Change management

1. ASPECTS OF FINANCIAL RISK :
CHANGE MANAGEMENT
&
IT RISK MANAGEMENT
MSC ACCOUNTANCY & FINANCE :
CORPORATE GOVERNANCE
& OPERATIONS RISK ANALYSIS AND CONTROL
Stephen Ong
BSc(Hons) Econs (LSE),
MBA International
Business(Bradford)
Visiting Fellow, Birmingham City University
Visiting Professor, Shenzhen University

2. • Discussion : CEO Hubris1
• Change Management
• IT Systems Failure
• End User Computing Risks
2
• Case Presentation: IBM3
Today’s Overview

3. 1. Open Discussion
• Petit, Vale´rie and Bollaert, Helen (2012)
Flying Too Close to the Sun? Hubris Among
CEOs and How to Prevent it, Journal of
Business Ethics, 2012: 108: pp.265–283.

4. Change Management
• Identify types of required strategic change.
• Analyse how organisational context might affect
the design of strategic change programmes.
• Undertake a forcefield analysis to identify forces
blocking and facilitating change.
• Identify and assess the different styles of leading
and managing strategic change.
• Assess the value of different levers for strategic
change.
• Identify the pitfalls and problems of managing
change programmes.

5. Key elements in managing
strategic change
Diagnosis
Leading and
managing
change
Levers
for
change
Managing
change
programmes

6. Managing change – key issues
Four key premises:
Strategy matters – in identifying the need for change
and the direction of change.
Context matters – the right approach to change
depends on the circumstances.
Inertia and resistance – getting people to change
from existing ways of doing things is essential.
Leadership matters – good leadership of change at all
levels is needed.

7. Diagnosing the change context
Types of change Context of change
Forcefield analysis

8. Types of strategic change
Figure 14.2 Types of change
Source: Adapted from J. Balogun and V. Hope Hailey, Exploring Strategic Change, 3rd edition, Prentice Hall, 2007

9. Types of strategic change
Four types of strategic change:
Adaptation – can be accommodated with the existing
culture and can occur incrementally.
Reconstruction – rapid change but without
fundamentally changing the culture.
Revolution – fundamental changes in both strategy
and culture.
Evolution – cultural change is required but this can be
accomplished over time.

10. The importance of context
Figure 14.3 The Change Kaleidoscope
Source: Adapted from J. Balogun and V. Hope Hailey, Exploring Strategic Change, Prentice Hall, 2007

11. Forcefield analysis
A forcefield analysis provides an initial view of
change problems that need to be tackled by
identifying forces for and against change.
Various concepts and frameworks are useful
here:
 Mapping activity systems.
 Stakeholder mapping.
 The culture web.
 The 7-S framework.

12. A forcefield analysis for the
UK forestry commission

13. Strategic leadership roles
Leadership is the process of influencing an
organisation (or group within an organisation) in its
efforts towards achieving an aim or goal.
Three key roles in leading strategic change:
 Envisioning future strategy.
 Aligning the organisation to deliver that strategy.
 Embodying change.
N.B. Middle managers have a key role in leading change as
well as senior managers.

14. Newcomers and outsiders
‘Outsiders’ can also play an important role in
strategic change.
These could include:
• A new chief executive from outside the
organisation can bring a new perspective.
• New management from outside can also
increase the diversity of ideas.
• Consultants are used to help formulate strategy
or to plan the change process.

15. Styles of strategic leadership
Situational leadership – successful strategic leaders are
able to adjust their style of leadership to the context they
face.
Two approaches:
– Theory E: the pursuit of economic value; top-down;
‘hard’ levers of change; emphasis on changes of
structures and systems, financial incentives,
portfolio changes, downsizing.
– Theory O: the development of organisational
capability; emphasis on culture change, learning,
participation in change programmes and
experimentation.
• A combination of the two approaches may be required and
can be beneficial.

16. Styles of managing change
Education/
Delegation
Participation Collaboration
Direction Coercion
Styles of
Managing
Change

17. Styles of managing change (1)
Education and delegation – Small group briefings to
discuss and explain things. The aim is to gain
support for change by generating understanding and
commitment.
Advantages – Spreads support for change. Ensures a
wide base of understanding.
Disadvantages – Takes a long time. For radical change it
may not be enough to convince people of the need for
change. Easy to voice support, then do nothing.

