Masters Programmes
Assignment Cover Sheet
Submitted by:
Date Sent:
1868240
23 Sep 2019
Module Title:
Module Code:
Leadership
IB9FJP
Date/Year of Module:
2019
Submission Deadline:
23 September 2019
Word Count: 2868
Number of Pages: 13
Question: Select a significant change leadership challenge you have experience
of. Undertake
“I declare that this work is entirely my own in accordance with the University's
Regulation 11 and the WBS guidelines on plagiarism and collusion. All external
references and sources are clearly acknowledged and identified within the contents.
No substantial part(s) of the work submitted here has also been submitted by me in
other assessments for accredited courses of study, and I acknowledge that if this has
been done it may result in me being reported for self-plagiarism and an appropriate
reduction in marks may be made when marking this piece of work.”
Why the change?
SABMiller, once a giant brewer in Africa underwent a merger (hostile takeover) with
ABinbev, resulting in the once household name, in Africa, dissolved and having to identify
themselves as the new giant ABinbev.
Upon completion of the merger in 2016, ABinbev became the world's largest brewer of beer,
accounted for 30% of global beer sales by volume and enjoyed 45% of the overall profit pool
for the industry. (Groenewalt, 2018)
As with all greatness, becoming the largest player in the game has a hefty price tag. Apart
from the merger costing in excess of $100bn, to get the deal signed off by the competition
tribunal they needed to divest nearly a third of the existing SABMiller enterprise. (Abboud,
2019).
There is, however, a hidden price tag for the merger. As a result of restructuring and
centralized business approach, the new African organization is experiencing a drastic brain
drain.
The share price might have fallen due to investor confidence, unrelated to the talent leaving;
however, ABinbev’s approach of migrating to a top-down management style with a
centralized decision-making unit within the first year of the takeover will prove to be more
damaging that what currently meets the eye.
“Tight-fisted AB InBev might be favoured by bean counters, but compared with SABMiller, it
sure sounds like a dreadful place to work. There can be little doubt where sympathy of
neutrals lies. And for South Africans, the loss of their most successful global company would
be felt long after the “super helpers” – lawyers, accountants, investor relations specialists, et
al – have spent the juicy fees such battles generate.” – (Hogg, 2015)
What changed, and how did they do it?
Figure 1 PESTLE diagram adapted from Aguilar (1967) & Force field analysis adapted from
Lewin (1952)
Due to political instability within the African continent, there was massive investor pressure
to integrate SABMiller with the existing business as quick as possible. They went from a
decentralized company, which allowed for in-market specialists in the different areas they
were operating, into a top-down management approach.
The financial stability of most African countries is nonexistent, with exchange rates not
performing anything close to the greenback. As a result of this, they implemented drastic
cost-cutting mechanisms, which resulted in them removing most perks such as free booze
quota, lunch subsidies, etc. of the employees lower down the organizational chart and this
impeded on the existing culture of “sharing the spoils.”3
The senior African leadership team got replaced with the current leadership in an attempt to
ensure a quick transition; however, the top management consisted of executives that, had
no experience in Africa, had no instinct for the African culture, was geographically not
present and attempted to mirror their American business model.
Evaluation of Change
Figure 2 Lewin Unfreeze Freeze Model 1958 used in conjunction with the Sense of Urgency
framework Source: Kotter (2008)
When evaluating the success, and lack thereof, of the transformational change, that SAB
underwent, several models, are available to perform the analysis. I will, however, be using
the Kotter’s N steps used in conjunction with Lewin Un-Freeze/Freeze model and The
McKenzie’s 7’s. These models address the softer side of change, i.e., the employees and
strategy, that SAB underwent and therefore well suited.
When evaluating the unfreeze stage of Lewin’s change process, which are stages 1 to 3 in
Kotter’s 8 step guide, it becomes prevalent that creating urgency, forming a coalition and
developing a strategy is critical in creating a conducive climate for change. Let’s evaluate
these first three steps in the context of the change that took place at SABMiller
Creating a sense of urgency:
“A Sense of Urgency” John Kotter explained that a true sense of urgency is rare; mainly
because “it is not the natural state of affairs. It has to be created and recreated.”(Cotter,
2008). The job of leading a team through change, therefore, requires a leader with the ability
to create an atmosphere of urgency that will, in turn, impact the change process positively.
