studies on change management and described how the change management theories were put in practice by the organization.
2. Using the strategic information available from the case study, drew some conclusions and offered suitable recommendations for the academia and the organizations to initiate suitable policies and strategies for the change to take place yielding positive results.

3.2 Performance Model – Theoretical Perspective

As per Russell (1999), organization needs to work outside in to drive improvement with a clear sense of requirements of its key stakeholders. To achieve outside in concepts, Russel (1999) proposed following conceptual model.

Figure 1: Outside in conceptual model (Russell, 1999)

 

Strong leadership with clear vision and mission about the organization can lead to improved productivity, efficient processing, and empowering workforce. This can produce increased political, financial & customer value, increased adoption & participation, usage and customer satisfaction.

The study was conducted in three phases. The first phase is data and information gathering. The second phase is the meta-analysis of the available literature. The third phase is discussion and analysis. Lastly, the fourth phase is the generation of conclusion and recommendation.

The change management measurement system to be used in this research was developed based on principles found in the change management literature. This is evaluated through case analysis of the Ace Hardware and the Home Depot companies. These two organizations were compared in order to attain more thorough internalization and understanding of emerging patterns. The results will then be discussed and critically analyzed in the following chapters. Afterwards, its impacts and contributions will then be evaluated through the quality criteria developed for this study

The measures in the change management measurement system are classified into two types: the first type measures change project management itself, and the second one assesses the outcomes of the change project. Both of these types are measured in terms of processes, human resources and technology. Each of these three categories will be further divided into effectiveness and efficiency. Effectiveness, in this case, is defined as the external, strategic performance. Effectiveness implies doing the right thing. Effectiveness is where strategically correct processes are developed while strategically sound targets are pursued. Effectiveness includes adaptability.

Efficiency, on the other hand, is defined as the internal, operational performance. Efficiency implies doing it right. Efficiency means reaching the objectives of the change project economically and ideally with the best possible input and output. These change management measurement system forms twelve measurement dimensions out of which six dimensions measure change project management itself and the other six dimensions measure changes in the organizational operations.

This method is being used in preference to others since the proposed change management measurement process suggest that particular attention should be paid to measurement and consequent timely reactions. There is a need for balanced change management measurement where both the change project management and the organizational operations management are measured. The balanced measurement improves the systems and coherence of the change process Likewise, the change management capability of the organisation is enhanced.

Sources of data were the online libraries for which the university has subscription and the Athens library portal was utilized to explore the relevant information on both these companies, the Ace Hardware and Home Depot. Further, the researcher used books, journals, magazines, newspapers, bulletins and any other literature where related articles, data and information could be gathered.

 

3.3 Specific Research Method

The combined research methodology of literature research and case study were chosen to answer the goal of this research. This research analyzed the existing literature on change management best practices. Research was conducted with an illustrative case study approach using documentary analysis and not any direct observations. To supplement the findings information about the organizations chosen as the case study was gathered from libraries, books, journals and peer reviewed articles. The information included both generic and the companies’ management information, ranging from guides to specific best practices.

The research began by identifying the organizations’ strategic plans on the change management. The web sites of Ace Hardware and Home Depot were used besides the information gleaned from other academic sources like EBSCOhost, ProQuest and the reports published in online journals. Then the research studied for evidences of performance measures that were part of the implementation and monitoring process of the strategic planning.

The research also investigated the performance measurement models of the organizations to gain better understanding of the best practices and how some of the principles could be applied by other organizations for managing change in their respective field.

3.4 Treatment of Data and Information

The data and information collated was analyzed to arrive at plausible conclusion and recommendation.

3.5 Limitations of the Research

As the researcher relied on the secondary sources gathered from books, journals and articles, this information cannot give specific information that might be collected through surreys and interviews. Furthermore, the literature based search soon become outdated as the information is updated most frequently. So, with the passage of  time, the conclusions drawn based on this research would not be as valid as these are at present. That is why; the results drawn from this study have to rely on the limited data and information of the two retail enterprises. This condition will affect the generalizations to be made.

