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Outline and analyze the challenges facing Mellon Investor Services in their organizational redesign and assess how well the company have dealt with those challenges in how they are approaching and managing the change.
Delong, T. and Vijayaraghavan, V. (2002) Mellon Investor Services (ECCH case reference 9-402-036, Harvard Business School)
Mellon Investor Services (“MIS”) is an investment management and investment services company, focused to help clients manage and move their financial assets and succeed in the rapidly changing global marketplace.
Between 2000 and 2001 MIS underwent a substantial organizational redesign, which will be critically considered in this essay. Wittington and Mayer (2002) suggest that organizational performance is driven by the company’s ability to redesign structures frequently, however the change requires participation of people leading the change i.e. agents, organizational structure that welcomes the change and appropriate managements styles.
The Chief Financial Officer of MIS, Jim Aramanda led the company for few very successful years, during which MIS was providing new offerings for transfer agent services including issue services, employee plans and direct services, broker / dealer services.
The company had five years of successful growth and MIS was meeting and exceeding its financial goals.
In Autumn of 2002 Aramanda’s became concerned for the successful future of the company and he recognised few areas that required closer attention: •different business units were not consolidating their offerings and taking advantage of various products, which resulted in two Requests For Proposal coming from one client whereby both RFPs were replied to separately, as opposed to a combined and unified response, •current successful offering of core products did not guarantee that MIS would grow in future, •MIS staff were not building long-term relationship with the clients therefore business opportunities may not be spotted in good time, •requirement for new measures of performance and progress, •lack of focus on hiring and rewarding talented people,
•lack of focus on product development, which was manifested in product being offered by the sales department without confirmation that the product may actually be delivered to the clients, •Some of the groups, such as technology, were too achievement oriented without being focused.
In order to address the above concerns and mould the company to his new vision, Aramanda hired a number of experienced consultants to support his structural redesign of MIS. Aramanda realised that the change would also involve a dramatic shift of vision and attitudes to introduce new systems and subsystems, with the likely result of clash of wills.
Buchanan & Badham (2008) argue that such a change can be successful if it involves one person influencing the organization according to their values, and Aramanda had the clear vision and skills to gather a team of knowledgeable people to fundamentally amend and adjust MIS future capabilities. The change that MIS underwent could be classified as ‘strategic’ or ‘transformational’ (Buchanan and Huczynski, 2010) and it aimed to redefine the boundaries, methods of problem-solving and doing business in the company.
Aramanda acted on his vision in a very organized manner, as he instantly hired experienced, independent and talented consultants, Mary Davis and Jeanne DiFrancesco, and empowered them to accurately assess how the change should be conducted whilst keeping disruption of the day-to-day business activities to the minimum, design a four-phase project that was consistent with Aramanda’s aggressive deadlines, and work alongside all business units to manage the organizational change smoothly and efficiently.
Although the organizational change instigated by Aramanda and facilitated by the consultants proved a great success, there were certain areas that should have been dealt with differently. The main challenges I have chosen as a topic of this assignment included overall communication, dealing with resistance to change and managing relationships.
Buchanan and Huczynski (2010) note that many managers do not pay attention to communication when implementing change, which may increase employee absenteeism, turnover and low productivity. Furthermore, some of the reasons for employees’ increased expectation during the change process are availability of information through the internet as well as employees’ anticipation to contribute ideas and be kept informed. If these expectations are met, employees feel valued and therefore are more likely to be committed to the company and perform better at their work.
Aramanda wanted to be supportive of a certain degree of open communication culture, which was manifested by a requirement for the employees to nominate their colleagues for newly created job posts. This approach was also constructed to represent Aramanda’s interests and to manipulate employee attitudes and behaviours.
The nomination process aimed to take advantage of knowledge in the network or informal skills that perhaps could have been difficult to be evaluated by an outsider. The outcome however proved to be different than anticipated, as it created a negative feeling amongst the employees. Furthermore, one of the reasons for hiring consultants in the first place was to take advantage of their impartiality and independence from office politics.
Insufficient communication was also evident in Phase One of the organizational change, during which key services, products and activities of the business were analysed. The result was anxiousness amongst the employees, who being afraid of job cuts, would feel that they were disregarded and forgotten, which in return lowered their productivity until the process was complete.
As outlined by Buchanan and Huczynski (2010), many companies operate within a range of open and closed communication climate. Open and honest communication leads to employees having realistic expectations, and closed and defensive communication creates an atmosphere of distrust and secrecy.
Although Aramanda’s relationship with his superiors was commendable, as he had a very open working relationship with the consultants and his direct reports, the communication with his employees was not as successful. One of the reasons for this situation was a lack of Head of Corporate Communications, whose post was vacant until June 2001, therefore all information during the process of a change was not communicated to the staff. Kotter and Schlesinger (1979) confirm that communication of ideas assists employees see the logic and need for change. The implication for MIS was that employees did not understand what was happening, therefore they were more unlikely to follow management decisions.
Issues of communication also affected existing relationships with clients. One of the objectives of the organizational change was to evaluate every job function and employee in line with the new business strategy. This resulted in creation of new key groups, including new ‘business development’ team focused on growth and return on investment in new clients and ‘client management’ team whose assignment was growth and return on investment in existing clients.
