Financial and Strategic Management

What do you mean by Strategic Change Management?

Organizations are always involved in a variety of changes, and this is not just confined to internal projects. For example, it could also encompass interaction with suppliers and customers. The change being undertaken by organizations now is inherently complex and often impacts diverse stakeholder groups both internally and externally. As the change portfolio grows the level of complexity grows with it. Many organizations now find it difficult to understand and track the plethora of change initiatives underway. An added complexity is a reduction in manpower and the availability of skilled resources.

Strategic change management is the process of delivering the strategy of an organization in a controlled, efficient, and effective manner. It is not about the delivery of a single project or monitoring business as usual activities. It is basically the process of governing a portfolio of programs, projects, and initiatives within the context of a wider strategy for the organization. The purpose of the whole exercise is to deliver value to the organization.

The term change refers to an alteration in a system whether physical, biological, or social. Thus organizational change is the alternation of the work environment in the organization. It implies a new equilibrium between different components of the organization i.e., technology, structural arrangement, job design, and people. An organization change may have the following features:
  (i)  Any change may affect the whole organization;
 (ii)  When change occurs in any part of the organization, it disturbs the old equilibrium          necessitating the development of a new equilibrium;
 (iii)  Organization change is a continuous process.

A strategic change is the movement of the company away from its present state towards some desired future state to increase its competitive advantage. There are three kinds of strategic changes that most of the companies pursue:
  (i)  Re-engineering
 (ii)  Restructuring; and
(iii)  Innovation.

Business process re-engineering is the redesign of the business processes and the associated systems and organizational structures to achieve a dramatic improvement in business performance. The business reasons for making such changes could include poor financial performance, external competition, and erosion of market share of emerging market opportunities. Business process re-engineering is the examination and change of the business components such as strategy, processes, technology, organization culture, etc. Strategic managers may need to develop a new strategy and structure to revise the level of their performance in the light of sudden changes taking place in the environment. They focus on the business process, which is an activity that is vital to delivering goods and services to the customers.

Restructuring is another kind of change that strategic management uses to implement strategic change to improve performance. It may be: (i) reducing the level of differentiation and integration by reducing divisions, departments, or hierarchy levels; (ii) by reducing the number of employees to bring the operating cost. The restructuring also involves changes in relationships between divisions or functions. Restructuring and downsizing become necessary due to:
– Unforeseen changes in the business environment;
– New technological development;
– Reduction in demand;
– Excess production capacity;
– High bureaucratic and operating costs;
– Improving the competitive advantage;

Innovation is the process by which organizations use their skills and resources to create new technologies or goods and services so that they can change and better respond to the needs of their customers. Innovation can lead organizations to change that they want, it can also lead to the kind of change, they do not want. Organizations that depend on innovation as the way to achieve competitive advantage should adopt adjustable structures such as matrix or cross-functional team-structures that give people the freedom to experiment and be creative.

About the author

Shreya Kushwaha

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