WEEK 30: Managing Change at Faslane

1. Introduction:                                                                                                                            

The HM Naval Base Clyde (Faslane) is a UK’s submarines base that was previously under direct control of the Ministry of Defense (MOD) and the Royal Navy. But in 2002, it entered into partnership with Babcock International, which was a private sector company. With this substantial transition, the Babcock had the responsibility to adopt a suitable change management strategy in order to improve performance as well as reduce the cost significantly.  They entered the contract for 5 years with the target of £76 million cost savings without affecting the services.

The report analyses the change process and impacts of change in the organization. In order to measure the impacts of change process strategic model, Balogun and Hope Hailey’s Change Kaleidoscope and Lewin’s Forcefield Analysis was used. Moreover to identify the internal factors of Faslane, Kotter’s 8 Steps Process and McKinsey’s Seven S Model was used. Lastly, to analyze the leadership style Lynch Model was used.

2. Analysis

The strategy change in Faslane can be considered as an emergent strategy rather than an intended one. The intended strategy come about as a result of careful deliberation typically associated with top management where as the emergent strategy is an unplanned strategy that arises due to the unexpected opportunities and challenges in an organization. It is interrelated with three areas position, choice and action.

It is more of an emergent strategy because the strategy of an organization was developed on the basis of series strategic moves. The Babcock Company with the aim of reducing the cost they firstly identified the problems in the management leading them to change the structure by trimming down management layers from 7 to 4. They reduced the bureaucratic burden and encouraged open discussion with workforce to find out their views, which can be taken as an example of an emergent strategic process. Also the series of review process was cut down from 56 days to 6 days making the decision process speedier. The leadership style also evolved from transactional which was top-down to more of a transformational (bottom-up) style. They developed and communicated the organizations purpose to the employees. They managed the human resources by reducing the number of employees and also allowed the employees to make their own team manage themselves to increase the productivity. The strategies in an organization emerged overtime in an incremental way by learning from partial commitments and previous moves.

2.1 Strategic change context in 2002

Change Kaleidoscope is model that deals with all the contextual features and implementation options that are required for consideration when organization undergoes change. The framework of the model helps to design a ‘context sensitive’ approach to change. It contains 8 contextual features that can be assessed as positive, negative or neutral to the change. If it suggests positive then those features facilitates change and the negative restrict changes.

                                  

Figure: 2.1, Change Kaleidoscope.

From the Figure 2.1, we can observe see that the management team had a target of reducing cost of £76 million within a time limit of 5 years. The time period was very short as compared to the task, which was relatively large. Since, the organization was not in crises it was not urgent for implementing the change. The management changes were implemented early, which was later followed by changes in personnel. They first decided to bring in skilled employees from Babcock who also faced similar changes to Faslane. With this transmission the time for adaption was reduced. Moreover, the company focused on implementing low level changes first, as they were easy and less time consuming. Speaking of the power, the workforce had limited autonomy but the change in management brought about transparency in the system. They transformed the organization management to a less bureaucratic one by reducing the layer of management from 7 to 4. They realigned the task force and encouraged teamwork to increase the productivity. The employees were given flexibility to form their own groups and come up with new ideas and manage their own work.

The structure of the organization’s management was totally different. The major task was to change the employee’s perception of the management and their view about the infrastructures and facilities being more important than the service and support to the Navy. So, the new management team focused on inward looking and providing better services. The Babcock realized the importance of the stakeholders of the company. Therefore, they maintained good relationship with the Naval Base commander and the Navy boards as well as the other stakeholders. The management team was highly diversified with different management team with various skill set. At first, the majority off staffs was against change as they were inexperienced. But later the Babcock Marines developed and communicated the organization’s purpose by encouraging open discussions, for example they held ‘the event in the tent’ session, they changed the mindset of employees, and they clearly explained them what are the company’s objectives.

The company had a positive capacity as the budget was fixed and they had limited time period. They had sufficient money, skilled people available to make the required changes. They even cut down the management staff into more than half that helped to reduce the cost as well as increased efficiency in performance.

We can conclude that Faslane went through fundamental change in both strategy and culture. So that the change, which took place, was revolutionary strategic change as the changes at Faslane occurred simultaneously in several fronts such as People, Organizational Structures and Systems within a short period of time.

2.2 Lewin’s Force Field Analysis:

This model is used to define the change context in Faslane. It identifies the problems that are for and against change in an organization. The factors that control the change process at Faslane are shown in the following table.

