Strategic Change

Strategic Change

Drs. Suhartono MBA., MA . PhD (cand)

Source: Shein (2011)

Process Models of Organization Change

Strategic Change: The Paradox of Revolution and Evolution

DISCONTINUOUS CHANGE CONTINUOUS CHANGE

Emphasis on Revolution over evolution Evolution over revolution

Strategic change as Disruptive innovation/turnaround Uninterrupted improvement

Change process Creative destruction Organic adaptation

Change magnitude Radical, comprehensive, dramatic Moderate, piecemeal, undramatic

Pace of change Abrupt, unsteady, intermittent Gradual, steady, constant

Change requires Sudden break with status quo Permanent learning and flexibility

Environmental jolts Trigger shock therapy Require continuous adjustment

Change pattern Punctuated equilibrium (Equilib Gradual development

is not the ends)

Change Management Effectiveness

Awareness Desire Knowledge Ability Reinforcement

Bus Need

Concept & Design

Implementation

Post Implementation

Successful Change

Inisiasi Unfreezing

Implementasi Moving

Inkorporasi Refreezing

Resistance to Change (Connor, 1995)

• Lack of Trust: distrust of the people who propose it.• Belief that change is unnecessary: if the current way of doing things has been

successful in the past and there is no clear evidence of serious problems that require major change.

• Belief that the change is not feasible: It seems unlikely to succeed.• Economic threats; personal loss of income, benefit, or job security.• Relative high cost: cost higher than benefit.• Fear of personal failure: some expertise obsolete and new ones that may

prove too difficult to master.• Loss of status and power: shift in relative power and status of individual and

subunits.• Threat to values and ideals: inconsistent with strong values and ideals.• Resentment of interference: do not want to be controlled by others.

Reactions To Change

• Denial• Confusion• Loss• Anger

“People fear the uncertainties of change. The slightest suggestion that things won’t stay the same can cause panic…but the real problem isn’t the change…it’s people’s reaction to that change.”

-Dr. Alan Zimmerman

Individual Perception and Changes (Satier Model)

DENIAL

RESISTANCE EXPLORATION

COMMITMENTPemungkiran

Shock

Frustasi

Acceptance

Experimentation

Understanding

Integration

KIN

ERJA

WAKTU

Mengenali Fase Perubahan Persepsi• Denial– Tidak percaya

– Apatis– Tidak peka

– Ada aktivitas tapi tidak ada kelanjutan• Resistance

– Kemarahan– Depresi

– Pembangkangan– Menyalahkan

– Absen• Exploration

– Berambisi– Over preparation (banyak rencana)

– Kebingungan mengenai prioritas– Tidak terkoordinasi, bekerja sendiri-sendiri.

• Commitment– Fokus pada hasil

– Paham benar mengenai langkah apa selanjutnya– Ada kepuasan kerja

– Bersiap dengan perubahan lebih lanjut– Percaya-diri ata kemampuan beradaptasi atas perubahan.

Prinsip• Acting better than planning (tindak lanjut lebih membuktikan

dari pada rencana). Perbaiki Kesiapan Berubah dan Pakailah cara Komunikasi sesuai perkembangan Persepsi Karyawan dalam setiap tahapan berubah.

• Think Big, Start Small, Act Now (Bergagasan besar, dan segera mulai dari yang bisa dikerjakan walaupun kecil).

• Mulai dengan antusias sejak awal. Ajak staff yang antusias di awal implementasi.

• Jangan mengharap semua langsung berubah pada saat inisiasi.

• Berikan bantuan dan dukungan setelah inisiasi.• Berikan penghargaan / pujian untuk setiap langkah

keberhasilan walau itu langkah yang (masih) kecil.

Komunikasi dan Perubahan

DENIAL

RESISTANCE EXPLORATION

COMMITMENT

Tell

TellAsk

Ask

Denial - Tell• Confront: Hadapkan pada kenyataan mengenai adanya

tuntutan perubahan.• Explain: Jelaskan alasan keharusan berubah.• Explore: Gali perubahan sikap dan perilaku apa yang

diperlukan.• Show: tunjukan sikap dan perilaku apa yang harus

lakukan.• Allow: berikan waktu untuk mencerna dan merasakan

perubahan yang dibutuhkan.

