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Change Management in Power Distribution Distribution Reform, Upgrades and Management (DRUM) Training Program CHANGE MANAGEMENT CONCEPTS AND PROCESS Vinod Shrivastava and Lois Varrick CORE International, Inc. 1. Context for Change and Change Management Implementation These lecture notes are developed to facilitate training in various concepts and processes for affecting change and managing the change implementation process in service organizations. It should be noted that organizations can change only when people in that organization make a commitment to changing. This can be achieved only with a strong leadership on one hand and a commitment of employees at all levels within the organization to the change management strategies. It is a difficult process but can be fun and very rewarding, if managed well. In the context of individual and organizational change a number of basic issues arise including the following: Concept and Definitions of Change Leadership in Change Management The Change Problem The Necessity or Reasons for Change Elements of Resistance to Change Drivers for Change General Guidelines to Change Role of Communication Strategies for Change Management These issues are discussed in more detail below based on the body of knowledge and experience and best practices in the change management area worldwide. 2. Concepts and Definitions of Change Typically, the concept of organizational change refers to organization-wide strategic changes, as opposed to smaller process-related changes such as adding a new person, creating a new division, modifying an existing program, etc. Examples of organizationwide changes include strategic changes such as (i) a change in mission, (ii) restructuring operations, (iii) adding a new line of business, (iv) divesting an existing business area, (v) introduction of new technologies, (vi) mergers with other businesses, etc. These types of changes are complex and require a very thoughtful and deliberate process often requiring months and years to achieve the organization‘s goals and objectives. They can also be disruptive in the short term and can require huge resources during the implementation phase – ―managing change‖. One commonly used definition of ―managing change‖ refers to the making of changes in a planned and systematic manner with both parallel and sequential steps designed as part of a comprehensive change management strategy. Basically, the objective in managing change is to effectively implement new approaches, systems and solutions in Space for Institution Logo Power Finance Corporation Ltd. (A Govt. of India Undertaking) 1 Change Management in Power Distribution Distribution Reform, Upgrades and Management (DRUM) Training Program an ongoing and functioning organization. Throughout the process of implementing change, the organization controls the process and makes any mid-course corrections, as necessary and demanded by changing events. One of the most frequently occurring examples of this change is the application of IT to managing various organizational functions and outputs. However, in most cases, such changes are triggered by events outside the organization such as market factors, new government policies or regulations, promulgation of new performance standards, changes in market structures, etc. Typically the organizations have little or no control over such factors but must quickly adapt to the changes necessitated by such events in order to (i) maintain their competitiveness, (ii) continue to provide high quality and reliable service or product, and (iii) continue to grow and be financially sustainable and profitable. Therefore, another definition of ―managing change‖ is to respond to outside factors over which the organization has little or no control. The passage of the Electricity Act 2003, the establishment of regulatory commissions in most states in India, and the emergence of new either autonomous or fully private distribution companies in India are examples of events external to the power industry and necessitate that changes be designed and implemented to serve the customer well. The Rural Electrification Policy of the Government of India is another example of a change external to the State Electricity Boards (SEBs) and distribution utilities that mandates a fundamental change in the power distribution business in India. The difference between organizations that are successful in implementing change and those that struggle and are left behind is often whether they anticipate external events and develop proactive response or whether they wait until the external events take place and then develop reactive responses. In the context of ―changing‖ what are some of the general guidelines practiced worldwide? Here are some examples: Consider establishing an internal ―Task Force‖ or a ―Working Group‖ that should be charged with the function to anticipate external events and recommend proactive change options. In many international utilities such a function is typically housed within the corporate planning or corporate development departments reporting directly to the top management and often uses external experts to provide strategic analysis and options assessment. Develop a practice of organization-wide and timely communication to the employees of (ii) the external factors, (ii) the need for change, (iii) what it could mean to the organization as a whole, (iv) what the employees can do to commit to supporting the change process, (v) the possible impacts of NOT changing in response to external events that mandate change, (vi) examples of how other organizations managed change and what worked and what did not work, etc. Practice a two-way or participatory communication in order to maximize the input of employee creativity into the change design and Space for Institution Logo Power Finance Corporation Ltd. (A Govt. of India Undertaking) 2 Change Management in Power Distribution Distribution Reform, Upgrades and Management (DRUM) Training Program implementation process. If necessary, create employee teams to be involved in the change management process. Ensure that the goals that need to be achieved are well understood and agreed to by those involved in the change management process. Develop appropriate benchmarks and monitoring instruments to measure the progress of change and the extent to which the goals of change are achieved. Anticipate potential problems and hurdles in implementing change and take proactive decisions to address them. Ignoring or dismissing the problem may only make it bigger and more damaging like a virus. Develop a plan of action with specific activities (parallel, sequential, and mission-critical) schedules, personnel responsibilities, resource allocation, and performance measuring tools to achieve the desired goals of change. Use external experts for strategic inputs throughout the process. Coordinate the implementation with all units and divisions and entrust the bottom-line responsibility for the implementation of change and achieving results in a single individual with a team at his/her disposal. Involve a wide variety of employees in the change implementation by delegating the responsibility for specific sub-activities in the change management plan to individual employees, units, divisions, departments, and groups throughout the organization. This way, the top management can ensure a commitment on part of the employees to the change rather than a change just for the sake of change. Maintain perspective and commitment as the process (i) will be long and tiring, (ii) will very likely require more resources than originally anticipated, (iii) will face hurdles, (iv) will result is some employees wanting to give up and lose a sense of commitment, (v) may need to be changed in mid course due to other