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Managing change effectively

The first two steps in managing change effectively are to identify the need for change and then set some achievable goals.

Outcomes
Overview of managing change effectively
Revision and case study data
More

HSC Topic1: Business Management and Change is covered in the Board of Studies NSW Syllabus (June 1999) on pages 25-26. the specific outcomes for this section are:

Outcomes

The student:

H2.1	describes and analyses business functions and operations and their impact on business activities
H3.2	evaluates the effectiveness of management in the organisation and operations of business and its responsiveness to change
H3.3	analyses the impact of management decision-making on stakeholders
H4.2	evaluates management strategies in response to internal and external factors
H5.3	communicates business information, ideas and issues, using the relevant business terminology and concepts in appropriate forms.

Overview of managing change effectively

Just like people, businesses find it easier to keep things going along in the same way rather than to change them. Change is often a process that introduces new ideas and increases stress. For example, many students say that the change from studying junior subjects to studying HSC subjects is more than they expected. So it is in the business world.

A company can be successful by operating in the same way for years, then suddenly find itself in crisis. Managers may find that the strategies they have always used no longer work. Commonly, businesses find that they have not kept up with changes in the environment where they operate. It's like trying to cope with HSC courses while continuing to use Year 8 study habits.

Before implementing change

Business managers attempting to manage change typically do at least two things before they begin to create a culture for change and implement change models.

Firstly, they identify the need for change. Often, the problem (or problems) is obvious. By the mid 1990s, BHP, an over 100-year-old Australian business, was badly in need of change. How did management know? An analysis of its continuous slide in profits made it obvious. A steady or large decline in a firm's profitability is usually one sure sign of the need for change.

Secondly, they set some achievable goals. In late 1998, senior management at BHP, one of Australia's largest companies, realised their business was floundering. They decided on a single broad, yet achievable, goal - "to remake BHP into a company focused on one overriding purpose, creating value for its shareholders".

Of course there is a lot more involved in managing change effectively, but recognising the need for change and setting some achievable goals are recommended first steps for any business organisation.

Revision and case study data

Let's explore the Broken Hill Proprietary Company Limited (BHP) to find out how it got itself into such a financial mess. To many Australians, BHP is, or has been known as, 'The Big Australian', and for good reason. BHP is amongst the world leaders in a few fields.

BHP was incorporated in 1885 to mine silver, lead and zinc on a long, low hill called 'Broken Hill' in western New South Wales. By 1888 it was supplying one third of the world's silver. As time passed, BHP moved into iron ore, steel-making and petroleum. The company grew, making more and more profits, and always paid a dividend to its shareholders. It seemed as if nothing could go wrong.

Then, a series of forces began to make an impact on the organisation. World prices for copper, oil, steel, iron ore and coal all took a nosedive, remaining low for years. BHP found itself with less revenue and a growing quantity of under-performing assets.

Management was slow to respond, perhaps convinced that markets would respond and things would be 'right' again. Unfortunately, prices continued to fall.

The BHP board of directors realised things had to change when, in the mid 1990s, they took a close look at the structure of their senior executive team. Under John Prescott, CEO at the time, there was a 90-person leadership team. Over 85 of the group were men, and roughly half, like Prescott, had been lifetime BHP employees who had 'worked their way up from the shop floor'.

Decision-making was consensual, and the board of directors - not the CEO or the leadership team - made most of the big operational and strategic decisions.

Exercise

1. List three advantages and three disadvantages of the management structure described above.

2. The board of directors decided to search internationally for a new CEO rather than promote a new CEO from within. Do you agree with this strategy? Why or why not?

3. What does it mean to 'work your way up from the shop floor'?

4. Briefly describe consensual decision-making.

In early 1999, Paul Anderson, was appointed chief executive officer (CEO). Anderson radically changed the senior management system. Instead of a 90-person leadership team, there were now eight managers (including Anderson) at the top.

The new management team has not only recognised the need for change, it has identified the changes that need to be made, and has set goals to achieve those changes.

For example, management:

• identified the need to deal with a possible continuing long-term decline in commodity prices

• set the achievable goal of simplifying the management structure to foster accountability and communication.

More

There have been many changes at BHP subsequent to the 1999 management restructure and the company has flourished. It is now the World’s largest resource company. Changes have included:

In 2001 BHP Ltd merged with Billiton plc. This merger made BHP Billiton the world’s largest mining company with operations based across the world covering most commodities.

In June 2005 BHP Billiton took control of WMC Resources after gaining more than 76 per cent of the mining company's shares. This means BHP now controls two of the world's four largest copper deposits - Escondida in South America and WMC's Olympic Dam mine in South Australia . Control of Olympic Dam established BHP as one of the world's biggest uranium producers.

The acquisition gave BHP the opportunity to build on its existing nickel and coppers businesses as well as bringing uranium into its portfolio of energy products. BHP’s chief executive, Chip Goodyear also noted that it gave the company the ability to satisfy continuing growth in demand from China and other economies long term.

The WMC Resources' corporate staff was concerned that the merger would result in job losses as BHP Billiton consolidated head office functions. Before the acquisition was completed BHP announced it would seek the resignation of WMC directors and appoint its own nominees in their place .

White collar workers at WMC feared the most for their jobs as nearly all or their roles were duplicated in BHP.

WMC Resources Ltd is now a subsidiary of BHP Billiton Limited. Students interested in following the management of change at WMC by BHP are encouraged to follow stories in the press and visit the BHP Billiton website (www.bhpbilliton.com ) and WMC website (www.wmc.com ).

Study hint

For HSC students, one of the best things about the change management information found in annual reports is that the strategies managers are using in real business situations can also be used by you when writing responses to exam and assessment questions. Take a few minutes to investigate.

Managing in Australia, by Frank Blount, published in 1999 by Lansdowne Publishing, is an outstanding source for practical case study information on this topic. It tells the story of the massive restructuring processes that took place during the 1990s at Westpac and Telstra. Please note that this book is published by New Holland Publishers.