Case Study Analysis
Kazakhstani background
Kazakhstan - one of the former Soviet republics it has begun to implement important structural reforms aimed to transform its economy into a more transparent, less regulated and more market-driven business environment. Until now the country was more concentrated on developing major sectors of their economy such as oil exploration and mining industry. Financial system of Kazakhstan is the most progressive industry of the country due to effective fiscal and the monetary policies applied by the Government and the National Bank of Kazakhstan.
Kazakhstan is one of the most sparsely populated countries in the world. The average population density is only 5,2 people per sq. km. In the most densely populated areas it comes up to 18,4 people per sq. km. The biggest city is Almaty with 1,2 mln. population considered as a financial and cultural center of the republic. Western Kazakhstan is considered as an oil and center of the country as the major oil reserves are located in the west of the state.
Company background
The company is situated in Aktau a city located in western Kazakhstan. Since 1995 the main operation of the company has been exploration, extraction and sale of crude oil which is executed under Subsurface Use Contract concluded with Government of Kazakhstan. The company employs about 400 employees 52 of which are the office stuff engaged in management, finance and accounting, geology, exploration and drilling, supply chain, human resource and administrative issues. The rest of employees are working in the oil field as managers, operators and workers. Almost all of the office staff is the local people living in Aktau.
Most of the office employees were of matured age and have been working in the company for 7-8 years; some of them were working since the company’s foundation.
Hiring or involving relatives is common feature of an Asian business environment. And along with the official organizational structure there is another unofficial scheme of organizational relations based on the authority of particular people despite their official position. Sometimes the authority is determined by being a relative of some locally well known governmental official, or one of the top management members. There were several related staff in the company as well, including the Human resource manager, salary accountant, drilling manager and one of the managers in chain department. The family is much respected among the local community. As a result of this, for instance, the Chief accountant did not have much power and influence on some members of the accounting team. Production department does not provide the required information to the accounting and finance staff on time and such situations were resolved not by interference of chief accountant but by the salary accountant. Finance and Accounting, Human resource and administration departments are mostly comprised by women.
The normal working day starts with tea drinking lasting for at least one hour. Another tea party usually started at 16:30 and after 17 most of them are leaving for home.
Finance and Accounting Department is comprised of two divisions: Finance and accounting. Finance division is engaged in Budgeting, planning and control activities while functions of accounting department include proper recording of day to day transactions, preparation of financial statements, filing the primary documents and tax compliance. The company had 2001-2003 tax audits.
It should be noted that afterwards the performance of accounting division is recognized as unsatisfactory. Accountants make mistakes in the processing of some transactions, calculation of state taxes, compliance of tax reports, accruals of expenses and prepayment write offs and etc. The Company does not spend funds on the trainings of accountants neither do they request these trainings.
Under subsurface use contract concluded with the Government of Kazakhstan, the company operated under tax stability regime, meaning that the company calculated, reported and remitted the tax amounts based on 1995 tax legislation. At that time numerous tax matters were not resolved which created significant tax risks.
Investor Company
In 2004 the company was acquired by a foreign investor company which appointed new general and financial directors. The finance director and general directors were members of different interest groups within this investor company and did not reflect much cooperation with each other.
General Director was a 45-50 aged British national with technical background and rich experience in large international petroleum companies. He did not interfere with the office issues and was more focused of field operations attracting expatriate drilling managers and geologists.
Financial Director was a Kazakh national recruited by the investor company specifically for this project. He is a highly skilled professional with strong financial background including financial institutions and industrial companies. Having western views on business management and relations within the organizations he was willing to change the existing environment.
Being a professional in the sphere of finance and accounting he highlighted the weaknesses of the accounting function and low professional qualities of the chief accountant and offered her trainings, while another person would execute her duties temporarily. However, the chief accountant resigned shortly.
A new chief accountant, Tax manager and reporting manager were hired by the financial Director in order to improve the accounting function of the department and reduce taxation risks.
The Chief accountant was generally welcomed by the accounting team as she was a local person, and previously worked in the same area. Secondly, a reporting manager was invited to deal with the reporting of financial performance of the head office of the investment company for consolidation. Just after that I was offered the position of tax manager for the company. I accepted the offer and moved to that city. Before the nomination of Reporting manager and tax manager of the company there were rumors among the accountants about new people coming to control their activities. As for me, the tax manager and the reporting manager, we experienced a considerable challenge during the first period of working in the Company.
My colleague, a Reporting manager was also a 27 year old professional from Price Waterhouse Coopers. Shortly before he left, he was promoted to being a senior consultant.