external events, (vi) may be prone to disrupting certain corporate functions such as customer service, inventory management, product delivery, etc., and (vii) may cause some employee morale problems. Many of the problems need to anticipated well in advance and contingency measures need to be in place and ready for implementation as the need arises. Other general guidelines include (i) maintaining perspective, focus, and determination, (ii) avoiding stress or managing stress effectively, (iii) avoiding any adverse impact on the customer, (iv) accepting and managing change rather than trying to controlling it, and (v) learn from others‘ experience by looking at case studies of both successful and failed change management. There are several schools of thought on what change management means and how it should be affected. There are those who manage change by ―gut‖ or ―seat of the pant‖. Space for Institution Logo Power Finance Corporation Ltd. (A Govt. of India Undertaking) 3 Change Management in Power Distribution Distribution Reform, Upgrades and Management (DRUM) Training Program Such managers do not have either the taste or the patience for strategies, plans, and various management tools. They roll with the punches and do what comes to them naturally and at the spur of the moment. While many such top managers are quite successful. The failures are also severe and devastating to an organization. Another species of top managers practice more the ―art‖ of decision making than the ―science‖ of change management decisions. There is a considerable need for art and finesse in change management but that alone is risky as it provides for poor confidence in the decisions and such an approach to managing change is cumbersome and often loses team commitment. Then there are those top managers who are slaves to complicated decision theories and models, extensive analytical tools, sensitivity analyses up to nth degrees, etc. Such managers gain their confidence in decisions only when a complicated and impressive model tells them what the decision should be. They often are consumed by analytical elegance and lose the forest as they are lost within the trees. Such an approach with an almost sole dependence on models does not work well either. Experience confirms that change management approaches designed with an optimum combination of ―gut‖, ―art‖, and science (i) are the most successful, (ii) are more lasting, (iii) maximize employee commitment and acceptance of change, (iv) minimize morale problems, (iv) promote team spirit and a group culture among the employees, (v) provide a better message to the customer regarding the strength of the organizations, (vi) improve customer service quality, and (vii) enhance the competitive position of the organization in the free market where the consumer has a choice to select from among different service providers. Examples of success in the U.S. include such large companies as the General Electric, IBM, Diamler-Chrysler, etc.; utilities such as Baltimore Gas and Electric, Florida Power and Light, Tampa Electric, and a number of rural electric cooperatives in the mid-western parts of the U.S.; and many small companies in a variety of market areas. Some of the less impressive examples include organizations such as ENRON, WorldCom, Southern California Edison, etc. There is a general consensus among practitioners in the change management field that the best definition of change and change management is a combination of a number of factors with considerable body of knowledge around the world. These include the following: The Gut – business experience, understanding of market structure and behavioral pattern, level of competition, and some mixture of typically well justified pride and arrogance among a certain breed of top managers The Art – a combination of economics, business administration, sociology, customer and employee psychology, human behavior, intuitive understanding of market players and their behavior, etc. Space for Institution Logo Power Finance Corporation Ltd. (A Govt. of India Undertaking) 4 Change Management in Power Distribution Distribution Reform, Upgrades and Management (DRUM) Training Program The Science – Engineering, analytical models, decision theories, operations research, industrial engineering, etc. Defining change management in terms of an optimum combination of these factors is especially crucial in a service industry where a satisfied and happy consumer is a ticket to the survival of the business and an unhappy customer can often lead to poor organizational performance and failure. The distribution sector in India is a prime example where (i) change is mandatory for its survival and (ii) change is needed at the organizational level to provide the consumer reliable and high quality electricity in order for the distribution companies to be financially sustainable. 3. Leadership in Change Management No other decision making in businesses is more challenging than change management. The leadership skills of top managers are put to the ultimate test when there is need for an organization-wide change. The best operational manager may succeed in operating an organization but may fail in a number of ways – high employee turnover, a poor company culture, low employee morale and an inability to change if external factors necessitate changes, thus, inadvertently preparing the organization for an ultimate failure. True leadership requires multiple skills and talents including the following: Vision – a vision for the organization‘s growth in a highly competitive and volatile sector where a number of external factors are rapidly changing and require the organization to be proactive in anticipating and implementing a ―change-as-you-go‖ approach rather than being reactive. Business Management and Operations Skills – Ability to organize and manage a team of top professionals with proven track records to ensure that the team, as a whole, possesses the full array of skills for change management even if the leader has specialty in only one or two areas. People Engagement and Management Skills – The success of any organization depends upon the skills, dedication, and commitment of its employees. This requires the organization leader to implement a policy of mutual loyalty. Loyalty is not a one-way street; the leader needs to implement a corporate culture whereby all managers instill loyalty in their employees through proven techniques of people engagement and people management. A Focus on Customer – A lot of experienced leaders are often bogged down with a focus on the product/service at the expense of the focus on the customer. While the focus on product/service quality and reliability is a necessary condition, it, by itself, is NOT sufficient. A focus on customer to ensure that every customer is satisfied and is served well is equally, if not more, necessary. After all why does a business focus on the Space for Institution Logo Power Finance Corporation Ltd. (A Govt. of India Undertaking) 5 Change Management in Power Distribution Distribution Reform, Upgrades and Management (DRUM) Training Program continuous enhancement of product/service quality – to ensure a well served and happy customer? And, how does an organization determine if the customer is happy and served well if it does not focus on the customer and learns what the customer wants? Therefore, a successful organization leader instills a customer orientation at all levels within the organization, where by proven Customer Relations Management (CRM) is always an integral part of any change management approach. No where it is truer and more needed than in the electricity distribution industry, given the very nature of the all-pervasive need for electricity for improving quality of life, economic growth, and poverty alleviation. Flexibility and