Some ways to create a sense of urgency in the context of the SABMiller merger are as
follows
1. Bringing the outside in – ABinbev with its worldwide experience and footprint excelled
in bringing the outside in within SABMiller an African focused business and enabled
people to see the external opportunities
2. Behave with urgency every day – To achieve this successfully, one needs to be
leading from the front and by example. Unfortunately, with a centralized leadership
team that was not geographically present, formed an isolation between the people on
the ground and the leadership team
3. Deal with the Neigh Sayers – for this to be successfully implemented one needs a
strong coalition with various change agents in the business, and unfortunately, due to
the full African leadership shown the door, this proved most challenging to
implement.
ABinbev was successful to a degree in creating a sense of urgency. However, a centralized
decision-making approach harmed their efforts.
Create a coalition:
“Senior leaders cannot implement change alone. They need a guiding coalition of
organizational partners to serve as a change oversight team.” (Tanner, 2019)
Kotter states that step 2 in creating a climate for change requires one to form a coalition. Not
only does this allow one to effect change on all levels of one’s business, it allows for the
leadership team to stay abreast of the resistance forming.
For a guiding coalition to exists successfully and to ensure change it needs to consist of
change agents, that are from all parts of the organization, on different levels on the
organizational chart are smart and credible members of the organization.
It also requires “change champions” that form part of the leadership team, however upon the
first 6months of the merger completing ABinbev restructured the business altogether,
dissolving the current leadership team in Africa, and replacing them with a centralized
leadership team, that had no feel for the African culture or landscape.
This resulted in a level of distrust from the current employees and had them resisting the
inevitable change, and ABinbev failed to realize the cost of the dilemma they faced in
retaining some leader’s vs. a companywide “revamp.”
Developing a vision and strategy
Employees of SABMiller were incredibly proud of the company that they had worked for, and
it was a true African success story that has been around for decades. What most employees
agreed was that the reason for its success was mainly due to its culture of valuing its people.
What ABinbev did when taking over was to publicize a newly formed “creed” that highlighted
their way of doing business and what the future would look like. They tried to keep it as
much in line with the current values that the SABMiller employee was used to and focused a
lot of attention on how it valued its people, sustainability, and cost savings.
However, within one month of distributing the values for change, they pulled the free alcohol
quota and lunch subsidies. It would have been a minute addition to the bottom line; however,
caused feelings of mistrust and panic when taken away.
Although ABinbev identified creating a vision and strategy as an essential part of the change
challenge they failed to realize the impact of the dilemma of cost savings vs. impact that the
small gestures would have on the trust and self-worth of the employee.
McKinsey 7s Model
Figure 3 The McKinsey 7-S Framework: Ensuring That All Parts of Your Organization Work
in Harmony, 2016
The McKinsey model looks at seven internal aspects of an organization that need to be
aligned if successful change is to be realized. (Singh, 2013)
For this case study, the soft S are of more significance as this is what leads to the most
resistance to change and ultimately resulted in the brain drain that is experienced.
Skill:
The causes for change were not cascaded widely enough, nor effective enough. Employees
were not geared up for the degree of change that was about to happen, and the radical
change caused that the employees were unable to adapt and institutionalize change.
Staff:
Apart from the Top African Leadership being dismissed, there were more than 3% job cuts.
For a poverty-stricken environment, this is very freighting and causes reason for panic.
Ultimately there was a poor connection between the words of the new leadership and that of
the staff. Feeling less part of a great organization but rather more of just another employee
Style:
The style of the change was abrupt and autocratic, not fully understanding the existing
business structure nor the culture of the continent and its people.
Analysis Summary:
Although mergers are never easy ABinbev did some things wrong that resulted in the
change being resisted and ultimately left ABinbev with a brain drain, not only is this a bad
reflection on them within the current market, it is also setting themselves up for future failure
due to the limited resources of skilled talent in Africa.
The culture of SABMiller was not one incapable of change, but one of pride and job security.
ABinbev should have taken a slower approach to change and should not have been so
hasty to rid themselves of the African leadership team, the team that most employees saw
as heroes within the organization.
Execution for the change was lacking, and the new leadership shows that there are clearly
gaps within their profile to manage the softer factors of the change.
The change design and execution did not appropriately balance the urgency and the degree
of anticipated and realized resistance to change and ultimately put cost-cutting above
employee trust.
The organization needs now to rebuild trust and instill the values that the African people
believe in, and that is that they too are valuable.
What I would do as CEO:
As CEO I would have most likely been set the same task as the one in question, and that is
to get in there, centralize the business as soon as possible and get the employees to accept
our way of doing things.
