3.6.1 Causes & Effects of Change

4 Aspects Change Can Impact

• Competitiveness
• Productivity
• Financial performance
• Stakeholders

Changes in Organisational Size

Competitiveness

• Economies of scale
• Stronger brand
• Improved production means

Productivity

• Investment in capital machinery
• More labour employed

Financial Performance

• Larger customer base -> More sales
• Overtrading -> Diseconomies of scale

Stakeholders

• Shareholders dividends rise
• Employees motivated with bonuses -> Staff retention
• Larger organisations may be out of touch with customers -> Reduced customer satisfaction

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Poor Business Performance

• Competitiveness
  • Less financial capital to reinvest and prevent stagnation
• Productivity
  • Workers less motivated with lower/less change of bonuses
• Financial performance
  • Liquidity problems may arise
  • May encourage businesses to be more efficient in lowering costs
• Stakeholders
  • Shareholders disincentivised from holding company shares
  • Uncertainty for workers over the future of jobs

New Ownership

• Competitiveness
  • Will look to bring new dynamics to business and improve the existing position
• Productivity
  • Investment in the new production system (E.G Capital machinery)
  • New corporate culture may take time to adjust to and temporarily slow down productivity
• Financial performance
  • New takeover/merger will provide new injection of funds into business -> Improvements to cash flow and investment
  • Initial losses or low profits in the short term due to changes/investments taking place
• Stakeholders
  • Employees may struggle to or resist change to new corporate culture
  • Shareholders may be encouraged by a change to the dynamic and potential catalyst for success -> Increase in share prices

The Market

• Competitiveness
  • If barriers to entry are lowered, competitiveness increases -> Downward pressure on price and innovation encouraged
  • Creative disruption can change the status quo and revolutionise a market (E.G Touch screen iPhone)
• Productivity
  • Encouraged investment in capital machinery if the market grows exponentially
  • Higher incentive to invest in efficient and productive production systems to undercut increasing competition in the market
• Financial performance
  • With a growing market, business profits will rise due to higher sales and a larger customer base
  • However, an increase in competition may put downward pressure on the prices of existing firms and therefore reduce profits
• Stakeholders
  • Increased technological advancement may demotivate workers knowing they could be substituted for machinery
  • Dynamic markets may deter shareholders from investing due to uncertainty and fluctuations in demand

Transformational Leadership

Where a leader works with teams to identify needed change, creates a vision to guide the change through inspiration, and executes the change in the corporation with committed members.

📝 Examples

• Bill Gates - had the vision to pioneer the computing industry and needed a group of committed members to follow him
• Elon Musk - a former HR head stated that he could make people believe in his vision which highlights charisma

Different Components

• Idealised attributes - creating a sense of belonging whilst caring about the interests of workers
• Intellectual stimulation - encouraging creativity among workers and challenging the status quo
• Individualised consideration - offering support and encouraging workers to share ideas with open communication
• Inspirational motivation - the leader has a clear vision to deliver to workers, helping them feel passionate and motivated towards achieving the goals
• Idealised influence - the leader serves as a role model for workers helping develop trust and respect between them.

Advantages and Disadvantages

Advantages

• Ensures that the workers are committed and share the same vision as the leader which increases productivity

• Encourages workers to show initiative and create innovative ideas

• Workers feel valued by the leader which increases staff retention and improves the corporate culture

• Transformational leaders interact more effectively with workers which reduces the chance of human error

Disadvantages

• Dedication could lead to long working hours causing demotivation within the workforce from fatigue
• Sharing the same vision can be inflexible due to one-dimensional thinking
• The leaders may prioritise the vision of the business over the welfare of the workers
• Difficult to gather a workforce all sharing the same vision giving workers the power to demand higher wages

Comparisons

Autocratic Leadership

• Autocratic leaders ensure that the workers are fully focused on their tasks whereas transformational leaders will prioritise worker motivation
• Autocratic leaders distance themselves from the workforce without consulting them, whilst transformational leaders expect input and contribution from workers
• Laissez-faire Leadership
• A laissez-faire leadership style encourages workers to use their initiative freely whilst a transformational leader will encourage innovation but contained within the shared vision
• Laissez-faire has little to no supervision whilst a transformational leader would supervise workers and cooperate with them