Adaptability to External Environment –One of the most important qualities that a leader needs is flexibility and adaptability to the external environment. Markets, by nature, are dynamic. Effective public sector governance requires continuous development of new policies and regulations in order to both promote the markets and ensure the provision of reliable, affordable, and acceptable quality of product/services. Therefore, any organization, especially the distribution utilities in India, are operating in a rapidly changing external environment which mandates that the organization be well prepared to change along with the changing environment. It is a leadership challenge to mould organizations to adapt to changes. Market forces further mandate that the change be anticipated and change implementation be proactive so that the organization is not left behind and set itself up for failure. How do good leaders do this? First, a good leader needs to be abreast of impending changes in the environment. This is accomplished by the leader through what is commonly referred to ―networking‖ – attending various conferences, national meetings, public hearings in the government, legislative bodies, and regulatory agencies; involvement in community events; keeping abreast of latest developments through news media and corporate meetings; and developing or acquiring an ability to translate vast quantities of data to information to facilitate change decisions. 4. The Change Problem Change is often viewed as a problem. It is not uncommon to hear people utter the following types of questions/statements: Why do we need to change? Let us just wait and may be we would not need to change. It is not necessary and too costly. No one else is changing, why do we need to? How do we know exactly what changes to make? What happens if we make a mistake? I am afraid to make the change. Space for Institution Logo Power Finance Corporation Ltd. (A Govt. of India Undertaking) 6 Change Management in Power Distribution Distribution Reform, Upgrades and Management (DRUM) Training Program Things seem to be OK; they are not perfect but they surely are OK. In other words, there are all sorts of questions – what, why, how, etc. Fred Nickols in ―Change Management 101: A primer‖ provides a well written definition of the change management problem. The following material is provided to illustrate the change problem: The Change Problem Change Management 101: A Primer Fred Nickols, September 2004 At the heart of change management lies the change problem, that is, some future state to be realized, some current state to be left behind, and some structured, organized process for getting from the one to the other. The change problem might be large or small in scope and scale, and it might focus on individuals or groups, on one or more divisions or departments, the entire organization, or one or on more aspects of the organization’s environment. At a conceptual level, the change problem is a matter of moving from one state (A) to another state (A’). Moving from A to A’ is typically accomplished as a result of setting up and achieving three types of goals: transform, reduce, and apply. Transform goals are concerned with identifying differences between the two states. Reduce goals are concerned with determining ways of eliminating these differences. Apply goals are concerned with putting into play operators that actually effect the elimination of these differences (see Newell & Simon). As the preceding goal types suggest, the analysis of a change problem will at various times focus on defining the outcomes of the change effort, on identifying the changes necessary to produce these outcomes, and on finding and implementing ways and means of making the required changes. In simpler terms, the change problem can be treated as smaller problems having to do with the how, what, and why of change. Change as a “How” Problem: The change problem is often expressed, at least initially, in the form of a “how” question. How do we get people to be more open, to assume more responsibility, to be more creative? How do we introduce self-managed teams in Department W? How do we change over from System X to System Y in Division Z? How do we move from a mainframe-centered computing environment to one that accommodates and integrates PCs? How do we get this organization to be more innovative, competitive, or productive? How do we raise more effective barriers to market entry by our competitors? How might we more tightly bind our suppliers to us? How do we reduce cycle times? In short, the initial formulation of a change problem is meanscentered, with the goal state more or less implied. There is a reason why the initial statement of a problem is so often means-centered and we will touch on it later. For now, let’s examine the other two ways in which the problem might be formulated — as “what” or as “why” questions. Space for Institution Logo Power Finance Corporation Ltd. (A Govt. of India Undertaking) 7 Change Management in Power Distribution Distribution Reform, Upgrades and Management (DRUM) Training Program Change as a “What” Problem: As was pointed out in the preceding section, to frame the change effort in the form of “how” questions is to focus the effort on means. Diagnosis is assumed or not performed at all. Consequently, the ends sought are not discussed. This might or might not be problematic. To focus on ends requires the posing of “what” questions. What are we trying to accomplish? What changes are necessary? What indicators will signal success? What standards apply? What measures of performance are we trying to affect? Change as a “Why” Problem: Ends and means are relative notions, not absolutes; that is, something is an end or a means only in relation to something else. Thus, chains and networks of ends-means relationships often have to be traced out before one finds the “true” ends of a change effort. In this regard, “why” questions prove extremely useful. The important point to note is that these questions and problems are real. It is equally appropriate to ask these questions as they provide us with a better sense of the need and type of change required and they provide us with focus and clarity in defining the most effective change management strategy. In fact, often any initiative to change begins with a series of questions and reservations. 5. The Necessity or Reasons for Change As mentioned earlier, the need for organizational changes is triggered by events in the external environment – new government policies and laws (e.g., Electricity Act of 2003 in India), new regulations, market structure, competition, and structural changes in the economy. Sometimes, change is needed because of workers‘ demand and a shift in consumer behavior. In response to these external events, both service and product organizations need to design and implement changes within the organizations. Such changes can be complex and take a long time to implement if the external factors are monumental. Such is the case in India with the passage of the Electricity Act 2003 and the establishment of regulatory commissions in various states. The entire utility business needs to be changed drastically. Drastic changes cause uncertainty in the organization, face reluctance from managers to change, and can be stressful. However, often, not changing is not an option. Experience confirms that organizations reluctant to change can run into major problems such as losing market share, sudden drop in customer base size, loss of cost competitiveness, severe drop in customer confidence in the organizations‘ ability to meet customer requirements, loss of confidence by shareholders, etc. The net result to not responding to needs for change is the gradual erosion of the organization and its eventual demise. Development by definition is