A notable influence on operations strategy arises from the need to manage and be responsive to change.
All businesses are subject to change from the external environment e.g. Covid-19.
These all impact on the business and shape its operations.
Moreover, change can also come from within the business through the initiative of staff or the application of technology and a focus on innovation.When changes arise from external sources, a business must learn to adapt.
Change can often be resisted as it can cause uncertainty and uncertainty can be stressful. In economic terms, uncertainty represents risk and most people are adverse to risk. Thus, a business needs to apply particular skills to help manage change processes. Resistance to change arises from two principal sources within a business:
One major cause of a resistance to change from managers and business owners is that of financial costs. The main financial costs associated with change include the:
1. Purchasing new equipment
Prior to making the investment in new equipment, it is highly likely that operations managers will assess the cost of purchase against the cost of leasing new equipment and technology. Leasing does not require a high upfront payment, but it can be more expensive as an ongoing operational cost.
More productive equipment will lead to redundancies as less workers are required to create the same amount of output e.g. robots making phones rather than humans.
Redundancy refers to employees losing their jobs, where the employees' job or work no longer needs to be done. It may be necessary due to a lack of work, as in the case of a fall in demand for a product or service, or the position may have been restructured or replaced by technology
Typically, redundancy payouts are quite high because the value of the payout depends on:
• the length of employment the employee has been with the business. Under legislation a certain number of weeks of pay must be paid when a person is made redundant
• The level of pay the employee is on prior to being made redundant
• The amount of unused leave that the employee has accrued (including annual leave and long service leave)
• Outstanding wages.
This cost arises from change that causes a reorganisation of the business’s internal hierarchy or from the acquisition of technology.
In the first instance, job roles may change requiring employees to acquire different work skills. This can be achieved through training. In the second situation, the purchase of technology often requires training or retraining on new software. Retraining may be performed on the job or off the job
Major changes such as the complete re-engineering of systems often require extensive reorganisation of the layout within the facility. There can be high costs associated with reorganising the plant. One cost is incurred when transporting, placing and bringing power to the new plant and equipment. Further costs are incurred in the downtime when transferring from the old machinery to the new machinery and when testing new equipment, machinery and technology. Further costs come with losses of productivity, arising from staff orientating themselves with new work processes and arrangements.
People do not like change.
Inertia is a term that describes a psychological resistance to change. People who feel:
Question 21 (10 marks)
(a) Explain why managers may be resistant to change. 4 marks