18. Styles of managing change (2)
Collaboration – Widespread involvement of the
employees on decisions about what and how to
change.
• Advantages – Spreads not only support but
ownership of change by increasing levels of
involvement.
• Disadvantages – Time-consuming. Little control over
decisions made. May lead to change within existing
paradigm.

19. Styles of managing change (3)
Participation – Involvement of employees in how
to deliver the desired changes. May include limited
collaboration over aspects of ‘how’ to change as
well as ‘what’ to change.
Advantages – Spreads ownership and support of
change, but within a more controlled framework.
Easier to shape decisions.
Disadvantages – Can be perceived as manipulation.

20. Styles of managing change (4)
Direction – Change leaders make the majority of
decisions about what to change and how. Use of
authority to direct change.
Advantages – Less time-consuming. Provides a
clear change of direction and focus.
Disadvantages – Potentially less support and
commitment, and therefore proposed changes may
be resisted.

21. Styles of managing change (5)
Coercion – Use of power to impose change.
Advantages – Allows for prompt action.
Disadvantages – Unlikely to achieve buy-in without
a crisis.

22. Levers for change
A compelling case for change
Challenging the taken-for-granted
Changing operational processes and routines
Symbolic changes
Power and political systems

23. Organisational rituals and change
Table 14.2 Organisational rituals and change

24. Political mechanisms in organisations
Table 14.3 Political mechanisms in organisations

25. Change tactics
• Timing:
 Building on an actual or perceived crisis.
 Exploiting windows of opportunity.
 Symbolic signalling of time frames.
• Visible short-term wins – the demonstration of
such wins can galvanise commitment to the wider
change strategy.

26. Turnaround strategy (1)
A turnaround strategy is where the emphasis is on
speed of change and rapid cost reduction and/or
revenue generation.

27. Turnaround strategy (2)
Elements of turnaround
strategies:
Crisis stabilisation.
Management changes.
Gaining stakeholder support.
Clarifying the target market(s)
and core products.
Financial restructuring.

28. Turnaround strategy
Table 14.4 Turnaround: revenue generation and cost reduction steps

29. Managing revolutionary change
Managing change in such circumstances is likely to
involve:
• Clear strategic direction.
• Combining rational and symbolic levers.
• Multiple styles of change management.
• Working with aspects of the existing culture.
• Monitoring change.

30. Managing evolutionary change
Managing change as evolution involves transformational
change, but implemented incrementally. This requires:
 An empowering organisation.
 Clear strategic vision.
 Continual change and commitment to
experimentation.
 Identifying interim stages and targets.
 Use of irreversible changes.
 Sustained top management commitment.
 Winning hearts and minds.

31. Why change programmes fail
Research into why change
programmes fail indicates
seven main failings:
1. Death by planning.
2. Loss of focus.
3. Reinterpretation of change
in terms of current culture.
4. Disconnectedness.
5. Behavioural (only)
compliance.
6. Misreading scrutiny and
resistance.
7. Broken agreements and
violation of trust by
management.

32. Change Management Summary (1)
• Types of strategic change differ in terms of:
– extent of culture change required;
– incremental change or urgency
• Aspects of organisational context (as shown in the
Change Kaleidoscope) include:
the resources and skills that need to be preserved,
 the degree of homogeneity or diversity in the
organisation,
the capability, capacity and readiness for change,
 the power to make change happen.
• Different approaches to managing change are likely
according for different types of change and context.

33. Change Management Summary (2)
• Forcefield analysis is a useful means of identifying blockages to
change and potential levers for change.
• Situational leadership suggests that strategic leaders need to
adopt different styles of managing strategic change according to
different contexts and in relation to the involvement and
interest of different groups.
• Levers for managing strategic change need to be considered in
terms of the type of change and context of change. Such levers
include building a compelling case for change, challenging the
taken-for-granted, the need to change operational processes,
routines and symbols, the importance of political processes, and
other change tactics.