There were certain issues circulating, not only in the finance department, but all throughout the organization. The HR manager, along with the salary accountant, gave away personal information, such as the precise amount of our salary, to the rest of the finance department. Furthermore, many of the junior accountants and office employees were demoralizes at the fact that none of them has yet received a promotion and has not yet been given the due amount of salary, whereas, some newly hired employees were given a higher degree of compensation, even more than those who have held higher office since the conception of the company. Moreover, some employees do not seem to have any inkling towards superiority in rank and ability. I was given two accountants to assist me with the tax calculation and compliance, but the two were not willing to be my subordinates and did not comply with my chosen flow of the work. However, the Finance Director took immediate action and notified employees that in the future, they should learn to work with me unless they wanted to receive a suspension.
Case Analysis
Organizational behavior perspective
Leadership and Motivation
Basically, leaders have a common set of characteristics which includes single-mindedness, excellent communication skills, self belief, very strong sense of purpose and charismatic. The leader’s behavior will demonstrate how that personality applies itself along the chosen purpose to give a behavior pattern in a given situation, with a leadership style. There are number of ways to categories leadership style; in one way lets look at the relationship set against the need to complete the task.
Ø Authoritarian style where the leader simply tell the people to do the task without regard of their view of it.
Ø Delegation style. The leader feel the task is not important or not interested in the task, or feels that its beneath his dignity; he delegate it totally on others.
Ø Participatory leadership, the task is not important but the people are. The people with whom the task is done are important.
Ø Persuasive leadership, here the people and the task both are important. Therefore, to finish the task incentives and motivation are given. Here the team could be the part of the process of objective setting.
The leaders are employed to get the task done through the people they have control over. It is the responsibility of the leader to balance the set of objectives, irrespective of his seniority. All the conflicts, which arise due to this, will be resolved. There should be no breakdown or neglect in one or the other areas, because if it is so, it will affect the efficiency of the work. The prime objectives of the leaders are to:
Ø Achieve the task – to get the job done by planning, allocating resources, controlling the work done, monitoring against the plan and taking the necessary and appropriate corrective actions;
Ø Develop individuals – attending to personal problems, praising individuals, giving status, recognizing and using the abilities. And continuously working towards improvement of the individuals. .
Ø Build the team – setting performance standards, maintaining discipline, building team spirit, encouraging, motivating, giving a sense of purpose and training the people as well as at all time working to improve communication with the group;
Ø Achieve personal objectives – leaders should not forget they themselves have the responsibility to their own career and personal objectives, and that no team wants to be lead by the leader who does not show a degree of personal enthusiasm and ambition.
To achieve these goals, leaders can work wonders through motivation. The relationship between organizations and their workforces is governed by what motivates individuals to work at their best and the satisfaction they derive from their activities. Without willingness and cooperation of motivated staff, an organization cannot be effective or successful. Motivators includes economic rewards (salary, benefits, pension and security), intrinsic rewards (interest in the job, personal growth and development, appreciation, positive recognition), and social relationships (friendship at work, status and dependency).
In the implementation of a new system in the company, problems are foreseen which are primarily on the employees. The new system would make major changes in the working scheme of the whole organization. Most of the employees are used to the old system and having the new system would change how people work, think or behave. Generally, people dislike changes which would undermine the implementation.
In this case, leadership and motivation would be an important task that the management of the company should take into action. Persuasion is the appropriate leadership style which the management of the company should use. As it is defined, both the task and the people are important in which incentives and motivation is also used to persuade the employees to finish their job.
As the leaders of the organization, it should be considered that people are motivated to do their work when they feel they are important in the organization and when they are given proper pay. Motivators can be extrinsic and tangible. Examples include pay, job security, safety, promotion, pensions, employee friendly policies and favorable working conditions. Or they can be intrinsic and intangible, with examples including opportunity to perform, challenge, sense of achievement, personal growth, positive recognition, and being appreciated, valued and treated with respect, care and consideration.
Managers and leaders should work therefore on these motivators to find creative and effective ways to improve staff performance, productivity and retention. Effective leadership and managerial support can reduce staff frustration and dissatisfaction while increasing productivity and retention.
Change management perspective
Treatment of employees is a key ethical element for any employer. This applies to everything within an organization, including change. Ethics should rule in organizational change.
When we speak of changing organizations, it is already understood that a group of people responds to enforced change at work in a corporate way and sometimes presupposes that there will be a consensus that change agents should work for in the larger group. Common sense suggests that in fact change initiatives, though planned for centrally, are implemented at group and individual levels. Therefore, any resistance to change from these individuals can create serious trouble for the change initiatives. Disregarding the need for change in order to retain employees could probably be bad for the company. In today’s competitive environment, more and more companies are viewing organizational change as a tool to help remain on top of the competition. If the company decides to disregard the need for change, in the long run maybe the employees will no longer have work too. It is therefore a must for employees to understand the need for change and support it for the benefit not only of the company but for the employees as well. The employees must understand that any change in the company is for the betterment of the company and for them as employees as well. To ignore the call for change within an organization is to ask for trouble.
