1 Syarat Keberhasilan Perubahan Pertemuan 21 s.d 26 Matakuliah: A0134/Audit Operasional Tahun: 2006.

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Syarat Keberhasilan PerubahanPertemuan 21 s.d 26

Matakuliah : A0134/Audit Operasional

Tahun : 2006

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Three Fundamental Business Concepts

• See p. 147 - 153

• Since his arrival at BBA plc, Sir John Egan has made no secret of his aim of transforming the airport company into a world class and first class business.

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• He has an impressive foundation upon which to build his present success. His entrepreneurial activities go back to his time as a teenager, when his father owned a car dealership in Coventry, and if he sold a car at the beginning of the weekend shift, he was paid with one for his personal use for the balance of the weekend. He left his father’s company to attend Imperial College, London, to study as a Petroleum Engineer and, after graduating, joined Shell International, where the time with that company was spent largely in the Middle East on oil rigs. In 1966 he went back to an academic career in order to join the newly opened Business School at London University for a two-year course resulting in a MSc in Business Studies, during which time he met, amongst others, Sir James Ball, of Legal & General, where he is a now a Non-Executive Director. He is also currently a Non-Executive Director of Foreign & Colonial Trust plc.

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• Sir John made a gread success of Jaguar, turning what had been a loss making enterprise valued at £1.6 billion. In each of the management situations in which he has been involved, he has broadly adopted the same initial approach which has involved:– An evaluation of the situation– The selection of managers likely to adapt to change

circumstances– Implementation of action to cut short-term losses– Implementation of a reduction of the cost base– Ensuring the stability of the enterprise’s operation– The above having been achieved, ensuring that the enterprise

recovers and returns to profitability and growth

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• When he joined BBA, he applied the same sound basic principles that he had applied in his previous successes, namely to start reform from an understanding of the company and its plans and to instill a sense of customer service.

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• Contemporaneously he introduced a Strategy for Growth which, basically, incorporated:– A business strategy– Focused on core business– Efficient management of existing airports involving the

continuous improvement of quality of service, productivity, safety and security

– Increasing revenue from retailing– Introducing professional property management– Ensuring, so far as new projects were concerned, that

they would be cost effective, matching the world’s best standards, and that the capacity was closely matched to demand

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• He found, in reducing matters to the core business, that there were a number of weaknesses in the organisation. BAA had – and it was not alone in this experience – tended on privatisation to build up a big portfolio of interest outside its core activity. This process of diversification, if continued unchecked, would have become an intolerable debt burden, as can be demonstrated by the fact that when BAA was privatised it has no debt, but the debt has mushroomed to £1 billion when Sir John arrived in 1990, and was forecast to rise to £ 3 billion. Sir John recognised that this was an intolerable position and, having looked at the diversified businesses, stopped expansion into hotels and put in had the sale of other interests. He tackled the problem, as he had in previous enterprised could not afford to do all that they were planning to do, and it was therefore necessary to see where the cash was being generated and where the outflow cash was going. There were, broadly, three income streams and one big cost outflow.

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• The three main income stream were:– Airport charges from airlines, which were regulated

and subject to the uncertainties of future regulatory directives.

– Retailing, which included the duty free franchises – themselves under long-term threat owing the unification of the European Community.

– Property income generated from 16 million square feet of office, warehouses and hangars, which were let to a variety of airport tenants.

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• The main outflow of cash was connected with the on-going airport development, a programme made necessary by the steady, long-term rate of growth in passenger numbers. At 4 per cent per annum, the forecast is for a near doubling of BAA passenger numbers between now and 2005.

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• However, so far as running the airports is concerned, it is not realistic to expect each Managing Director to master all four skills that had been their responsibilities prior to the reorganisation (namely running the airport, retailing, managing property, and managing building programmes). The critical responsibility, so far as each airport was concerned, was running the airport itself, and the other three areas of management responsibilities were gouped under prove professionals in those areas who had a direct lineof responsibility to the Board, with indirect reporting lines to the Managing Directors of the specific airports.