34. IT SYSTEMS FAILURE
&
END USER COMPUTING
RISKS

35. How Critical is IT to Business?
• Does it depend on the
business?
– Amazon? ($31,000 / min
globally (2008))
– Asda?
– Small shop?
– One man business?
• NOTE: the question is
NOT how much IT do
they use?

36. Information systems Projects
Frequently Fail!
• 50%-80% FAILURE rate in large projects
• Compare with building an office block!
– Project sponsor
– Architect
– Civil engineers
– Electrical engineers
– Mechanical engineers
– Project managers
– etc

37. How SHOULD IT systems be put
together?
• With similar engineering
principles
• Good governance
– Who is in charge of IT
systems?
• Good project
management
• Appropriate people!

38. Three Keys to Project Success
• Top level management
support
• A sound methodology
• Solid technical leadership
– Someone who has
successfully completed a
similar project before!

39. Top Management Support
• Without full commitment – problems will
occur
• Must stay behind project when problems
occur
• Managers need to be educated on what
progress they will see
• Managers often don’t understand what they
see

40. Development Methodology
• Lack of attention to process can kill a system
• Many systems built with little thought
– Why?
• Major areas of user requirements ignored
– Why?
• Large amounts of code need to be rewritten
– Why?
• If completed, system often put into place with
inadequate testing
– Why?
• We can see that without a well thought out process
there is little chance a system will be completed!

41. Development Methodology
• Surprisingly WHICH methodology doesn’t
matter
– Many different
• UML
• SSADM
• Yourdon
• Soft Systems
• What matters is a methodology is used!
• All methodologies gather the same
information but organize it differently and
view the system differently

42. Solid Technical Leadership
• Technical lead must be in
control of the
“architecture”
– The data model
– Application design
• If no overall control the
pieces won’t fit together
• Must have built similar
systems before
– Requires experience

43. Other Factors
• Cost
• Quality
• Speed
• Risk

44. 10 Ways to Guarantee Failure of a
Systems Project
1. Don’t use a specific methodology because coding is all that is really
important
2. Create the project plan by working backwards from a drop dead system
completion date
3. Don’t bother with a data model. Just build whatever tables you need
4. Use a technical lead that has never built a similar system. Hiring such a
talent is too expensive
5. Hire 40 developers to make the coding go faster
6. Build the system in Java, even though most of the development team
still thinks that Java is coffee and you have no intention of ever
deploying to the Web
7. Three months before the system goes live, assign one junior developer
to handle the data migration.
8. Skip the testing phase because the project is way behind schedule.
9. Change the system to support critical new requirements discovered
during final development.
10. Buy a commercial, off-the-shelf package and customize it … a lot.

45. Conclusions
• Don’t cut corners, methodologically. In the long
run, this results in system failure or an
inadequate system that doesn’t meet the users’
needs.
• Audit each major deliverable and step along the
way for accuracy and correctness.
• Carefully monitor top management support for
the project. Make sure that managers are aware
of the progress of the team.
• Secure the correct technical lead for the project.

46. So Now You Have a Working System
• Surely nothing else can go wrong?
– Requirements change over time
– Software / Hardware become obsolete
– People change
– Natural disasters
– Non natural disasters
– Security breaches
– Data loss
– Virus
– etc

47. What is Important in IT
• Good Governance
– Should avoid many of the issues discussed
• COBIT
– Including VAL IT & RISK IT
• At the highest level governance means:
– Including and implementing the mission, vision and strategy
– Having an appropriate management structure to manage the
function
– Having a suitable organisational structure in place to
undertake the work required
– Implementing some form of performance management of
senior managers to ensure targets are achieved and
strategies successfully implemented
– An effective level of management to achieve the objectives
of the function

48. Information systems governance
• Day to day aspects include
– Liaison between IS and wider organisation
– Controlling the IS function
– Managing the workflow to achieve requirements
– Compliance
– Managing budgets and expenditure
– Ensuring accountability and transparency
– Developing the function to meet forward needs
– Managing and controlling changes

49. COBIT
• Control objectives for
information and related
technology
• Set of best practice /
framework
– 4 areas
– 34 high level processes
– 210 control objectives

50. COBIT
Plan and
Organise
Acquire
and
Implement
Deliver
and
Support
Monitor
and
Evaluate

51. Val IT
• Collection of proven management practices
• Fosters the partnership between IT and rest
of business

52. Val IT

53. Risk IT
• New framework
• Looks at how to ensure value from IT
• Fits COBIT framework

54. Exercise
• Evaluating a system

55. End User Computing
User created or acquired systems that are
maintained and operated outside of
traditional Information Systems Controls.

