An in-depth analysis and critical evaluation of implementing change in organisations – Nokia Corporation Case Study
Introduction
Change in an organization, regardless of how it is implemented, always affects performance. According to Kasim Randeree (2008, p.43), ‘Organisational change can be defined as the difference in form, quality, or state overtime in an organizational entity.’
According to Price and Chahal (2006, p.238), an organization is defined as a bunch of consciously coordinated activities as a form of social arrangement to achieve controlled performances in the process of achieving common goals. What Price and Chahal mean in simpler terms is that an organization is a sum of its culture, and its performances are dependent on any structural, functional, or implementational shift in its culture.
Nadler and Tushman (1995) proposed that organizations go through periods of very subtle but significant changes over a period, which are then punctuated by periods of major disequilibrium when the entire output of a certain industry, as well as the companies that make up the industry, go through a major change. These periods in the past used to be a form of the former process changing and occurred over a relatively extended period.
However, with technological advancements and the rapidly changing job requirements of employees, the periods of major changes shrinking to the barest minimum, more industries are likely to struggle to adapt. Hayes (2002, p.5) pointed out that rapid changes, like we have now, breeds an environment that is so short-lived, strange and complex that it has the potential to cause an adaptive breakdown. This adaptive breakdown is a form of future shock.
Toffler (1970) came up with the idea of ‘future shock’ and said it is similar to culture shock but with the major difference being that future shock has no returning state. When people find it hard to adapt to a new culture, they always have the option of reverting to their old ways or old cultures with a few exceptions depending on circumstance. However, Future shock does not offer the option for people to return to the state from which they tried to change.
The term ‘future shock’ is an important concept of change in organizations as it conceptually explains why some companies thrive after an organizational change occurs and why some fail. ‘Future shock’ and other concepts like ‘incremental and discontinuous change’ are important to understand why companies might choose to implement some changes slowly and steadily, while some changes are sudden and disruptive to the entire culture of the company.
Today, companies face a myriad of challenges when a policy is implemented to act as the driving force of change. One major factor for implementing change properly or improperly as the case may be is ‘leadership’. Barker (2001, p.491) states that ‘leadership is all about change.’
In this literature, we would use one company as a case study; Nokia Corporation. Nokia Corporation went through major changes that caused a full-scale disruption in the culture of the company, and according to Price and Chahal (2006, p.238), a company is a function of its culture. The failure of Nokia after undergoing cultural changes would be analysed in this essay. The success and failure of the various change programs that were implemented in the Nokia Corporation relied heavily on the leaders and established culture within the company.
The final report would be around 3,500 words in length. To write this report, an informed analysis and discussion of business challenges when implementing a change programme in an organisation will be carried out. For this research, a number of research literatures will be consulted to extend my understanding of leadership qualities and management styles, culture change and elements that enhance personal impact. I will as well apply the appropriate theoretical perspectives and research findings to an in-depth analysis and critical evaluation of implementing change.
Literature Review
Organizational Change
Several works of literature and theories have emerged over the years to tackle organizational development in the form of change management, leadership types and the effect of innovativeness on business performance.
Understanding change in an organization requires the study of the organization’s culture and practices. This is because an organization as stated by Price and Chahal (2006, p.238), ‘organization is defined as a bunch of consciously coordinated activities as a form of social arrangement to achieve controlled performances in the process of achieving common goals.’ Therefore, an organization is defined by its cultural practices.
Culture, in its simplest form, is the total way of life of a particular group of people (Hofstede, 1997). Culture is the collection of behaviours, beliefs, values, and symbols that they accept, generally without thinking about them, and that are passed along by communication and imitation from one generation to the next.
Therefore, change can be defined as the subtle or total disruption of the way of life of a certain group of people. Organizational change as extracted from the two definitions above is the disruption of the total way of life of the members of an organization.
Bennis (1969) more aptly defines organizational development as ‘a response to change, a complex educational strategy planned to change the beliefs, attitudes, values, and structure of organizations so that they better adapt to new technologies, markets, and challenges, and the dizzying rate of change itself.
From the definition above, a couple of important factors that influence change in an organization include external and internal influences as a means of changing the output of an organization.
Beliefs, attitudes, values, and structure of an organization all point to the culture of an organization. Culture has been stated as being important to the effectiveness of an organization.
As broad as the definition giving by Bennis above is, it does not include a critical factor that influences change in industries and organizations around the world; Leadership. According to Bennies and Nannus (1985), the subject of leadership is still a field of which little is known, even though it has been intensively studied, especially in the last century.
Firestone (1996) says ‘leadership belongs to a specific position, and it covers obligatory tasks and functions that businesses have to fulfil to live, develop and be efficient.’ According to the definition offered by Firestone, leadership is divided into two broad categories; leadership functions in regular operations and leadership functions during a transformation. According to Sebahattin, Faruk and Ilknur (2014, p.786) Leadership functions in a regular operation have been studied as support and structure. A leader in normal operations establishes an environment suitable for employees to function and assists with organizing labour in the process of normal operation. Normal leadership is the type of leadership emphasized upon in the former studies involving leadership.