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• It was necessary to improve quality, service and productivity by first emphasising quality, which in turn relied upon training and communications. Communications is one of Sir John’s articles of faith. He sees it not only as a tools for conveying information, but also as a way of establishing personal contact with employees generally and his immediate managers. He carries this to a wider constituency in using market surveys both within the organisation and with customers – large customers such as airlines or more numerous individual customers such as people using BAA facilities. He emphasised, shortly after joining BAA, that ‘airlines are customers’ not a bunch of naughty children. When he receives a complaint concerning an airport, he asks the Managing Director to draft a reply and the first draft replies so astonished him that he seriously suggested on the company’s writing paper that there should be the slogan ‘BAA plc. The answer is yes – now what is the question?’ The perception of BAA’s approach has now changed to the point that it is accepted by all management that their business is about satisfying customers, whether they are airlines or individual users.

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• Contemporaneously with introducing a changed perception of service, it was also necessary to reduce by at least 12 per cent the numbers of staff whilst maintaining the same level of customer service. This requirement was communicated in a series of training sessions when Sir John and the Director of Corporate Communications communicated the requirements directly to the most senior managers in the Group and to all levels of the organisations via ‘cascade’ briefing sessions. It was found that people were receptive and a voluntary severance scheme was introduced, which was broadly based on the British Airways proven model, and for which 18 per cent of the employees volunteered. The managers decided to let all those who volunteered for severance to be an receipt of the package (not just the 12 per cent originally targeted) and additional time was allowed to meet the productivity targets; in the event productivity improved an quality of service to passengers increased dramatically.

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• Training is now being brought into line with how BAA is being managed which, starting from the top, comprises a Management Committee of 12, and a meeting every three months with 60 top managers when major issues are brain stormed.

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• One of the problems has been to lead BAA away from the preprivatisation and bureaucracy and the immediate post-privatisation euphoria where, as soon as management ‘gets free’, they start buying business when they do not often know how to run their own.

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• Business Schools are now being used for the training of the top managers and succession planning is making a positive attempt to find top class people within BAA, and then fit them for increased responsibilities as they rise through the organisation. Managers are also encouraged to delegate responsibility to their staff.

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• Communications play a vital role in training and bringing about change, especially as different levels of staffing expect reactions in different time periods; for example a person on the shop floor exposing a problem expects that problem to be resolved virtually immediately, whereas a senior manager thinks in a longer timescale influenced by medium and long-term business plans.

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• New projects involve looking at all the functions performed by BAA and seeing if they can be turned to profit.

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• The property portfolio will be utilised to the best advantage. Hand in hand with this, the building programme will be rationalised yet further, an construction firms which have proved themselves to plan in depth and build with speed will be used rather than the more conservative and traditional firms which have not yet adjusted away from the ‘planning as you build’ concept with its additional monetary costs.

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• The main asset in all these changes are the Human Resources and Sir John is determined that they shall receive proper training in order that their full potential can be realised, and also be made aware through increasingly good communications of the need for change: - “Information will help the individuals to do their job. If people recognise why change is necessary, they will help to achieve change.’

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The Importance of Direct Communication

• See p. 137 - 146• Sir Graham Day takes a bottom-up approach to

management: he emphasises the importance of the management communicating with all employees throughout the organisation. When rebuilding an organisation, he feels you cannot trust the existing structure to convey the message intended or put in place the elements for change. Sir Graham has applied his approach to many business situations; he feels it creates a positive, if surprised, reaction from employees. It is still a novel concept to many companies.

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• He captures a crucial concept of Management Audit: that he specific skills in the specific job matter: there is no such thing as a good or a bad manager. He emphasises the need for cohesive management. Managers should be involved in the business formulation as well as strategy implementation. Sure values and better skills matching are key factors for sir Graham.

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• Sir Graham, who is a canadian by origin, was educated in Halifax and, having obtained his LLB, practised law in Nova Scotia for some eight years before joining Canadian Pacific Limited in 1964 from whence, in 1971, he was invited to join Cammell Laird Shipbuilders Ltd as Chief Executive. The success which he achieved during his five years with that company led to his appointment to British Shipbuilders and subsequently to Rover Group Holding Ltd (formerly BL plc) and British Aerospace plc culminating at the present time in his Chairmanship of Cadbury Schweppes plc. He is also Chairman of PowerGen and on the Boards of other companies in the UInited Kingdom and Canada.

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• The conversation with Sir Graham concentrated in the main on his time with Cammell Laird, British Shipbuilders and the Rover Group, as it was in those organisations that he needed to introduce to a high degree his concepts of the management of change.

