Dr. Michael A. McGinnis, C.P.M., A.P.P.
Dr. Michael A. McGinnis, C.P.M., A.P.P., Professor of Marketing and Logistics, University of South Alabama, Mobile, AL 36688-0002, 334/460-7907 (FAX) 334/460-7909.
ABSTRACT. Purchasing professionals face three challenges when managing change. They are: managing change within their own organizations, managing change with suppliers, and coordinating change among multiple buyer-seller departments. This paper presents insights into managing change, including dealing with resistance to change; the role of organizational culture in change management; and applying these insights to the change management challenges faced by purchasing professionals.
INTRODUCTION. Over the last twenty years the need to effectively manage change has increased dramatically due to rapid changes in technology, the need to respond to rapidly changing markets, an increasingly changing global competitive environment, and constantly changing work forces and supplier bases.
The challenge of change management processes is to (a) develop organizational structures, rewards, and practices appropriate for a situation without (b) disrupting operations, adversely affecting organizational performance, and damaging morale. While these challenges are seldom totally achieved, effective change management can help. The balance of this paper discusses change management, organizational culture's role in change management, and the application of change management basics to situations faced by purchasing professionals.
CHANGE MANAGEMENT. (This section draws on the writings of Vijay Sathe, Culture and Related Corporate Realities: Text, Cases and Readings on Organizational Entry, Establishment, and Change (Homewood, IL: Richard D. Irwin, Inc., 1985). Especially Chapter 11.) Resistance to change is overcome when people are motivated to change, know what new behavior is expected of them, and the change process is appropriate for the situation. This relationship can be shown as follows:
Motivation refers to the intrinsic or extrinsic drives of those participating in, or affected by, the change effort. Model refers to the examples set by management, patterns of activity, and settings for interaction. Method refers to the dealing with resistance to change, implementation speed, and the orchestrating of change. If motivation, model, and method are not present then the resistance to change will not be overcome. Managers usually spend too much time on model and too little time on motivation and method. The following paragraphs discuss resistance to change, motivation, model, and method and then review their implications for purchasing professionals.
Resistance. Resistance to change can be due to the nature of the current psychological contract, parochial self-interest, honest differences of opinion, low tolerance for change, or a combination of these issues. The psychological contract is the set of expectations and obligations that each party in a relationship assumes. A buyer who performs his/her job well with the expectation of favorable performance reviews is an example of a psychological contract. The expectations and obligations in a psychological contract may be explicit or implicit.
Parochial self-interest, where someone feels that they have something to lose from the change, is another source of resistance. Perceived loss of status, income, influence, or respect can cause an individual, or organization, to frustrate a change effort. For example, a change in a purchasing department where a senior buyer's staff is reduced from three subordinates to one may be perceived as a loss of status even though the senior buyer is given greater electronic purchasing support, greater decision authority, and a substantial pay increase.
In many instances, honest different points of view can result in resistance to change. For example, one purchasing manager may feel that the best way to increase purchasing efficiency is to centralize buying of high volume items at corporate purchasing, while another purchasing manager may feel that this objective is best accomplished by designating lead buyers at plants that are the heaviest users. Finally, many individuals have a low tolerance for change. For these people, and that includes most of us, a significant change from what they are used to is stressful.
A number of techniques for dealing with resistance to change are summarized in Exhibit 1. As demonstrated later in this paper, a combination of techniques will be used in most situations. This maximizes the advantages and minimizes the disadvantages of the approaches selected. Two techniques should be used with caution. First, manipulation & co-option are frequently used when the change initiators have little time to accomplish the change, or did not adequately anticipate and plan for change. This technique almost always leaves those resisting the change feeling betrayed. As a result future relations are likely to be frustrated by the mistrust of those individuals. Second, negotiation should be used only when those resisting change know that they have the power to resist.
Motivation. Motivation refers to the drive directed to a specific action. Intrinsic motivation is the inner drive directed to a specific action. Extrinsic motivation is a drive resulting from an external stimuli, such as rewards or punishment. In managing change the preferable motivation is intrinsic, where the new behavior becomes internalized and responses occur without external stimuli.
Model. Model refers to techniques of change management, such as examples set by management, patterns of activity, and settings for interaction. Examples set by management are important because a "do as I say, not do as I do" approach will undermine the change effort. Patterns of activity, such as role modeling by change initiators or building on early successes, provide reinforcement for those participating in the change. Settings for interactions, such as the location of meeting or training sessions and the establishment of priorities, can help create a climate conducive to change.