However, Sebahattin, Faruk and Ilknur (2014b, p.786) state that in recent years, transactional and transformational leadership styles are now being examined and have seen increased interest in scientific studies.
Kocel (2011) stated that transactional leadership relies on the interaction between the leader of a particular group and the members of that group. The focus of transactional leadership is the relationship established between the leader and the members of the group. This is why transactional leadership is also known as managerial leadership or task-oriented leadership.
According to Hayes (2002, p.9), organizational change can be classified as ‘Reactive’ and ‘Anticipatory’ change.
Reactive change in an organization is the process the follows the response of an organization to a clear and present requirement.
Anticipatory change is associated with the changes that occur in an organization in the absence of a clear and present external driving factor. Anticipatory changes are usually done to gain a competitive advantage or prepare for an event that is likely to shift the culture of the company sometime in the future. Anticipatory change is riskier than a reactive change, and it also gets the most resistance from the employees of an organization.
To show the effect of time pressure on the type of change that an organization could undergo depending on the degree of continuity or discontinuity, Nadler and Tushman (1995, p.24) produced a typology of change as shown in Figure 1 below.
According to the figure shown below, Tuning is the type of change that occurs in anticipation of a major change in the industry down the line, or the future. It is gradual and rarely disrupts completely the established culture of the company in a major way. Tuning changes include improving policies, manufacturing processes, and redesigning processes to reduce cost and time of production. This type of change is initiated internally
Adaptation is also a form of incremental change but is it usually influenced externally. Adaptation is a form of reactive change that involves responding to the external demands of the market due to the improvement of a manufacturing process by competition or the development of new technology, for instance. While adaptation may involve minor or major changes in an organization, the changes are usually built on the already established culture of the company.
Re-orientation and re-creation, on the other hand, involve disruptive changes to the established culture of an organization. It is usually harder to implement these types of changes.
Re-orientation involves changing the fundamental processes in an organization in anticipation of a shift in the processes used in the industry in the future. Re-orientation is used to ensure that the organization is better positioned to handle the shift.
Re-creation is the kind of change that occurs as a response to a sudden shift in the industry that requires that an organization abandon its old way of doing things and creating a new one to remain competitive or survive.
Note. A Typology of change as presented by Nadler and Tushman (1995), combining the degree of continuity or discontinuity with a dimension of time and pressure.
Business Challenges and Risks Surrounding Organisational Change
Future shock is a concept that bears much relevance to the current discussion surrounding an organizational change in this modern era. When Toffler (1970) argued that future shock would be a major factor affecting the effectiveness of organizational change in the future, the state of industrial change at the time was not as rapid as it is today.
Today, an entire industry could be created overnight and be gone by the end of a fiscal year, leaving thousands of employees with high-level skills in areas that are no longer relevant. According to Toffler, the novelty ratio in most industries is rising, meaning that the number of unfamiliar situations in an industry is less than the familiar ones. In 2020, many industries are at the future shock stage in which there is an adaptive breakdown, especially at the non-managerial level.
According to Antoni (2004), the demands for organizational change has grown and is still growing due to the speed of technological advancement. Technological advancement has caused cultural shifts in organizations worldwide that the biggest challenge to most management is adaptability and training.
Change usually takes time and effort, and with the rapid change in technology and manufacturing processes, employees and managers are left uncertain of how to adjust to new working procedures and market demands.
The biggest challenge to most organizations now is a failure. In the past, a company could afford to pick up a new practice or develop a new policy and fail without the fear of losing their position in the competitive market. However, in this current day and age, “failure can lead to a loss of market position and credibility among the stakeholders of an organization, as well as decreased morale among management and staff, which can result in a demotivated workforce or worse still, the exit of key employees” (Elmonds, 2011).
When a new CEO is brought into a company, it is usually not to maintain the status quo but to improve performance and bring about organizational change. (Ajit, 2017).
Several risks can undermine the change initiative developed by a new executive or management. According to Ajit (2017), there are 12 elements of the ‘wheel of woe’, which fall under three (3) broad categories of driving forces; critical resources, stakeholder commitment and alignment, and emotional and social resistance.
Resources
Under ‘Resources’ there is the risk of inadequate budget to carry out the proposed or needed change. This can lead to a reduction in the number of change elements executed and a finished project that falls below the expectations of the stakeholders.
Additive workload – Most organization members, according to Ajit (2017), complain that during a change process in an organization, the work and effort required for change to occur become additive workloads for the existing employees. Those that are required to execute change are usually tasked with carrying out the usual workflow, while also developing and executing the new workflow.
Talent is a very important part of the change initiative of an organization. This is because an organization needs employees that have the skill and knowledge of the new change initiative that an organization is about to implement. This talent requisition can go all the way up the management level, meaning it would take time and resources for successful onboarding and execution.
