Change Management Process: Downsizing and Outsourcing in an Oil Refinery

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Table of Contents

Refinery’s Approach to Change Management
How the Refinery Has Dealt With Stakeholders During Their Change Process
Recommendations and Conclusion
References

In contemporary business environments, leaders need to make strategic decisions that effectively address prevailing business challenges; change aims at improving business operations within an organization through cost-cutting and sales improvement policies. The net effect of change management programs is improvement of financial and non-financial performance of an entity.

When undergoing change, stakeholders need to be involved as their acceptance of the intended change plays a crucial role in its implementation success (Carr, Hard and Trahant, 1996). This paper, in the form of a case study, evaluates change process adopted in an oil refinery parent company; it will focus on two main areas as discussed below.

Refinery’s Approach to Change Management

The initial approach of the oil refinery parent company was to establish the need for a change in the company; this was done through gauging its rate of performance in the 1990s and making interventions that were to assist it become more profitable in the future. The change that the company decided to undertake was a downsizing and outsourcing as a cost management strategy.

The change management strategy adopted by the company can be classified as spontaneous-planned change; under this change model, change is supported from the top management but managed within a certain time framework, mostly less than one year (Figure 1).

Figure 1. The Stages Involved in a Spontaneous-Planned Change

In the case of the oil refinery company; the change was expected to be finalized within six months.

Preparation Stage

The parent company identified the problem that the industry was facing and sought to offer a remedy to the challenge; in abstract, the oil refining industry was defined as one with low profitability and higher costs. In the problem analysis, the parent company realized that the industry suffered from having a high number of employees per project than they would have required.

The above revolution by the management forms the initial stage of a change management process, this is where leaders of change determine the problem that is facing their company then well–define it to get the interventions that can be made through a change management process.

The move by the management can be classified as a change preparation stage where emphasis has been placed on knowing exactly the cause of the problem that is facing the organization (Diamond, 1986).

With full definition of the problem and the need for a change identified, the management came up with a blueprint illustrating the goals that the process would attain as follows:

Improve current working conditions and strategies : the aim was to have costs reduced and efficiency improved after the change has occurred.
Make new combinations of resources in an organization.

Have a different human resource management system, and allocation of tasks (Ian and Dunford, 2005).

Managing Change

After defining the problem that needed to be addressed by the change to come, the management decided to appoint a steering committee of three people, including the engineering manager; the choice of the people to design the change was made to specific people who well understood the industry and the areas that need intervention.

According to spontaneous theory of change, when an organization or company is planning to change, the change agents should be people who understand the way current business operations operate and one who have the passion of driving their organization a notch higher.

In the oil refinery case, the parent company decided to have engineering manager involved in the change design as he would offer some insight information from his experience that could assist shape the change.

After the team was appointed, there was a delay between reducing overmanning in refineries and designing the most effective method to do it; this is a strength in a change management process as it give the change agents time to think, strategize and come up with the best policy and design (Drucker, 1983).

The decision that was made was to reduce the number of personnel in a certain refining project and strategically manage the remaining staffs; the steering team came with the recommendation of reducing total headcount at the refinery site, including contractors.

Other than defining what the industry needed to do, the steering committee went ahead and developed the program and pathway through which the recommendations should be implemented; under the planned change model, the approach that the management did can be classified under the title, development of sponsorship model.

Under this stage, the managers should offer the best pathway through which the change they recommend will be attained. In specific, the steering team suggested that there would be move from current process of competitive bidding for work and embraces partnering relationships, de-recognize the unions, cutting supervision layers, and introducing performance-related pay for everyone (Jones, 2003).

After understanding the change the organization wanted to make, and the approach to the change, the steering team assumed the task of analyzing core business strategies that needed to be touched and be re-aligned.

Sometimes a change may be made but confronts or violates some labour laws a within a country, the decision by the steering committee that every person should apply for their position was an effort to align the change with the legal requirements.

The approach can be classified under change management plans; under this process, the parent office ensured that national and international laws had been complied with and employees understood their new terms of employment as was required by the change.

One main issue that leads to failure of change is when there are some areas that have been violated creating a situation that cannot allow the enforceability of the change (Ford, Ford and D’amelio, 2008).