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• He was recruited at the age of 38 by Nicholas Ridley, who at the time was Parliamentary Undre-Secretary of State at the Department of trade of Industry, who told him bluntly that one of the reasons he was being appointed was because it was ‘easier to shoot a colonial than a native!’. His approach to Cammel Laird was essentially the one which the subsequently adopted at Rover, but because or the smaller numbers he was able to conduct interviews on a wider and deeper basis. At Cammel Laird within a period of two months, he and a colleague that he had brought with him, spoke to some 3,000 people out of the 10,000 work force including all the individuals in the first, second and third layers, and a sample balance in the remaining layers with responsible managers sitting in those instances.

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• Now, happily, that is changing, and the industry is moving away rapidly from the generations of promoted managers grounding down those from whence they had come, towards individuals who are much more empathetic, and in this regard he is pleased that women are being promoted to line management as they provide a positive force for change. He has been delighted to see a number of women out-performing expectations, and he is encouraged that younger people are now relating much better to employees. That having been said, he feels that British industry employees at all levels, compared with its competitors, are still under educated and under trained, and that the real problem is still to obtain remedial education in order to realise the full potential of the workforce. That the potential is there, he has absolutely no doubt, and mentioned the example of an individual joining Rover on a Youth Training Scheme indicated on her employment form creating models with clay as a hobby. The reality impressed the styling studio (basic styling being in clay) to the extent that the individual was sponsored to the Royal College.

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• ‘A key in effecting this change is the proper use of communications.

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• The contrast between my previous occupations and Cadbury Schweppes is substantial. Cadbury Schweppes is a very well managed, successful company. Here at Cadbury Schweppes there is a mandatory retiring age for directors at 60, which I believe is a good age for most senior managers to leave. Assessment is done as part of the annual manager’s appraisal. So far as the management of Human Resources is concerned, our Group Personnel Director is on the Board, and gives a presentation to the Board on the managers with most potential, including future board material, at regular intervals.

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• When we effect an acquisition, there are no pre-conceived ideas about the management being acquired, but there is a careful review on everyone in the new business, for example the individual who was Finance Director of Trebor when we acquired that company, is now Finance Director of the whole confectionary stream of Cadbury Schweppes.

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• To sum up I would say that the core elements in effecting management of change include:– The necessity to try and stabilise the organisation as

soon as possible. – It is essential to get out and be seen; to walk the

property; to talk to people; to make individuals realise that you genuinely have their sense of well being at heart – and that sense of well being depends on the success of the enterprise in which you both work.

– Communicate, communicate, communicate.

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– Ensure that the bureaucratic process is separated from line management; if you confuse the two you fail them both.

– Trust people.

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Meeting and Knowing the Team

• See p. 155 - 157• Paul Insley believes that the key to

success has been the combination of extremely tight management and the encouragement of individuals to treat the business in which they are involved as being their own business. So people should be accountable; an organisational structure has to be developed to make that feasible.

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• Mr. Insley points out that it is fundamental to meet and know the new team in an acquisition situation. Difficulties tend to occur where the new company’s ideals and standards are different from the acquiring group’s; he is determined that a good fit should be achieved between the parent group and the potential subsidiary. This points to the importance of having a management audit before an acquisition; risk factors can then be better evaluated, and the management can work on the critical integration issues prior to the acquisition, so that they do not become unmanageable.

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• Although relatively small, the Exxtor Group is diversified; amongst UK companies, it is outstandingly successful. Turnover has increased over the ten years to 1991 from £11 million to £ 51 million, and profit before tax from £ 850,000 to £ 5.8 million, while shareholders’ funds have increased from £1.1 million, to £16 millon.

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• More specifically, the corporate principles under which the Exxtor Group is run are arised, but the key ones can be summarised as follows:– Each person must be given the opportunity to run their own

business within the simple constraints of a corporate format.– Each business has to return a profit, which includes having to

pay for its own financing.– Instrinsic within this is the concept that any expansion or other

requirement for capital must be financed in the same fashion, and the Group is therefore not seen as a benevolent giver of finance, but rather as a guiding banker.

– Generally, people are encouraged to feel that they are not only as good as their last result, and there is a strong emphasis on establishment and then achieving financial targets.