In order to understand more clearly the role of the employees in organizational change, further explanation on the dynamics of change is needed. Change is frequently characterized as fast or slow, enthusiastically endorsed or adamantly opposed, or as "on a roll" or "dead in the water." These characterizations highlight three distinct change dynamics currently receiving research attention: resistance to change, readiness for change, and building and maintaining momentum (, 2000).
Creating these changes has the aim of leading the company to organizational improvements in order to keep up with the changing environment. Change management is supposed to provide a map that will allow organizations to turn those changes to their advantage by redesigning the formal operating system of the company (, 2002).
There is nothing more difficult to carry out, nor more doubtful of success, nor more dangerous to handle, than to initiate a new order of things. The difficulties of managing change have been recognized for over 400 years. Changing a company's culture is indeed a major task. The change is managed with this proven path. It is a tested way to implement your program with very little risk (, 1991). This difficulty in implementing change is further intensified with employees who continually resist to changes.
Resistance to change has long been recognized as a barrier to organizational change attempts. It encompasses a range of behaviors from passive resistance to active resistance or even aggressive resistance. It is an outcome, a natural by-product of change, a fact of life (, 2000).
With all the changes in the world, industry, and market, there will simply be no more standing still. Employees who continually resist change have to accept the fact that there is no other way forward for the company but this.
At one time or another, all organizations share some common concerns and challenges to do with change, such as rebuilding trust, instilling a sense of ownership, shifting strategic focus, or adapting to new management. The various players in a change situation--sponsors, change agents, advocates, well-wishers, targets, and bystanders--and how they interact with one another as a change plays out, make the difference between a winning initiative and something less desirable (, 2002).
The secret to effective change management is to reprogram the culture slowly but steadily. The real key to successful change management is to be able to ensure that the business and culture are in synch with each other. The culture must constantly support the business initiatives. Left unattended, the two will get out of synch, and the culture will deteriorate and bring down the business or make it less efficient (, 2002). By culture, it includes the employees and how they do things in the organization. If organizational culture does not support the change needed by the business, then most likely the whole organization will suffer. There are some recommendations that can help overcome employee resistance to change and get business and culture in synch.
Studies of change management in organizations suggest that employees are more likely to respond to an intervention when they directly contribute to its development or when the content of the intervention accurately reflects their personal concerns. In order for an ethics program to be accepted by employees, it is thus important that their perspective be incorporated into the design by whatever means are most appropriate to the particular cultural context (, , 1994).
As already stated, employee resistance is a common reaction to any organizational change. The employees who will have the difficulty in accepting change will be those in the positions who do follow-through and attend to repetitious and tedious work such as, secretaries and accountants, while employees in self-managing positions such as, salespeople and management will readily welcome change. To be able to implement this effectively and with less resistance, be sure to explain the necessity of the change in details, listen to what the employees will have to say and finally, ask for their support (, 1997).
The most sensitive situation that requires the managing of change is one dealing with a subordinate employee or manager who must change to improve effectiveness and meet changed performance requirements. It is successful when the subordinate employee or manager makes the change required and improves performance to a satisfactory level. If this is not the result, the subordinate employee or manager must be replaced and/or reassigned (, 1994).
People who switch jobs want and expect change. Employees, however, frequently react negatively to being told they must change the way they do their job, especially by their boss or their boss' boss. Some resent having change being handed down "from on high" without being given the opportunity for input (, 1997).
In order to bring about change, leaders therefore must address all important domains that go with change effectively. According to a business review article, seventy percent of change programs fail (, 2002). That's depressing news at a time when more and more companies face upheaval. They fail because leaders shy away from making changes broad enough, deep enough, and above all, swift enough to revive the company. Instead, they administer a series of half-cures, which often serve only to prolong the agony which is inevitable to respond to change anyway.
One of this important domain is the understanding the employees. All of these are clearly easier said than done. Some basic principles in organizational change and innovation may help improve the success rate of managing change in organizations and these should be taken into account by managers and leaders (, 2003).
In addition to understanding your employees and their specific, personality-related reaction to change, there are four things that management can do to reduce resistance.
First, explain, in detail, why the change is needed. If it is being made for obvious or logical reasons, your people, after the initial shock, will probably understand and support it. Next, be very specific when explaining the change. The more detail you can provide, the better. This helps employees know exactly what part of their work will be affected and what will not. This also helps pull the plug on the company rumor mill. The less concrete information your people have, the more likely they are to worry, speculate or object (, 1997).
Third, ask for each employee reaction, both for and against. Don't be afraid of negative comments. The open, responsive atmosphere you will create by asking for input will far outweigh the effects of any negative comments. Then, after you have explained why the change is necessary, how it will affect your people and have asked for and listened to their feedback, ask each employee to support the change, even if they disagree with it (, 1997).