Reinforcing Change

When the management was sure that all plans were set and the company was set to adopt and embrace the intended change, the next approach that was made was to align the company’s policies with the change then get to the ground and see the change work.

The engineering manager described the change as a ‘Big Bang’ change; which meant that the change was involving alignment of a number of actions and factors to the good of the industry.

The management understood that the main objective of the change was to reduce the number of human resource working in a certain project, however, if the objective was to be attained, then there were some other changes that needed to be looked into. The move was an indirect approach to handling the situation.

For an effective change, the change agents should not focus only on the problem at hand but should have a mind that some adjustments can be made and improve situation in the company.

In the case of oil refineries, the management decided to have policies and adjustments that were not only focused on reducing the number of personnel per project but also those that were likely to introduce much greater profitability( Hansen and Gammel, 2008).

The steering committee was given the task of ensuring that the change was accepted by the stakeholders; they sold their ideas to the stakeholders and convinced them to adopt the change as they suggested it was the right path for the industry and the parent company. The management was actively involved in the change and was felt on the ground offering appropriate instructions and communicating the change to the stakeholders.

How the Refinery Has Dealt with Stakeholders During their Change Process

Stakeholders have an effect on the degree of success of a change process; in the case of oil refining case, the stakeholders that were involved were companies in the industry, employees of the companies, labour unions, contractors, among others. The following are the main was through which the change steering committee dealt with the stakeholders:

Change Communication and Buy Off’s

When the management realized that there was need to have some change in the organization, they mandated the steering committee with the role of letting stakeholders understand the change that is going to happen in the industry.

Change communication assists the management express what triggered the change as well as explaining to stakeholders on their role and the effect that the change will have on their business. When using this approach, the engineering manager was actively involved in talking to stakeholders where he expressed his viewpoints and stands as well as how the new change would affect business.

The main advantage of using this method is that it ensures that stakeholders understand the new system as well as its intention. When stakeholders have an understanding of the change, they are more likely to embrace and support the change. On the other hand, change communication offers the change agents a chance to get more ideas from people on the ground on how they can make the process better (Hayes, 2010).

In the change communication stage, the team of three has the main task of convincing people that the change was needed as well as that their strategy was the best strategy available for the industry or the companies as per that time.

When convincing, there were two approaches to the same, ensuring that the people understood the factors that necessitated change, and making them aware of the way the set change should address the problem they have established. This method of buy-off takes some time so the team was using the method realizing that it had limited time to accomplish the task.

When using the approach, the team did not limit the process to its own efforts and convincing power but they used some people who supported the change like refinery manager and managing director (Hiatt, and Creasey, 2003).

Change communication was an effective way through which ‘corporate arrogance’ was dealt with; those companies who felt they were doing okay with the current systems were targeted and the need to change was advocated. When changing, may people have the tendency of wanting to retain their status quo, they feel that the change has come as a bother to their conventional way of operating thus opt not to change.

When such people are addressed independently, then their need to support change can be addressed from a more micro angle and if need be at personal level.

For buy-in purposes, there were some interventions that should have been made to make the process more effective, they include taking employees to seminars that cover topics such as customer care, organizing get together between employers and employees, rewarding employees, holding regular meetings, including major stakeholders in business decision, assurance to personal service, among others.

This approach does not concentrate on solving past troubles but on laying down a good foundation that guarantees business future success (Kotter and Schlesinger, 2008).

Participation and Involvement

The next approach that the team used was involvement of staff of different levels in the change process; they appreciated through their newly changed roles and ideas. The engineering manager did not overlook his subordinates but he used them to communicate the change down the ladder to technicians; this was a policy that created a total acceptance of the intended change.

When persuading people to change, the steering team was on the ground polishing some of the issues that might affect the system negatively.

The intended change had a cost-benefit analysis where some adjustment would result in pains inflicted in the system; however, the benefits that were to follow after the change was the main motivator of the change, thus the change agents, opinion leaders and engineers were given the tool to convince people to support the intended change.

The benefits of the change were seen as motivation to the company, thus it was a strong pillar when dealing with stakeholders. Those companies that embraced the change and saw the change as necessary where also used as the change supporters to persuade other companies to adopt change (Adrian, 2003).

