Matakuliah
Tahun
: A0134/Audit Operasional
: 2006
Syarat Keberhasilan Perubahan
Pertemuan 21 s.d 26
1
Three Fundamental Business Concepts
• See p. 147 - 153
• Since his arrival at BBA plc, Sir John Egan
has made no secret of his aim of
transforming the airport company into a
world class and first class business.
2
• He has an impressive foundation upon which to build his present
success. His entrepreneurial activities go back to his time as a
teenager, when his father owned a car dealership in Coventry, and if
he sold a car at the beginning of the weekend shift, he was paid with
one for his personal use for the balance of the weekend. He left his
father’s company to attend Imperial College, London, to study as a
Petroleum Engineer and, after graduating, joined Shell International,
where the time with that company was spent largely in the Middle
East on oil rigs. In 1966 he went back to an academic career in
order to join the newly opened Business School at London
University for a two-year course resulting in a MSc in Business
Studies, during which time he met, amongst others, Sir James Ball,
of Legal & General, where he is a now a Non-Executive Director.
He is also currently a Non-Executive Director of Foreign & Colonial
Trust plc.
3
• Sir John made a gread success of Jaguar, turning what
had been a loss making enterprise valued at £1.6 billion.
In each of the management situations in which he has
been involved, he has broadly adopted the same initial
approach which has involved:
– An evaluation of the situation
– The selection of managers likely to adapt to change
circumstances
– Implementation of action to cut short-term losses
– Implementation of a reduction of the cost base
– Ensuring the stability of the enterprise’s operation
– The above having been achieved, ensuring that the enterprise
recovers and returns to profitability and growth
4
• When he joined BBA, he applied the same
sound basic principles that he had applied
in his previous successes, namely to start
reform from an understanding of the
company and its plans and to instill a
sense of customer service.
5
• Contemporaneously he introduced a Strategy for
Growth which, basically, incorporated:
– A business strategy
– Focused on core business
– Efficient management of existing airports involving the
continuous improvement of quality of service,
productivity, safety and security
– Increasing revenue from retailing
– Introducing professional property management
– Ensuring, so far as new projects were concerned, that
they would be cost effective, matching the world’s
best standards, and that the capacity was closely
matched to demand
6
• He found, in reducing matters to the core business, that there were
a number of weaknesses in the organisation. BAA had – and it was
not alone in this experience – tended on privatisation to build up a
big portfolio of interest outside its core activity. This process of
diversification, if continued unchecked, would have become an
intolerable debt burden, as can be demonstrated by the fact that
when BAA was privatised it has no debt, but the debt has
mushroomed to £1 billion when Sir John arrived in 1990, and was
forecast to rise to £ 3 billion. Sir John recognised that this was an
intolerable position and, having looked at the diversified businesses,
stopped expansion into hotels and put in had the sale of other
interests. He tackled the problem, as he had in previous enterprised
could not afford to do all that they were planning to do, and it was
therefore necessary to see where the cash was being generated
and where the outflow cash was going. There were, broadly, three
income streams and one big cost outflow.
7
• The three main income stream were:
– Airport charges from airlines, which were regulated
and subject to the uncertainties of future regulatory
directives.
– Retailing, which included the duty free franchises –
themselves under long-term threat owing the
unification of the European Community.
– Property income generated from 16 million square
feet of office, warehouses and hangars, which were
let to a variety of airport tenants.
8
• The main outflow of cash was connected
with the on-going airport development, a
programme made necessary by the
steady, long-term rate of growth in
passenger numbers. At 4 per cent per
annum, the forecast is for a near doubling
of BAA passenger numbers between now
and 2005.
9
• However, so far as running the airports is concerned, it is
not realistic to expect each Managing Director to master
all four skills that had been their responsibilities prior to
the reorganisation (namely running the airport, retailing,
managing property, and managing building
programmes). The critical responsibility, so far as each
airport was concerned, was running the airport itself, and
the other three areas of management responsibilities
were gouped under prove professionals in those areas
who had a direct lineof responsibility to the Board, with
indirect reporting lines to the Managing Directors of the
specific airports.
10
• It was necessary to improve quality, service and productivity by first
emphasising quality, which in turn relied upon training and
communications. Communications is one of Sir John’s articles of
faith. He sees it not only as a tools for conveying information, but
also as a way of establishing personal contact with employees
generally and his immediate managers. He carries this to a wider
constituency in using market surveys both within the organisation
and with customers – large customers such as airlines or more
numerous individual customers such as people using BAA facilities.