Designing Effective Change Strategies. Ultimately, the responsibility for managing change rests with top management. However, you can manage change within the limits of your influence and authority. Common errors in managing change are (1) a low awareness of the current psychological contract, (2) a lack of sensitivity regarding the impact change will have on the psychological contract, and (3) failure to adequately communicate with those affected by the change.
Exhibit 1: DEALING WITH RESISTANCE TO CHANGE (1)
Approach : Education & Communication
Commonly Used: Where there is a lack of/or inaccurate information & analysis.
Advantages: Once persuaded, people will often help with implementation.
Disadvantages: Can be very time consuming if too many people are involved.
Approach: Participation & Involvement
Commonly Used: Where initiators do not have all information and others have the power to resist. Advantages: Participants will be committed to implementing the change & will share information.
Disadvantages: Can be very time-consuming if inappropriate change is designed.
Approach: Facilitation & Support
Commonly Used: Where resistance is due to adjustment problems.
Advantages: No other approach works as well with adjustment problems.
Disadvantages: Can be time-consuming and still fail.
Commonly Used: Where resistors have considerable power to resist.
Advantages: Sometimes is a way to avoid major resistance.
Disadvantages: Can alert others to negotiate for compliance.
Approach: Manipulation & Co-option Commonly Used: Where other tactics will not work, or are too expensive. Advantages: Can be a quick and low cost solution to resistance problems. Disadvantages: Can lead to future problems if people feel manipulated.
Approach: Explicit & Implicit Coercion
Commonly Used: Where speed is essential and initiators have considerable power.
Advantages: It is speedy and can overcome any kind of resistance.
Disadvantages: Can be risky if it leaves individuals angry with the initiators.
Commonly Used: A combination of approaches are used simultaneously.
Advantages: May optimize the advantages and minimize the disadvantages of the alternatives selected.
Disadvantages: May bog down in finding the "optimum" approach.
(1) Adapted from George A. Steiner, John B. Miner, and Edmund Gray, Management Policy and Strategy, 2nd ed. (New York: Macmillan Publishing Co., Inc. 1982), p. 458.
Six overlapping steps affect the effectiveness of change processes. They are: (1) creating the awareness of the need for change, (2) diagnosing the situation, (3) determining the direction of change, (4) effective communications, (5) monitoring and adjusting the process, and (6) using your knowledge of organizational culture and psychological contracts to understand and manage resistance to change.
Greater amounts of power and longer amounts of time favor the change initiator. Change management is almost always more difficult in organizations with strong cultures and in larger organizations.
CULTURE. While the change management literature focuses on culture within the firm, the purchasing professional faces the challenge of managing change in the inter-organizational cultures of buyer-supplier relationships. This section focuses on culture within an organization. An application of change management in inter-organizational cultures will be discussed later.
Culture is the set of shared assumptions, internalized values, and internalized beliefs shared by those in the organization. The dimensions of culture are thickness (the number of shared assumptions, values, and beliefs), extent of sharing (extent to which the assumptions, values, and beliefs are widely held), and clarity of ordering (the extent that conflicting assumption, values, and beliefs take precedence over each other). A strong culture is thick, widely shared, and clearly ordered.
The culture can inhibit or facilitate change. Change that is consistent with the culture will be facilitated. For example, if a new order processing procedure is consistent with the cultural value of "take care of the internal customer" then the change will meet less resistance. Change that conflicts with the culture will be resisted. For example, a change which conflicts with the cultural value "nothing is done without proper authorization from all interested parties" will be resisted.
Changing an existing culture is usually difficult and time consuming. Because of the difficulty of changing culture, four techniques that can be helpful include: (1) obtaining the desired results without changing the culture; (2) obtaining the desired results by creatively using the potential of the culture; (3) obtaining the desired results by creatively using the latent potential of the culture; and (4) obtaining the desired results by using intrinsically appealing assumptions, values, beliefs.
APPLICATIONS OF CHANGE MANAGEMENT TO PURCHASING. In this section three scenarios are presented. First is a situation involving change within a purchasing department, second is change involving suppliers, and third is change involving multiple departments of the buyer and seller organizations.
Managing Change In The Purchasing Department. The change in this situation occurred because the firm needed to become more cost competitive. This meant that the purchasing staff had to become less transaction and more process oriented. The purchasing manager met with each member of the department. The resulting evaluations indicated that individuals needed additional skills in the areas of negotiation, supplier selection and evaluation, supplier management, team participation, interdepartmental coordination, and problem solving. The manager developed individualized professional development plans in consultation with each person in the department.