 

Chapter IV

Results

5.1         Introduction

In this chapter, the researcher will discuss the results which I concluded after a comparative analysis of data, information and reports published of the Ace Hardware and  Home Depot. In order to investigate the change management best practice theories and models, the researcher chose these two big organizations which have seen ups and downs since their establishment and have implemented many changes to improve their business perspectives. For this purpose, the researcher chose the combined research methodology of literature research and case study to answer the goal of this research.

Retailing is the tougher job at present as the American consumers, like those in most parts of the world, are facing major economic pressures, most notably high energy costs, but also increasing job losses and inflationary cost increases, especially for food. The results of these economic hazards are that the customers are cutting back on purchases, making fewer shopping trips and, in many cases, changing where they buy. As a consequence, retailers everywhere, certainly those in America, are having to cope with unusual conditions. However, in spite of all the difficulties and bad period for economic growth, Ace Hardware has maintained its performance in the market. This is confirmed by a survey report by the J. D. Powers research organization, in which Ace Hardware stores had the highest customer satisfaction rating in its Home Improvement Retail Store Study, achieving 791 on a 1,000 point scale. True Value dealers rated 774, ahead of Sears and Home Depot. Lowes and Menards trailed Ace.

One of the big changes at the Ace Hardware and Home Depot is their respective reorganization through hiring of new management people as part of leading to new, aggressive store growth strategy The Ace Hardware Corporation, specifically, plan to add more than a thousand new stores until 2009 (Ace Hardware Corporation, 2004) Technology change often leads to organizational change. The advent of new technology results to changes in the Ace Hardware Corporation and the Home Depot. The short-term change occurring in these organizations is the introduction of computerization in the company. The computers that are being used in this organization have general-purpose. In the short-term change, the constituents of the organization will get to be acquainted with basic computerization.

These companies also enhance the provision of training packages for its employees. Revisiting employee training material and programs on a regular basis will assist both retail companies especially their employees in adapting more effectively to process and organizational change Capability building will assist these corporations in ensuring that the daily activities and responsibilities are done competently.

The small-scale change to be adopted by the organization is enhancing the capability of all the components of the organization involved in the company processes that requires computerization. In the small-scale change, capability of the constituents of the organization in basic handling of computer software and hardware and their application will be upgraded. A long-term change in these organizations is the enhancement of the business capabilities of these companies to existing Internet infrastructure large-scale changes.

The Internet enhanced the prospect as well as the intricacy in strategic decision – making. Mobility assures to intensify as the industry and application boundaries turn out to be more permeable. These organizations can utilize investigative structure to come up with a tactically easily understandable objective for spending on mobile solutions.

In the following pages, i will discuss the change strategies of both these organizations separately and their comparison will be discussed in the last section of this chapter.

 

5.2         Ace Hardware

Low margins, high fuel costs, economic uncertainty and unrelenting competition have affected the performance and business perspectives of Ace Hardware quite significantly. More than 1.6 million U.S. retail outlets, with 2005 sales of nearly $4.4 trillion, employ more than 24 million people, close to one-fifth of the U.S. work force. Meeting those challenges is more important than ever in light of the increasing role that logistics plays to a company’s bottom line. ”With the bias of someone who has ‘supply chain’ in his job title, the success of some large retailers can be attributed to the supply chain,” said Brian Cronenwett, director of supply-chain distribution and logistics for Ace Hardware Corp. An example of the supply chain’s critical importance to Ace is the recent freezing weather in California, which caused spikes in demand for heat tape, plumbing fixtures and other hardware products. With $13 billion in sales, 4,700 locations worldwide and 15 U.S. distribution centers that stock more than 65,000 items. Oak Brook, III.-based Ace is one of the top 25 U.S. retailers.

Demand spikes aren’t the only times that the supply chain can provide competitive advantage. It is the same with everyday business; Ace’s fundamental retail strategy, a pledge to provide customers with the right products in the right place at the light time, is dependent on the smooth flow of goods.

