Problem
Case Study: Change Management at Epsilon Corporation.
Epsilon Corporation is an organization that provides automobile insurance. Last year, a new Managing Director (MD) was brought in by the owner to improve the company's competitiveness and customer service. After spending several months assessing, the situation, the new MD introduced a strategic plan to improve Epsilon's competitive position. He also replaced three Line Managers.
The new MD immediately met with all managers and directors, and visited employees at Epsilon insurance centers. As an outsider, this was a formidable task, but his strong interpersonal skills and uncanny ability to remember names and ideas helped him through the process. Through these visits and discussions, he discovered that the organization had been managed in a relatively authoritarian, top down manner. He could also see that morale was extremely low and employee-management relations were guarded. High workloads and isolation (employees work in tiny cubicles) were two other common complaints. Several managers acknowledged that the high turnover among employees was partly due to these conditions.
Following discussions with the owner he decided to make morale and supervisory Leadership his top priority. He initiated a divisional newsletter with a tear-off feedback form for employees to register their comments. He announced an open-door policy in which any division employee could speak to him directly and confidentially without going first to the immediate supervisor. He also fought organizational barriers to initiate a flextime program so that employees could design work schedules around their needs. This program later became a model for other areas of Epsilon.
One of MD's most pronounced symbols of change was the 'Epsilon's Management Credo' outlining the philosophy that every manager would follow. At his first meeting with the complete management team, he presented a list of what he thought were important philosophies and actions of effective managers. The management group was asked to select and prioritize items from this list. They were told that the resulting list would be the division's management philosophy and all managers would be held accountable for abiding by its principles. Most managers were uneasy about this process, but they also understood that the organization was under competitive pressure and that the MD was using this exercise to demonstrate his Leadership.
The managers developed a list of 10 items, such as encouraging teamwork, fostering a trusting work environment, setting clear and reasonable goals, and so on. Once this was done, a copy of the final document was sent to every division employee. The MD also announced plans to follow up with an annual survey to evaluate each manager's performance. This worried the managers but most of them believed that the credo exercise was a result of MD's initial enthusiasm and that he would be too busy to introduce a survey after settling into the job.
One year after the credo had been distributed, the MD announced that the first annual survey would be conducted. All employees were to complete the survey and return it confidentially to the human resources department where the survey results would be-compiled for each manager. The survey asked the extent to which the manager had lived up to each of the 10 items in the credo. Managers worried about MD's statement that the results would be shared with employees. What "results" would employees see? Who would distribute these results? What happens if a manager gets poor ratings from his or her subordinates? "We'll work out the details later".
The survey had a high response rate. In some centers, every employee completed and returned a form. Each report showed the center managers average score for each of the 10 items and how many employees rated the manager at each level of the five point scale. The reports also included every comment made by employees at that center. No one was prepared for the results of the first survey. Most managers received moderate or poor ratings on the 10 items. Very few managers averaged above 3.0 (out of a five-point scale) on more than a couple of items. This suggested that, at best employees were ambivalent about whether their center manager had abided by the10 management philosophy items. The comments were even more devastating than the ratings Comments ranged from mildly disappointed to extremely critical of their manager. Employees also described their long-standing frustration with Epsilon, high workloads, and isolated working conditions. Several people bluntly stated that they were skeptical about the changes that the new MD had promised. "We've heard the promises before, but now we've lost faith." wrote one employee.
The survey results were sent to each manager, the regional director, and employees at each center. The MD instructed managers to discuss the survey data and comments with their regional manager and directly with employees. The center managers, who thought employees only received average scores, were shocked to learn that the reports included individual comments. Some managers went to their regional director, complaining that revealing the personal comments would run their careers. Many directors sympathized, but the results were already available to employees.
When the MD heard about these concerns, he agreed that the results were lower than expected and that the comments should not have been shown to employees. After discussing the situation with the regional directors, he decided that the discussion meetings between managers and their employees should proceed by as planned. To delay on withdraw the reports would undermine the credibility and trust that the MD was trying to develop with employees.
Although many of these meetings went smoothly, a few created harsh feelings between managers and their employees. The source of some comments was easily identified by their content, and this created a few delicate moments in several sessions. A few months alter these meetings, two claims center manager's quit and three others asked for transfers back to non-management positions in Epsilon. Meanwhile, the MD wondered how to manage this process more effectively, particularly since employees expected another survey the following year.
Question: What are the main problems the new MD found in Epsilon Corporation? How can you evaluate the Managing Director's approach to Change Management Process?