Introduction: oil prices and the due to the

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Introduction: oil prices and the due to the

Introduction:

 

The rapid advancements that govern the
variables of the era and the new technologies -that produce what it is
reshaping the markets every day with unfamiliar solutions which facilitate the
human life-, pushes the organizations to seek further transformations,
restructurings, and M&As to sustain itself in a wild and
competitive market (McKinsey & Company (2008). Regarding the
energy industry, the downturn in the oil prices and the due to the market
instability besides the accessibility to shale resources and the geopolitical
issues, a lot of mergers and acquisitions took place in last five years, as an
example, shell-BG, Noble Energy-Clayton Williams, GE-Baker Hughes and so
on.  Also, the organizational transformation
programs are one of the solutions that any company can apply it, to remain
alive in the market which suffered from severe conditions in the last decades.  As some
academic writers claimed that most organizational
change programmes fail, some writers identify a lack of teams’ capabilities
(Boddy and Buchanan 1992, Kotter 1996). Others point to deficiencies in either the
preparation or implementation of the transformations (Burnes and Weekes 1989),
(Huczynski and Buchanan 2001). But (Burnes 1996), assumed that there is a ‘one best way’ to
manage change and that failure arises from not stick to it. But others
argued this claim as it lacking discussion of methods,
validity, references (Mark Hughes 2011), unscientific
estimates, lacking evidence and supporting references (IBM 2008,
Bain& Company 2008).  

 

 The Dilemma:

 

Organizational change is altering patterns of
corporate behaviour by reviewing and modifying management structures
and business processes to succeed and sustain, in response to – or as a result
of – external or internal pressures. This pressure includes rapid movements of
markets, technological changes, consumer demand, economic conditions and
government policy actions, the organizations have to embrace changes, or
it will disappear. The transformation is so unpleasant because each
company has its system of traditions, taboos, habits, and inhibitions which
constitute its distinctive culture (Henderson 1968), these characteristics
ingrained in individuals’ cognitive beliefs, which not adapt to changes
easily.  

 

From this point, the dilemma arose, when starting
to have a look at various quotes in the literature 70 percent failure rates. It
was a little bit suspicious by taking a look and go to the actual sources and
find out where the research was. Basically, not all academic journals are
equal, so a good piece of research is as valid and reliable as possible. So how
good is the evidence, what is the evidence and how good is it. The research
journals are graded, and this grade based on a thing called an impact factor, and Harvard
Business Review impact factor is 0.72, so the Harvard Business Review is not
considered to be a serious research source. Its John Kotter’s article
(HBR) called leading change, and it’s a personal observation. What Kotter says
is “a few of these corporate efforts have been very successful a few have been
utter failures what while most fall somewhere in between with a distinct tilt
towards the lower end of the scale”.  The second
source of claim is a book (re-engineering corporation,
hammer and Chaney, 1993) they stated that “Sadly, we must report that
despite the success stories described in previous chapters, many companies that
begin reengineering don’t succeed at it…Our unscientific estimate is that as
many as 50 percent to 70 percent of the organizations that undertake a
reengineering effort do not achieve the dramatic results they intended”. And
there is a difference between not owning the dramatic results you intend and
failure. The third famous claim is by (Nohria & Beer) cracking
the code of change published in 2000 (HBR, IF=0.72) and they claim that 70% of
all change initiatives fail, what is their evidence for this? It’s not
referenced there’s no source, no research and no evidence. The source must
be right without thinking about whether the source needs to be accurate enough. 

 

Does it depend on what is the success? From
2008 McKinsey Global Survey Results: “Creating organizational
transformations” (it is only a survey it’s not a piece of research), this
report stated that this 4.88 % reported that the change had been extremely
successful, 30.51% said it was very successful, 48.96 % said it was somewhat
successful, 5.87% say not successful, so we can deduct 84.35% of
the respondents mentioned the word successful and only 5.87
say not successful, but what about the 9.78% of
not responding executives who didn’t know if it was
successful or not.  A year later, in the 2009 paper by Atkin and Keller, consultants at
McKinsey, they quoted that “as we’ve already said in 2008 at McKinsey survey of
3199 executives around the world found, as Kotter did, that only one
transformation in three succeeds”. But what Kotter said is “A few of these
corporate change efforts have been very successful. A few have been utter
failures”. In 2007 a research paper (Reijonen, H and R. Komppula 2007)
stated that the success for small firms is survival and for the large companies
is profit.  

 

Mark Hughes had a look at failure rates
of organizational change programs and in his paper (a piece of
research), He concluded that there is no valid and reliable empirical
evidence to support such a narrative. So not only is there no evidence of 70
percent of change programs fail but also what little evidence there is and it
is very little evidence hinges on a McKinsey survey with very little research
reliability or validity suggests that the failure rate is most likely around 6%
not 70%.  

But at all I am not believe in
consulting firms statistics as its very useful in selling services
and products. It’s not reliable.

 

 

The actions management can take to reduce the chances
of failure and increase the chances of success 

 

 Why do we need to change?  