Resistance - Ask• Listen: dengarkan apa yang menjadi keprihatinan dan

kekawatiran staff dan tawarkan support.• Acknowledge: Maklumi perasaan dan kegundahan.• Allow: dengarkan dan lapangkan dada untuk menerima

komplain.• Support: ikutlah berempati atas suatu kerugian atas

perubahan yang terjadi.• Bersegera: menanggapi sesuatu hasil dari usaha

berubah, walau sekecil apa pun.

Exploration - Tell

• Konsentrasi pada prioritas perubahan.• Fokuskan pada setiap tahap prioritas.• Tentukan ukuran keberhasilan untuk setiap

prioritas.• Pandu, latih, dan dampingi langkah-langkah

berubah.• Mulai mengaktifkan pembentukan tim

kerjasama.

Commitment - Ask• Akui dan rayakan sukses yang dicapai oleh seseorang

atau tim, berikan penghargaan (tidak harus materi) untuk setiap kemajuan dan keberhasilah.

• Umpan Balik: diberikan sepanjang perubahan sedang berjalan.

• Rencana ke depan berbagai kemungkinan perubahan berikutnya.

• Membangun kerjasama tim yang telah ada agar lebih solid dan lebih kuat lagi.

Komunikasi dalam Perubahan

DENIAL

RESISTANCE EXPLORATION

COMMITMENT

Tell

TellAsk

Ask

Berurut, Jangan

Meloncat

19

Kalau ada merasa takut dengan perubahan

TOLONG ACUNGKAN TANGAN

Berapa banyak dari Anda di sini sebetulnya yang

TAKUT dengan PERUBAHAN?

20

Kalau anda pikir banyak orang lain takut (dengan

perubahan), TOLONG ACUNGKAN

TANGAN

Berapa banyak menurut anda ORANG-ORANG di luar sana yang takut dengan perubahan?

21

Kebanyakan dari kita takut pada perubahan. Bahkan ketakutan itu lebih besar dari pada apa

yang kita ingin akui terhadap diri sendiri.

Fakta apakah yang berbicara mengenai ‘pengakuan’ tadi?

Kita sering lupa melihat diri sendiri pada saat melihat ‘banyak orang’

Apa yang kita persepsikan mengenai kebanyakan orang, sebenarnya

merupakan reflek-pikir (mirroring) bahwa kita sendiri seperti yang kita pikirkan mengenai orang-orang lain tersebut.

22

23

“Perhaps the only person who likes change is

a wet baby.”

Anonymous

24

Based on the #1 BestsellingBusiness Book

25

Who Moved My Cheese?The Movie

Understanding Through Animation

26

SNIFF?Who can smell change in the air.

27

SCURRY? Who goes into action immediately.

28

HEM?Who does not want to change.

“It’s Not Fair!”

29

HAW?Who is startled by change, but then

laughs at himself, changes and moves on to enjoy New Cheese.

30

The Sniff, Scurry, Hem & Haw Parts of Ourselves

We may have a little bit of each of these characters in us—which we can use to

help us deal with change.

Social Change

Diffusion of Innovations

Source: Rogers, Everett M. Diffusion of Innovations, Fifth Edition. NY: Free Press.

Social Change

Adopter Categories

People and organizations typically can be classified according to the timing of their adoption of new innovations.

1. Innovators: Adventuresome, high risk. 2. Early adopters: Thoughtful, early adoption.3. Early majority: The first to follow the lead of opinion leaders.4. Late majority: Responding to pressure to adopt.5. Laggards: Do not adopt for a variety of reasons.

Social Change

Social Change

Definitions

An innovation is an idea, practice, or object that is perceived as new. What might seem familiar to some is new to others. Innovations can be material or nonmaterial.

Diffusion is a process whereby an: (1) innovation is (2) communicated through certain channels (3) over time (4) within social systems.

Creating social change requires: (1) a flexible political system (democracy), (2) a willingness to change by people, and (3) a process of mobilizing resources for change.