The direction of change consisted of eight components: emphasis on A.P.P./C.P.M. certification within two years, an increase in the professional development budget, educational assignments with other departments, a program of facility visits to key suppliers, the development of supplier evaluation and supplier certification programs, a revision of performance evaluation criteria, a commitment to the computerization of purchasing procedures, and recognition in the company newsletter. Monthly purchasing department meetings were held to review and revise progress. Goals were revised (up or down) based on these meetings.
The manager explained how the change program would help several employees achieve their goals of being on a winning team and playing an important part in the firm's success. Resistance to change was managed through a combination of education & communication (professional development, visits to other departments and suppliers, revision of the evaluation system, and monthly meetings), participation & involvement (development of supplier evaluation & certification programs and computerized purchasing processes), facilitation & support (one-on-one meetings, increased commitment to professional development, recognition in the company newsletter, and monthly department meetings), negotiation (revised goals based on monthly meetings), and implicit coercion (revised the performance evaluation criteria). Two cultural values that facilitated the change process were "we are a winning team" and "we can get the job done."
After three years the focus of the department had changed, all original goals had been reached, and a second cycle of "reinventing purchasing" had begun.
Managing Change In The Supplier Base. Many organizations have implemented supplier evaluation and/or supplier certification programs over the years. Other firms have developed programs of supplier development. This example explains how a purchasing department developed two marginal suppliers into winners. Problem recognition occurred when the evaluation of five current suppliers revealed that none of them were satisfactory. Exhibit 2 summarizes this evaluation.
Exhibit 2: COMPARATIVE SUPPLIER EVALUATION
||Minimum Acceptable Score
|Meet Scheduled Deliveries
|Quality of Management
(1) Scale: 5 = Excellent, 4 = Very Good, 3 = Average, 2 = Weak, 1 = Poor
Purchasing explained to each supplier that reliable sources who could meet total performance needs were needed, that suppliers meeting total performance needs would be certified, and that future preference would be given to certified suppliers. After evaluation, it was concluded that suppliers B, D, and E were either unable and/or not committed to the supplier certification process. Suppliers A and C agreed to seek supplier certification.
The direction of change consisted of five phases. First, the purchasing manager obtained management commitment for a supplier certification program and formed evaluation/certification teams to implement the concept. The teams included representatives from purchasing, engineering, quality control, scheduling, and production. Each team was coordinated by the purchasing representative. Second, comprehensive visits to supplier facilities by evaluation/certification teams were conducted. Third, the buyer's teams identified areas for improvement in cooperation with each supplier. Work with supplier A focused on identifying areas for cost improvement, developing quality control procedures, and identifying areas for management development. Efforts with Supplier C centered on bringing technical ability up to "excellent," improving quality control processes, and developing production scheduling and delivery systems.
Fourth, regular meetings, and excellent efforts by suppliers and team members, resulted in both supplier A and C being certified within twelve months. After two years both suppliers met minimum acceptable scores in all five areas and exceeded minimum acceptable scores in two areas. Fifth, business was awarded on the basis of annual audits with one supplier being awarded 70% of annual requirements and the other supplier being awarded 30% of annual requirements. Each year the annual audit is used to reevaluate supplier share. Diagnosing the situation, determining the direction of change, use of effective communications, monitoring and adjusting the change process, and using the psychological contract all worked together to achieve the desired change in suppliers A and C.
Change Management Among Buyer and Supplier Departments. In the previous example, changes in the interactions among buyer and supplier engineering, cost, quality, scheduling, and management personnel required change efforts within each firm and between buyer-supplier pairs of firms. Key issue in managing change among multiple departments included (1) developing well thought out processes for supplier evaluation and certification by the buyer, (2) insuring that the cultures of the firms are compatible - or at least not incompatible, (3) the thoroughness of preparation by all individuals, (4) complete documentation of the roles of all departments in buyer and supplier firms, (5) the development of working relationships through regular meetings, (6) the continuous emphasis of trust and good faith in all dealings among all individuals, and (7) having conflict management processes in place.
CONCLUSION. The insights provided in this paper are applicable to change management within the purchasing department, with suppliers, and among multiple departments of buying and selling organizations. The six fundamental steps of creating the awareness of the need for change, diagnosing the situation, determining the direction of change, effective communications, monitoring and adjusting the change process, and managing resistance to change provide a useful framework for purchasing professionals in all three situations.
Managing change within purchasing departments, with suppliers, or among multiple departments of buying and selling firms is always challenging. However, the concepts of change management can help these processes work more successfully, smoother, faster, and with less stress.