Toffler’s model on Akzo’s case of leadership change

Introduction

Nowadays the leadership style is a crucial factor to the success of an organization. As the CEO of Akzo, Wijers has led Akzo to regain the good reputation, made considerable profit and a privileged position. This project paper is to analyze the case of Akzo and give justification of some performance made by its CEO Hans Wijers in the changing process of Akzo.

Based on the change including cost reduction, management team replacement, new products development, redesigning pension scheme, market reorientation and so on, this paper will discuss the following aspects.

1) Using Toffler’s theory to explain the depth of Akzo’s leadership change.

2) Explaining the changes made by Wijers.

3) Discussing the skills of Wijers owns as an internal change agent.

4) Using Dunphy- Stace’s contingency model to analyze the change implementation made by Wijers

5) The related effects of change leadership style on Akzo.

Toffler’s model on Akzo’s case of leadership change

i ) Toffler’s model

 

In Toffler’s model we can know that the famous futurologist Alvin Toffler shows us a useful and interesting model about change on history and society (Toffler 1980 cited in New Scientist 1994 cited in SocioSite). The model clarifies three waves of change. The first wave began from A.D. 10,000 years ago, people began to grow crops and do cultivation for the first time. It was the first time for the human beings to enter the era of agriculture. The second wave began from 18th century, when the industrial revolution took place. Based on the industrial revolution, people left the farms for factories in large cities to make a living. The third wave is a great revolution of human thought which is the so called “information age”. On the basis of information technology and social demands, the world wide globalization will be dramatically developed and all the people of the world will break the borders, seeking cooperation.

In the third wave there is a need to create a harmonious society to create a balance between work and entertainment, production and consumption, physical work and brain work and so on ( Ping Liu 2002). This kind of balance in the world of third wave is a relatively mild one.

The society in the third wave is a diversified one (New Scientist 1994 cited in SocioSite). All the organizations in this wave try their best to adapt to the changes. Especially for the managers, they must have a clear mind to analyze their charge organizations, to find the existing problems and to find out proper solutions to these problems. All the series of these actions are aimed at making more profit to the organizations.

ii) The causes on change of leadership

Because Akzo’s case happened in the year 2003 or so, only judging from the time we can infer that Akzo is an organization in the third wave.

In the society of third wave, just as Toffler’s model says (New Scientist 1994 cited in SocioSite), if an organization wants to survive, it must accept the changes. For Akzo, the external market was full of hyper-competition, fluctuant marketing demands such as the changeable demands on Japirone and so on. Such kind of external environment made the internal situation of Akzo in a mess such as the pension deficit of €2.3bn, high cost in several production fields, over concentration on pharmaceutical business, shareholders’ disappointment towards Akzo’s performance and so on. All of these were because of the failure of Akzo to acclimatize itself to the change of environment. As Daft (2005) mentions in his book that a proper method to solve the problem like Akzo is to change leadership.

iii) Organizational intervention-Change leadership

As Cummings and Worley (2005) remind in their book that there are four types of interventions to assist change in organizations. They are techno-structural interventions, human resources management interventions, strategic change interventions and human process interventions. All of the four interventions can help organizations deal with some kinds of issues in the development process.

As the case says Hans Wijers was appointed as the new CEO of Akzo to solve the present problems. This is a kind of intervention. Appointing a new leader for Akzo was obviously a reasonable intervention to meet the need of environment.

And changing the leadership for Akzo was to give the organization new blood. Due to the problems in both internal and external situation, Hans Wijers who has rich experience of consultancy, fantastic diplomatic skill and desires for challenges became the most proper person to be the new CEO of Akzo.

iv) Depth of the intervention

As I have mentioned above, the organizational intervention for Akzo to deal with its problems was to change its leadership. In Tofflers’ third wave theory, all the world needs to meet a balance (Ping Liu 2002), including the organization. As Daft (2005) remind us that the change of leadership is to meet a kind of balance between the environment and internal situation. The purpose of appointing Wijers as the new CEO was not to change all the face and orientation of Akzo. It was to make Akzo to meet the need of environment such as the economy situation, changing market and so on which was a mild and intermediate intervention. It was to create a kind of harmony between the external part and internal part. This kind of harmony was an intermediate, mild atmosphere. So based on Toffler’s third wave theory, we can conclude that the intervention of changing leadership in Akzo was intermediate.

v) Changes made by Wijers

Wijers is a fantastic leader for Akzo because he has made a great many changes to Akzo and helped Akzo out of troubles. The followings are the changes he has made.