Social Change

The Innovation-Decision Process

People and organizations typically follow a predictable process of steps in adopting innovations.

1. Knowledge: Information acquisition.2. Persuasion: Evaluation of information based upon the opinions of others.3. Decision: The acceptance of the innovation as a good idea.4. Implementation: Trying out the innovation.5. Confirmation: Deciding to permanently adopt the innovation.

Two-Step Flow of Communication and Adopter Categories

EarlyAdopters

Scurry

InnovatorsSniffy

EarlyMajority

Haw

Company MessageOpinionleader(s)

Potential targetaudiences

Opinion recipient 1Opinion recipient 2Opinion recipient 3

Characteristics of Opinion Leadersin contrast with their followers

• More like, than unlike, their followers• More technically competent• More socially accessible• More cosmopolitan• More innovative (receptive to change)• Higher media exposure (more informed)• Higher social status• More conformist with social norms and values

Social Change

The Keys to Gaining Adoption of Innovations.

Education (information dissemination) is a necessary, but not sufficient factor of adoption.• People are understandably skeptical at first.• Opponents will disseminate negative information.• Negative information carries disproportionate weight in the short run.

Persuasion by opinion leaders can overcome skepticism and the negative inputs of opponents.• Opinion leaders are respected, outside agencies with no perceived vested

interest in the innovation.

Social Change

The Diffusion Effect.

Persuasion by Opinion Leaders.• Opinion leader adoption deems the innovation as “ok.”• The new idea/practice becomes socially acceptable.

Persuasion by Group Influence.• As more and more persons adopt, social pressure builds for others to adopt.• What once was “deviant” becomes “expected.”

Model of Transformational LeadershipBass (1985)

TL motivates followers beyond the expected by: raising consciousness about the value and importance of specific

and idealized goals transcending self-interest for the good of the team or organization addressing higher-level needs

Transformational Leadership Factors

Leaders who exhibit TL: have a strong set of internal values & ideals are effective in motivating followers to support greater good over self-interest

Full Range of Leadership Model

Additive Effect of Transformational Leadership

Guidelines for Transformational Leadership (Yukl)

Articulate a clear and appealing vision.Explain how the vision can be attained.Act confident and optimistic.Express confidence in followers.Use dramatic, symbolic actions to emphasize key

values. Lead by example.Empower people to achieve the vision.

EARLY WARNING SYSTEM

The paradigm Implementation

ifunsatisfactory

Step 1Tighter control

Step 2Reconstruct or developnew strategy

Step 3Abandon paradigmand adopt a new one

The dynamics of change‘paradigm’

Corporateperformance

Development of strategy

Early Warning Signs• Early Warning Signs• In order to prevent these internal and external causes of

distress from festering until it is too late, effective management teams must proactively look for potential challenges, because the sooner they are identified, the greater the likelihood that management can address them successfully.

• Companies should remain vigilant by using four major analyses: – management analysis, – trend analysis, – industry analysis, and – diagnostic and prediction models.

Management Analysis

• Management Analysis– As the most common cause of internal distress, it

should come as no surprise that management of a struggling company should be subject to a rigorous analysis to determine whether it has the personnel and skills in place to handle challenges.

Trend Analysis

• One of the best ways to determine whether a company is heading for trouble is to analyze the trends in its operating and financial performance.

• In postwar Japan, Dr. W. Edwards Deming used trend analysis as a way to help then - struggling Japanese car manufacturers produce high - quality products, with the key observation that a trend is often more important than the actual numbers.

Sara Lee

Industry and Product Analysis

• In addition to monitoring trends in a company’s own performance, managers should use benchmarking to see where a company stands in relation to its peers.

• Though no set of comparables will ever be perfectly equivalent, it is valuable to see how a company is performing compared to the best, mean, or median performers in its field.

Time

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Phase 1 Phase 2 Phase 3/4Incremental change Flux Transformational

change or demise

Strategicchange

Environmental change

1

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2

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4

Strategic Drift

PowerPoint Slides Prepared by Robert F. Brooker, Ph.D.

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Diagnostic and Prediction Models

• Finally, several diagnostic and prediction models exist to assist in the analysis of a company ’s situation.

