Week 30 Individual Case Study Assessment

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 Managing change at Faslane

Introduction

This case study is about the strategic change at HM Naval Base Clyde (Faslane) after being managed by Babcock Marine. Faslane Naval Base is home of the United Kingdom`s nuclear submarines that carry the Trident weapon system situated in Gare Loch (Scotland). In 2002, the Naval Base transitioned from being under the direct control Ministry of Defense to a private company called Babcock International in a bid to reduce the cost, improve operational effectiveness and service standards. This case study gives us a clear picture about the strategic change that is implemented in the Faslane and how was it successful.   

The main purpose of this report is able to understand the change in respective to Faslane, learn from it and be able to deal with it sometime in the future.  This report shows that to perform change management in order to smooth over the transition, as well as improve performance, only one person is not capable. All the people involved in the organization should work together and help each other to achieve the common goal.

  

Managing change at Faslane

Case Study Analysis

The task ahead for the John Howie, the Babcock Marine Managing Director was not easy. The Faslane was completely Ministry of Defense installation and run by them with 7500 people which includes Royal Navy Personnel, security personnel’s, police, the Royal Marines and sailors. In 2002, Babcock Marine and MOD come into agreement and establish partnering arrangements to reduce the cost of Faslane and improve operational effectiveness of the naval bases. The Babcock signed a contract for five year period to deliver the £76, £83 and £114 million of cost savings without affecting the service provided to the Navy.

To analyze the strategic change process at Faslane, let’s use the Balogun and Hope Hailey`s Change Kaleidoscope and Lewin`s force field analysis.

 The Change Kaleidoscope

A change kaleidoscope is a diagnostic structure that aims at monitoring and seeing through a change process that is situation sensitive. The particular function of a change kaleidoscope makes it bear immense importance in the organizations management process. The change kaleidoscope has an exterior ring composed of organizations strategic context, a central ring that encompasses the change context and an interior ring that has the design choices at disposal. 

      

                        

The contextual features are aspects of the organization that relate to its culture, competencies and current situation. These can be extracted from the broader strategic context. Let’s discuss the 8 contextual features in respect to the Babcock Marine attempt to make a strategic change at Faslane.

a)      Time: After signing contract for a five year period to deliver the cost saving of 114 million dollar without affecting the service provided to the Navy, the first job for John Howie was to change the mindset of their employees to see their job as to deliver with the minimum spend. As we see the time frame was short and change needed was big. The Babcock Marine first implemented all the low level changes upfront because they were easy and less time consuming. They also reprocess the documentation and review process and drastically minimized the 56 days process to 14 days.

b)      Scope: The scope of Faslane change was organization wide rather to a particular division or department. To increase the operational effectiveness they need to realignment the task force, they focused on delivering service to the customer, reduced bureaucracy and even the levels of management.

c)      Preservation: Preservation relates to the extent to which it is necessary to maintain certain ways of working and certain aspects of culture retain particular groups of staff, preserve specific organizational competencies. The Babcock marine understand the importance of their allies such as Naval Base commander, MOD, Navy Board and various stakeholders. They maintain good relationship with them by organizing regular meetings and most important thing was they were able to maintain the standard of their service even by reducing the costs.

d)     Diversity: At first it was difficult for Babcock to initiate the change. The public sector manager who`s got wide ranging responsibilities and a fairly large budget has no incentive to reduce costs. There was no perception of a need to save money, all looks good with the situations. In the complete different environment Babcock initiate the change and they start diversifying the perception of staffs and high level staffs.

e)      Capability: There are three levels of capability: individual, managerial and organizational. The individual capability includes the ability to cope with transition that the Faslane that they will have to undertake. Individual employees understood that they had come up with new ideas of how to cut spending.

Managerial capability includes the ability of mangers to help their staff through transition period. At Faslane managerial employees accept the change and welcome the new structure followed by Babcock.

The organizational capability focus on the existence of organizational resources with the knowledge and ability to manage the change required. The Babcock Marines developed and communicated the organisation’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.

f)       Capacity: The capacity relates to the available fund, time and number of manpower. As the primary objective of Faslane change was to reduce the cost and increase the operational effectiveness. The Babcock was mainly concerned to restructuring then increasing the capacity. They reduced the levels of management from 7 to 4, reduced about 400 full time equivalent posts which was key for the cost reduction.

g)      Readiness: At first the staffs and people inside the Faslane does not looks happy with change, but after some time they became aware of the change needed in Faslane and committed to make personal changes as well.

h)      Power:  As the Babcock enter into the five years contract they pose the power in manner to restructuring and reprocessing but they don`t have authority in delicate decision making and planning’s.

Figure 1: Key contextual features of Faslane

                     Change Kaleidoscope showing key contextual features in Faslane

Lewin`s Force field Analysis

 In Lewin’s force field analysis model there are forces driving change and forces restraining changes. Where there is equilibrium between the two sets of forces there will be no change. In order for change to occur the driving force must exceed the restraining force

Driving forces:  Driving forces are forces that push in a direction that cause change to occur. At Faslane the driving forces become the target that the Babcock Marine has to achieve within the five years period. Though the staffs and navy members were not so attracted towards the change at first, they gradually started to accept the change. In order to make employees more receptive for the change process Faslane implemented "the event in the tent" sessions where employees can be informed about possible changes and goals but also are encouraged to raise issues and ask questions.

