This paper will analyse and discuss downsizing issues at BT as presented in the case study. Broadly speaking the discussions will be presented in three main sections. These sections seek to: a) Analyse and evaluate the changes made in the 1990s. b) Explain what senior management did well to achieve their target of reduced cost and improved productivity. c) Explain how management could have handled the downsizing to give the organisation the opportunity to cope with the change better. Explain how the suggested approaches should have improved levels of service and productivity.
2. Introduction Fundamentally, the intended reason for organisations to downsize is to achieve an improvement in organisational performance (Kozlowski et al. , 1993). This is to be obtained through cost reduction, increased productivity, less bureaucracy and faster decision making. Since BT emerged as a separate company in the 1980s, it faced a number of significant changes in its operating environment. These factors range from increased competition resulting from government policy, to technological changes in the telecommunications industry.
Such changes in the operating environment have necessitated the need to increase productivity in order to remain competitive. Throughout the case study, it becomes apparent that BT have sought to use downsizing as a simple tool to reduce the organisations headcount thus reduce cost. However, although such a structural change may be easy to comprehend at its superficial level, in reality the process of downsizing is highly complex and can often generate a range of reactions that undermine the original objectives.
This is why a noted scholar assessed downsizing as “probably the most pervasive yet understudied phenomenon in the business world” (Cameron, 1994). For BT’s intentions of downsizing to be realised, it was necessary to consider and manage the process from the perspective of affected individuals and workgroups and the stresses which this change creates (Shaw ; Barrett-Power, 1997). This paper will start by considering how the changes were made at BT. What for example, were the strategies to achieve downsizing? What level of control did management have?
What were the reactions to the change? These are the type of questions which will be answered in this section. This will be followed with an analysis of how and why senior management achieved their target of improved productivity in section 4. Here, it will be shown that a considerable amount of attention was given to the process of Change. But was this sufficient to ensure future survival of BT? The discussion which follows in section 5, investigates shortcoming by the management and suggests how these could have been avoided. 3. Analysis and Evaluation of Change
There are essentially three organisational strategies to achieve downsizing (Cameron et al, 1991, 1993). These are: 1- Workforce Reduction Strategy 2- Organisation Redesign Strategy 3- Systematic Change strategy To evaluate how changes were made at BT, it is important to understand what the strategy for change was. The evidence presented in the case study suggests the presence of all three strategies. Each strategy will now be looked at. 3. 1 Workforce Reduction This strategy focuses simply on reducing the organisations headcount. BT certainly engaged in workforce reduction, decreasing its workforce by over 100,000.
This was achieved in several stages starting with Project Sovereign in 1990. The period from 1991 to 1995 witnessed significant workforce reduction through voluntary redundancies and other methods such as natural wastage. BT’s experience of Release ’92 led it to modify its approach in subsequent programmes. Although it would appear that BT managed and implemented its workforce reduction policy well, it must be pointed out that the exclusive use of this method can lead to diminution rather than an improvement in organisational performance.
In a study by Mishra and Mishra (1994) It was found that organisational performance was adversely effected in relation to both cost and quality where this strategy was heavily used. As it will be shown in sections 3. 2 and 3. 3, BT did use other strategies for downsizing but it would appear that the workforce reduction method was at the forefront of the downsizing strategy. 3. 2 Organisation Redesign This involves elements of delayering, eliminating areas of work and job redesign, so that the amount of work is reduced. In the case study there is evidence of the use of such organisation redesign strategy.
Project Sovereign for example was designed to promote a more customer focused culture through significant restructuring and de-layering. In 1991 27 geographical, each with up to 12 management layers, were restructured to 3 divisions accompanied by flatter organisations. But did such structural change bring about the desired customer focused culture? Or did it simply follow the broader strategy of reducing headcount? Certainly it would appear that considerable effort was made to reduce the impact of downsizing through cultural and structural change. The effectiveness of such programmes will be looked at later in this report. 3.
3 Systematic Change Systematic change strategy as its name would suggest, is a longer-term approach intended to promote a more fundamental change that effects the culture of the organisation through promotion of employee involvement and adherence to a continuous improvement strategy. The case study shows that BT sought to introduce long term changes to the way work was conducted through the use of new technology, culture change programmes, etc. It can also be seen that downsizing was proactively planned. BT staged its downsizing over several years, which allowed for a process of incremental learning and policy modifications.