Ace Hardware realized in 2005 that it needed to fix its supply chain. Supplier lead times were unreliable, and low visibility into supplier performance prevented Ace from monitoring supplier commitments and schedules, from addressing errors and exceptions, and from identifying the reasons for late deliveries. So Ace decided to make inbound transportation a top supply-chain priority with a goal of reducing inventory levels while limiting stock-outs at its retail stores. The management realized that the key to improving the flow of inventory and reducing cycle times was cutting lead times on inbound items. While that’s easier said than done, the answer was not to add more facilities; Ace had been adding new distribution centres every year for several years running, and top management challenged the supply-chain group to free up capital infrastructure spending for new retail initiatives. Research revealed that the existing distribution network would be viable for at least another five years if the flow of inventory could be improved, In a nutshell. Ace wanted to optimize its distribution centres through fixed order-ship time commitments, ready-to-ship data from suppliers, and by improving appointment scheduling, receiving and visibility into data concerning consumer demand.

Shortly before Christmas 2005, Ace contacted LeanLogistics, A Holland, Mich.-based provider of on demand transportation management systems. The company’s main product, LeanLogisties On-Demand TMS, is a Web portal for connecting supply chain partners with procurement, inbound logistics, business intelligence and other special features. The companies reached an agreement, and a pilot program went live last year. The pilot program revealed that when Ace got consistent lead times from its vendors, it was able to reduce inventory at three DC test sites by 23 to 26 percent. said Pete Stiles, vice president of strategy and marketing for LeanLogistics.

LeanLogistics’ rate analysis and procurement tools enabled one Ace DC to save $2.1 million, or 13 percent, on its total freight costs. The pilot program convinced Ace to proceed with a companywide initiative. By November, nearly 700 vendors were aboard. Inventory continues lo drop as vendors are added at a rate of two or three per week. Ace wants about half of its 2,500 vendors, who together account for more than 90 percent of the company’s total supplier spending on the portal.

 

Ace Hardware cut 20 jobs at its corporate headquarters in February 2008 to reduce expenses. The company said the jobs were eliminated from various support areas to “help bring corporate expenditures in line with Ace’s revised bottom line operating expenses.” Ace, which employs about 1,000 workers at its corporate headquarters, recently discovered a $152 million accounting shortfall it attributed to lack of controls and human error over the course of several years.

Quite recently, the Ace Hardware employed a new strategy to effectively handle the customers who come up for assistance. This strategy was formulated by 12 Ace staffers who spent a year analyzing how to increase the time employees spend helping customers without adding extra bodies. In case of influx of shoppers, the coordinator alerts sales associates to drop everything and focus on customers. This new policy is only implanted when there is a heavy traffic of customers and shoppers and the purpose of this strategy is the helping customers. The customer coordinator talks to incoming shoppers, analyzes their body language, and decides whether each one is a browser, a mission shopper with no time for small talk, or someone gearing up for a project. Then she calls the play. Using an earpiece, she radios ahead so the right expert is waiting when the customer gets to the aisle. In this way, the team gets a warning about the approaching customer and can effectively handle such customers (McConnon,  2008)

            Ace Hardware has initiated many publicity campaigns to attract more customers. The desire to change the publicity methods is evident through an agreement which the Ace Hardware signed with Weather-Bug dot com. In such a Ace Hardware signed an agreement with meteorology site WEATHER-BUG.COM’S “Hurricane Command Center” for banner ads. At this website, an interactive spot provided both a scrolling list of storm-prep supplies plus a link to Ace’s store-locator function (Newswire 2007).

