Professional Documents
Culture Documents
Information Systems
BMO6624-Organisation Change Management
Assessment 4
Case Study Group Project
Submitted by
Sharon Brewster
STD No. 3059803
Andrew Camm
STD No. 3802955
Deb Maugey
STD No. 3807789
Abhishek Srivastava
STD No. 3798974
SECTION 1: INTRODUCTION
REFERENCE LIST
APPENDIX
i. Employee Questionnaire (Unanswered)
ii. Employee Questionnaire with answers, notes and comments
SECTION 1: INTRODUCTION
The type of change that Diebold went through in January of 2010 was a
change of structure and way of doing business which resulted in downsizing
an area of the organisation.
Fifteen (15) individuals were made redundant. Six (6) in New South Wales,
eight (8) in Victoria and one (1) in Western Australia. The area affected was
Service Operations where the direct resources employed as Security
Installation Technicians, positions were made redundant. The company
decided to outsource this labour via a subcontractor model instead.
This impacted the Project Managers who no longer had direct labour and the
Service Administration group who alternatively had to liaise with
subcontractors.
Diebold Australia Pty Ltd is part of a successful global public organisation listed on
the New York Stock Exchange that has been operating for more than 150 years.
They are a key provider of automatic teller machines (ATMs) and security equipment
to financial institutions, government, universities and commercial markets.
Diebold Inc. expanded their operations into the Australian market in 1997 by
purchasing Safetell International Security Ltd who manufactured rising counter
screens for banks, as well as bullet and blast resistant products.
It continued its diversification in the electronic security market by acquiring other
smaller security companies, Vangren Technology in 2003, TASC Security in 2005 and
Sound Security in 2006.
In all instances, one of the conditions of sale specified that every existing employee
of the company must be transferred across to Diebold, there was to be no positions
made redundant. This bought about many challenges for Diebold who already had its
own systems, processes and structure in place. This did not make for a smooth
transition of the companies into Diebold. This resulted in its own set of challenges
including segregation between companies who were still operating as separate
entities under the one roof.
Over the last two to three years, there has been a dramatic shift in this culture
through new management and voluntary attrition. However, this was still not
sufficient enough to justify the headcount compared to the revenue. Therefore, the
organisation has been through a series of redundancies, downsizing and
restructuring in the same time. Various employee benefits have been introduced for
the surviving employees, although there has still been an increase in the voluntary
turnover figures over this period also.
There are state offices in Sydney (head office), Melbourne, Queensland, Western
Australia and South Australia and employ approximately 130 associates nationally
(compared with 280, 3 years ago) and the annual revenue turnover is approximately
$40 million. Diebold has not made a profit for 5 plus years, and service margins have
either been in the negative or single digit range during that time also. This year
(2010) is the first year the company will make a profit since 2005.
300
2008
275 2009
260 256 258 2010
250 247 241
238 241 241 238 240 238 236 237
223 223
225
197
200
186
181
177 175
175 165 163 162 158
150 138
134 132 135 130 135 134
131
125
100
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Interviews were held with the following members (a copy of the questionnaire is in
the appendix, at the end of this report):
Managing Director
General Manager Service Operations
Project Managers x 3
National Project Coordinator
Contracts and Administration Manager
HR Manager
Strategic Account Manager (sales)
Administration staff x 2
Interview with all the members mentioned above contributed towards understanding
the situation at Diebold. All possible medium like reviews of email, questionnaires to
above mentioned key responsible persons, advice from External and Internal
consultants and details of sub-contractors agreement were all used to gather
information.
An email from the Managing Director was the start of this restructuring. The email
explained all the ETU EBA issues concerned with the Fair Work Act. A significant
amount of information was revealed through the General Manager Service
Operations as Service Operations being the area of significant restructuring where
Security Installation Technicians positions were made redundant. Furthermore,
discussion with Project managers was of great help, as dealing with the new
contractors and deciding on service level agreements and on-time customer service
was a challenge for the company.
The same set of questions were asked from National Project Co-ordinator, Contract
and Administration Manager, Strategic Account manager and Administration Staff to
analyse views in perspective of different departments and their responsibilities
towards the business as a whole. Lastly, how the company managed to bring in this
change and maintain trust within the existing employees through relevant training
and proper communication strategy was revealed by the HR Manager.
SECTION 2: Description of change process
The leadership group, who identified the need for change, was made up of the
following personnel; The Managing Director (MD), the General Manager of Service
Operations (GMSO) and the Human Resource Manager (HRM). The GMSO
was ultimately responsible for suggesting and deciding on the change,
however this was in consultation with both the MD and HRM.
The leadership group of Diebold identified a few reasons for the downsizing and
outsourcing of work within its organisation; however in summary, it was purely a
financial decision. The leadership group identified that Diebold needed to improve its
profitability, through a „better cost structure aligned with organisational goals of
increased margin and profitability‟. This meant lowering overheads, through
initiatives such as reducing its labour force and training program.
iii. What ‘tools’ did the leadership group use to decide to outsource?