not static. As a matter of fact, a key pattern observed in developing economies is ―continuous change‖, which requires change in the public sector, the private sector, and the citizens. So, if we want to develop we cannot escape change. Space for Institution Logo Power Finance Corporation Ltd. (A Govt. of India Undertaking) 8 Change Management in Power Distribution Distribution Reform, Upgrades and Management (DRUM) Training Program Despite the most commonly observed behavior – resistance to change – those organizations and individuals that grab the opportunity to change and implement well thought out changes make progress. Being locked up in old ways and denying new ways of doing things retards progress, whereas change leads to betterment, expanded opportunities, and a better quality of life. On the other hand, rejecting change leads to even a greater need to change and rejecting it further makes the situation worse and worse. In other words, change is needed and it is inevitable if we are to develop our societies and provide better opportunities to the people. Not accepting the need for change, denying its pressures, and pretending that the need for change will go away are mistakes that we cannot afford to make. Planning and preparing for change requires that we understand the resistance to change and what is needed to encourage people and organizations to change. How do we make change a more desirable and fun experience rather than a stressful exercise? 6. Elements of Resistance to Change Typically there is strong resistance to change in both people and organizations. Resistance to change comes in many shapes and sizes. The following are just some of the key patterns of resistance to change that are frequently observed: Inertia – the tendency to stay put and not delve with the need to change Fear of the Unknown – apprehensions such as what will happen, how will we cope with the change, what happens if things go wrong, what about if we fail mid way, etc? Emotional Attachment to Old Ways – Sometimes people and organizations find themselves too rigidly tied to old ways to doing things. They feel more secure and confident in sticking to these old ways and also know the ―tricks of the trade‖ to fix mistakes Conflicting Goals – In the case of some organizations, there may be conflicting goals that may lead to a resistance to change Fear of Failure – In some cases unfounded fear of failure can be a greatest resistance to change Lack of Understanding of the Process and Resource Needs for Change – Often individuals and organization managers have a poor understanding of the strategies and resources needed to design and implement change. They are misinformed and fear the worst Copy Cat Syndrome – Many organizations and individuals suffer from the ―copy cat syndrome‖ – why should I change if others are not changing. There is greater apparent comfort in being part of a herd than taking an initiative and venturing into new situations Space for Institution Logo Power Finance Corporation Ltd. (A Govt. of India Undertaking) 9 Change Management in Power Distribution Distribution Reform, Upgrades and Management (DRUM) Training Program Whatever the reasons, resistance to change comes in many forms and has to be overcome if progress is to be made and things are to be made better. It is clear that power distribution problem is a sizable problem and is a result of years of resistance to change. Now change is mandated even more urgently if the situation is to get better. 7. Drivers for Change Despite the fact that there are many forms of resistance to change there many drivers as well and change does occur. Organizations and people do change and progress does occur. Through generations we have seen changes – infusion of new technology, scientific research, new discoveries, major natural events, etc., all have caused changes in societies. Societies change as a result of changes in people and institutions. With respect to organizational transformation, a number of drivers are quite commonly observed including the following: Desire to not lose and a strong motivation to survive and win Fear of not knowing how bad things could get and an instinct to avoid failure and suffering Fear of personal losses at the individual level if the organization does not survive Need to be useful to others – the customers, stakeholders, society, etc. Forces in the environment that push for progress that can only come through change Other factors Overall, it takes strong leadership to lead organizations and people through the change process. Commitment at the leadership level can often make the difference in an organization succeeding or failing. Market forces can also act as major drivers to change. As we shall see in the next sections, the change process and implementation approaches, it is the organizations and people whose commitment is essential to any change process. 8. General Guidelines for the Change Process Successful change in India‘s power distribution utilities will require the active leadership of the top management of the utilities and a few champions of change. Usually there is at least one champion who is unstoppable and forcefully instigates the change by being visionary, persuasive and consistent. This soon leads to other champions to ―convert‖ so to say. In the change management field, these people are often referred to as ―agents of change‖. An agent of change is usually responsible to translate the vision to a realistic plan and carry out the plan. However, a few agents of change alone cannot succeed by themselves; a team-wide effort is needed throughout the organization to persistently carry out the change implementation. Space for Institution Logo Power Finance Corporation Ltd. (A Govt. of India Undertaking) 10 Change Management in Power Distribution Distribution Reform, Upgrades and Management (DRUM) Training Program One approach to understanding the change process has been described by Kurt Lewin as follows: Stage One: Unfreezing – This essentially requires the organizations to break the inertia in the face of external factors and get in a state of readiness to implement change. Due the initial understandable resistance to change this stage may take some time. It also offers the greatest challenge to the ‗agents of change‖ to motivate the organization, develop teams, and influence the willingness to change. Stage Two: Change – The second stage requires the development of an action plan and implementation of the required change. The challenges in this stage are somewhat different. They require the entire intellectual capital of the organization to work in unison toward developing a detailed strategy for affecting and managing the change. Once again, the ―agents of change‖ have an important role to play not only with the employees within the organization but also external sources from where help may be needed in the form of expertise and additional resources. Stage Three: Refreezing – Once the changes in the organization have been implemented, it is time to refreeze until the next time there is some other external event or factors that require change. The advantage of this framework is that it facilitates the thinking for developing a systematic and staged approach to changing organizations. In other words, it is a safer approach as it provides the change implementers the opportunity to think before they act. The drawback in this framework, on the other hand, is that it does not allow for change efforts that begin with the organization that are already ―unfrozen‖, nor does it allow for organizations faced with the prospect of having to ―hang loose‖ for extended periods of time (i.e., staying ―unfrozen‖). The beginning and ending point of the unfreeze-change-refreeze model is stability — which, for some people and some organizations, is a luxury. For