Neutralization and Opinion Leaders’ Method

Under the method, the team identified those key people who could support change as well as influence other people to change or to resist the change. Under the method, the team used change supporters’ opinion leaders and made policies that neutralized non-change supporters.

In the case they identified an opinion leader who supported the change, the team was using such people to formally or informally promote the intended change and fight resistance. Opinion leaders are people who could influence the direction that personnel in an organization take; they are seen as the “spokesmen” of the people formally or informally.

When the team was using them, they were made aware of the extent that the change would affect an individual employee as these were some of the main questions that they were to get from those following them. It is also important to note that opinion leaders are the drivers of organizational politics and some extent organizational behavior; using them could mean that the company was aligning its politics to the change.

The next batch of opinion leaders that the team had to deal with were negative opinion leaders, these are people who could promote change resistance within the organization.

When dealing with those opinion leaders, the team had to use some graduated method which starts with taking time and explaining to them on the need that is there for the organization to take the suggested change, this first approach was in the efforts to change their stand and promote the intended change.

When the first step seemed not to yield much benefit, the next method that was available to the team was the use of some “cruel methods” like move to another site, transfer to a non-influential position or tie them down in some other way, when such methods were used, they were meant to reduce their influence and leave those who promote the change at peace (Burke, 2008).

Legal Policy Observance, “Divide and Rule Policy” and Strategic Involvement

Within the change process, there were some adjustments that would have violated legal rights of employees if precaution was not taken; this was a potential area that could have created some resistance from union members and legal practitioners. The issue was addressed by the steering team nullifying the existing employment terms/contracts and enacting others that included the new changes.

Other than ensuring the new employment contracts were in accordance to the law, the team went a notch higher and sorts to reduce the role of labour unions; the engineering manager encouraged his subordinate engineers to talk to their technicians on a one-on-one basis on the need to change and ensure that they were not negatively influenced by the labour union they subscribed.

When negotiating the team emphasized that someone should negotiate as an individual and bring forth his or her issues but not rely on the union (Barbara and Jocelyne, 2006).

Recommendations and Conclusion

Although the change process adopted by the oil refinery can be classified as successful, it followed a process that was not comfortable with all stakeholders making it vulnerable to resistance. In the future, the company should embrace continuous change strategy combined with “painless” change strategy to enact changes.

The methods take the form of continually improving current business processes and ensuring that future business processes are always better than those of the previous period; some of the tools used include total quality management (TQM), continuous process improvement, customer relationship management, and Six Sigma.

When such policies are in place, change would be gradual and more effective than the case of spontaneous change.

References

Adrian, T.,2003. Managing Change. London: Pearson Education

Barbara, S. and Jocelyne F. ,2006. Organizational change. London: Financial Times Prentice Hall.

Burke, W.W.,2008. Organization Change: Theory and Practice. California: Sage Publications.

Carr, D.K., Hard, K.J. and Trahant, W.J.,1996. Managing the Change Process: A Field Book for Change Agents, Consultants, Team Leaders, and Reengineering Managers. New York: McGraw-Hill.

Diamond, M.,1986. Resistance To Change: A Psychoanalytic Critique Of Argyris And Schon’s Contributions To Organization Theory And Intervention. Journal of Management Studies, 23(5), pp. 543-562.

Drucker, P.,1983. Managing in a Time of Great Change. New York: Butterworth-Heinemann.

Ford, J., Ford, L. and D’amelio, A.,2008. Resistance To Change: The Rest Of The Story. Academy of Management Review, 33(2), pp. 362-377.

Hansen, M. and Gammel, G.,2008. Management of Change. Professional Safety, 53(10), 41.

Hayes, J.,2010. The Theory and Practice of Change Management. New York: Palgrave Macmillan.

Hiatt, J., and Creasey, T.,2003. Change management: the people side of change. Colorado: Prosci.

Ian, P. and Dunford, R.,2005. Managing Organizational Change. New York: McGraw-Hill.

Jones, H.,2003. Managing Change. Businessdate, 11(1), p.1.

Kotter, J.P. and Schlesinger, L., 2008. Choosing strategies for change. Harvard Business Review, 80(30), pp.117-124.

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