Consider the following scenario: Senior management of a large multinational corporation is planning to restructure the organization. Currently, the organization is decentralized around geographical...

Consider the following scenario: Senior management of a large multinational corporation is planning to restructure the organization. Currently, the organization is decentralized around geographical areas so that the executive responsible for each area has considerable autonomy over manufacturing and sales. The new structure will transfer power to the executives responsible for different product groups; the executives responsible for each geographic area will no longer be responsible for manufacturing but will retain control over sales activities.

Describe two types of resistance senior management might encounter from this organizational change, and identify some ways in which they can make the change effort more successful.

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kipling2448 | (Level 3) Educator Emeritus

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In most organizations, including in the corporate world, individuals and departments react very defensively to the suggestion that “power” or authority will be transferred from them to somebody, anybody, else.  Government agencies routinely battle each other over responsibilities for high-profile missions or activities, all the more so when budgets are seriously affected.  To lose budget and responsibility is to lose face and, potentially, to disappear altogether.  Organizations tenaciously cling to every bit of power they can, and resent the suggestion that another organization can perform the work or execute the mission more cost-effectively or better. In a scenario such as the one described – the transfer of responsibilities from regional managers to centralized product-specific departments – such resistance is a virtual certainty.  Many U.S. companies with overseas markets learned the hard way the costs associated with a failure to fully understand those foreign markets and the idiosyncrasies associated with each geographic regions.  Foreign-based managers, or even U.S.-based managers responsible for specific foreign markets take pride in maintaining a superior understanding of the foreign cultures and markets for which they are responsible.  They will look upon any transfer of their responsibilities with respect to these foreign markets as a threat not just to their personal fortunes, but to the company’s well-being.  Individuals and teams tend to interpret the greater good in terms of what benefits them personally.  The welfare of the organization and their own professional success are inexplicably linked.  The notion that a centralized decision-making process with respect to global manufacturing will be operationally superior to the status quo is, in a word, preposterous – or so these individuals believe.

This, then, represents one major form of resistance the type of change described in the question will confront:  The natural inclination to defend one’s turf irrespective of objective analyses concluding that the optimal condition requires fundamental change.  Resistance to change is a natural phenomenon, and what demands effective leadership to overcome.

Another type or form of resistance to change such as that described in the question would likely come from the foreign markets themselves.  Each region of the world is culturally and commercially vastly different from every other region.  Even within regions, for example, the Far East, cultural and economic distinctions between individual countries are large and entrenched.  What sales in Thailand may not be attractive in Vietnam, and what consumers in Japan respond to may differ markedly from what motivates consumers in China or Korea.  Real estate in Japan has long been at a premium, and apartments and homes are notoriously confined due to space constraints in a country with a large population but minimal habitable land.  Products tailored to those constraints, therefore, are likely less attractive to products tailored for a far more geographically expansive country like China or India.  It is the responsibility of geographically-oriented management to know those distinctions and to tailor sales efforts accordingly.  Any disconnect between sales and manufacturing will almost always result in major problems that could cost a corporation access to lucrative markets. 

These, then, are two types of resistance to change that could emerge under the terms of the scenario provided: bureaucratic resistance to relinquishing responsibilities or power, and centralized operations unresponsive to the unique requirements of disparate foreign markets.

The key to overcoming these challenges, as noted, resides in effective leadership at the top of the corporate hierarchy.  First, determinations have to be made regarding the ability of the manufacturing base to cater to each of the foreign markets – presumably a given, but one that cannot be taken for granted.  Additionally, overcoming bureaucratic resistance to change requires a combination of both tact and force (not in a violent sense, obviously, but in the sense of a commanding presence to oversee potentially painful changes).  Tact, or sensitivity, is needed to assuage the concerns of those expected to “lose out” in a major reorganization so that resentments are not allowed to fester and undermine efficiency, but without sacrificing the scale of change needed.  If the changes make sense, however, resistance has to be overcome, and management has to be prepared to part ways with recalcitrant managers.

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