The first one was that he cut costs. Just as mentioned in the case, Wijers cut the cost to protect profits. Because there were high costs in chemicals and coatings and a pharmaceuticals division, there was a need to reduce the cost on these areas to increase profit. So Wijers conducted cost reduction which was really necessary.

The second one was that Wijers replaced the management team. If Akzo wanted to regain its privileged position in the market, it must have some reasonable strategies. And the people who come up with the ideas and the people who facilitate the process of change are very crucial. While in the original management team, there must be some one who were stubborn and resist any change. So to achieve the new aim and create more profit, it was also necessary for Wijers to change management team. Because Akzo never lacks good staff to assist changes, as Wijers said in the case” Typically there are always people in a company who are eager for change, who see exactly what needs to be done and often know the organization better than the CEO.” With the new blood, the management of Akzo must lead Akzo regain its good performance.

The third change was to develop new products. In the case says that Akzo has asenapine as well as a fertility treatment to enter the market. And both of the new products have good market response. As a medicine manufacturer, the concentration on developing new products is as important as maintaining the good performance of old ones. While at the former time, Akzo only focused on the performance of the old ones such as Japirone, when faced with the market demand decline on Japirone, it can only suffer. So this change for Akzo’s future development is fantastic.

The fourth one was the change on pension scheme. As the case mentions, there was a pension deficit €2.3bn. Pension policy is vey important for every company which directly affects the relationship between employees and employer. The former policy of final salary created by Dutch union was too indifferent. So to gain the support and increase the morale, Wijers transferred it into defined-contribution scheme. Of course, it can win the support of the employees and make them work harder.

The last one was the acquisition. After Akzo had decided to concentrate on coating, Wijers has conducted a series of acquisition, which helped Akzo enter into Asian markets. And it also turned out that it was a wise decision. As the case says the targeted regional paint sales can grow from $650m to $1bn by 2010. Large profit increasing must be fantastic news to both shareholders and employees of Akzo. So this change conducted by Wijers was definitely wise.

vi) Strategic Change

Strategic Change as Hofer and Schendel (1978) says in their book means changes in the content of the organizational vision, mission, goals and using strategies to achieve these aims.

From all of the above changes conducted by Wijers, we can see the first change was to adopt low-cost policy. That was a cost-control strategy to reduce the original high cost of the business practices. The second change was a reorientation on leadership. It was a change strategy on management part. The third one and last one were the reorientation of market. New products coming into the market and entering new markets in Asian areas were the changes in market strategy. The fourth one was to conduct acquisition which was also a change in organization development.

All of these changes were the changes on the missions or goals of different areas of Akzo to reduce cost and make profit. These changes all assisted Akzo to achieve the goals which made Akzo more successful.

So from the above analysis, we can see the changes made by Wijers represent strategic changes.

Wijers – an internal change agent with good skills

i) Concept of the change agent

Change agent is just like a scientist on behavioral area and understands the tactics of making employees work actively in an organization to facilitate it to conquer its problems. And the change agent should own knowledge of human behaviors as well as a great many intervention techniques (Stevenson 2008).

According to Cummings and Worley (2005), change agent can be internal or external. Internal change agents are often members of the organization who have good knowledge of how the target organization works including its culture, process, policies, norms, problems and even the fields of resistance. While an external agent is not a staff of the organization but the one who often work for a consulting firm, sometimes for a university or for himself or herself. The functions of either the internal or external change agents are to find and solve the organization’s problems.

ii) Wijers – an internal change agent of Akzo

In the case it says Wijers is the chairman and chief executive of Akzo Noble, and he conducted a very fantastic change for the company which included the business reorientation, market expansion, pension system rectification and so on. The restructuring program worked so well which made Akzo enjoy a privileged position in the world‘s hypercompetitive market. From this point we know that definitely Wijers is an excellent internal change agent who has good knowledge of how Akzo works including its culture, process, policies, norms, problems besides the fields of resistance and he also had defined the Akzo’s problem as well as conducted a proper restructuring program which won a good reputation for him. Rich working experience and well educational background endow him not only sharp observation capability but also flexible management means and diplomatic skills which make him the fully deserved person to lead Akzo to achieve more glorious results.