Diebold had undertaken several organisational changes prior to the latest change.
Another organisational change was therefore not unexpected. Rumours of another
change persisted and employees „generally understood that meaningful change was
required. Over the last two years falling revenue had already resulted in several
phases of downsizing.‟ It was however still a shock to many, especially for those
directly affected by the change.
The leadership group held several meetings with relevant managers, once the
change had been decided, to communicate a strong and consistent message.
Individual meetings were then scheduled with the effected employees and an
external agency was engaged to support those exiting the business.
Once the effected employees had been advised, an email was sent by the MD to the
whole organisation communicating the change. A follow up email communication
was then sent to the whole organisation by the GMSO post organisational change.
The whole process was managed by the GMSO, with a great deal of support from
Project Managers and the HRM.
Despite several downsizing changes over the last two years and a widespread
knowledge amongst employees of falling revenue, it was still a shock and a
disappointment to many people.
Using the answers supplied in the interviews with employees, it is evident that there
is a disparity of views on the communication of the change. The GMSO for example
feels that sufficient information was given and effectively communicated. Other
employees however remarked that „there was not sufficient information offered to
employees.‟ This disparity of perspectives is not unexpected within organisations, as
Management and staff can often perceive things very differently.
Once the change had been announced, there were rumours that Diebold was „closing
up shop‟. This exposed further the ineffective communication supplied to employees,
who felt confused, disappointed, shocked and fearful of more job losses. It was
therefore left to direct Managers to explain the reason for change and contain the
emotions of employees.
It was not only the Technicians who were affected by the change. Several Project
Managers expressed disappointment at the decision, as many had worked with the
technicians for years. There was a period of adapting to the changes, as the
technicians had left with a wealth of valuable information and experience. This was
difficult for the remaining employees, especially as it meant an increased work load
for many.
Prior to the change, union and legal issues needed to be resolved, before the change
could commence. These obstacles were overcome with the assistance of an external
IRC. Entitlements were inspected and paid up in full. Despite the vocal and
behavioural response to the change, there was no legal or union reaction.
The first obstacle after the redundancies had taken place, was the availability of
technicians at short notice. This problem was compounded by the need for Diebold
to approve all subcontractors, regardless of whether they were previous employees
and thus qualified to perform the required tasks.
Other obstacles indentified included negativity, poor employee engagement and low
morale. Convincing employees that organisational change was the right thing to do
(to ensure short term stability), was the hardest obstacle management encountered.
The training of new sub-contractors was also a hindrance that effected day to day
operations.
Despite the obstacles, officially Diebold experienced only minor disruptions to it‟s
service, such as service reporting delays. The leadership group advised when
interviewed that there was „little to no customer impact‟. It has however emerged
that there is conflicting opinion on this matter, within the organisation and thus it is
difficult to measure the level of disruption accurately.
Initial communications from the GMSO seems to have failed. The results from the
interviews identified that resistance to change was largely ignored and the message
was inconsistent. Depending on the Manager, some were very direct with staff and
got agitated if they had to explain the reasons for change, whereas others focused
on the advantages.
Employee engagement has certainly been affected by the dwindling workforce over
the last nine months; however, discounting the redundancies, attrition for the
calendar year to date is 13.4% which is about the same as last year. This may be
explained by the fact that many remaining employees were part of the old „Diebold‟
or smaller company acquisitions.
There is therefore a perception that these people do not feel that they fit with the
new Diebold and the direction of the company and would explain why morale is low,
but attrition is unchanged. People possibly feel that as the company diminishes in
size, they will witness a return to the „good old days‟.
Time is a great healer however and there have been some signs of improvement,
although it is unclear if current employee engagement is at the same level prior to
the latest redundancies.
As previously discussed, Diebold has endured several difficulties over the last five
years relating to diminishing profits and staff. As identified earlier, employee
engagement has been effected by a succession of downsizing measures. In 2007
Diebold Australia employed 280 personnel, at the beginning of 2010 that figure was
nearly half.
It is also worth noting that many of the technicians made redundant had come into
Diebold from acquisitions with long service. This level of change has made it difficult
for Diebold to establish a lengthy culture. However it is unclear if that is a good or
bad thing, as an established culture does not necessarily mean that it is the right
culture.
When asked what have been the benefits of the change, the leadership group
remarked that service margins are the best they have been for more than five years
and profit margins have increased. The group expanded on this by stating that
service margins have greatly improved as a result of outsourcing labour. It is
something that most of Diebold‟s competitors have successfully been doing for years
and so it made sense from a business perspective to follow suit. As a result of this
saving, profit margins have increased.