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– Much of the strength and stability of the Group has come from as extraordinary degree of stability, with most of the Group’s senior managers having been with the company over the last eight years.

– The Group has expanded both organically and through acquisition, and feels that much has been learned about acquisitions, some of it painfully.

– While recognising that mistakes in acquisitions and start-ups have been made, Paul Insley is certain that their continued profitability is due to a willingness to accept the consequences of tough and harsh action with a firm belief that where there is a commercial ‘cancer’ in a group, it will quickly spread.

– Despite this, there have been several cases where the company has nursed a subsidiary back to health, but, while recognising that there must be commercial flexibility in such decisions, Paul Insley is critical of much of UK industry, where excessive amount of time is spent in attempting to revive terminally sick businesses, even though ill-suited to their parent company.

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– The Group firmly believes that ‘cash is king’ and has not been a net borrower for the last four years.

– The company has never been afraid to start something new, but after a while the Group’s strict criteria for financial performance is always applied, and every organisation must be seen to contribute both financially and in the context of a corporate whole.

– Given their emphasis on people, the Group has aimed at keeping relatively small labour units, thus preserving a real sense of identity, and also genuine accountability.

– While not seeking to crush spontaneity and creativity within each subsidiary, the Group has sought to standardise as many of its procedures as are practical, but recognising that in some organisations total standardisation is inappropriate.

– Probably the most importat aspect in terms of dealing with itas employees, is an approach of openness and honesty, with Paul Insley’s ‘bottom line’ being a combination of truth and fairness

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– Although continued growth has been a corporate hallmark, Paul Insley is not afraid to admit to many mistakes, and has said that if more than seven in ten business decisions are correct, the businessman is probably doing quite well.

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Changing to a Marketing Culture

• See p. 159 – 166• ‘The biggest issues may lie in the area of

winning hearts and minds.’ david Laing knows from experience that achieving such change is complex: he recognises that new skills will have to be developed, and that organisational structures will need to adapt. His company’s advice brings with it strategic change: his experience shows how vital some form of Management Audit in bringing about that change.

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• During the 1980’a, it seemed as if some universal verities had been discovered by Tom Peters and others as they analysed what made excellent companies excellent; judging by the sales analyses, they were satisfying an unquenchable thirst for magic solutions to managerial problems!

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• Nothing Fails Like Success

• Customer Driven Change

• The Effect of an External Catalyst

• The Political and Diplomatic Contest

• Issues in Implementing Change

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Nothing Fails Like Success

• More recently, however, it has become very obvious that there are few if any eternal constants in the arcane art of achieving excellence. Moreover mounting evidence suggests that successful companies who continue to practice their traditional strategies in a changing environment will soon fail. Only five years after ‘In Search of Excellence’ 29 of the 43 outstanding corporation described had fallen below the performance criteria that had justified their original selection.

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Customer Driven Change

• Recognising the need for change is however only the firs stage; how to achieve successful change is much more difficult. Another recent study by Warwick University’s Centre for Corporate Strategy and Change identifies five essential factors in the management of change for competitive success.

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• For all companies, the key to altering strategic focus is the market place. It is only through deep insight into consumers, distributors, influencers and competitors that the direction, nature and scale of change can be defined. Furthermore, as change programmes are implemented, it is the market place which provides the criteria for measuring their effectiveness.

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• In the public, as well as the private sector, there is continuing, and accelerating, acceptance that the customer is king, that the market should be the focus of the enterprise, that quality is of the essence, and that the implications of management accountability should be accepted down the organisation.

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The Effect of an External Catalyst

• Many companies find it difficult to manage and sustain change without help from an external catalyst.

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• Why is an external catalyst needed? Because the very nature of culture change demands that individuals at all levels reconsider their own roles, responsibilities and priorities. This is not easy to accomplish when an organsiation has developed very effective systems of management and operation designed to achieve very different sets of objectives and standards. A bank, for example, is supremely efficient at credit control, at processing transactions, and at balancing each day. Traditionally, all its operations and structures and training and reward systems have been geared to achieving objectives and standard expressed in those terms. Marketing and customer based strategies, on the other hand, will probably require different management structures and certainly revised roles, responsibilities and priorities. Change required in such organisations is dramatic.