iii) The image of Wijers as an internal change agent

As I have mentioned above, Wijers is an undoubtedly excellent internal change agent. Being the CEO of Akzo, he defined Akzo’s problems such as a pension deficit, high cost in chemicals, coatings and a pharmaceutical division and so forth. Then he used his excellent observation capability, flexible management means and diplomatic skills to carry out a three year restructuring program. As the case mentioned, he shifted the concentration on the core business of coating and chemicals, cut costs to protect margins, replaced the management team, identified non-core and loss making units as well as changing a final salary to a defined-contribution scheme. All of the change management involving these activities such as planning, organization, commanding, coordinating, and controlling that associated with a top-down, hierarchical view of managing ( Palmer, Dunford & Akin 2009) is just under his direction to produce the required change. From all the above, Hans Wijers is absolutely an director in the change program of Akzo ( Palmer, Dunford & Akin 2009).

In the Akzo case, Wijers also says,” Typically there are always people in a company who are eager for change, who see exactly what needs to be done and often know the organization better than the CEO.” So based on this point, he made a compelling appeal to staff with deep knowledge of the business to assist in the restructuring. From the aspect we can praise him as an intelligent CEO in the field of judging and using talents. And we can also give him a definition of an excellent coach, which is an image of managing change as it mentioned in the book of Palmer, Dunford and Akin (2009). In the changing process, Wijers ‘acted as a coach by helping to structure activities to help the organization members solve their own problem and learn to do that better’( Palmer, Dunford & Akin 2009, p.31).

All in all, Wijers, an internal change agent, successfully acted as not only a director but also a coach in the process of Akzo’s changing programme.

iv) Skills Hans Wijers owns

As the CEO of an organization, the chairperson should have the following basic skills to be effective.

The first one is intrapersonal skills or “self-management” competence (North Central Regional Educational Laboratory 2000). It requires the agents handle their high stress caused by the higher-pressure from the organization.

The second one is the interpersonal skills. It requires the agents work with groups and gain their trust to help the members become competent enough to deal with the forthcoming changes (Cummings & Worley 2005).

The third one is general consultation skills. They are the skills as well as knowledge about intervention techniques the agents should have to assist themselves to define the problems and design changing interventions (Palmer, Dunford & Akin 2009).

The last one is the organization development theory, which enables the agents to understand the roles of them in the changing process (Cummings & Worley 2008).

From the above, we can get that the successful changing programme in Akzo proved that Wijers has the above skills. And now I’d like to discuss the skills Wijers owns as an internal change agent in Akzo’s case.

Hans Wijers is also good at general consultation skills. He has so rich consultancy experience that he can well analyze the existing problems in Akzo, such as the pension deficit, high production cost and then design appropriate interventions including business reorientation, market expansion and salary system rectification and so on.

Wijers also has fantastic interpersonal skills such as diplomatic skills. As the case says his nice diplomatic skills and competence of managing expectations helped him diagnose the situation, use proper means to calm down these angry shareholders and win their trust to work together towards the ongoing change. And he also facilitated the staffs to develop themselves towards their goals in the changing process, which from the case we can see he used some methods to attract the staffs who owned good knowledge of business to assist him in restructuring. The good relationship among the shareholders and employees made him become the final winner.

Wijers has good self-management competence ((North Central Regional Educational Laboratory 2000). He has very thick curriculum such as working as a minister for economic affairs in the Netherlands government, managing partner at BCG, etc, which makes him fit for the task of pushing through change. The rich working experience, diplomatic skills, sharp observation are all good enough to enable him to manage the stress in the changing process.

Wijers also has a strong desire to meet the challenges and create new look. He says,” I think it was the prospect of real change and the chance of getting things done that attracted me.” From these words we can infer he is a man who is ready for the challenges all the time. And the actions he had conducted in Akzo did give Akzo a new face. A CEO needs creativity in organization development. And Wijers obviously has such gift.

The taking off of Akzo also proved that Hans Wijers understood the organization development theory so well. He defined his role so well that he acted not only as a director but also as a coach in the procedure of change implementation. He decisively sorted out the pharmaceuticals side, rearranged the management team, conducted margins protecting strategy, etc. These series of actions helped the organization focus on the core business more effectively.