If only everything were as clean-cut as that, unfortunately, change is not widely accepted,
and especially considering the geographical location of this change challenge, there are
several factors to consider and implement before any change can be implemented or
accepted.
The Dilemma of Preservation vs. Centralization:
Due to the uncertain landscape of African politics and financial instability, there will be a lot
of pressure from the board to integrate the business into the existing international business
as quickly as possible; however this would need to be done in stages.
Stage 1:
90-Day interview, discovery, and consultation process, this will allow me to assess the
current state of the nation, identify internal change agents as well as identify a senior
leadership individual to be the change champion
Stage 2:
The 30-day vision building process, not only outlining the need for change and identifying
early adopters but also to further assert the companies position that people are important to
us and this together we will make this work. Communication is key to the success of change
if one thinks you have communicated enough, communicate some more.
Stage 3
During the first 120days as outlined above, it will allow me to assess the current culture of
the business, to enable us to collectively decide what to keep and integrate into the new
business and what to discard. It will also allow me to get a feel for the demographics of the
region that we will be operating in and what employees regard as high value but for the
business is financially small.
The second Dilemma of Speed of Change VS Internal Resistance:
Figure 4 Kotter and Schlesinger, 2008
Moving Fast involves overcoming resistance, given time limitations. But overcoming
resistance can fail and cause significant change friction, threatening execution. Minimizing
resistance is slower but aids execution.
Step 1:
A systematic approach to determine strategy and tactics from the onset, such that resistive
forces can be identified early on and that the necessary contingency models can be put in
place.
Step 2:
Applying Kotter’s N-Step models to progress change of time and minimize resistance by
engagement and communication rather than by using the carrot and stick approach.
The third Dilemma of Internal vs. External Changes
SABMiller, due to the pressure of the newly acquired owners needed urgent organizational
restructuring while they were still familiarizing themselves with the terrain and African
landscape. Navigating both simultaneously, risks the lack of focus and poor execution.
Step 1:
Focus first on internal restructuring ad address resistance by adding change agents, also
hiring of a local internal COO to champion the change. Adopt change not only from a TopDown approach from a bottom-up approach as well.
Step 2:
Better employee expectation management. This is about building trust and over promising,
and under-delivering will not assist in serving this purpose.
Generic factors faced when dealing with change:
There are however a couple of generic factors that one would face, regardless of the type of
organization, demographics or landscape and those are as follows
The Stages of Change
Understanding the stages of change can help one quickly assess the problem at hand and
empower you to react and allow you to help your employees transgress through the various
stages as quickly as possible.
They are,
Endings – When something new begins, it means some things known must have ended.
These endings can be painful and confusing. People need to come to address their feelings
before they can move on; it is the responsibility of the change leader to ensure this happens
swiftly with minimal disruption.
Transitions – also known as the grey area, these are the times that people start to let go of
the old and begin accepting the new. They become more attentive and become engaged
with the change message.
Beginnings – This is the stage that occurs once people have accepted the change and fully
embrace it. There is no longer a feeling of uncertainty, and people are positive about the
future.
During these stages, there will be productivity dips, and it is, therefore, essential to help
people transition through the three stages as quickly as possible to ensure that frustration for
all colleagues and stakeholders are minimized.
There is also some generic feeling to change, I have mentioned a couple below together
with the suggested method to address it
Denial – This can be addressed by communication, reiterate the change goal and the
reason for changing. Be positive, give honest context and do not make excuses.
Resistance – More of a Q&A style communication is needed to address this. Make sure you
understand the full context of what they are feeling and ensure that they feel heard.
Exploration – Clarity, and Focus are vital with this; allow people to contribute with ideas of
how the future will look.
Commitment – Implement a reward system, provide recognition for effort.
Conclusion
Successful change requires the softer, human element to be addressed and aligned as
demonstrated by the change leadership models discussed.
These aspects should have formed part of the design of the change.
Addressing these ‘softer’ challenges was likely outside of ABinbev’s leadership profile and
critical competencies.
Given the degree of resistance, no extent of participation, negotiation might have addressed
the culture required.
Promotion of internal resources (e.g., an insider supportive of change as a COO) to
delegate execution to would have benefitted execution with reduced resistance and
outcomes.
References
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Cotter, J., 2008. A Sense of Urgency. 1st Edition ed. s.l.: Harvard Business Press;
Groenewalt, Y., 2018. Mail & Guardian Africa. [Online]
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[Accessed 01 09 2019].
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