others, internal stability spells disaster. We all know the story of a tortoise on the move that can overtake even the fastest hare if that hare has a tendency to stand still. The Change Process as Problem Solving Exercise. Another very useful framework for thinking about the change process is derived from the approach to looking at change as a problem and applying the classic techniques of ―problem solving. Within this framework, the organizations essentially see change as moving from one state to another – moving from the problem state to the solution state. The change process, therefore, includes the following steps: Diagnosis of the Problem: An internal team in the organization is assigned the responsibility for conducting a detailed diagnosis of the Space for Institution Logo Power Finance Corporation Ltd. (A Govt. of India Undertaking) 11 Change Management in Power Distribution Distribution Reform, Upgrades and Management (DRUM) Training Program problem. This includes (i) definition of the problem, (ii) enormity of the problem, (iii) possible impacts if the problem is not solved, (iv) experience of others with similar problems, (v) possible approaches to solving the problem, (vi) potential risks, (vii) recommended approach to problem solving, (viii) required resources, etc. Problem Solving: Moving from the problem state to the solution state requires setting goals and a step-by-step process to achieving those goals. People play an important role in this process. Therefore, careful planning is accompanied by efforts to obtain buy-in, support and commitment within the organization. The net effect is a transition from one state to another in a planned, orderly fashion. This is referred to as the ―planned change model‖. The word ―problem‖ carries with it a negative connotation that some people do not like and prefer to avoid. To these people it means a ―bad thing‖ or a ―bad situation‖ which must be avoided. It also generates negative feelings which can be de-motivating. Others see a problem as an ―opportunity‖ to make things better and take it on as a challenge. An approach widely practiced for designing and implementing change is based on viewing problems as opportunities and combining the art and science of decision making to make decisions and affect change. This is illustrated in the example below. Change Management Concepts and Processes A Simple but Very Effective Approach to Change Decision Making Change Management Strategy Matrix HIGH IMPORTANCE CONTINGENCY QUADRANT (No. 1) LOW CONTROL STRATEGY QUADRANT (No. 2) HIGH CONTROL NON-STRATEGY QUADRANT (No. 4) RISK MITIGATION QUADRANT (No. 3) LOW IMPORTANCE DEVELOPMENT THROUGH INTERNATIONAL PARTNERSHIPS 15 Notes about the Change Management Strategy Matrix The change management strategy matrix is a simple and structure way to manage the process of decision making in any change process. The vertical axis represents the level of importance of various internal and external factors on the decision that is being Space for Institution Logo Power Finance Corporation Ltd. (A Govt. of India Undertaking) 12 Change Management in Power Distribution Distribution Reform, Upgrades and Management (DRUM) Training Program considered as part of the strategy. The horizontal axis represents the level of control that the organization has on each of these factors. The steps to be followed under this exercise include the following: Clearly define the problem and the decision to be made by the organization as part of the change process. Create a Strategy Development Team within the organization and assign the Team to develop a detailed list of all internal and external factors that have a bearing on the strategy/decision. Initially no value judgment should be placed on any factor. They should be included in the list on the basis of only one question – could they have any impact upon the strategy that the team decides. Next, the Team should engage in a subjective exercise where every Team member has a vote. The level of importance of and the level of organization‘s control on each of the factors should be debated by the team and finally decided in terms of either low or high. All factors on the list should be considered and decided upon. The next step is for the team to allocate these factors to the various quadrants in the strategy matrix. Thus all factors which are very important and over which the organization has a high level of control should be assigned to quadrant number 2. Conversely, all factors that have relatively low importance and over which the organization has a lower level of control are allocated to quadrant number 4. And so on. This may appear to be a very subjective exercise, but it is not if taken seriously by all members of the Team. The exercise should be continued until all of the factors have been allocated to one of the strategy quadrants. In case of disagreement among the Team members on the allocation of any of the factors, the exercise should be repeated until an agreement is reached. Let us now ask ourselves the following questions: -- What have we achieved? We have completed a fun exercise to inject some discipline into the decision-making process for affecting change. The various quadrants in the change strategy matrix can be defined as follows: No. 1: Contingency Quadrant -- All of the factors in this quadrant share something in common. They are all very important to the decision making. However, the organization has a relatively low level of control over them. Therefore, this quadrant is appropriately names as the ―Contingency Space for Institution Logo Power Finance Corporation Ltd. (A Govt. of India Undertaking) 13 Change Management in Power Distribution Distribution Reform, Upgrades and Management (DRUM) Training Program Quadrant‖. The organization better have a contingency plan for these factors – either reduce their importance to the decision making or increase the organization‘s level of control over them. No.2: Strategy Quadrant – All the factors belonging to this quadrant are very important to the decision making. At the same time, the organization has a high degree of control over them. Therefore, any strategy to be developed should maximize the use of these factors – hence the name ―Strategy Quadrant‖. No. 3: Risk Mitigation Quadrant – The factors on this quadrant are not very important to the decision making process. However, the organization has a high degree of control over them. Therefore, the organization can reduce its risk by watching these factors in case some of them over time become important and move into Quadrant No. 2. No. 4: Non-Strategy Quadrant – All the factors in this quadrant are low in importance to the decision making and the organization has a low level of control over them. These factors essentially have no impact on the strategy, hence the name for this quadrant as the ―Non-Strategy Quadrant‖. Caution: Change is dynamic by its very nature. Therefore, the various factors can move from quadrant to quadrant over time and must be watched. Appropriate corrections should be made to the decision process as the various factors move around among the various quadrants. So far, this is called the ―art‖ of the change process. Next comes the science whereby the Strategy Development Team should conduct an analysis of the various factors in the strategy quadrant and develop a detailed action plan for change implementation. 