He emphasised, shortly after joining BAA, that ‘airlines are
customers’ not a bunch of naughty children. When he receives a
complaint concerning an airport, he asks the Managing Director to
draft a reply and the first draft replies so astonished him that he
seriously suggested on the company’s writing paper that there
should be the slogan ‘BAA plc. The answer is yes – now what is the
question?’ The perception of BAA’s approach has now changed to
the point that it is accepted by all management that their business is
about satisfying customers, whether they are airlines or individual
users.
11
• Contemporaneously with introducing a changed perception of
service, it was also necessary to reduce by at least 12 per cent the
numbers of staff whilst maintaining the same level of customer
service. This requirement was communicated in a series of training
sessions when Sir John and the Director of Corporate
Communications communicated the requirements directly to the
most senior managers in the Group and to all levels of the
organisations via ‘cascade’ briefing sessions. It was found that
people were receptive and a voluntary severance scheme was
introduced, which was broadly based on the British Airways proven
model, and for which 18 per cent of the employees volunteered.
The managers decided to let all those who volunteered for
severance to be an receipt of the package (not just the 12 per cent
originally targeted) and additional time was allowed to meet the
productivity targets; in the event productivity improved an quality of
service to passengers increased dramatically.
12
• Training is now being brought into line with
how BAA is being managed which, starting
from the top, comprises a Management
Committee of 12, and a meeting every
three months with 60 top managers when
major issues are brain stormed.
13
• One of the problems has been to lead BAA
away from the preprivatisation and
bureaucracy and the immediate postprivatisation euphoria where, as soon as
management ‘gets free’, they start buying
business when they do not often know
how to run their own.
14
• Business Schools are now being used for
the training of the top managers and
succession planning is making a positive
attempt to find top class people within
BAA, and then fit them for increased
responsibilities as they rise through the
organisation. Managers are also
encouraged to delegate responsibility to
their staff.
15
• Communications play a vital role in
training and bringing about change,
especially as different levels of staffing
expect reactions in different time periods;
for example a person on the shop floor
exposing a problem expects that problem
to be resolved virtually immediately,
whereas a senior manager thinks in a
longer timescale influenced by medium
and long-term business plans.
16
• New projects involve looking at all the
functions performed by BAA and seeing if
they can be turned to profit.
17
• The property portfolio will be utilised to the
best advantage. Hand in hand with this,
the building programme will be rationalised
yet further, an construction firms which
have proved themselves to plan in depth
and build with speed will be used rather
than the more conservative and traditional
firms which have not yet adjusted away
from the ‘planning as you build’ concept
with its additional monetary costs.
18
• The main asset in all these changes are
the Human Resources and Sir John is
determined that they shall receive proper
training in order that their full potential can
be realised, and also be made aware
through increasingly good communications
of the need for change: - “Information will
help the individuals to do their job. If
people recognise why change is
necessary, they will help to achieve
change.’
19
The Importance of Direct
Communication
• See p. 137 - 146
• Sir Graham Day takes a bottom-up approach to
management: he emphasises the importance of
the management communicating with all
employees throughout the organisation. When
rebuilding an organisation, he feels you cannot
trust the existing structure to convey the
message intended or put in place the elements
for change. Sir Graham has applied his
approach to many business situations; he feels it
creates a positive, if surprised, reaction from
employees. It is still a novel concept to many
companies.
20
• He captures a crucial concept of
Management Audit: that he specific skills
in the specific job matter: there is no such
thing as a good or a bad manager. He
emphasises the need for cohesive
management. Managers should be
involved in the business formulation as
well as strategy implementation. Sure
values and better skills matching are key
factors for sir Graham.
21
• Sir Graham, who is a canadian by origin, was educated
in Halifax and, having obtained his LLB, practised law in
Nova Scotia for some eight years before joining
Canadian Pacific Limited in 1964 from whence, in 1971,
he was invited to join Cammell Laird Shipbuilders Ltd as
Chief Executive. The success which he achieved during
his five years with that company led to his appointment
to British Shipbuilders and subsequently to Rover Group
Holding Ltd (formerly BL plc) and British Aerospace plc
culminating at the present time in his Chairmanship of
Cadbury Schweppes plc. He is also Chairman of
PowerGen and on the Boards of other companies in the
UInited Kingdom and Canada.
22
• The conversation with Sir Graham
concentrated in the main on his time with
Cammell Laird, British Shipbuilders and
the Rover Group, as it was in those
organisations that he needed to introduce
to a high degree his concepts of the
management of change.