 

The firm must know first the real
reasons that pushes them
to change and the purpose from making
a change, as an example in natural resources industry as
stated in Ernest and young’s publication in
2016 “Defining your company’s purpose Oil and gas Purpose-Led
Transformation”, the oil companies thinking to change to achieve one
of this factors : Sustainability, Corporate social
responsibility, Employee engagement, Return on capital
employed, R&D spending, Social media engagement, and Health,
safety and environmental performance. Also, reasons (Robert M.
Grant, 2002) included value maximization, focusing in profitable business,
cutting back on staff, decentralization of decision making, shifting from
geographical organization to product-set organization;
by focusing on shell case: dissatisfaction over financial
performance, the failure of matrix structure to provide effective
coordination of the operating companies. 

 

What is our vision – what will the future
state be?  

 

Without a clear vision of your state after
transformation the plan will going to fail, and the firm may reach a
position more worthless than the one before the transformation.
As (Robert M. Grant, 2002) stated that shell restructuring took about
8 months from
thinking and research towards approval. They conducted
interviews with 40–50 managers at different levels to provide a basis both for
assessing the existing structure and for generating ideas for change. Then they
prepared a diagnosis of the existed Shell structure together with a suite of
options for reorganization. After that, they explored in greater detail
the specific dimensions of change and to clarify and evaluate the available
options, and this ended with a blueprint for transformation.  

 

What is changing and what will remain the
same?  

 

This is an important point, because there
are some differences between organizational transformation and change
management. Do they will reinvent the organization and discover
a new or revised business model based on a vision for the
future or just some initiatives, change culture, change
process, change technology. As an example, the article in change management by
Rosendahl and Egir about the implementation of integrated operations
in Norway, which descried an initiative about integrated operations
which combine people, technology and work processes via information
technology infrastructure. But in shell case, it was a
transformation, as they converted to simpler structure to have
effective influence and control over their subsidiaries and to improve
coordination between them. This coordination, should be based on the business
sectors rather than geographical regions.

   

Where are we most likely to stumble? 

 

The executives should be
predefined with the obstacles that they could face
like the resistant to change.
The employees’ response takes three paths by
acceptance, by ambiguity, or by resistance (Ford, Ford & D’Amelio 2008), and this is the main factor
that derails change initiatives (Regar et al. 1994; Kotter
1995). In Norwegian case, there were four reasons to change as
fellows, 1) Belief that change is unnecessary. If the organization has
been successful, and there is no visible trouble on the horizon, resistance is
more likely to occur when change is introduced. 2) Economic threats.
Employees might fear that they will suffer personal loss of income, benefits
and job security as a consequence of organizational change.3) Loss of status
and power. Since changes often imply a shift in power and status for some teams
or individuals, employees holding positions that most likely will be affected
negatively might be more prone to oppose the change.4) Resentment of
interference. Some employees simply do not like to feel controlled by others,
and attempts at changing their job situation are likely to cause resistance. 

 

 

 

 

Commitment to change: 

 

The establishment of the
employee commitment is a very important aspect (Buchanan &
Huczynski 2010; Cummings & Worley 2009; Beer & Nohira 2000). It must be clear for the participants to
differentiate between commitment to the whole organisation and the transformation
aspect. This commitment is the readiness to apply exertion on behalf of the
change. Employee commitment is vital for the Company to manage
change successfully, (Fedor, Caldwell & Herold 2006). (Buchanan & Huczynski 2010) the employees who
are being concerned with the transformation should take part in the planning
and implementation phases to decrease their resistance and to eliminate this
strength from the beginning. As (Beer, Eisenstat & Spector 1990) they stated that
changing employee attitude and culture takes more than applying new social
structures and schemes. To achieve successful transformation, the initiatives
must be developed from down-top levels. However, (Bennis 2000, Conger 2000) mentioned the
top-down module to change, they claim that the change can happen by having
agreeable and dedicated employees. As (Beer & Nohria 2000), both tactics must be taken to achieve the
transformation efficiently. Employee involvement and participation are required
to support in the preparation of change and implementation. 

 

Also, change agents or the change makers
should know the readiness of the managers, to be sure that they effectively
communicate the change message with their teams. Those managers sometimes
considered to represent obstacles and increase resistance. So the change agent can be aware of this
issues and deal with it positively by making some effort and doing some
restructuring before the implementation. If the company is
not ready for change because of its various rules, operations, and working
culture, you have an institutional problem not a human problem. To be aware of
the company readiness you have to collect some information like: the
measures that the company use to assess business performance, the others change
initiatives in the organization, how the company deal with people for being
innovative, taking risks, and solving problems?, As stated in an article by
consulting firm strategy & (Culture’s Critical Role in Change
Management) “Nonetheless, corporate culture often doesn’t get the
attention executives suggest it deserves. Only 53% of businesspeople say
culture is an important part of the leadership agenda at their company. Even
fewer people (35%) say their companies do an effective job of managing
culture”.   After
that you will be able to identify some important obstacles that
require instant care before your take-off. This could be a change in
workflow or technology or reallocation of resources to support the pending
change effort.  