Dunphy-Stace’s contingency model on Akzo’s case and consequences due to Akzo’s leadership changing

i) Dunphy-Stace’s contingency model of change implementation

Dunphy-Stace’s contingency model of change implementation is well fit for Akzo’ case. It can help understanding of the relationship between scale of change management and the style of change. The essence of their model is illustrated in Figures1. (Stace & Dunphy 2001, p. 109 cited in Palmer, Dunford & Akin 2009, p.230)

figure 1.0

Figure1. (Stace & Dunphy 2001, p. 109 cited in Palmer, Dunford & Akin 2009, p.230)

From the figure1.we can see Dunphy and Stace define four different change leadership styles:

The first one is called collaborative style. It means that the future of both the employees and the organization is influenced by the involvement of employees on some important decision making processes. The second one is consultative style. That is controlling the involvement in goals setting aspects, especially these connected with responsibility in employees’ areas. The third one called directive style is that the commanders use their power of positions to make decisions on transformation, future and the changing process. The last one is coercive style which means the top management carries out change through the organization.

And also four main scales of change are defined as follows:

The first one is fine tuning which is to touch up these already being done well. The second one is incremental adjustment. It is to modify some aspects of management, structures and strategies or plans, but it shouldn’t be too radical. The third one is modular transformation which means conducting the realignment or restructuring to the organization radically. And the last one is corporate transformation which is radical changes in structures, systems, strategies, procedures, goals and people to meet brand new or totally different situation.

Based on the change leadership styles and scales of change, Buchanan and Huczynski (1997) summarize four types of change implementations on management of change from the model above. They are as follows:

Participative evolution is used when the organization requires small adjustment to meet the need of environment. And at the moment that time is enough and the key shareholders support change. Forced evolution is used when the organization needs small change and time is enough, but main shareholders oppose change. Charismatic transformation is used when the organization requires main change and there is full support for change but time is limited. Dictorial transformation is used when there is almost no time as well as small internal support for the change, but major adjustments are required badly.

ii) Corporate transformation associated with dictorial transformation by Wijers

In the case of Akzo, we can get the change scale in Akzo is the second order one, a revolutionary transformation (Palmer, Dunford & Akin 2009). It is a top down change and radical change in the following areas. In the parts of structures and systems, Wijers replaced the management. In strategies’ field, Wijers had led Akzo to expand in Asian markets and developed new products. And he had also redesigned the pension scheme for the employees. All of these changes he made were almost radical ones and had made Akzo get a new face and reorientation which is the same as the definition of corporate transformation as Palmer, Dunford and Akin define (2009). So we can say this change is a top down corporate transformation for Akzo.

And at the same time, Wijers used dictorial transformation to associate this corporate transformation. The evidences are as follows.

Firstly, as the case mentions that Akzo had problems such as a pension deficit €2.3bn, high cost in some production areas, and a terrible share price of €17, etc. All of the problems were so serious, because they affected the profit of the organization so directly that the major adjustment towards the restructure was needed badly.

Secondly we can see from Akzo’s case that Wijers sorted out the pharmaceuticals side. This action didn’t win the support. Instead, it was thought as wasting money and made Akzo lack the scale to compete effectively with large rivals. But Wijers still insisted his strategy and used his power to force the required change.

Thirdly, he brokered a deal with the Dutch unions to redesign the pension scheme. This can bring profit to the employees but a loss to unions. Of course it would make Wijers lose some support from Dutch unions. But he still forced this change. Because he thinks Akzo should focus on the international market but not on a small field just like the pension policy.

At last, with the awkward situation that Akzo can’t make ends meet at some aspect, Wijers had no choice but to adopt immediate action to solve the present problems because the profit is so serious to an organization’s survival. So with the limited time and almost little support of the top internal members, Wijers still forced a series of changes to help Akzo regain profit and privilege.

Generally speaking, Wijers implemented the revolutionary changes to Akzo including market reorientation, management team replacement, and salary system redefinition, etc. All of these changes were all top down and radical ones with little support. So from all the above we can conclude the implementation that Wijers used in the change process was definitely a dictorial transformation combined with directive and coercive management styles.

iii) Consequences of change leadership style

To Akzo, Wijers is a hero. Absolutely, his leadership style gained more advantages than disadvantages to Akzo. So the following I would discuss the effects due to the change leadership style.