23
• He was recruited at the age of 38 by Nicholas Ridley,
who at the time was Parliamentary Undre-Secretary of
State at the Department of trade of Industry, who told
him bluntly that one of the reasons he was being
appointed was because it was ‘easier to shoot a colonial
than a native!’. His approach to Cammel Laird was
essentially the one which the subsequently adopted at
Rover, but because or the smaller numbers he was able
to conduct interviews on a wider and deeper basis. At
Cammel Laird within a period of two months, he and a
colleague that he had brought with him, spoke to some
3,000 people out of the 10,000 work force including all
the individuals in the first, second and third layers, and a
sample balance in the remaining layers with responsible
managers sitting in those instances.
24
• Now, happily, that is changing, and the industry is moving away
rapidly from the generations of promoted managers grounding down
those from whence they had come, towards individuals who are
much more empathetic, and in this regard he is pleased that women
are being promoted to line management as they provide a positive
force for change. He has been delighted to see a number of women
out-performing expectations, and he is encouraged that younger
people are now relating much better to employees. That having
been said, he feels that British industry employees at all levels,
compared with its competitors, are still under educated and under
trained, and that the real problem is still to obtain remedial education
in order to realise the full potential of the workforce. That the
potential is there, he has absolutely no doubt, and mentioned the
example of an individual joining Rover on a Youth Training Scheme
indicated on her employment form creating models with clay as a
hobby. The reality impressed the styling studio (basic styling being
in clay) to the extent that the individual was sponsored to the Royal
College.
25
• ‘A key in effecting this change is the
proper use of communications.
26
• The contrast between my previous occupations
and Cadbury Schweppes is substantial.
Cadbury Schweppes is a very well managed,
successful company. Here at Cadbury
Schweppes there is a mandatory retiring age for
directors at 60, which I believe is a good age for
most senior managers to leave. Assessment is
done as part of the annual manager’s appraisal.
So far as the management of Human Resources
is concerned, our Group Personnel Director is
on the Board, and gives a presentation to the
Board on the managers with most potential,
including future board material, at regular
intervals.
27
• When we effect an acquisition, there are
no pre-conceived ideas about the
management being acquired, but there is
a careful review on everyone in the new
business, for example the individual who
was Finance Director of Trebor when we
acquired that company, is now Finance
Director of the whole confectionary stream
of Cadbury Schweppes.
28
• To sum up I would say that the core elements in
effecting management of change include:
– The necessity to try and stabilise the organisation as
soon as possible.
– It is essential to get out and be seen; to walk the
property; to talk to people; to make individuals realise
that you genuinely have their sense of well being at
heart – and that sense of well being depends on the
success of the enterprise in which you both work.
– Communicate, communicate, communicate.
29
– Ensure that the bureaucratic process is
separated from line management; if you
confuse the two you fail them both.
– Trust people.
30
Meeting and Knowing the Team
• See p. 155 - 157
• Paul Insley believes that the key to
success has been the combination of
extremely tight management and the
encouragement of individuals to treat the
business in which they are involved as
being their own business. So people
should be accountable; an organisational
structure has to be developed to make that
feasible.
31
• Mr. Insley points out that it is fundamental to
meet and know the new team in an acquisition
situation. Difficulties tend to occur where the
new company’s ideals and standards are
different from the acquiring group’s; he is
determined that a good fit should be achieved
between the parent group and the potential
subsidiary. This points to the importance of
having a management audit before an
acquisition; risk factors can then be better
evaluated, and the management can work on
the critical integration issues prior to the
acquisition, so that they do not become
unmanageable.
32
• Although relatively small, the Exxtor Group
is diversified; amongst UK companies, it is
outstandingly successful. Turnover has
increased over the ten years to 1991 from
£11 million to £ 51 million, and profit
before tax from £ 850,000 to £ 5.8 million,
while shareholders’ funds have increased
from £1.1 million, to £16 millon.
33
• More specifically, the corporate principles under which
the Exxtor Group is run are arised, but the key ones can
be summarised as follows:
– Each person must be given the opportunity to run their own
business within the simple constraints of a corporate format.
– Each business has to return a profit, which includes having to
pay for its own financing.
– Instrinsic within this is the concept that any expansion or other
requirement for capital must be financed in the same fashion,
and the Group is therefore not seen as a benevolent giver of
finance, but rather as a guiding banker.
– Generally, people are encouraged to feel that they are not only
as good as their last result, and there is a strong emphasis on
establishment and then achieving financial targets.