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• Companies may need to:– Identify the signposts and milestones which

chart the path to change– Implement and manage changes of

knowledge, skill and attitudes amongst staff– Develop new systems and processes to

enable change to take root

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• Here, we are not primarily concerned with the vital techniques of communication, consultation, persuasion and organisational development, important though these are to achieving change. Programmes featuring these techniques alone are unlikely to succeed. The essence of the problem of change management is the definition and implementation of the strategies of change and persuasion to be applied to the realities of the business as a whole. These strategies, particularly as they relate to moving people to change fundamentally, involve some of the characteristics of a political or diplomatic contest.

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The Political and Diplomatic Contest

• Ideally, of course, the support, and preferably the leadership, of the most senior management is essential. Here has to be outward and continuing expression of this leadership, however. It does little when only lip service is paid to the purpose and direction of change and leadership hides behind subordinates.

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• A vehicle for change is needed which drives the whole process. This will not be training, or definitions of quality standards, or organisational development programmes, vital though these are. We need management activity which cannot be carried out unless managers focus on, think about and resolve matters which are themselves the key to change. A market based planning system serves very well. Market based business planning cannot be done unless the manager analyses his market, defines his objectives, considers the needs of his markets and customers, develops his strategies, and produces his plan. The move from badget based planning to a market based plan can have a dramatic effect on unit managers and their teams as they are forced to concentrate on the business relaties driving the change and have to plan resources and priorities accordingly.

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• As a matter of tactics, it mas be wise to withhold many implications of change before the project starts as they are often so wide ranging and disturbing that, if known, the project would be dismissed through fear of the consequences. Avoud detailed blueprints, therefore, and let the process naturally evolve. If it was known in advance that to make a selling culture, it might be necessary to change all job descriptions, appraisal systems, career structures, payment systems and so on, every vested interest in the company would react. Often, far greater co-operation and, indeed, enthusiastic support can be obtained from these interests if it becomes obvious as the new behaviour and processes evolve that changes in all these will be necessary. Affected departments and units will be making the recommendations themselves as they see the implications of the change strategy.

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• Eventually, of course, the implications of culture change have to be built into the fabric of the company. This means that everything that affects people in their job and life must reflect the behaviours one is attempting to introduce. So, if we are trying to encourage people to sell or to provide service, this must be reflected in recruitment profiles, in assessment systems, in reward packages, in incentive schemes, and so on. If we don’t affect a man or woman’s real life, they won’t change.

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Issues in Implementing Change

• Some of the issues to be resolved in applying a change strategy to the essentials and realities of the business will now be considered.

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• Not surprisingly, the greatest problems and the biggest issues may lie in the area of winning hearts and minds. Culture change programmes need to secure ownership for the culture change mission at all levels of the business. This is easy to say but so difficult to achieve.

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Change in the Civil Service

• See p. 167 – 169• Sir Peter comments on how the civil Service

handles the management of change. The catalyst of change is not necessarily market forces; often it is a drive for greater efficiency. He shows that civil servants will respond in a civil service fashion, but face many of the same challenges as the private sector. A change in purchasing strategy and budgeting brought sustantial change to the Ministry of Defence: managers had to develop new skills in order to respond to commercial forces.

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• Sir Peter commented in a conversation about the changes effected during his time at the Ministry of Defence, which were more in culture and policy than in actual management of human resources.

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• On arrival at the Procurement Executive, he found it to be run by the Procurement Executive Management Board, which met weekly prior to his arrival.

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• The controllers, as in commercial organisations, were required to prepare monthly report to the Board which would then be discussed by all Board Members. Management was by exception, in that if projects were proceeding satisfactorily, then the reports would be taken as read, but if there were difficulties, then those difficulties would be discussed by the Board. Prior to his arrival Controllers had little knowledge of each other’s areas of activities.

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• Arriving just a few weeks before the end of the Financial Year, he found the staff concerned that they were going to underspend. Coming from the outside he found this an unusual problem, caused by the Treasury assistance on a policy of annuality. He entered into negotiations with the Treasury, and an agreement was struck which allowed the Ministry of Defence to have a carry-forward of approaching 10 per cent of the procurement budget.

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• There were may able people in the Ministry who understood commercial concepts very well, but they could only operate under the policy directives that they were given and very few of them had any commercial background experience.