The objective of the organisational change was to improve Diebold‟s finances,
through cost cutting measures, to increase profit margins. If the change is to be
judged solely on this objective, then thus far it has succeeded.
The change was evaluated by the organisation from a pure key decision maker‟s
point of view, which focussed on financial results only (margin and profit) over the
course of 2010 in comparison to 2009 and the 2010 forecast which was set in
December of 2009.
The below graph depicts the 2009 actual SST margins, the 2010 actual margins and
the forecast for remaining months. This is a lagging indicator as the financials are
prepared at the end of the month for the previous month.
The trend is showing a positive improvement in the SST service margins (from 2009
to 2010) with the exception of May where there was a one off accounting
adjustment which had an adverse impact on the result.
60.0%
50.0%
40.0%
30.0%
20.0%
10.0%
0.0%
-10.0%
J F M A M J J A S O N D
80.0%
60.0%
40.0%
20.0%
0.0%
-20.0%
-40.0%
-60.0%
-80.0%
J F M A M J J A S O N D
Since the downsizing and outsourcing in January 2010, the overall service margin
(which is a combination of SST and Security margins, depicted below) has been
trending well above forecast (except for May). It is important to note that the
forecast up until May was set prior to the redundancies, whereas the margins from
June onwards were adjusted based on the first 5 months run rate.
Another evaluation of the change process is the voluntary attrition rate. As at July
2010, the voluntary attrition rate (year to date) is 13.4%. This is about equal at the
same time last year (13.3% in July 2009). This on face value does not seem
concerning although the average headcount for July 2009 was 203 which means that
the voluntary attrition has actually increased from 2009-2010.
Exit interviews conducted with exiting employees do not indicate that they are
leaving due to the downsizing. Some common reasons include not being with happy
with the direction of the company, dissatisfaction with remuneration, or for better
career opportunities.
Jul-10
18 21 134 13.4%
Jul-09
27 46 203 13.3%
Overall, the company is very pleased with the results of the change process to date.
The significantly improved service margins are delivering profit to the bottom line,
which was the intended outcome of the change.
SECTION 4: Analysis of change progress
Communication
The announcement to the effected employees were made face to face but no
consideration seems to have been given to the reaction of employees who have
close colleagues who were effected.
When the announcement was eventually made to the remaining staff the method of
communication chosen was email, which did not seem to have adequately
communicated the reason for the decision. Employees interviewed gave differing
reasons ranging from; purely financial, aligned with organisational goals, greater
flexibility and increased competitive margin. It seems from these results that the
message communicated may have clearly articulated „what‟ was happening but did
not offer a clear explanation as to „why‟ this decision was made. All research
reviewed mentioned communication as the number one requirement for effective
change management.
Strong Leadership
As sighted in Sadri (1996), there are at least five steps which managers involved in
this type of change process need to adopt to lessen the dysfunctional effects of
redundancies:
1. Open communication about the process involved;
2. To conduct any necessary redundancies in a professional manner (the
feedback received from Diebold employees on this point was favourable);
3. To ensure managers are aware that employees who have formed a special
attachment to the „victims‟ of this process are of greatest risk of worry,
reduced effort and turnover intentions;
4. To ensure the company has provided suitable support for those that are
leaving, and finally;
5. To invest in the option of offering Employee Assistance Programme (EAP)
should this be required.
Sadri, 1996, advises to never underestimate the effects of continual change (such as
that experienced throughout Diebold‟s history) on the employee‟s ability to
constantly adapt without any consequences.
The Diebold management interviewed had differing involvement with this change
process. Those who were involved in the decision making process were confident
with the level of communication offered, whereas those who had to deal with the
staff directly and the impact the change caused were less likely to agree.
Participation
The remaining staff described concerns with the balance between cutting costs and
having sufficient people to do the work, difficulties were incurred by suddenly being
left without installation technicians and the knowledge they took with them. Having
to engage subcontractors and waiting for approval through Diebold‟s procedures
caused delays. These obstacles caused concerns to staff which should have been
addressed within the diagnosis phase of this change process.
Management should have scrutinised the impact across all areas of the organisation,
keeping in mind that implementing change in one factor (removing installation
technicians) will cause change in another factor (sub contractor engagement process
to be refined). Gaining input from staff on better ways to operate allows staff to
have their say and feel empowered in the decision making process, resulting in less
resistance during the implementation phase.
It is interesting to note that both survivors and „victims‟ (as outlined in Burke and
Cooper, 2000) share common symptoms. Organisations seem to concentrate on
providing for those who are leaving however do not compensate survivors for coping
with the pressure of implementing these changes. Companies would be rewarded in
trying to boost motivation and provide direction which would assist both the
company and employees with the transition period.
It must be noted that those interviewed were largely from management positions all
having differing levels of involvement and input with this change initiative. Two
administrative staff declined to participate in these interviews, an assumption can be
drawn that these employees were uncomfortable discussing this issue with the fear
of being held accountable for their views which were no doubt less than favourable.
