Case study - week 30

Introduction

The main aim of this paper is to focus on the strategic changes at Faslane from different perspectives of the Babcock marines and the MOD (Ministry of Defense). The objective is to understand the change and the studies of strategic leadership. Taking into consideration a number of different theories and models to analyze internal and external influences of the organization.

In the year 2002 Faslane which was previously managed jointly by the MOD and the Royal Navy decided to partner with Babcock Marine, a private sector company. The main aim of such partnering agreement was for the purpose of reducing cost and improving their services. Babcock Marine was given the responsibility to save the cost as well as to improve their operational effectiveness. They were given a target of £76 million saving within five years. With a significant change Faslane was able to achieve the target and was considered best.

In this report the analysis is carried out using a variety of strategic tools and models to describe the strategic change and leadership styles of Faslane. The Change Kaleidoscope and Lewin’s Force-field Analysis are applied to explore the strategic change context at the beginning of the change process. The internal features and strategic leadership styles will be examined to contrast the difference before and after the Babcock Marines implemented. This will be carried out using the Mckinsey Seven S framework, Johnson’s Cultural web and Lynch’s leadership model.

 1   The strategic change context at the start of the change process

1.1 Change Kaleidoscope

The change kaleidoscope is a diagnostic framework. It can be particularly useful in a context sensitive change process, which one can argue is the case in this Faslane project.

             Figure 1.1        Sources: Nixon, R.(2009) Change process, 5th Edition, Prentice Hall,

From the figure 1.1, we can see that Change Kaleidoscope has been used to analyze the change process in Faslane. We can clearly observe that change process was revolutionary because the main objective was to change the mindset of staffs. There was a huge participation due to participative programs like “the event in the tent”. During the change period, Babcock tried to increase the efficiency without affecting the quality of services being provided. This was done through changing the mindset of people and bringing in skilled employees in the Faslane.

In this section we will be discussing about the change process in brief using the elements of the Kaleidoscope Model.

The contextual features of change in Faslane ,  (Kaleidoscope Model )

Time:

Change is needed relatively quick. There is no sense of urgency as the organization is not in a crisis. It is more concerned with long term strategic development .

Power:

The workforce has limited autonomy but the change leader is encouraging transparency and allowing employees to express their opinions .Objectives are aligned and the business planning is top down. However the employees have the power to resist change as previously transformational change has failed in the past .

Scope:

The change will affect the whole organization as the hierarchical structure has been personalized and the organizational structure has been compressed. The management team has been halved and the financial department has saving targets. Overall the change is transformational.

Preservation:

The organization is ring fenced from radical changes, reducing the risk of a potential crisis. The diverse range of people within the organization creates a pool of skill sets and innovative change ideas.

Diversity:

The organization has seven layers, creating many groups and divisions. The change will force certain group of people for instance the management group has been halved .  There will be groups supporting change as well as group which opposes change .

Capability:

The management team has been halved from 250 people. This may result in one of two things the there won’t be enough managerial capability to implement changes or the flattened structure will increase efficiency. However there seems sufficient competence to initiate change. The question is whether they can deliver change as there are feelings of mutual benefit.

Capacity:

External linkages such as people from Babcock , networks with trade unions and other companies who went through similar changes . The firm has delivered a reduction of 20% in annual running costs. In the second year , the firm has implemented performance scorecards and other measure outputs .

Readiness:

The mixed management team believed change was necessary; however those opposed to partnering were likely to be deprived and less encouraging. The workforce seemed fearful what change would mean.

Thus, the change process at Faslane was a revolutionary change strategic as well as cultural change. The kaleidoscope does not give predictable configurations that lead to more formulaic change recipes. The eight contextual features remain the same but they are constantly reconfigured to produce different pictures for each organizational change situation

1.2 Force Field Analysis

A force field analysis identifies forces (for and against change) to restore equilibrium and establish balance by strengthening driving forces or reducing the impact of resisting forces. It is as simple yet effective tool to identify potential blockages to change.