2.3 McKinsey’s Seven S Model

This model is used to identify the internal features of the organization. It contains 7 elements including hard and soft. The hard factors are easily identifiable that includes strategy, structure and system. The soft elements are tangible, hard to describe and more influenced by culture. It includes shared values, skills, style and staff.

Elements	MOD and Royal Navy (up 10 2001)	Babcock Marine (2002-2010)
HARD ELEMENTS
Strategy	Progressive and customer oriented. Delay in decision making	Willingness of MOD to reduce cost and enhance performance The decision process time made speedier by reducing the review time to 6 days
Structure	Hierarchal structure with 7 layers Unclear roles and responsibilities	Reduced the bureaucratic structure (flat) by decreasing the management layers to 4 Alignment of workforce, work in team having clear roles and responsibilities
Systems	People oriented system Inflexible with political intervention	Process oriented system Transparent system
SOFT ELEMENTS
Style	Transactional leadership style where the decision was made by the top level management	Transformational leadership where participation of employees is encouraged.
Shared values	More concerned about buildings and infrastructure facilities than supporting the Navy Resistant to change	Reduce the expenditure while maintaining the quality. Focused on staffs so as to increase productivity and efficiency
Skills	Experienced staffs in their own functional areas. But unfamiliar with modern management styles.	Experienced employee on change process. Sharing of ideas and skills on naval base
Staffs	Large number of staffs about 7,500 employees 250 management team	Reduced the management team to 125. Reduction of 400 full time local posts

From the model above we can observe that there were many operation hurdles faced by Babcock while handling Faslane. The biggest obstacle was to change the complex culture of the Naval Base. Until 2001, the management system was more of a top-down system. But after the partnership the management changes to more of a transformational one. Leadership moved from command and control to managed teams, capable of leading their own team. The process was totally reengineered by removing the unwanted systems and changing the process to more effective ones. With all these changes MOD was able to achieve cost effective operations with 20% reduction in annual running cost. Babcock delivered £197m of cost reduction till today. (babcockinternational.com, 2013)

2.4. Kotter’s 8 Steps Process For Leading Change:

Step1:  Establishing sense of urgency:

For Faslane, the change initiations began after analyzing the company’s competitive position and its financial performance. Thus creating sense of urgency in the organization. Therefore after partnering with Babcock marines, the task was to reduce the cost and increase performance. They first communicated the change to the employees as they often refrain from change. They put an effort to motivate people to embrace the change by giving hem flexibility to manage their own team and share ideas. The company also encouraged open discussion and honest conversation with the staffs by informing them about where the company’s stands in the market place, creating transparency.

Step 2: Creating the Guiding Coalition:

To lead the change the manager need to bring together a team of influential people. In this case Babcock recruited a team of experienced individuals who were capable of carrying out the change. They focused more on team building to guide the coalition as a unit. They also reduced the workforce to more than half and also reduced 400 full time posts.

Step 3: Developing a Change Vision:

An organization must develop a clear vision of the future, which is easy to communicate to customers and stakeholders. This evolves clear understanding of what the change is about by the employees. The vision of improving the operations for better performance derived the employees to work efficiently. Maintaining scorecards to measure outputs encouraged the employees to work along the objectives as it made the strategy and vision transparent.

Step 4: Communicating the Vision:

Communicating the vision in daily activities is fairly important. The Babcock Marines developed and communicated the organization’s purpose by encouraging open discussions, for example they held ‘the event in the tent’ session, they changed the mindset of employees, and they clearly explained them what are the company’s objectives.

Step 5: Remove Obstacles:

Removing barriers helps to empower people to implement the vision and support the change. The decision to position John Howie as MD for managing change in organization brought about positive changes. He identified the obstacles in the management structure, which was complex having 7 layers, and brought about change by reducing it to 4 layers. The decision making process was relatively slow due to a long review process of 56 days which he reduced to 6 days. This allowed them to aligns the change system with the change vision.

Step 6: Generate Short-term goals:

Generating short terms wins is needed to maintain enthusiasm and momentum to keep the change initiative going. The Babcock was able to achieve 4 million pounds cost saving in year 1 against the target of 3 million pounds and 16 million pounds cost reduction in year 2 where the target was just 12 million pounds. This performance goals supported the change process goals i.e. cost reduction, encouraged the management and the staffs encourage to work towards change.