Another change brought about by the Ace Hardware management is its workers are using new enterprise reporting software in a project that could eventually be used by some 10,000 partners, suppliers, customers and internal users. The Oak Brook, Ill.-based hardware store chain plans to replace its current business intelligence (BI) tool, which it declined to identify, with the WebFocus reporting software from New York based Information Builders Inc. Ace’s developers had been working with WebFocus for quite a some time. Officials said the company decided to replace its current BI software because its developers have found it too difficult to use. Brian Cook, a software engineering consultant at Ace, said the programming model for the old tool was too rigid and led to several internal failures. “People were getting tied in knots trying to develop reports in that tool,” he said. “The tool was very rigid and had a lot of requirements as far as the way you did reporting. There was one way to do development, and you had to figure it out.” Last year, Ace evaluated tools from several vendors, including Business Objects SA, Cognos Inc., Hyperion Solutions Corp. and Microsoft Corp., but none was flexible enough for its developers. Cook said. Ace tapped WebFocus for its flexibility and strong integration with Microsoft Excel — even stronger than Microsoft’s own reporting tools. Cook contended. The Excel integration was important because it allows developers to “embed formulas, and users [to] manipulate data. Excel is an interface users are familiar with,” he said. Ace further plans to begin rolling the Web- Focus tool out to the 3,000 employees who are using the older tool. Eventually, as many as 10,000 internal users, customers, partners and suppliers would be added to the WebFocus system. Some of the new users will include personnel at the company’s 5,000 stores, where only point-of-sale data and limited inventory data can now be rolled up and presented to the corporate office. The migration won’t be without challenges as the mangeemnt of Ace Hardware acknowledged. The biggest problem might be to convince users of the current system that the new one will work as promised. “The system as a whole in the past has gotten a bad rap [because] we were unable to deliver on some projects and bad some high-profile failures,” Cook said, “Building confidence that this system can deliver is the biggest challenge.” Wayne Eekerson, director of research at The Data Warehousing Institute, agreed that winning back users who have been burned in previous BI projects is a difficult task. He suggested that companies should let a true cross section of users select BI tools instead of “the most outspoken users, who tend to be power users” and likely will select tools that are too complex for most users.

 

5.3         Home Depot

The Home Depot look a much larger earnings hit in its fiscal first quarter than its rival Lowe’s, reporting a decrease of 66 percent compared with the same time last year. Both took a hit from general economic woes, such as the housing slowdown and related credit-crunch and higher energy costs. Consolidated net earnings for Home Depot for the quarter, ended May 4, was $356 million, down from $1,046 billion for its fiscal first quarter last year. Lowe’s reported that its net earnings were down 17.9 percent to $607 million for its fiscal first quarter, ended May 2, down from the previous year’s $739 million in earnings. Home Depot said the results reflect a nonrecurring charge of $543 million due to the recently announced closing of 15 stores and removal of 50 stores “from the future growth pipeline.” Excluding this nonrecurring charge, the chain reported consolidated net earnings of $697 million. Sales for the first quarter totaled $17.9 billion, a 3.4 percent decrease from the first quarter of fiscal 2007, reflecting negative comp-store sales of 6.5 percent, offset in part by sales from new stores. Due to the 14th week in the fourth quarter of 2007, first quarter benefited from a seasonal timing change that added approximately $536 million to sales. In his prepared statement with the report, Frank Blake, chairman/CEO, blamed the slow housing and home-improvement markets for Home Depots problems in the quarter. “In fact, conditions worsened in many areas of the country.” At the end of the first quarter, the chain operated a total of 2,258 retail stores, which included L970 The Home Depot stores in the United States (including the Commonwealth of Puerto Rico, the territory of the U.S. Virgin Islands and the territory of Guam), among its operations. In reporting its first-quarter numbers on Lowes also blamed its lower earnings and flat sales for its fiscal first quarter that ended May 2, on the housing market, as well as higher fuel and food costs. Sales for the quarter declined 1.3 percent to $12.0 billion, down from $12.2 billion in the first quarter of 2007.

The business prospects of Home Depot have been a matter of great concern for the management as the store has been slammed by both the retail slowdown and the housing bust. After an 11% decline in earnings per share last year and still there is apprehensions of another 24% decline in 2008 to $1.73. The reason for this decline is because its management has focused much on profits rather than on raw growth. The result of it is that the $77 billion (fiscal 2007 sales) firm is closing 15 stores and scrapping plans to open another 50.