Force field Analysis

                                                    Restraining forces (against change)

                       

                                   

            Current equilibrium

                                                   Driving forces (for change)

Figure 1.2

From the figure 1.2 we can observe the Force Field Analysis where there are factors which are for and against change. On the driving forces, MOD was in the need to reduce the cost and improve operational efficiency with better quality services. There was a great support from the top level as well as customer were expecting better quality services. Due to vision for the future, the change was essential.

Table 1: Faslane’s Force Field Analysis

Force field Analysis
Driving Forces	Restraining Forces
Need of cost saving	Traditional ways of working and thinking.
Improve operational efficiency	No perception to save money.
Support of change from the top	Fear from impacts of change
Better quality services	Management Structure
Expectations from customer	Slow organizational process
Viewed favorable by management	Traditional mindset of staffs.
Vision for future	Problems due to political interventions
Increased diversity and unsustainable cost	Existence of Bureaucracy
External linkages ; people from Babcock	Cultural Challenges and conservative staffs
Aware of development needed in operations.	Limited level of autonomy
Implemented low-level changes early	No previous experience of change

The table above illustrates the opposing forces that may impact the change process at Faslane . The two models interlink, with many aspects of the kaleidoscope classified as either driving or restraining forces. It could be considered that the most significant features are power and time, however the readiness of the staff is also important. Unless there is a high degree of readiness in the organization it is unlikely to deliver a transformation.

Hence, the analysis provides a strict indication that the proposed changes at Faslane are viewed favourable by the management. The concept of power is very important as it merges with readiness of staff and managerial capabilities .It if often seen that the staff become fearful to change and oppose any kind of transformational change. This may have a domino effect impacting the entire scope of the organization.

2.  Compare and contrast the internal features of the organization when it was run by MOD and Royal Navy.

 2.1 McKinsey 7S Framework

The model is most often used as a tool to assess and monitor changes in the internal situation of an organization. The model proposes 7 interdependent factors – 3 hard ‘S’ i.e. strategy, structure, systems; and 4 soft ‘S’ i.e. shared values, skills, style and staff.

Sources: Lynch, R., (2009) Strategic Management, 5th Edition, Prentice Hall, chapter 16, pp619

The table below indicates how Faslane acknowledged the need to change aspects such as the organizational activities structure and co-ordinate the key value adding processes. Evidence suggests that performing measures need to be implemented to ensure financial stability and resource efficiency.

Table2: Faslane run by the Royal Navy and MOD (up to 2001)

McKinsey’s Seven S Model
SEVEN S ( 7S )	STRENGTH	WEAKNESS
HARD ELEMENTS
STRATEGY	Progressive and customer oriented.	Time consuming in decision making.
STRUCTURE	Clear chain of command	Unclear roles and responsibilities.
SYSTEM	Good management and improvement in manpower.	Problems in handling customer complaints and late adaption to change.
SOFT ELEMENTS
SKILLS	As most of the staffs are civil servants they are experienced.	Unfamiliar with modern management styles and change process.
STYLE	Leaders are experienced.	Leaders are bureaucratic but only some people will be benefited.
STAFF	Over 1700 civil service staffs were engaged in Faslane.	Not ready for change. Focused more on infrastructure and facilities than people.
SHARED VALUES	Commitment to provide quality services to Navy.	Ethnocentric beliefs and resistance to change.

Table 3 : Falsane run by the Babcock Marine (2002-2010)

McKinsey’s Seven S Model
SEVEN S ( 7 S )	STRENGTH	WEAKNESS
HARD ELEMENTS
STRATEGY	Cost saving and good quality services.	Cost saving may lead to poor quality of services.
STRUCTURE	Structure is formal but each individual are able to form team and can present business plans. Clear roles and responsibilities. Layers of management reduced to 4 from 7.	Excessive freedom may damage the hierarchy of the organization. Can arise serious problems.
SYSTEM	Expert management teams. Change the mindset of people.	Problems in handling customer complaints. Immediate change process.
SOFT ELEMENTS
SKILLS	Most of the staffs have experience of change.	Unfamiliar with the operation of naval base.
STYLE	Leaders are experienced with change process.	There are risks associated with the change process in such industry.
STAFF	Over 2000 civil service staffs were engaged in Faslane. Staffs are focused more on people than infrastructure and facilities. More involvement of staffs..	Reducing the management layers means loss of job and it may not motivate staffs to work effectively.
SHARED VALUES	Commitment to reduce cost without damaging the quality of services.	As a private company, Babcock Marine may seek more profit which may hamper  its strategy.