34
– Much of the strength and stability of the Group has come from as
extraordinary degree of stability, with most of the Group’s senior
managers having been with the company over the last eight
years.
– The Group has expanded both organically and through
acquisition, and feels that much has been learned about
acquisitions, some of it painfully.
– While recognising that mistakes in acquisitions and start-ups
have been made, Paul Insley is certain that their continued
profitability is due to a willingness to accept the consequences of
tough and harsh action with a firm belief that where there is a
commercial ‘cancer’ in a group, it will quickly spread.
– Despite this, there have been several cases where the company
has nursed a subsidiary back to health, but, while recognising
that there must be commercial flexibility in such decisions, Paul
Insley is critical of much of UK industry, where excessive amount
of time is spent in attempting to revive terminally sick
businesses, even though ill-suited to their parent company.
35
– The Group firmly believes that ‘cash is king’ and has not been a
net borrower for the last four years.
– The company has never been afraid to start something new, but
after a while the Group’s strict criteria for financial performance is
always applied, and every organisation must be seen to
contribute both financially and in the context of a corporate
whole.
– Given their emphasis on people, the Group has aimed at
keeping relatively small labour units, thus preserving a real
sense of identity, and also genuine accountability.
– While not seeking to crush spontaneity and creativity within each
subsidiary, the Group has sought to standardise as many of its
procedures as are practical, but recognising that in some
organisations total standardisation is inappropriate.
– Probably the most importat aspect in terms of dealing with itas
employees, is an approach of openness and honesty, with Paul
Insley’s ‘bottom line’ being a combination of truth and fairness
36
– Although continued growth has been a
corporate hallmark, Paul Insley is not afraid to
admit to many mistakes, and has said that if
more than seven in ten business decisions
are correct, the businessman is probably
doing quite well.
37
Changing to a Marketing Culture
• See p. 159 – 166
• ‘The biggest issues may lie in the area of
winning hearts and minds.’ david Laing knows
from experience that achieving such change is
complex: he recognises that new skills will have
to be developed, and that organisational
structures will need to adapt. His company’s
advice brings with it strategic change: his
experience shows how vital some form of
Management Audit in bringing about that
change.
38
• During the 1980’a, it seemed as if some
universal verities had been discovered by
Tom Peters and others as they analysed
what made excellent companies excellent;
judging by the sales analyses, they were
satisfying an unquenchable thirst for magic
solutions to managerial problems!
39
•
•
•
•
•
Nothing Fails Like Success
Customer Driven Change
The Effect of an External Catalyst
The Political and Diplomatic Contest
Issues in Implementing Change
40
Nothing Fails Like Success
• More recently, however, it has become very
obvious that there are few if any eternal
constants in the arcane art of achieving
excellence. Moreover mounting evidence
suggests that successful companies who
continue to practice their traditional strategies in
a changing environment will soon fail. Only five
years after ‘In Search of Excellence’ 29 of the 43
outstanding corporation described had fallen
below the performance criteria that had justified
their original selection.
41
Customer Driven Change
• Recognising the need for change is
however only the firs stage; how to
achieve successful change is much more
difficult. Another recent study by Warwick
University’s Centre for Corporate Strategy
and Change identifies five essential
factors in the management of change for
competitive success.
42
• For all companies, the key to altering
strategic focus is the market place. It is
only through deep insight into consumers,
distributors, influencers and competitors
that the direction, nature and scale of
change can be defined. Furthermore, as
change programmes are implemented, it is
the market place which provides the
criteria for measuring their effectiveness.
43
• In the public, as well as the private sector,
there is continuing, and accelerating,
acceptance that the customer is king, that
the market should be the focus of the
enterprise, that quality is of the essence,
and that the implications of management
accountability should be accepted down
the organisation.
44
The Effect of an External Catalyst
• Many companies find it difficult to manage
and sustain change without help from an
external catalyst.
45
• Why is an external catalyst needed? Because the very nature of
culture change demands that individuals at all levels reconsider their
own roles, responsibilities and priorities. This is not easy to
accomplish when an organsiation has developed very effective
systems of management and operation designed to achieve very
different sets of objectives and standards. A bank, for example, is
supremely efficient at credit control, at processing transactions, and
at balancing each day. Traditionally, all its operations and structures
and training and reward systems have been geared to achieving
objectives and standard expressed in those terms. Marketing and
customer based strategies, on the other hand, will probably require
different management structures and certainly revised roles,
responsibilities and priorities. Change required in such
organisations is dramatic.
