Question

Kotter’s eight step change management model can be applied to an actual example such as the change management challenge which Lou Gerstner faced at IBM.

In your answer, discuss the topic of Change Management, including Kotter’s eight step change management model and an example of how it can be applied to a real scenario, drawing on any relevant findings you discovered in your research.

Answer 1

Kotter’s eight step change management model as following:

1 – Institute a sense of urgency: Identify the competitive realities facing the organization:

2 – Develop essential Alliance – Assemble a group with enough power to implement the changes.

3. Form a vision for change: link change to an overall vision that people can Identify.

4.Talk about the vision – communicate the vision frequently and enthusiastically with all employees

5. Remove obstacle: Change any system or structure that undermine the vision.

6. Generate short term wins: Success is great motivation.

7.Build on wins: Create wining culture but always remain focus on long term.

8. Implant changes in the organization culture

April 1993, Louis Gerstner—an outsider to IBM and the information technology (IT) industry—became the new CEO of IBM.

At that time IBM which has such a great company, with no competitors and seemingly unlimited resources, almost going to bankrupt.

being the CEO of IBM would appeal to many IT people. But by 1993, most people presumed that IBM was probably going to perish and nobody wanted to risk their status by taking on an impossible job. One by one, the big names in the computer industry refused the job. Slowly, the attention shifted to Louis Gerstner. Gerstner started as a consultant for McKinsey & Company. At McKinsey, Gerstner was engrossed in a culture of hard debates. It didn’t matter whether the best idea came from the youngest associate or the most senior partner. What mattered was getting to the right answer.

He developed a style where he enforced employees to think about long term strategies His expertise was turning companies around and making them profitable again. After talking to the board of directors of IBM, he understood that this knowledge would be for the job. More important, he was an IBM outsider, so he was not “polluted” by the IBM corporate culture.

On his first day He called the heads of the IBM divisions and asked them to produce a five-page report that answered the following questions:

1. What business are you in?

2. Who are your customers?

3. What is your marketplace?

4. What are your strengths and weaknesses?

5. Who are your main competitors?

Gerstner told them, “Stop lying. I should to know the facts, however worst they are. Nobody will be punished for carrying bad news. People will be penalised for hiding bad news.”

He broke another tradition by sending e-mails to the whole company. Nobody had done that before. It was personal and informal. It was a sign that Gerstner wanted IBM to change its way of doing things.

As IBM had always sold its products at prices 30 or 40 % higher than its competitors and its market share had started to fall intensely. his first decisions was to cut the price of IBM mainframes to be at the same level as the competition. it helped stabilize the business.

In 1993 IBM announced that 35K employees were reduced. People appreciated this act because it was a quick, decisive move rather than a slow process of retiring “old” employees. His philosophy was to cut quickly, get the pain over with, and focus on building.

the key for Gerstner orbited around changing IBM’s corporate culture. The initial values in the corporate culture were the inheritance of Tom Watson and dated back to the 1950s. These values became a permanent part of the IBM culture but in a negative, inaccurate way. Almost 50 years later, IBM had become so successful that the company was looking inside, not bothering with outside (the marketplace). IBMers thought they were the best and were extremely arrogant and took things for granted. Gerstner saw a lot of good in the old style IBM values. But he wanted IBM to change, so he created a sense of urgency. He wanted to get other people inside IBM to accept the need for change. The biggest decision was to stop the “job for life” policy. From now on, if you they did not perform, they got fired. Similarly, he wanted employees to playe political games inside the company to get out. He told 5,000 IBM employees to become volunteers to make the change happen and persuade other employees to change. The change was characterized by a new building: smaller, discrete, modern, with few offices but lots of open space. When he joined IBM, Gerstner was shocked at first. He has described the first IBM meeting he attended. There were a few managers and many administrative assistants who seemed to be doing nothing productive.

To make sure people understood the significance of leadership, Gerstner created the Senior Leadership Group (SLG). To belong to this group—about 300 people out of 300,000 employees—you had to perform and deliver leadership and change in your department. Membership did not come with title or rank and was never permanent. Membership changed every year, and executives who were not invited back knew they had not performed. That sent a very vital signal to the company.

Gerstner visited IBM offices and factories all over the world. There were great ideas, great products, and great people, but nobody was executing well.

Gerstner identified a series of barriers. Often, this meant moving dead wood out of the way. It meant reallocating budgets, removing executives who did not want to change, and stopping internal wars. By the end of 1996, Gerstner observed that IBM was faster than before in getting new products to its customers.

Gerstner understood that the only way to be a leader is to demonstrate leadership. That means having the self-confidence and the communication skills to make a difference. In fact, for Gerstner, communication is the essence of leadership. That was the only way to gain the trust and loyalty of the IBM workforce. He spoke clearly, without any notes. He did not go into specific detail but he conveyed optimism and got people focused on customers.