Babcock implements a clear strategy, encouraging visibility and transparency. However the process for changing direction is rigid and the hierarchical structure may hinder change. Nonetheless, Babcock flattened the organizational structure to a maximum of four layers which supported the low-level changes. However, Babcock also halved the management team and this resulted in reduction of staff, but may result in a lack of management capability and people power to drive towards change.

But on the other hand, reducing the cost may hamper the quality of services being provided. Management is formal but individuals can create their own ideas and implement it. However such flexibility may damage hierarchy of organization and can be a serious problem. But due to this change process there has been a huge loss of jobs. This may affect the employees’ performance because of fear.

  

2.2 Cultural Web

The Cultural Web, developed by Gerry Johnson and Kevan Scholes in 1992, provides one such approach for looking at and changing your organization's culture. Using it, you can expose cultural assumptions and practices, and set to work aligning organizational elements with one another, and with your strategy.

The Cultural Web identifies six interrelated elements that help to make up what Johnson and Scholes call the "paradigm" - the pattern or model - of the work environment

                              MOD AND ROYAL NAVY ( upto 2001 )        

                             

Babcock Marines (2002-2010)

                                                              Figure 2.2

From the figure 1.3 and figure 1.4 we can see the Johnson’s Cultural web up to 2001 and from 2002 to 2010 respectively and figure3.5 and figure 3.6 represent the McKinsey’s Seven S Model. If we observe the cultural web of these two different years we can see that positive changes in the management style can really help to succeed any organization. Babcock managed loyalty, commitment and welfare which come from the employees’ side. Infrastructures were seen as the assets before and after people were considered as the most important elements of organization.

When the Faslane was managed by MOD and the Royal Navy it was working whether it is bad or good. The management structure was huge and complex. People used to just do their job and creativity and business plans were not considered important. Organizational structure was also huge with seven layers and they were having traditional management and organizational structure. Perception of change as a negative or unimportant factor can also be considered.  Although Faslane was customer oriented it was not delivering good services due to time consuming decision making styles.

 In addition, unclear roles and responsibilities were also obstacles. Late adaption to change was seen from the management to employee level. Leaders were experienced but were bureaucratic so only some people were getting benefit from this. Ethnocentricity behaviors were seen in most of the employees as well as the management level that they know better than others.

After Babcock Marine, a private sector company was given the management the face of Faslane changed. Babcock was able to transfer or change the mindset of people. Management brought new employees who have already dealt with changes and used them to successfully implement the change.  The change process became successful because of the active participation of employees. They were asked to collaborate and emphasized the importance of change. Now management became strong and staffs were given the power to choose their own team and make business plan. Now peoples were considered and they were having common objectives. With this flexibility there was a low power distance and there were unique management teams having different skills. In the same time, cost was reduced by reducing the management structure from 7 to 4. In addition, reduction of review period from 56 days to 6 days was a significant decisions made by the management. Reappointment of all jobs and cut off in jobs were also the major factor which helped the company to achieve its goals year by year.

But on the other hand, reducing the cost may hamper the quality of services being provided. Management is formal but individuals can create their own ideas and implement it. However such flexibility may damage hierarchy of organization and can be a serious problem. But due to this change process there has been a huge loss of jobs. This may affect the employees’ performance because of fear.

To sum up with, Faslane has gone through change process and it has totally changed its management as well as organizational structure. It has been able to achieve organizational goods within time limits. So, change is in favor of Faslane.

2.3  Internal Perspectives of Faslane

The resource based view of strategy states that the performance of an organization is explained by distinctiveness of its capabilities and capacity to maintain competitive advantage (Johnson, et al. 2011). Resources are defined as the assets owned by the organization whereas competences refer to the way the assets are used effectively, such as management and specialized capability.