9. Role of Communication in the Change Process Effective communication, both from top to bottom and from bottom to top, in any organization is crucial for many reasons and especially during a change process. Communications about the change should be open, clear, and frequent and with all organization members. Effective and timely communications are also crucial in avoiding gossip and rumors and minimizing anxiety and stress in the organization. Furthermore, as the success of change depends upon a ―buy-in‖ of the various units of the organization to the change process, communications becomes even more critical. Other advantages of effective communication during the change process include the following: Reduces confusion and misperceptions about the needed change and the change implementation process Space for Institution Logo Power Finance Corporation Ltd. (A Govt. of India Undertaking) 14 Change Management in Power Distribution Distribution Reform, Upgrades and Management (DRUM) Training Program Reduces employee resistance to committing to change Synergizes employee intellectual capital, motivation, and commitment to moving forward as a team to affect change Builds confidence of the employees in the management‘s ability to address change-related problems or difficulties Avoids interruption in the day-to-day operations of the business or customer service while the change is being implemented Strengthens the organization as a whole as change is implemented and prepares the employees and management to address future change requirements more easily and confidently Reduces any productivity losses as employees feel less anxious about the operations than they would if they were in the dark Communication is also very important after the change has been affected. The results/success of the change process should be shared by all in an organization. There are always ―lessons learned‖ in any change process. Often, these lessons are very useful in internal employee training and capacity building for managing future changes. Therefore, a systematic approach to post-change communications is a key for the managers to keep the organization intact and the employees motivated for the next round of change. The most significant advantage of effective communications is to reduce employee resistance to change. Increased and sustained communications and education go a long way in achieving change acceptance. Typical approaches to accomplishing this include (i) meetings with all managers and staff to explain reasons for the change, (ii) explanation of how the change was implemented and how the difficulties were overcome, and (iii) the lessons learned for the future and the management plan to implement the lessons as part of the organizations strategy for managing changes in the future. These communications also provide the employees with the opportunity to share their inhibitions, fears, and frustrations through the change process with the top management. 10. Strategies and Approaches to Change Management Organizations are like organisms and when change is needed the whole organism needs to change. In other words all employees must understand the need for change, commit to changing, and affect the change. The role to be played by different employees and managers is a function of where the employee is in the organization. For example, in a distribution utility slated for a major change, the engineering and systems department employee may be more concerned with technology and technological developments; the financial department personnel would be more concerned with ensuring and enhancing the integrity of the financial and accounting process during the change; and the marketing and customer relations personnel will focus more on customer needs and competitive factors; etc. Space for Institution Logo Power Finance Corporation Ltd. (A Govt. of India Undertaking) 15 Change Management in Power Distribution Distribution Reform, Upgrades and Management (DRUM) Training Program The distribution reform challenge in India is multifaceted and a multi-pronged change strategy is needed in every one of the distribution utilities in the country to simultaneously focus on changes in the following areas: Technical Operations – reducing technical losses; enhancing operation and maintenance (O&M) functions; increasing system performance by introducing performance standards; improving safety and disaster management capabilities; etc. Business Operations – improving financial and accounting systems; modernizing customer billing; introducing modern IT-based financial management systems; enhancing investment decision making; etc. Marketing and Customer Relations Management – implementing modern and proven customer service approaches; enhancing call center management; improving customer service – quality and reliability of service; etc. Policy and Regulatory Compliance – increasing participation in the policy and regulatory process; ensuring regulatory compliance; etc. Given the multi-faceted nature of the change management challenge facing the power distribution industry in India any change strategy will require an unusually broad and finely cultivated set of skills including the following: Engineering and Technical Skills – Typically these skills involve all technical and systems operations within a distribution utility. Specifically, they include all substation, feeder and transformer operations and maintenance, inventory management, voltage and frequency management, distribution system extensions, etc. The delivery of service to the consumer is dependent on the operations of the system and the utility‘s ability to make timely repairs and maintenance improvement. Therefore, these skills are not only required to contribute to the design of change strategies but need to be continuously upgraded in order for the utilities to keep abreast with best practices and current technology in power distribution. Specifically, from a system planning perspective, two particular sets of skills are key to the utilities in meeting their primary challenge – provision of reliable and affordable power to its consumers. These include (i) workflow operations and (ii) systems analysis. Change agents within the utility must learn to continually enhance both systems analysis and workflow management in order to ensure smooth operation of system. Specifically the goals need to be to (i) reduce the frequency of outages, (ii) reduce average response and fault repair time, (iii) take a proactive approach rather than a reactive Space for Institution Logo Power Finance Corporation Ltd. (A Govt. of India Undertaking) 16 Change Management in Power Distribution Distribution Reform, Upgrades and Management (DRUM) Training Program approach to maintenance, and (iv) anticipate system demand in order to avoid overload situation. In the distribution business trade, sometimes, this is referred to as ―Solution Engineering.‖ Business Management Skills – It is equally crucial for business managers to understand the challenges of power distribution business. This requires an understanding of (i) inflows and outflows of funs, (ii) investment planning, (iii) cash flow management, (iv) debt service, (v) collections business, etc. In addition to understanding the requirements of the business the managers also need to understand forecasting and strategic planning which is very necessary to anticipate both financial problems and new business investment opportunities. Managers also need to make a distinction between ―financial data‖ and ―business information‖. While financial data are clearly needed to accurately manage receivables and payables, data alone are not sufficient for managers to plan and make decision. Vast quantities of data need to be distilled down to concrete information useful for decision making. In addition, utility managers need to understand the power market and refine their business approach to survive and grow in a market where traditional protection begin to disappear and are replaced by competition, something that will eventually happen in India. People Engagement and People Management Skills – The business of power distribution is to sell electricity. In a non-competitive or monopolistic environment the consumer has no choice and the