56. Traditional Communication Chain
Database
Administrator
User
Business
Analyst
Programmer Operator Computer
Network
Specialist

57. End-User Computing (EUC)
• End-user computing
– Development of all or part of applications
– Information specialists act as consultants
• Stimulants to EUC
– Increased computer literacy
– IS backlog
– Low-cost hardware (the PC)
– Prewritten software (electronic spreadsheets)

58. IS and EUC
The End-User Computing Communication
Chain
User Computer
Information
Specialists
Support
Communication

59. Why has EUC Grown
• Declining costs and increasing functionality of
hardware and software
• Increasing importance of information + more timely
access to management information
• Inability of organisations to satisfy demands of users -
users more self reliant.
• Aggressive marketing of EUC computing by vendors
of software and hardware.
• IS Costs
• Users seek alternatives
• Increased interest in and familiarity with computers
• Often compliments de-centralised organisational
philosophy

60. Where does EUC happen?
Strategic
Tactical
Operational

61. Benefits of EUC
1. Increased flexibility and responsiveness -
Management Information
2. User Self Reliance
3. Reduced Development Life Cycle
4. Reduced costs
– Development
– Maintenance
– Support
5. Ability to respond to competitive pressures

62. Concerns
• In many organisations, EUC operates in an
unstructured environment.
• Traditional IS procedures may be
circumvented
• Formal review procedures may not exist
• Removes / distracts users from core role
• Undermining of Purchasing department

63. Metaphor

64. EUC Risks
1. Poorly aimed systems
2. Poorly designed/ documented systems
3. Inefficient use of information
resources
4. Loss of data integrity
5. Loss of security
6. Loss of control

65. PROMPT
Presentation Use of language, style, layout
Relevance Is the information relevant geographically, is the
emphasis correct, is the level of information what
you desire
Objectivity Are the authors likely to be objective? Do they
have a balanced perspective, use emotive
language, have biased opinions or financial
backing of an interested party?
Method If it is a research paper, is the research laid out
clearly, were appropriate methods used etc
Provenance Can the source be traced? Are the authors or
organisations involved named?
Timeliness Is the information dated clearly and is that date
applicable to your needs or might the
information already have become obsolete?

66. Exercise
• Read the paper
–Mitigating Security Risks for End
User Computing Application
(EUCA) Data
• Evaluate the paper using the
PROMPT criteria

67. EUC Findings
• Has experienced tremendous growth
• Growth should continue
• It’s getting easier
• But, many traditional controls may be
overlooked
• Or - some controls may not be appropriate
for the environment.

68. The Strategic Implications of
End-User Computing (EUC)
• Levels of end users in
terms of capabilities
– menu-level end users
– command-level end users
– end-user programmers
– functional support
personnel
• EUC application
considerations
– shifts workload so that
end-users and information
specialists’ talents are
better used
– reduces communications
gap

69. Core Readings
• CIMA - Performance Strategy: Study Text (2011)
BPP Learning Media Ltd. Part D : 13 & 14
• Johnson, Scholes & Whittington (2012) Ch.14

70. Ideas for Discussion
• Abernethy, Margaret A. and Brownell,
Peter (1999) The role of budgets in
organizations facing strategic change: an
exploratory study, Accounting,
Organizations and Society No.24 : pp.189-
204

71. Casestudy 5 : Gertsner’s Pay
Package at IBM
Read and prepare the
Casestudy on Gertsner’s
Pay Package at IBM
(Monks & Minow (2011))
for discussion next class.
Identify the corporate
governance issues faced.
You are required to:
–Map out the stakeholder
power/interest issues.
–Evaluate the executive
compensation & incentives
scheme and model of
executive succession
planning.
–Propose a more equitable
scheme and model to
satisfy all stakeholders.

72. QUESTIONS?