Aside form understanding the employees and explaining to them in detail the need for change and how this could benefit them, the manager or change leader needs to think beyond resistance. The change leader must attend to the more specific reasons for resistance, such as loss of control or loss of self-efficacy, to diagnose problems more accurately and to overcome them more efficiently and effectively.
Leadership Perspective
A change leader, by definition, should inspire the workforce to embrace change, creates direction for the change effort, helps the organization’s workforce to adapt to change, and ensures that intervention is continuously monitored and guided in ways consistent with stakeholders’ desired results.
The role of change managers is of great importance to managing change. Aside from understanding the employees and explaining to them in detail the need for change and how this could benefit them, the manager or change leader needs to think beyond resistance. The change leader must attend to the more specific reasons for resistance, such as loss of control or loss of self-efficacy, to diagnose problems more accurately and to overcome them more efficiently and effectively (, 1995).
Change leaders must also keep in mind the context of the change and focus on explanations other than individual resistance for why change may not be occurring. Change leaders must also think beyond the wisdom that people resist change by challenging themselves to consider their role as change leaders may play in creating and propagating resistance (, 2000).
Change leaders must also create and foster readiness and momentum. They need to consider just how much (or how little) contribution a change leader makes to influence individual change perceptions. According to (1990), both readiness and momentum research propose that managers can indeed manipulate aspects of the change to increase readiness or build momentum. For starters, this research suggests that change leaders, managers, and HR professionals should take into consideration the message for change, the manner by which messages are communicated, and the timing of events (, 2000).
Lastly, change leaders need to manage the social energy of change. Beyond the message and timing of events, change leaders should remember that each of the methods for creating or building energy will be interpreted through individual and group lenses (, 2004). Thus, it is important to keep in mind the social aspects of maintaining energy. It may be that early adopters can be enlisted to help spread the word about the need for change or that individuals central to the change can play a key role in maintaining momentum (, 2000).
This also suggests that negative information associated with a change should be communicated in situations or at times when social interaction is less likely to minimize its impact (e.g., e-mail or note rather than large gathering of employees). Last, but certainly not least, change leaders must remember that individuals may respond to change either cognitively or affectively. Both responses are important carriers of social information. Cognitively, individuals will arrive at judgments about readiness and momentum by considering their own attitudes as well as those they are exposed to socially. Affectively, it is important to remember that while excitement and enthusiasm can be quite contagious, so too can fear, anger, and resentment. Managing the social energy of change is fast becoming a necessary tool for change leaders (, 2000).
Once an organizational change has been established, the individual and collective behavior of the organization should change and adapt itself in a process that might be very slow and whose results can be unforeseeable. The institution might be strengthened, or change, or lose its force, or it might produce changes in other institutions and norms that, in turn, give way to a new adjustment process as a result of the organizational change (, , 1994).
What needs to be cultivated is the motivation, sensitivity, and imaginative vision needed to change irreconcilable factionalism into a growing pluralistic community (, & , 1988). As already seen, such a change requires not an imposition from on high, but a deepening that gets beneath such impositions.
The understanding of a radically diverse way of life or way of making sense of things is not to be found from above by imposing one's own reflective perspective upon such diversity, but rather from beneath, by penetrating through such differences to the sense of the various ways of making sense of the world as these ways emerge from the essential characteristics of beings fundamentally alike confronting a common reality in an ongoing process of change ( & , 2000).
In the case of the company, it is vital that the company hire a certain professional regarding the issues on change management. Though it may seem impractical at first, it would be of great benefit to the company later on, especially considering the fact that the company needs westernization of certain aspects in the company management. Furthermore, the company must employ an effective retention strategy, so as not to scare away its employees, like what happened to the former chief accountant.
An effective retention strategy is comprehensive and starts with a commitment to examine the issue and work toward improving it. These would include salaries, benefits, communications, training, a supportive management staff, and, when possible, a promote-from-within philosophy. The following are some of the strategies (, 1999):
Conclusion
Individuals resist change; teams and groups resist change; whole organizations do it, too. Furthermore, entire societies, continents, world religions, and even the broad sweep of humanity, reflexively resist change. This is a problem, but it is not without a solution. Finding which solution works best for the organization is the key to overcoming employee resistance to change.
Changes always bring things, good and bad, to organizations. When not handled properly, change would likely become a barrier to the growth of the organizations. However, when handled carefully it would be a way to success for many organizations. Changes just needed to be implemented properly in order to support the improvement of the organizations.
Furthermore, with the above analysis, the company has the exact strategies to properly manage the business. The company possesses a lead in the market. However, as business as it is there are still threats of competition and changing consumer demand. The company should considered sustainable competitive advantage to be able to stay in the business.
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