service providers can get away with anything. As reform begins and regulatory agencies and competition are introduced utilities come under increasing pressure to compete for service quality and satisfied customers. Indeed, the very survival and possible growth of the utility depends upon its ability to ensure that existing customer stay and new customers are cultivated. This can only be achieved by (i) excellence in service and customer satisfaction and (ii) stateof-the art skills in people engagement and business management. Until recently, the discoms in India did not need to focus on these skills. Now they are becoming increasingly important. Any change management strategy needs such skills in the agents of change in the utility. These skills need to developed and acquired, as necessary. The skills most needed in this area are interpersonal skills and effective communication. Utility officials need to see things from the consumer‘s perspective; they need to listen and be patient; on a pro-active basis they need to solicit consumers‘ views (surveys, focus groups, etc.); and, above all, have a ―customer focus‖ in stead of ―product focus‖ in their operating philosophy which should be translated at all levels within the utility. Part of the job of a change agent is to reconcile and resolve the conflict between the utility and consumer points of view that may be at odds with each other. Space for Institution Logo Power Finance Corporation Ltd. (A Govt. of India Undertaking) 17 Change Management in Power Distribution Distribution Reform, Upgrades and Management (DRUM) Training Program Charm is great if one has it, courtesy is even better. A well-paid compliment can buy gratitude. A sincere “Thank you” can earn respect. Political Skills – All business have to survive and grow in an environment that has social, economic, and political components. Businesses that do not pay adequate attention to the environment in which they operate are doomed to failure. Within the political context, the utilities in India need to work within the prevailing policy and regulatory environment. While in a truly open economy the utilities have the opportunity to influence policy and debate regulatory rule making, they also have the obligation to conduct their business within the established laws, policies, and regulations. Political skills, therefore, become very important in navigating skillfully in an evolving policy and regulatory environment. Once again, any change process requires that the change agents have adequate political skills to guide their business effectively. As competition in the market increases the environment becomes even more political. Therefore the Indian distribution utilities need to begin enhancing their political skills. The policy and regulatory process needs to be participative in nature whereby the policy makers, regulators, and utilities exchange dialogue in an open forum and in a transparent manner. IT Applications Skills: The new IT availability is causing a revolution in the power industry. Utility managers need to take advantage of IT in their operations. However, there seems to be some reluctance in older utilities and older managers to adapt to new technologies for the management and operations of distribution business. Any change management strategy must incorporate organization-wise skills upgrade in the IT area. This trend has begun in Indian discoms and needs to be significantly accelerated. Utility managers and change gents have a very important role to play in this area as the technology is moving too fast and many of us are being left behind. 11. Implementing Change One of the most challenging links in the chain of change management process is ―implementation‖. Often, even some of the best businesses spend an inordinate amount of resources in developing the change strategy and fall short on the challenges of implementation. It is needless to say that the best strategy if implemented partially or sporadically will not allow for the organization to reach the desired goals. There is usually a single reason why this happens – a lack of commitment. Firm and unrestraint commitment is a prerequisite to any change process. In addition, there are other prerequisites as follows: Firm Commitments and Loyalty to the Goals of Change Persistence and Tenacity in the Face of Occasional and, Sometimes Frequent Frustration Space for Institution Logo Power Finance Corporation Ltd. (A Govt. of India Undertaking) 18 Change Management in Power Distribution Distribution Reform, Upgrades and Management (DRUM) Training Program Need for Converting the Non-believers into Converts. There are always a few non-believers in any change process. The change agents‘ challenge is to convert them into believer Motivation and Ability to Quickly Bounce back from Disappointments during the change process – an there will be many in any change management process Willingness to Seek and Accept Outside Help with the Change Process Confidence – both Individual and Collective in Reaching the Change Goals Lasting Ability – Change process can be very slow and tense Flexibility – Willingness to Make Mid-Course Corrections in the Change Strategy as Dictated by Both Internal and External Factors Let us consider the following thought process for change implementation that also applies to the power sector and distribution utilities. The following thought process for change implementation is based in part on "Implementing Change" by Todd Jick Usually when we think about change we focus on the need to create a vision and strategy for the change. But even more challenging is what follows the strategy and vision; this is the implementation itself which involves three broad roles: change strategists: the early work, identifying the need for change, creating a vision of the desired outcome, deciding what change is feasible, choosing who should sponsor and defend it change implementers: these "make it happen" by managing the day to day process of change; they must respond to the vision from above and the responses from below change recipients: the largest group including those who must adopt to the change; they determine whether the change will hold The implementer has the challenge of wrestling with the complex, real-time issues day after day in a changing turbulent environment. What makes this worse is that they often receive too little authority from above to make change happen entirely on their own and from below the more the "recipients" balk at the decisions implementers make, the more frustrating the task becomes. Common Pitfalls of Implementation: Textbooks present a tidy pattern for change but this rarely happens; no matter how much preparation, organizations are rarely well prepared for major change. The literature on change projects a very unrealistic view of sequential change and unless those hoping for change understand the difficulties, the change will fail. By making change seem like a bounded, defined, controlled, and discrete process with guidelines for success, the writing on change misleads managers who will find the reality far more daunting than they expected. Rather than a controllable process, we find chaos. Change does not occur by following a well defined path; rather it is a laborious journey on hands and knees toward an elusive goal with many wrong turns and missed Space for Institution Logo Power Finance Corporation Ltd. (A Govt. of India Undertaking) 19 Change Management in Power Distribution Distribution Reform, Upgrades and Management (DRUM) Training Program opportunities. Only rarely does an organization know exactly where it is going and how to get there. No matter how much thought has gone into the change effort, there will be unforeseen external, uncontrollable and powerful forces that will have a profound impact on the success of the