Release ’93 for example, did not permit volunteers from everywhere in the organisation. In addition, the leaving period was extended to two years to minimise the impact of downsizing. Such decisions were as a result of lessons learnt from Release ’92. Stakeholders such as the trade unions were also involved in strategy formulation. However, even with this level of proaction on the part of BT, problems still arose. For example, release’92 led to some reactive behavior given the unexpectedly large number of volunteers. In the following sections the process of change will be looked at in more detail. 4. Positive Actions of Senior Management
There is no doubt that through downsizing, BT managed to reduce cost and improve productivity. In order to understand how senior management achieved this it is important to first look at various models associated with implementing change. One model is the 3-Stage Model of Change by Kurt Lewin (1951). Lewin identified 3 stages that any organisation has to go through for any level of change. These are: 1- Unfreezing. This is the recognition that there is a need to make change. Unfreezing involves advising employees about the change, planning it, organising it, scheduling it, arranging training. 2- Moving.
This is the implementation stage, where the success and flexibility of the planning, organising etc will be tested. 3- Refreezing. This is the follow-up stage, making sure the change which has occurred, is recognised and is now a normal part of the functioning of the organisation. Examining the case study would suggest that these stages were present and were implemented by management. Management had clearly planned the downsizing programmes and communicated the need to change to its employees. Project Sovereign in 1990, Release ’92 and Release ’93 were highly planned affairs and although not trouble free they did seem to be well drawn out.
Moreover, in trying to unfreeze the organisation, a range of redundancy terms were offered which were generous and early leavers attracted additional payments. Line managers played a central role in promoting the release schemes and received training to be able to cope with this event. Throughout the moving stage services such as outplacement, retraining, financial advice etc were offered. In trying to refreeze the organisation new structures and working practices were developed. Another model which can be used here is that of Christopher Mabey. The 3 stages of change which Mabey describes are shown in the diagram 1 below:
Figure 1. Implementing Strategic Change This system suggests that the transition phase of the change process requires detailed consideration and planning. It is better to have a second rate strategy and a first rate implementation that the other way round. Once again BT seem to have followed this recommendation. 3 important issues were dealt with by senior management. These were resistance to change, need for control and to build power. As described earlier, resistance to change was tacked by a number of ways. Clear communication and reward systems for leavers generated good motivation for change.
So much so that the level of applicants for voluntary redundancy was much higher than expected for Release ’92. Management also maintained a level of control by using feedback mechanisms to continuously monitoring the change process and modify and restructure the downsizing process. Thus it can be seen that in order to achieve their targets, management at BT paid particular attention to the process of downsizing. This process was well planned and executed. However it can be argued that the strategy driving the process was not well formulated. This meant that in the Lewin model for example problems occurred during the refreezing stages.
Long term problems were exhibited when “rebuilding power” in the Mabey model. The following section will investigate this issue further. 5. Management Shortcomings Throughout the downsizing programme BT experienced many negative reactions. This section will discuss some of these issues as raised in the case study and will show what could have been done to alleviate or lessen such reactions. Fundamentally, effective implementation of change is best carried out through 3 key elements. It is best to examine BTs’ approach within this framework . These elements are namely Commitment, Co-ordination and Competencies. 5.
1 Commitment Commitment can be achieved through the joint diagnosis of business problems and the development of a shared vision of how to achieve success. At BT there seemed to be little commitment towards long term strategies for success. Most of the effort was towards what is now regarded as short term reduction of costs. Key strategic areas such as the retention of valuable employees with specialist skills were only considered much later in the downsizing process. This in itself led to complex survivor reactions which will be talked about later. Another area of high strategic importance was the level of customer service.
Evidence suggests that customer service deteriorated quite rapidly. This is because when achieving the vision for success little effort was made to explain and investigate how commitment to customers can be obtained alongside the downsizing programme. The realisation that key staff and structures which could support the requirements of the customers were missing, caught management by surprise. Even though early on in the programme there seemed to be the understanding that the organisation must to be more customer focus, there is no suggestion of any plan as how to achieve this.
Thus it can be seen that a lack of effective strategic HRM planning from the start, led to difficulties later on. By the time management reacted to rectify this considerable damage was done to the structure and working practices for those who remained. Survivor reactions plays an important part in the level of commitment given by the individuals. Many felt that they were asked to perform the job of several former colleagues. If management had designed more effective working structures for those which remained, such feelings would have been much less thus positively effecting employee commitment.
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