                                             

2.4   Resource Analysis

Table 4 Resource Based View of Faslane (2002-2010)

Resource based View (VRIN) at Faslane
	Before 2001	2002-2010
Valuable	Buildings, infrastructures and facilities were valuable. Resources could be easily copied.	Human resources, flexibility and achieving goals are more valuable. Resources are hard to copy such as management skills and change management.
Rare	Lack of rarity in human skills.	Employees were brought who already faced changes. Heterogeneous management skills.
Inimitable	Lack of inimitable resources	Unique management skills. Knowledge about change and adaption.
Non-substitutable	Infrastructures and facilities were non-substitutable because the organization was a Naval based industry.	Employees were substituted by Babcok with skilled human resources. Human resources and infrastructure are non-substitutable.

For the comparative aspects of the internal features of the organization, it is clear that Faslane has sufficient resources to initiate change. The MOD first established partnering arrangements to build on Faslane’s intellectual capital, whereby Babcock further developed this by creating networks with companies undergoing similar changes. From a financial perspective, the MD spent the entire budget by means of routine whereas Babcock initiated a 5 year contract to encourage savings and improved operational efficiency.

2.5  Competence Analysis of Faslane (2002-2010)

Table 5

Competence Analysis
	Up to 2001	After 2002
Physical resources (Tangible)	Infrastructures and facilities were seen more important.	After the reconstruction, improvement in the infrastructure. Capacity has increased.
Financial resources (Tangible)	Government budget (taxpayer’s money) Over spending	Government budget. Able to minimize spending.
Human resources (Tangible)	Knowledge about running naval base.	Expert of change management. Heterogeneous management skills.
Intellectual capital (Intangible)	Buildings and infrastructures. Stakeholder relationship.	Unique management and organizational structure. Home base for entire UK submarines fleet.

The competence analysis indicates the many developments of Faslane. Babcock improved the functioning capability by re-engineering the review process, refining the process from 56 days to 6 days. The improved operational efficiency and Babcock further enhanced the specialized capability by re-aligning the workforce to become more autonomous. Similarly, both leaders saw the importance of internal and external linkages as te MOD transferred people with the knowledge and skills o running a naval base. The commodore saw partnering as an opportunity to which Babcock established these arrangements with industrial firms. These linkages can add value and skills set of the firm.

The comparison suggests that from 2002-2010, when Babcock ran Faslane, the changes initiated has encouraged organizational distinctiveness of its capabilities. Faslane is now in a more financially stable position, due to the savings and improved operational efficiency. The form now has the ability to maintain competitive advantage as it offers an improved service, with a better attitude, communication and responsiveness.

3. Strategic Leadership Style at Faslane

Strategic leadership is defined as “the ability to influence others in your organization to voluntarily make day-to-day decisions that lead to the organization’s long-term growth and survival, and maintain its short-term financial health”.

The model determines the four main principles leading to the development and communication of organizational purpose. It considers ethical standards, competitive advantage as well as incorporating stakeholder requirements..With the help of figure 1.5 we can compare the organization against the Five Elements of Successful and Effective Strategic Model.

Figure 3.1   Five Elements of Successful and effective strategic Leadership Model

                 

         Sources: Lynch, R., (2009) Strategic Management, 5th Edition, Prentice Hall, chapter 16, pp619

From 2002 to 2006 the Babcock marine managing Director was John Howie and from 2006 the Managing Director was Craig Lockhart. From the period 2002 there has been a significant change process. The main aim of giving away the management to Babcock was because it was more competitive, different targets, experienced management skills which are totally different from that of service sector. With the help of figure 1.5 we can compare the organization against the Five Elements of Successful and Effective Strategic Model.

In this section, let’s examine each elements of successful and effective strategic leadership Model:

 Ø  Developing and communicating the organizations’ purpose:

 The purpose to significantly reduce costs and improve operational effectiveness has been clearly defined and communicated within the company. Faslane changed their developing and communicating the organisations purpose by changing the infrastructure, promoting honesty and open discussions, changing the approach to customer service.