change effort. A recent study identified these problems that a majority of firms experienced: change took more time than allocated unforeseen problems surfaced coordination of implementation activities was ineffective competing crises distracted attention insufficient capabilities and skills of those involved in the implementation inadequate training was given uncontrollable external factors had a major adverse impact (eg. Competitive, government, economic) inadequate support for change failure to define expectations and goals clearly failure to involve all those who will be affected by change Tactical Implementation Steps: Those involved with change search for a checklist to overcome the problems but there is no one best way to implement change; yet we can learn from the experiences of others. Jick suggests a tentative list of suggestions which include the following: analyze the organization and its need for change: look at the company's history of changes (successes and failures), patterns of resistance; analyze the forces for and against change (Force field analysis) create a shared vision and common direction: this should reflect the values of the company; the vision should include the rationale, the benefits, personal ramifications develop a non-threatening and preferably participative implementation process: skillfully present plans, make information readily available; explain the benefits for end users; start small and simple; go for quick wins; publicize successes, separate from the past, and create a sense of urgency. Other prerequisites include the following: Support a strong leadership role line up political sponsorship: broad based support is important (both formal and informal support); identify target individuals and groups whose support is needed; define the critical mass of support needed; identify where each key player is on the continuum (from "no commitment", "may let it happen", "help it happen" to "make it happen" craft an implementation plan: this plan maps out the effort develop enabling structures: examples include pilot tests, off-site workshops, training programs, new reward systems, symbolic changes like redesigned work spaces communicate, involve people and be honest: not every change effort calls for full involvement, communication and disclosure but most do; where possible there should be meaningful dialogue that gives people a stake in the change reinforce and institutionalize change: it is important to reinforce the change, reward those who take risks and incorporate the new behaviors Space for Institution Logo Power Finance Corporation Ltd. (A Govt. of India Undertaking) 20 Change Management in Power Distribution Distribution Reform, Upgrades and Management (DRUM) Training Program A Final Thought What have we learned and what should be a valuable final thought for us from this exercise? Open Discussion with and among the Participants. Janssen’s Four-Room Apartment Model of Change A fun Way to Look at the Change Management Process with a Personal Touch Janssen‘s Model is a pictorial way to describe the Change Management Process. Four Rooms depict different stages of the Change Management Process. The Model subjectively integrates individual knowledge, psychological profile, emotions, resistance, response patterns, and actions into a logical process of going through the Change Process. How does it work? Let us decide on one Area of Change in our lives and use the Model to navigate the change process starting from the Contentment Room • CONTENTMENT ROOM Business as Usual No Need to Change Space for Institution Logo Power Finance Corporation Ltd. (A Govt. of India Undertaking) 21 Change Management in Power Distribution Distribution Reform, Upgrades and Management (DRUM) Training Program High Level of Control Good Knowledge of Risks and Benefits A Mistaken Belief that One can Survive without Changing The net result is one is left behind, loses out, and becomes unhappy with a sense of failure. • DENIAL ROOM Enhanced Defense Mechanisms Submerging Pressure of Change Frustration, Unhappiness and Anger Not Accepting the Reality of Change The net result of being in the Denial Room is that it makes one helpless. As a result, one becomes a helpless recipient of change. Over time, one acknowledges the reality of change. The reward of this important recognition of the inevitability of change is ―Seeing the Light and Moving to the Confusion Room‖. • CONFUSION ROOM A ―Neither Here Nor There‖ Status Old Way Gone and New Way Unclear Living with Uncertainty, Ambiguity, Rumors, Suspicion, and Fear The net result of being stuck in this room is that it becomes difficult to live in the confused state. One needs to get out of the confusion. This leads to the beginning of solving the puzzle. Eventually a new picture is firmed up. The reward is ―Transition to the Renewal Room‖. • RENEWAL ROOM Full of Responsibility to Implement Change and Achieve Intended Result Temptation to Move Back to Confusion or Denial Rooms High Energy But a Lack of Structure If one makes it, one has successfully undergone change and the reward is ―Back to the New Contentment Room‖. The ―New Contentment Room‖ is the old Contentment Room with change. Question: What happens if one does not make it out of the Renewal Room? Lesson Learned: You have to make it out of the Renewal Room Space for Institution Logo Power Finance Corporation Ltd. (A Govt. of India Undertaking) 22 Change Management in Power Distribution Distribution Reform, Upgrades and Management (DRUM) Training Program What do you do? - Keep a Sense of Perspective, Humor, Balance, and Stable Energy Level. Avoid Peaks of High and Valleys of Low. EXERCISE: WHAT TO DO AND NOT DO IN EACH ROOM • CONTENTMENT ROOM: --------------------• DENIAL ROOM: ---------------------• CONFUSION ROOM: ---------------------• RENEWAL ROOM: ---------------------______________________________________________________________________ Selected Sources: Beckhard, Richard and Reuben T. Harris, Organizational Transitions, (Reading MA: Addison-Wesley, 1987). Dalziel, Murray M, and S. C. Schoonover, Changing Ways: A Practical Tool for Implementing Change within Organizations (New York: Am. Management Association, 1988) Jick, Todd D, "Implementing Change," Harvard Business School Case N9-491114, 1991 Moohrmann, Allan, S. Mohrmann, G. Ledford, T. Cummings, and E. E. Lawler Jrs (eds.), Large-Scale Organizational Change (San Francisco: Jossey-Bass, 1989) http://web.mit.edu/hr/oed/learn/change/art_four_room.html The Four-Room Apartment Model of Change (contentment, denial, confusion, renewal) for Understanding and Choosing Action Strategies, by Jim Dezieck http://www.toolpack.com/change.html Organizational Change Management (measurement as a tool, resistance, barriers) http://humanresources.about.com/od/changemanagement/l/aachange_mgmt1.ht m Article on ―Change Management Wisdom‖ by Susan Heathfield http://humanresources.about.com/od/changemanagement/a/change_lessons.htm ―Change, change, change: Change Management Lessons from the Field‖, Susan Heathfield http://humanresources.about.com/od/changemanagement/l/aa_change1_old.htm ―Change, change, change: MORE Change Management Lessons from the Field‖, Susan Heathfield Journal of Organizational Change Management; Various Issues. The Planning of Change (2nd Edition). Warren G. Bennis, Kenneth D. Benne, and Robert Chin (Eds.). Holt, Rinehart and Winston, New York: 1969. Human Problem Solving. Allen Newell and Herbert A. Simon. Prentice-Hall, Englewood Cliffs: 1972.. Organizations in Action. James D. Thompson. McGraw-Hill, New York: 1967. http://www.mapnp.org/library/mgmnt/orgchnge.htm Basic Context for Organizational Change -- Written by Carter McNamara, PhD Space for Institution Logo Power Finance Corporation Ltd. (A Govt. of India Undertaking) 23
"CHANGE MANAGEMENT CONCEPTS AND PROCESS"