However, in order to revive the business perspective, the administration has realized the necessity of change in its strategy and planned to spend $1.2 billion spiffing up its stores during the year 2008. Through this strategy, It will add extra floor staff to improve its spotty service and lure back customers who fled to archrival Lowe’s. So, if this strategy works, there’s plenty of upside and it will provides a foundation for a move upward at the first sign that housing and the economy in general are on the rebound (Randall 2008).

In order to cut down its cost, Home Depot has decided to no longer have an HR manager in every store. However, some industry expert say that the Home Depot had better be prepared to stay on top of employee relations issues more than they have had to in the past. In March, 2008 Home Depot announced that it is establishing district HR teams to oversee workforce management at six to 10 stores each rather than have one or two HR managers in each store. The composition of these HR teams will be made up of an HP, district manager and three HR managers. In order to cut down its field HR staff, the organization has reduced the number of employees from 2,200 to 1,000. In order to handle the HR inquiries from employees and managers, the Home Depot is also hiring 200 people to staff a new call center. Further, in order to improve the business scenario, the Home Depot is planning to add more sales associates to its stores as the company’s goal is to add three sales associates to each of its 1,970 U.S. stores by the end of the year. These drastic changes on the part of Home Depot have been viewed by the industry experts positively as they applaud the move by Home Depot particularly in the context of the crisis in the housing market. The change management policy of Home Depot is visible through the fact that it established the old HR organization in 2002. However, Home Depot has realized that the old model was way overdone and not typical for a retail operation like Home Depot. A necessary outcome of not having HR managers in the stores to watch their every move will be the much more empowerment on the part of the store managers to run their operations. However, there are some concerns about this strategy, i.e., Home Depot will have to make sure its managers are prepared to take on the added responsibilities. The good thing about having HR in each store is that they usually have a finger on the pulse of any potential employee relations issues before they become problems. In order to overcome any such drawback of the policy, Home Depot will give its managers additional training to help them with the added responsibilities and at the end of the day, the store manager will be the leaders of their stores as is described by the management of Home Depot (Marquez 2008).

An interview with Mr. Roger W. Adam, senior VP-Chief Marketing Officer at Home Depot sheds light on the policies and strategies take up for the change management at Home Depot. Mr. Roger joined Home Depot in February 2005 and has spent seven years in various marketing positions. Mr. Roger aimed at building the company based on service and selection. His interview is transcribed for analyzing the strategy of Home Depot to bring about the change in the context of decline in sales during the year 2007. In his interview has was confident to get back to what made them great: price, service and selection. In reply to the question how difficult it was for the CMO to affect the frontline, particularly the customer service, he said he worked for the chairman and CEO, and they met weekly in order to determine their priorities. He was sure that they could impact things at the store level in short time as it was not a job of an individual, but It was a team effort. He said “We have a lot of communication streams to the store.”

While describing their aims to start all over again after facing many difficulties in sales and promotions, Mr. Roger said that “What it means to us is going back to what made us great, which is what we call the three-legged stool: Price, selection and service. Looking at that critically and saying “Are we delivering that in a compelling way today?” the strategy to change the existing situation was highlighted by him that they had done a lot of deep customer research to unearth the motivation of customers and are now breaking that down into African-American Home-improvement customers; female homeowners; Hispanic customers; English speaking vs. Spanish-speaking Hispanic; and also echo boomers vs. baby boomers to understand the segments. Though, according to him it was more complicated, but it allows them to communicate to different groups instead of one message in all channels. Mr. Roger named this strategy “mass customization.” As it was really their basic promise but explained and made relevant to the right audiences. In order to support the new strategy, he exemplified that Eco-Options is a certification program in their stores that identifies products that are better for the environment. It skews younger and more educated. He said they promote it through podcast clinics as it is a more effective way to reach that audience than being on TV because it’s not relevant to about 80% of their customers, but only 20%. While answering the remarks of the interviewer that the housing slump had negatively affected results for home-improvement retailers, including Home Depot, how could he manage a brand in that kind of environment, Mr. Roger said that that was the time one could manage the brand for the long term as it gives them the ability to spend more time on the brand. They believe strongly in supporting the stores and supporting the staffing of the stores in a down period because, at some point, it’s going to come back and we want the stores to be in a full state of readiness (Frazier 2007).