 

Resistance to change: 

 

When challenged with change, people usually
react in one of three possible ways regarding how to follow the shift: by
acceptance, by ambiguity, or by resistance (Ford, Ford & D’Amelio 2008). Really, employee resistance is
the primary factor that disrupts change initiatives (Regar et al. 1994; Kotter
1995). 

People often reject change
for these reasons (Yukel 2010):   

 

1 Lack of trust: This Distrust can
enlarge the outcome of other causes of resistance, as the people may imagine
dark, fateful implications. This widespread mistrust pushes leader to be
secretive about the real reason for change 

 

2 The high cost, necessity and feasible of
change: The necessary of the resources to implement change and the
resources committed to the traditional way of doing things will be lost.
Resistance would happen if there is no evidence that the past practices have
achieved fails and this would be harder if the top management used to
overestimate the performance in the past. The change that is radically
different from the previous techniques will appear very difficult and sometimes
impossible to most people.  

 

3 Economic threats, Loss of status and
power: Some people may suffer a loss of income, benefits, or job security when
change includes substituting individuals with equipment or improving methods to
make them more efficient. The transformation may imply some shift in power and
status of individuals and subunits. This state of the current employees that
have a professional expertise which may be missed in the case of applying new
working techniques. 

 

4 Fear of personal failure, and the
threat to value and ideals: Some skill will become out-dated, and new
techniques may be required but also may be difficult to obtain. But the company
may give some help to employees to learn these new ways of doing things. The
changes in the person’s values will increase resistance to change. 

 

5 Resentment of interference: Some people
resist change because they don’t want to be controlled by others and from this
point, the resentment and hostility will arise. The commitment of
employees to change is very important at this phase.  

 

 

Dealing with the resistance:

 

By seeing the resistance as an asset not as a
threat, (Ford, Ford ‘Amelio 2008), this will help in invoking conversations about change,
and this will support the awareness and widespread the culture of change. In
return, the idea of transformation will slowly take place within the
organisation. This engagement might represent a higher level of commitment (Piderit 2000). This resistance will improve the
quality of decisions (Ford, Ford & D’Amelio 2008) if management can apply the
resistance’s thoughts and ideas in the planning of change.  

 

What are critical success factors? 

 

It is important to take a holistic, systems
approach because change often has far reaching effects throughout the
organization. By focusing in the energy sector, (Recreating the
Argentine National Oil Company: A Paradigm for Privatization Christopher E.
Ross), the Argentina’s NOC transformations efforts was very
clear about the success factors, with the following:   

 

1 – The commitment of the top management and
politicians to doing restructuring towards privatization with a clear time
frame as a result of political consideration. And the senior management
communicates an unambiguous message regarding this issue.  

 

2 – They applied the top-down model, and to
avoid the significant resistance from a significant
numbers of people, they decreased the supernumeraries of staffing by choosing a
generous combination of compensation and temporary contracts that soften the
impact. 

 

3 – Speeding up the forming of the new
management teams without doubling up the responsibilities to avoid the
inevitable dilution of accountability with creating “temporary” staff
support activities. 

 

4 – A Clear Philosophy through the development
and implement of a phased approach in undertaking such massive change, the plan
must be comprehensive working in parallel tasks, because facets of the old
system will trouble implementation of the new system. 

 

5 – Choosing the perfect time to for the
operations to be energised, once the new managers are involved and the
employment process become complete, the new organization can be empowered. They
have now to improve processes and simplified procedures and developing them. 

 

6 – The emphasising of the measurement of
results and process effectiveness rather than the direct inspection and
supervision of employees’ activities. This solution will help in decentralising
the organisation and fill the isolation gap between the top management and
operations. 

 

7 – To deal with the hostile attacks, they
established separate activity centers directed by the CEO to deal with each attack in parallel
manner to master this complex battlefield. 

 

8 – Alien with the Correct Order for
Restructuring by Change the high-level organization, Complete the comprehensive
organization and fundamental business procedures, Design IT systems and other
key support procedures, Empower the new organization within each step.

 

9 – Expecting Reaction, the old ways of doing
business will continue to influence the organization, even after a
dramatic transformation. This reaction needs to be expected, and specific
measures are taken to counteract it, “we introduced a temporary position for a
high-level “Jedi Knight” to preserve the philosophy, eliminate
bureaucracy, and help with ongoing process improvement”. 

 

10 – Be aware of the unwritten rules, some
organisations have a sort of tacit rules. They employed two pairs of attributes
to map each entity’s condition: an inclination toward authority versus
teamwork, and a tendency to focus inward or outward versus a disposition to be
analytical or action-oriented.  

 

To conclude all, I have to say that the claims of the failure
are not strongly supported and the management can take several actions before
the implementation process to achieve the success, like the shell, the
Argentina NOC’s privatization cases and the Norway case trying to  implement integrated operations. 

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