The “greater the impact on the existing culture and norms, the greater the amount
of resistance that is likely to emerge” (Brown 2011, p168), thus more difficult it will
be to implement the change program. In the case of Diebold, only one staff member
interviewed mentioned the impact on culture, but having incurred many occasions of
change in the past, it would be reasonable to assume change has developed into
being part of the Diebold cultural norm.
As outlined in Davison (2007), the most important step at the heart of any successful
strategy executions in a „rightsizing‟ effect is to implement, measure, evaluate,
analyse, link, predict and act. After all the data was collated it seems the issue
requiring a lot more attention for Diebold is that of evaluate and analyse which didn‟t
seem to be involved in any component of the process, except post the change
implementation.
It is quite possible that having transitioned through change quite effectively in the
past and not dealing with vast amounts of resistance has left management with a
feeling of complacency, assuming that if they haven‟t heard anything, change must
have been a success.
SECTION 5: Recommendations and conclusion
The study shows that Diebold has gone through a significant amount of change in
terms of organisation restructuring through downsizing. To stay alive and
competitive in the market, it became necessary for Diebold to cut down operational
cost to increase profitability.
To have immediate upfront benefits in terms of profit margins and justifiable cost
structure in accordance with company‟s vision and mission, there was an immediate
need for the company to look at the current business process. Eventually the
management committee came up with an option to bring down the labour cost to
maximise profit and stay ahead of their competitors.
The shock experienced by the employees who were made redundant and the
remaining employees however, could have been minimised through proper and
effective communication. Rather than focusing only on the employees made
redundant, management should have also communicated with the remaining
workforce, to avoid unhealthy rumours and lack of morale for the existing
employees. Moreover, discussing or explaining the current position of the company
and the necessary changes that needed to be brought in to stay alive, employees
would have understood the situation better and resultantly the resistance towards
change would have also been curtailed.
Burke, R & Cooper, C, 2000, The organisation in crisis: downsizing, restructuring &
privatization, Blackwell, Oxford, UK
Chick, G, 2009, “The cycle of grief – helping to deal with unexpected change”,
Human Resource Management International Digest, Vol. 17, No. 3, pp. 27-28
3 How was the announcement communicated and was there sufficient information
offered?
6 How did you feel, were you able to easily transition through this phase?
The following questions were answered by Sharon Brewster, as the Human Resource
Manager.
17 What processes and change interventions were used (that is the HOW of
Change)?
Subtly communicated by the MD via email then follow up email from GM services,
there was not sufficient information offered to employees
The message was communicated in a number of different ways, sufficient
information was offered (GM Service Operations)
No announcement was communicated prior to the changes, except for the people
directly involved in the change
4 What was the general reaction from colleagues?
6 How did you feel, were you able to easily transition through this
phase
Service margins are now the best they have been in 5+ years, most competitors
outsource their installation labour so it made sense from a business perspective
to follow suit
Financially but one challenge will be to maintain a large enough pool that have
the rights skills to draw from
Increase in profitable margins, compared to the internal costs of performing the
same job
There has certainly been an adverse affect to morale given slowly dwindling
workforce over the last nine months
Disillusioned with the leadership team
Not sure, hard to tell ready. Attrition rate for the calendar year to date is 13.4%
which is about the same as last year. A lot of people were part of the old
„Diebold‟ or smaller company acquisitions so I think they do not feel that they fit
with the new Diebold and the direction of the company
It has improved for the most part
Those that are still with the company are loyal
Existing employees were affected in the sense of having to pick up the pieces of
incomplete work. Forces you into the position of having to implement process
improvement through organisational change, where you might have left it before
Yes (service reporting delays, some minor disruption in the field) – but little to no
customer impact
Yes minor disruptions since the technicians had knowledge of the various sites.
It took a while a adapt and learn of the works that the technicians had done,
with time it was all sorted
No, I don‟t believe there was as we had contractors already lined up to go and do
the work so don‟t believe there were any delays in completing jobs
[conflicting opinions]
14 Who decided on the change?
It came to the decision through analysis of service margin and profit from
that area of the business which had been losing money and in negative
margins for 3+ years. It was bench marked against other competitors in the
industry in terms of best practice.
17 What processes and change interventions were used (ie, the ‘HOW’
of change)?
Internal consultant used was HR Manager for advising the legal requirements
and risks, coaching the managers on delivering the required message and
paperwork as well as supporting the managers in the meetings.
The organisation had been through significant change from 2007. 280
employees in 2007 and at beginning of 2010 was at 148.
Many of the installation technicians being made redundant had come to
Diebold from acquisitions with long service.
The General Manager Service Operations had only been employed for approx
3 months (Oct 2009) when this decision was made.
The business had not been profitable for 5+ years.