Step 7: Build on the Change:

It is important to consolidate gains to produce more change by focusing on short-term success for the enabler of future success. The restructuring process of the management, gaining the trust of the people, transforming the leadership, and achieving cost reduction goals were brought about by the change process.

Step 8: Incorporating Changes into the Culture

The corporate culture determines the values of the vision. The employees were allowed to express their view about change allowing them to gain trust. Sense of belonging among the employees was developed. The Navy’s view and attitude towards the service was better. They were able to achieve service improvement. In 2009, Craig Lockhart was able to produce joint business with the customer. Finally by 2010, Faslane became the home base for the entire UK submarines.

2.5. Leadership style at Faslane (2002-2010)

For a successful management a good strategic leader is essential. The leader should be able to give correct direction, organize and implement strategies. They must be able to adapt to change easily and should also be able to motivate and support his follower/employees.

Before the contract agreement with Babcock, Faslane was totally controlled by the MOD and the government. But in 2002, John Howie was appointed as the managing director. He was most concerned about the system and the structure process within the organization. He focused mainly on changing management responsibilities, saving costs, re engineering the system and maintaining good customer relationship. In 2010, Craig Lockward took over the role of managing director. He focused on performance improvement and quality service rather than structural processes. He aligned all the workforce to come at a common objective. He was more concerned about creating good relationship with stakeholders of the company. Both the leaders adopted different change management styles to achieve the desired goals. We can compare the Babcock’s leadership Model using the Lynch Model.

Five Elements of Successful and Effective Strategic Leadership Model (Lynch Model)

1.   Developing and communicating the organization’s purpose: The main purpose of the company was to significantly reduce the cost and improve the performance by increasing the operational effectiveness. This goal was clearly defined and communicated to the entire employee within the organization.

2.  Sustaining competitive advantage over time: The Company was able to change the staffs’ attitude, decrease the time of decision-making process and also improve the operational activities. These progresses undoubtedly helped to enhance the competitive advantage of the company over time.

3.  Managing human resources and organizational decisions: The company brought change experienced specialists from Babcock to Faslane and also managed the Faslane employees to work in teams and groups that allowed them to sustain the change process. They also cut more than half of jobs to maintain a flat structure of the organization. This reduced the hierarchy in the management system.

4.   Setting ethical standards: They changed the idea of spending the tax to receive budget was quickly changed to giving quality services to the customer. By doing so they were able to create more jobs and set ethical standard.

5.  Defining and delivering to Stakeholders: They understood the importance of the stakeholders, which build the success of the company. The MOD, Navy Board, the commanding officer and the local communality were the stakeholders of the company. So, they maintained good relationship with them.

2.6 Transcendent Leadership at Faslane (2002-2010)

3. Conclusion:

After examining and analyzing different strategic model we can conclude that strategic change in Faslane was successful. Faslane underwent changes involving people, system and the organization. They practiced changes in strategy, leadership, structure, culture and process. They re-engineered the system, maintained continuous improvement in change and focused on customer-centered changes. All this changes were aimed at reducing the cost and improving the effectiveness of the operations.

Finally, the change was effective because of the exceptional management style and ability to adapt to that change processes. The company was able to provide better services to both the customers and the employees. They excelled in providing better quality service to the customers that made them the home base for entire UK submarines. They were also able to motivate the employees by providing job opportunities leading them to better performance results and they were able to achieve organization’s goals and objectives.

4. References:

A. Franken, C. Edward, and R. Lambert, ‘Executing Strategic Change’, California Management Review, (2009), pp. 49-71.

Babcock International. 2011. Marine & Technology Division Clyde Operational efficiency in a mission critical environment. [ONLINE] Available at: http://www.babcockinternational.com/media/205608/glb168368_-_case_study_-_partnering_-_print_file.pdf. [Accessed 11 January 14].

Lynch, R., (2009) Strategic Management, 5^th Edition, Prentice Hall, chapter 16.

Erwin Losekoot, ‘How change does not happen: The impact of culture on a submarine base, May (2008), pg. 255-264

G. Johnson and K. Scholes (eds), Exploring Techniques of Analysis and Evaluation inStrategic Management, Prentice Hall, 1998.

J. Kotter, ‘What leaders really do’, Harvard Business Review, December (2001), pp. 85–96.

Mindtools. (2010). The McKinsey 7S Framework Ensuring That All Parts of Your Organization Work in Harmony. [Online] Available at: http://www.mindtools.com/pages/article/newSTR_91.htm. [Accessed 12 January 2014]