Most of the effects are positive ones. Firstly, margins gained a lot due to change implementation. In the case it says disposals of some loss making units brought in €1.6bn for Akzo. And the targeted regional paint sales will grow from $650m to $1bn by 2010. And it also says first half results in July showed turnover up by 7% at €3.75bn and underlying operating profits up by 9% at €365m. This gained profit will give Akzo staff confidence and increase their morale toward the future development.

Secondly, the redesigned pension scheme is good for the employees’ interest. It can help Akzo build a reputation as a good employer, win the support of working staff and make them work hard.

Thirdly, it can enhance the expansion speed of Akzo and offer more work opportunities even promotion chances for the employees. Form the case, we got that Akzo has extended its reach into Asian market and even in China. The great potential market is absolutely a great opportunity for its development.

Fourthly, these changes can also rebuild the reputation of Akzo and gain more potential clients for it. Just as the case says the retaining some of rewards from upcoming drugs and finding new shareholder base are expectable. More clients mean more profit. This can also increase the income of working staffs.

Fifthly, the staff’s well development will help Akzo gain lots of rewards. Wijers empowered some of the staffs to be fully involved in the implementation. Because he knew that all these people he empowered were with deep knowledge of the business that could help the restructuring. In the staff aspect, the empowerment could also help them develop. So both for the organization and the staff, it’s a win- win consequence.

All the things have two sides just like the coins. The change leadership style will also bring some side effects to Akzo.

Firstly, the radical change is a long term process. Although it will bring a lot profit to Akzo, it is also a time consuming project. And the long term period will also make the future too fluctuant to control.

Secondly, this long-term, second order change is also money consuming. And sometimes big investment doesn’t mean big return.

Conclusion

From the above analysis, we can make the following conclusions.

Firstly, to meet the needs of environment, Akzo Company adopted change of leadership as the organizational intervention to solve its problem which led Wijer to be appointed as the CEO. And of course this kind of intervention is a not radical one but an intermediate one.

Secondly, after Wijer became CEO of Akzo, he conducted a series of changes to solve these problems, such as cost reduction, management team replacement, changing pension scheme and so on. All of these changes were so successful that made Akzo develop very smoothly.

Thirdly, Wijer is an excellent internal change agent. He used his fantastic skills to fulfill the desired changing plan. These skills include rich consultancy experience, diplomatic skills, desire for challenge and a new face and so on.

Fourthly, Wijer acted both detractively and coercively to make a corporate transformation for Akzo. He adopted dictorial transformation style to associate this change which has important influence on the employees.

Generally speaking, Wijer is an outstanding CEO for Akzo. His excellent skills help him conduct a successful change in Akzo.

Reference

1. Buchanan & Huczynski1997, Organizational Behavior – An Introductory, Prentice Hall, London.

2. Cummings & Worley 2005, Organization development & change, 8th edn, Thomson south-western, USA.

3. Daft 2008, The leadership experience, 4th edn, ed. Calhoun, Acuna & Sabatino, Thomson South-Western, USA.

4. Hofer& Schendel 1978, Strategy formulation: Analytical concepts Post a Comment, West Pub. Co., St. Paul.

5. North Central Regional Educational Laboratory 2000, Skills and competencies needed to succeed in today’s workplace, viewed 20 December 2009
<http://www.ncrel.org/sdrs/areas/issues/methods/assment/as7scans.htm>

6.Palmer, Dunford & Akin 2009, Managing Organizational Change, 2nd edn, Mc Graw Hill, New York, p.31,p.230.

7.Ping Liu 2002, 犹太未来学家托夫勒及其乐观主义未来学思想(Jewish futurologist Alvin Toffler and his optimistic thoughts on the future), Regentcsp.org, viewed 20 December 2009,
<http://www.regentcsp.org/list_bbs.asp?id=260>

8. SocioSite1994, Alvin Toffler still shocking after all these years: New Scientist meets the controversial futurologist, New Scientist, viewed 17 December 2009,
< http://www.sociosite.net/topics/texts/toffler.php>

9. Stevenson 2008, What is a “Change Agent?”, Toolbox.com. , viewed 17 December 2009
<http://it.toolbox.com/blogs/original-thinking/what-is-a-change-agent-23764>

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