The new groups comprised of employees that had to move away from the relationships they took time and effort to establish with their clients. Before the change these relationships lead to more sales and generated more business through word of mouth. Furthermore, strong relationships improved the internal organization, morale, increased engagement and lead to greater satisfaction at work. By creation of new groups the above relationships were damaged or broken, which could have lead to a possible revenue loss caused by the impact that the organizational change had on the client satisfaction.
2. Resistance to change
Buchanan and Huczynski (2010) confirm that change implies a positive experiment and creation of something new as well as a negative confrontation with the unknown through the deconstruction of familiar arrangements. Some of the MIS employees demonstrated unwillingness to accept the proposed changes, as they perceived them as threatening to the individual. The main causes of resistance to change were as follows:
•Lack of facilitation and support
Kotter and Schlesinger (1979) outline facilitation and support as most helpful, where fear and anxiety lie at the heart of resistance. At MIS some of the managers were not supporting their employees in new roles, as people were expected to continue to take care of their old responsibilities, therefore the new responsibilities had to take second priority. They employees were not given sufficient time to adjust to new jobs or recover after demanding period.
•Low tolerance for change
Buchanan and Huczynski (2010) stress that that people differ in their ability to cope with change and uncertainty, which may lead them to oppose even potentially beneficial changes. Kotter and Schlesinger (1979) agree that if the change is significant and the employee’s tolerance for change is low, he might begin to actively oppose the change for reasons he does not consciously understand.
•Misunderstanding and lack of trust
Buchanan and Huczynski (2010) argue that employees are more likely to resist the change if they don’t understand the reasons behind it. As outlined in the section above regarding lack of communication, it becomes transparent that MIS employees were not told what are the positive implications of change, therefore they believed the change might cost them much more than they would gain. This could be characterised by having a low level of trust between employees and managers and result in misunderstandings and increased perception of threat when change was introduced.
3. Networks and relationships
Another challenge facing the organizational change of MIS was managing existing relationships and creating new networks.
One of aims for the reorganization once MIS services and products and market needs were analysed, was to break down capabilities into building blocks and then to recompose the blocks to fit within the new strategy. In practice this meant changing the divisional structure of the organization from service-based to customer-based. The change from ‘squares’ to ‘squares and triangles’ caused a large power shift and a felling of unrest and injustice to many employees.
In the new organization chart the ‘triangles’ comprised of market-facing professionals and were perceived as the ‘winners’. The triangles included new business development, client management, product management & development and business management & analytics units. A triangle holds its place as a symbol in the mathematics of ideal proportions and in the MIS reorganizational design employees chosen to become a part of new teams were deemed as ‘drivers’ having a superior status.
This formal status was closely related to the leadership, generally accepted by the others with a power to influence and control other groups. On the other hand, the ‘squares’ represented all other employees in the company and were perceived as the ‘losers’ and ‘followers’ and deemed to have an inferior status. Buchanan and Huczynski (2010) note that lower status groups have less power and tend to be less influential, therefore employees actively seeking status in order to fulfil their self-esteem may experience personal dissatisfaction.
Buchanan and Huczynski (2010) note that this method of implementing organizational change can cause confusion and increase employees’ level of stress. The MIS consultants hoped that by dismantling of social networks, new networks would grow very quickly. The presumption was made that the existing social networks used to compensate for the inefficiencies in the old system, so now they should accelerate the efficiencies of the new system.
Some employees viewed this as a positive move, as it allowed transitioning some people to other teams to build communication and continuity based on their prior experiences in other business areas. This however had a more political aspect as many managers when switching roles from ‘triangles’ to ‘squares’ in their self-interest wanted to take the good people with them. In practice, whereby poor communication was also a contributing factor, the new social networks were not created as rapidly as anticipated and had a negative influence on employee engagement and work performance.
Another reason for changing the divisional structure of the organization was MIS’ lack of integration. Child (2004) stresses that integration is a vital product of good organization, whereby different activities collectively create value. One of identified reasons for change at MIS was to consolidate their product offering to create more value for the customers.
Although it is relatively easy to state the requirement for integration, it is not so straightforward to achieve it. The problem of integration presents itself most noticeably in the relations between functions that are responsible for producing services according to predetermined parameters established within the company, and functions that have to continuously adapt to the external environment.
The organization cannot remained viable without this integration. Teams are one of the most commonly used means for achieving integration, however during the implementation of change at MIS these were taken apart under conditions of uncertainty and pressure. One of the signs that the integration needs were not sufficiently met by the new teams was conflict between departments, mainly between ‘triangles’ and ‘squares’. This situation would require ongoing monitoring to ensure that the conflict does not become persistent and threat overall teams’ performance.
As outlined above, the main challenges of the organizational change instigated by Aramanda included overall communication, dealing with resistance to change and managing relationships. The organizational change was possible due to a great contribution from the consultants, who appreciated that an organizational change is a complex process to dramatically adjust organization vision, structure and culture in a continuous effort to improve the performance.
1.Buchanan D., Badham R. (2008) ‘Power, politics and organizational change: Winning the turf game’, p. 9. 2.Buchanan D., Huczynski A.A. (2010) ‘Organizational behaviour’, pp. 329-330, 562-564, 570-573. 3.Child J. (2004) ‘Organization: Contemporary Principles and Practice; Chaper 4:
Achieving Integration’, p. 81-82. 4.Kotter J. P., Schlesinger L.A. (1979) ‘Choosing strategies for change’ Harvard Business Review, March – April pp. 108-109. 5.http://www.bnymellon.com/about/index.html, accessed on 18 June 2012.
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