46
• Companies may need to:
– Identify the signposts and milestones which
chart the path to change
– Implement and manage changes of
knowledge, skill and attitudes amongst staff
– Develop new systems and processes to
enable change to take root
47
• Here, we are not primarily concerned with the
vital techniques of communication, consultation,
persuasion and organisational development,
important though these are to achieving change.
Programmes featuring these techniques alone
are unlikely to succeed. The essence of the
problem of change management is the definition
and implementation of the strategies of change
and persuasion to be applied to the realities of
the business as a whole. These strategies,
particularly as they relate to moving people to
change fundamentally, involve some of the
characteristics of a political or diplomatic
contest.
48
The Political and Diplomatic Contest
• Ideally, of course, the support, and
preferably the leadership, of the most
senior management is essential. Here has
to be outward and continuing expression
of this leadership, however. It does little
when only lip service is paid to the
purpose and direction of change and
leadership hides behind subordinates.
49
• A vehicle for change is needed which drives the whole process.
This will not be training, or definitions of quality standards, or
organisational development programmes, vital though these are.
We need management activity which cannot be carried out unless
managers focus on, think about and resolve matters which are
themselves the key to change. A market based planning system
serves very well. Market based business planning cannot be done
unless the manager analyses his market, defines his objectives,
considers the needs of his markets and customers, develops his
strategies, and produces his plan. The move from badget based
planning to a market based plan can have a dramatic effect on unit
managers and their teams as they are forced to concentrate on the
business relaties driving the change and have to plan resources and
priorities accordingly.
50
• As a matter of tactics, it mas be wise to withhold many implications
of change before the project starts as they are often so wide ranging
and disturbing that, if known, the project would be dismissed through
fear of the consequences. Avoud detailed blueprints, therefore, and
let the process naturally evolve. If it was known in advance that to
make a selling culture, it might be necessary to change all job
descriptions, appraisal systems, career structures, payment systems
and so on, every vested interest in the company would react. Often,
far greater co-operation and, indeed, enthusiastic support can be
obtained from these interests if it becomes obvious as the new
behaviour and processes evolve that changes in all these will be
necessary. Affected departments and units will be making the
recommendations themselves as they see the implications of the
change strategy.
51
• Eventually, of course, the implications of culture
change have to be built into the fabric of the
company. This means that everything that
affects people in their job and life must reflect
the behaviours one is attempting to introduce.
So, if we are trying to encourage people to sell
or to provide service, this must be reflected in
recruitment profiles, in assessment systems, in
reward packages, in incentive schemes, and so
on. If we don’t affect a man or woman’s real life,
they won’t change.
52
Issues in Implementing Change
• Some of the issues to be resolved in
applying a change strategy to the
essentials and realities of the business will
now be considered.
53
• Not surprisingly, the greatest problems
and the biggest issues may lie in the area
of winning hearts and minds. Culture
change programmes need to secure
ownership for the culture change mission
at all levels of the business. This is easy
to say but so difficult to achieve.
54
Change in the Civil Service
• See p. 167 – 169
• Sir Peter comments on how the civil Service
handles the management of change. The
catalyst of change is not necessarily market
forces; often it is a drive for greater efficiency.
He shows that civil servants will respond in a
civil service fashion, but face many of the same
challenges as the private sector. A change in
purchasing strategy and budgeting brought
sustantial change to the Ministry of Defence:
managers had to develop new skills in order to
respond to commercial forces.
55
• Sir Peter commented in a conversation
about the changes effected during his time
at the Ministry of Defence, which were
more in culture and policy than in actual
management of human resources.
56
• On arrival at the Procurement Executive,
he found it to be run by the Procurement
Executive Management Board, which met
weekly prior to his arrival.
57
• The controllers, as in commercial organisations,
were required to prepare monthly report to the
Board which would then be discussed by all
Board Members. Management was by
exception, in that if projects were proceeding
satisfactorily, then the reports would be taken as
read, but if there were difficulties, then those
difficulties would be discussed by the Board.
Prior to his arrival Controllers had little
knowledge of each other’s areas of activities.
58
• Arriving just a few weeks before the end of the
Financial Year, he found the staff concerned that
they were going to underspend. Coming from
the outside he found this an unusual problem,
caused by the Treasury assistance on a policy of
annuality. He entered into negotiations with the
Treasury, and an agreement was struck which
allowed the Ministry of Defence to have a carryforward of approaching 10 per cent of the
procurement budget.
59
• There were may able people in the
Ministry who understood commercial
concepts very well, but they could only
operate under the policy directives that
they were given and very few of them had
any commercial background experience.
60