Ø  Sustaining Competitive Advantage over time :

The change in employees' mindset, speedier decision making processes, and more efficient operations clearly build the ground for sustainable competitive advantages over time. Improved sustaining competitive advantage over time by changing employee mindsets, cutting down the management layers, building joint business ventures. Babcock employed those people who have already faced change process. The best confirmation is that Babcock being private company has been successful in transferring culture of private organization to publically owned organization. With this competitive advantage, Faslane is expected to become home base for the entire UK submarines fleet.

Ø  Setting ethical standards:

A focus on spending money (people's taxes) to receive the same budget again was turned into a customer oriented one what finally led to the creation of more jobs (clearly more ethical in my opinion).  Set ethical standards by changing the money spending, bringing new jobs, building trust and honesty in the community.

 In the case of Faselane, the MOD made a five years contract with Babcock in order to minimize the spending by restructuring the organization. As it will be unethical to spend tax payers’ money it has maintained the standard of ethics. In addition, the management team was able to convince employs that they are for developing them.

Ø  Defining and delivering to Stakeholders

The parent company, the MOD, the Navy Board, the commanding officer, security people, the local community, etc. were defined as stakeholders and the production process was geared accordingly. Defined and delivered to stakeholders by building trust of the organization, understanding the importance of good allies and proving the good management. For example : To the Navy, the service was better than before. For MOD, Babcock was able to meet the target by which it has satisfied both the stakeholders.

Ø  Managing human resources & organizational decisions

Management of HR primarily happened in bringing change specialists from Babcock to sustain the change process at Faslane and in cutting jobs (mostly management people) to flatten the organization’s hierarchy. Managed human resource and organizational decisions by changing layers of management and creating 2000 new jobs.

Hence, it can be said that they have used the Lynch Model properly and Faslane was very successful by utilizing all its resources to achieve its goals and objectives that is cost saving. It has been found that with its good performance, it was able to meet its target and was able to manage the entire UK submarines fleet.

3.1 The Transcendent Leadership Model

The forms of leadership contains; the organization, self and others. It centralizes nonhuman elements such as strategy, structure, rules and procedures. Similar to the Lynch model, it interprets the changing external environments, presenting the bigger picture to organizational members. This offers a coherent unifying approach that enables the alignment of strategy: organization and environment. Transcendent leadership model consists of:

Ø  Leadership of organization         

Ø  Leadership of self

Ø  Leadership of others

Figure 3.2             Transcendent Leadership at Faslane (2002-2010)

                   Sources: Nixon., (2009) Strategic Management, 5th Edition, Prentice Hall

 3.2  Cultural Influences:

Culture is the characteristics of a particular group of people, defined by everything from language, religion, cuisine, social habits, music and arts.

Shaping the firm’s culture is deemed central to effective strategic leadership. It is imperative to encourage employee autonomy and entrepreneurial orientation to sustain further development .However, Johnson,(2011) deems this difficult to observe and manage , hence why analyzing culture is imperative due to its influence on strategy .

Figure 3.3

Source: @2002, Alicia M. Rodriguez , M.A. Execuive Coach.

CONCLUSION

The case study showed that especially during times of change an exchange of know-how is vital. This transfer must happen between new and experienced employees, generalists and specialists, and so on.

In addition, it became apparent that cost reductions and service improvements are possible at the same time. What is needed is a clear goal (strategic leader's responsibility), a certain autonomy for employees (limited autonomy is likely to be ineffective due to long decision making processes) and the inclusion of all affected stakeholders in the change process (customers, employees, local community, etc. in case of Faslane).

Faslane has been able to comply with all the five elements of Successful and effective strategic leadership. It was able to communicate organization’s purpose to all the stakeholders. It was also successful in maintaining ethical standard as well as managing human resources. With its good performance, it was able to meet its target and was able to manage the entire UK submarines fleet.

Evidence for this leadership style being effective can be seen in the decision that Faslane would become the home base, not just for nuclear submarines but for the entire UK submarines fleet which means up to 2000 more jobs.    

Faslane was very interesting case study and thought us a lot about organizations management and how can smart changes affect everything.

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