 

 

 

Chapter V

Conclusions and Recommendations

5.1 Introduction

This chapter will present and discuss the findings arrived at in the previous chapters. It will include the recommendations to the business sector and its academia and show limitations encountered in the process of the research. It will also draw and discuss conclusions.

As stated in the introductory chapter, the objectives of this study were:

1. To analyse the role of management to bring about the change
2. To analyze different strategies, theories and models of organizational change
3. To analyse the policies taken up by two business giants, Ace Hardware and Home Depot for brining about the organizational change and enhance their business perspectives.

For this purpose, the researcher explored and reviewed the literature on change management best practices which shows that changes in business have significant relationship with the external factors (Nadler and Nadler (1998). Companies change because something outside the organization force them to make a change. Nadler and Nadler, while discussing the change management practices, named seven steps to drive and sustain change to include: owing, aligning, setting expectations, modelling, communicating, engaging, and rewarding. Furthermore, Goff (2000) claimed that change management tools and process were enough to make change management succeed; rather, it was people who made companies work. Gary Kissler, a partner at Deloitte Consulting Change Leadership practice, concluded that the three components critical to the project’s success and that form an integral part of change management were people, processes, and technology (Goff, 2000). So, change within an organization is an inevitable phenomenon which has to take place and which is essential for the survival of the company to compete with the changing world.

In my change management study, I learned that it is important to monitor the human change elements of the project wherein several measures will be put in place. Measurement of change management drives organizational behaviour to a large degree. Using outcome measures provide data and information for improvement or strategy implementation.

I also learned that the regular improved performance appraisal system can be conducted to better promote productivity in any organization. Measurement is a key component for performance management.  If performance is measured, the degree of improvement will be known.  This guiding principle is critical to determine the impact of infusing change in an organization.

Currently, there are structural changes in the economy and in business practices that resulted to new information gathering and assessment techniques to assess the efficiency of organizational change infused. The quality movement, reengineering, process management, and other initiatives introduced new metrics. Change management and strategy implementation gained prominence and created new opportunities to gauge achievement.

The research conducted through collecting data from books, journals and peer revieed articles have contributed significantly to my research questions. The results discussed in chapter four reveal that the for successful business environment it is essential to facilitate changes with the rapidly changing business scenario in order to keep pace with the outer environment. The economical setback of Home Depot and its strategies to overcome these difficulties and efforts for revival are clear illustrations that without properly managing changes at all levels, no organization can survive.

This study involved some potential practical and empirical obstacles for collecting primary data. Access to data and information was difficult since this study focused on two retail giants, the Ace Hardware and the Home Depot. During the process of gathering data, some conceptual and theoretical problems and difficulties were met. Also, the ethics were critical in this study both in the narrow and the broader senses.

5.2 Conclusion

Organizational change is crucial in the operationalisation of sustainable development. It provides a theoretical framework and a methodology which managers can use to successfully lead their organizations to embrace sustainability. After the implementation, several management practices may be adopted to ensure the project’s continued success.

During the entire change management process, key performance indicators should be captured periodically and are used by management to alter or adjust procedures and practices. After the implementation of the change, these key performance indicators, as reflected from the outcome of the performance appraisal records of the employees, should be monitored and evaluated.

Change is usually introduced to enhance the products and / or services of the company.  The critical analysis of the organization’s history report on organizational issues and concerns will help the organization to come up with a baseline in case this will be relevant in the future introduction of change. This will also be important if enhancement on the next change management life cycle is needed by the organization.

5.3 Summary

The background study revealed the change management process and its relevance in organizations. The literature review led to the discovery of vast data and information on change management and the best practices in leading companies. The study design is created to cover various facets of change management. The methods are outlined in such a way that the study will come up with conclusions, generalizations and recommendations that will give valuable insights for change managers and organizations.

Organizational change is essential in order to revitalize and improve the performance of organization. To address this, there are numerous leading practices in change management. The management may have several tools and strategies at their disposal. However, the knowledge and skills on how, when and why use them can make or break a change management process.