• Naturally, these models work on a “ garbage in, garbage out ” basis, so any inputs, such as financial data, must be heavily scrutinized to ensure that they drive the proper conclusions.

Condition and Causes of Distress External Causes• As the name suggests, external causes represent exogenous

shocks to all or a significant part of the company, sending management into a tailspin / chaos. Here are some common external causes of companies ’ declines:– Economic Downturns– Industry-wide Issues– Shifts in Consumer Demand– Changes in Technology– Government Regulation– Changing Interest Rates– Changes in Business Model

Internal Causes• Though managers are naturally eager to point to external

causes so as to deflect blame, a study suggested that causes of distress coming from within the company are six times more likely to cause a firm ’ s failure.– Blind Pursuit of Growth– Overextension of Credit– Insufficient Capital– Fraud and Dishonesty– Product Issues

Cash Flow Timing Across theOrganizational Life Cycle

The gap between cash outlay for salaries and supplies that occurs later in a company’s life (G2) typically exceeds that same gap earlier (G1).

Cash-flow Healthiness • Fixed Charge Coverage Ratio (FCCR) = Cash

Flow / Fixed Charges• Funded Debt to EBITDA = Funded Debt /

EBITDA• Current Ratio = Current Assets / Current

Liabilities• Tangible Net Worth = Tangible Assets − Total

Liabilities

Typical Covenants Tripped by Downturns

Fixed Charge Coverage Ratio (FCCR) = Cash Flow / Fixed Charges

• The fixed charge coverage ratio measures a company’s ability to pay its fixed expenses, typically comprising interest expense, the current portion of long - term debt, capitalized leases, and rents.

• Lenders often insist on a minimum FCCR of, for example, 2.0x, indicating that cash flow divided by agreed - upon fixed charges must equal or exceed 2.0, with cash flow measured quarterly on a rolling four - quarter basis and adjusted for any unusual or one - time items.

Typical Covenants Tripped by Downturns

Funded Debt to EBITDA = Funded Debt / EBITDA• Like many such measures, this ratio uses earnings before

interest, taxes, depreciation, and amortization (EBITDA) as a proxy for cash-flow and compares it to the company’s leverage as represented by funded debt, which consists of outstanding debt, any deferred purchases, and capitalized leases.

• Banks require that this ratio not exceed a specified maximum ratio. Funded debt to EBITDA is expressed as a maximum ratio, such as 4.0x, indicating that funded debt may not exceed four times EBITDA for a similar four - quarter rolling period.

Typical Covenants Tripped by Downturns

Current Ratio = Current Assets / Current Liabilities• The current ratio measures a company ’ s ability to pay

the liabilities it reports as due in the next twelve months, as represented under generally accepted accounting principles (GAAP) by its current liabilities, possibly excluding the current portion of long – term debt.

• It assumes that the company’s reported current assets will be used to pay those expenses, so it simply sets a minimum threshold of current assets divided by current liabilities such as 1.5x.

Typical Covenants Tripped by Downturns

Tangible Net Worth = Tangible Assets − Total Liabilities• This figure (also equal to total equity less intangible

assets) represents a cushion of sorts for lenders, assuming that assets could be monetized at their book values to cover the company ’ s liabilities.

• However, as noted here and in Chapter Four as well, GAAP accounting will differ significantly from actual market values, so this covenant should be treated with caution.

Z-Score (Altman)

Z-Score (Altman)

Tabel Z-Score

Strategic Change Leadership

Model of Transformational LeadershipBass (1985)

TL motivates followers beyond the expected by: raising consciousness about the value and importance of specific

and idealized goals transcending self-interest for the good of the team or organization addressing higher-level needs

Transformational Leadership Factors

Leaders who exhibit TL: have a strong set of internal values & ideals are effective in motivating followers to support greater good over self-interest

Full Range of Leadership Model

Additive Effect of Transformational Leadership

Guidelines for Transformational Leadership (Yukl)

Articulate a clear and appealing vision.Explain how the vision can be attained.Act confident and optimistic.Express confidence in followers.Use dramatic, symbolic actions to emphasize key

values. Lead by example.Empower people to achieve the vision.