Lastly, in today’s world, data is a very critical aspect of the resources needed to bring about change. Insufficient data available in a certain industry can make it hard for an organization to weigh the benefits of said change or even implement the change properly.
Alignment
Alignment has to do with the dedication of the upper management and lower management team to the change process, as well as the properly stated vision for what the change will entail, what will be affected by the change, and how the change will be brought about.
Alignment involves stakeholder commitment to the change process, governance mechanism, and ambiguity in the reasons and benefits of a particular change process.
Emotional and Social Resistance
This part of the driving force for risks associated with organizational change has a lot to do with the culture of the company or organization. This is the reason why many times for change to occur, a new executive or a bunch of executives are brought in to effect the change. Habits formed by old executives can impede the change process in an organization and also the effect of a certain change process on the autonomy or power of certain departments can cause resistance to come from such departments.
Discussion
Case Study – The Fall of Nokia Corporation
The fall of Nokia from being the best-selling mobile phone brand in the world, to one of the biggest business failures of the 21st century, is a subject that has been studied by many students and teachers of business management classes.
There were several reasons why Nokia failed as a company, but prominent among those reasons was the inability of Nokia to adapt to the rapidly changing industry circumstances. Nokia suffered from several factors that had to do largely with its management and the talent that they had at the time. Everything that Nokia had going for them was against everything that Toffler (1970) had warned against in his rapid change model.
Nokia had a culture that was toxic for the employees and in turn, the employers as well. Nokia had become a faceless machine in which information could not flow freely. There was, therefore, wasted energy on slow decision-making and the wariness of middle management (Cord, 2014; Heikkinen, 2010; Nykanen & Salminen, 2014).
After the crisis that Nokia went through in 1995, its organizational structure had been shaped into one that emphasized internal efficiency. Therefore, as the company grew, it had developed a culture that relied heavily on risk-aversion. As this continued, the organisation, in its culture that involved risk-aversion had created so many sections and levels that each one was focused on avoiding risks and ensuring sufficient viability, regardless of the situation. This led to the development of the multilevel Nokia Corporation that failed in recent times (Cord, 2014; Nykanen & Salminen, 2014).
‘Leadership is a social and goal-oriented influence process that involves the communication between components at multiple levels of analysis and unfolds over time and space’ (Dinh et al., 2014; Fischer, Dietz, & Antonakis, 2017). Therefore, the events that happened at Nokia is a good indication of what bad leadership looks like when it is allowed to foster and develop.
The fall of Nokia, as a mobile manufacturing company, happened based on the type of culture that had been developed by past management and the management in charge before the corporation failed. This event agrees with the definition of an organization as being a culture of the people that make up the organization (Price and Chahal, 2006, p.238).
Conclusion
An organization is a complex working multicultural, superstructure that takes the effort of more than just the employees to make successful. In this literature, organizational change was observed from the perspective of internal and external mechanisms of change, which include factors like market forces and consumer preferences.
Change management for a very long time was viewed as a separate concept that did not rely heavily on the type of leadership that an organization was under, however, as Firestone (1996) has shown, leadership is involved in more than just the normal running of an organization. Leadership is also responsible for the transformative part of an organization. Noruzy et al. (2013) have discovered that transformational leadership has a positive impact on business performance.
For change to be implemented in an organization, it is clear that all the risk factors have to be taken into consideration and worked out even before the change process is initiated. Also, an organization is very dependent on its already established culture, and whenever a change is proposed, the leader needs to realize that the culture of an organization is the first thing that changes. This is true, even if the change is subtle or continuously progressive.
The current culture of an organization plays a big role in the success of implementing a change program in any organization, and it is one of the first things that can derail any plans for a progressive or sudden change in an organization. It is human nature to resist change, regardless of where or when it occurs, this is why it is essential that a leader clearly defines the goals of a proposed change, and clearly states the role that every individual or department has to play. However, most importantly, an organization that does not allow communication both horizontally across departments and vertically between different management levels will struggle to implement change.
Appendices
Personal Reflection
Change management is an extensive topic that much like the topic it treats, constantly requires change itself. The kinds of changes introduced to organizations a decade ago are different from the kinds of change transformations seen across various industries in modern times. I believe that change management is the responsibility of everyone in an organization, and it takes a well-defined and favourable culture with the right leaders, equipped with the right resources to carry out change in an organization successfully.
I, however, observed that not every change introduced in an organization is beneficial in the long run. Some changes can cause cultural disruption to the degree that makes it hard for members of an organization to cope with the changes brought to the organization. Therefore, I believe that sometimes, organizational changes should be applied on a small scale and observed properly before initiating it on a large scale.
Lastly, education on the benefits of change should be conveyed to the concerned parties prior to implementing a change program. This will help to reduce the risk of rejection and total cultural disruption to the point of no return.
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