Change: The actual change step at Faslane included various actions. Employees' focus "from the waterfront inwards rather than outwards to the ships" was turned into a clear customer oriented focus. A highly hierarchical structure was repealed in that management positions were cut. In regards to processes and procedures, series of review points were shortened what led to a speedier decision making process. Finally, the top-down leadership style was replaced through a bottom-up one and transactional management style became more transformational.

Refreeze:  Faslane introduced changes to the organization and structure that assures that change becomes a permanent part of the organizations. They deliver both the cost reduction and service improvement to the Faslane.

Managing change at Faslane

To compare and contrast the internal features of the Faslane  when it was run by Ministry of Defense and Royal Navy with when it was run by Babcock Marine we apply the Johnson`s Cultural Web and Mckinsey`s Seven S framework.

First let`s use Johnson`s cultural web model. This model suggests different elements of organizational culture and the elements include:

a)      Symbols

b)      Power structures

c)      Organizational structures

d)      Control systems

e)      Rituals and routines

f)       The Paradigm

Using cultural web model at Faslane up to the period of 2001, when it was run by MOD and after 2001 (2002-2010) for comparison and contrast.

Comparison and Contrast

a)      Symbols: The symbol represents the visual representation of companies. This remains pretty same before and after managing by the Babcock. As the Faslane is Naval Base, most of the staffs are navy army and commanders. They represent for the nations and remain the nation’s workforce. Only difference is, before 2001 it was home base for only nuclear submarines but after 2010 it became the home base for entire UK submarines.

b)      Power structures: The power structure before 2001 and after 2001 looks different. The management team after 2001 changed; Babcock brought the people from their own firm who had lived through similar changes.  The change was effectively from a bureaucratic structure to a functional structure.

c)      Organizational Structure: As I mentioned above, the change was effectively from a bureaucratic structure (moving towards a more corporate entity, with supervisors and standardization) to a functional structure (where individuals had a specialized set of tasks) after partnering with Babcock. The process reengineering was so effective that they reduce 56 days process to 6 days as well as they reduce the management team of 250 members to 125.

d)     Control systems: With the motive of cost reduction and improving operation effectiveness, John Howie, managing director of Babcock from 2002 to 2006 tipped a different control system than it used to be before 2002. Before the Babcock, commodores were in charge for the planning and controlling. The commodore management teams were less supportive and were not willing to change. But after 2002 Babcock bring their own management team and control the process and procedure at Faslane.

e)      Rituals and Routines: Rituals and routines in respect to customers, staffs and employees had changed after 2002. Babcock management team implemented a performance scorecard in order to measure outputs – this left the specifics of job performance and business change management effectiveness open to everyone in the company. This provided additional accountability, thus creating incentive for these changes to be implemented more readily. “Event in the tent” sessions were held, with discussions being held throughout the day in order to get the opinions from the workforce as to how the changes to Faslane were going over.

Figure 2: Johnson`s Cultural web of Faslane when it was run by Babcock Marine (2002-2010)

Figure 3: Johnson`s Cultural web of Faslane when it was run by MOD (up to 2001)

McKinsey`s Seven S framework includes the seven internal aspects of an organization that need to be aligned if it is to be successful. The seven aspects are divided into 2 elements. They are:

1)      Hard Elements  (Strategy, Structure and Systems)

2)      Soft Elements (Shared values, Skills, Style and Staffs)

Using McKinsey`s Seven S framework model at Faslane up to the period of 2001, when it was run by MOD and after 2001 (2002-2010) for comparison and contrast.

Table 1: Seven S framework model at Faslane up to 2001

McKinsey’s Seven S Model
Seven Models	STRENGTH	WEAKNESS
HARD ELEMENTS
Strategy	Infrastructure focus and customer focus	More budget and time requirement.
Structure	Bureaucrat centralized structure with a high complexity	Unclear roles and responsibilities.
System	Poor management system unable to reduce the cost and increase operational effectiveness.	More time needed for processing and decision making.
SOFT ELEMENTS
SKILLS	Navy officers, security personnel’s, Royal marines and MOD guard with specific skills and trainings.	Unfamiliar with modern management styles and change process.
STYLE	Leaders are bureaucrat with supervisors and standardization	Limited numbers of people are only benefited.
STAFF	About 7500 people were engaged in Faslane.	Not initiated for change. More focused on infrastructure and facilities than people.
SHARED VALUES	Commitment to provide quality services to Navy.	Ethnocentric beliefs and resistance to change.

Table 2: Seven S framework model at Faslane (2002 to 2010)

McKinsey’s Seven S Model
SEVEN	STRENGTH	WEAKNESS
HARD ELEMENTS
STRATEGY	Cost reduction and operational effectiveness without affecting service to the Navy.	Cost saving might lead to the degradation of service to the customers.
STRUCTURE	Functional structure where individuals had a specialized set of tasks and team and can present business plans. Clear roles and responsibilities. Layers of management reduced to 4 from 7.	Regular performances are to be measured and excess freedom sometimes damages the hierarchy of the organization.
SYSTEM	Expert management systems with teams deployed for the timely result.	Didn`t know how to run a naval base.
SOFT ELEMENTS
SKILLS	Expert Babcock management teams with similar experience of strategic change	Unfamiliar with the operation of naval base.
STYLE	Leaders are experienced with change process.	There are risks associated with the change process in such industry.
STAFF	Staffs are focused on change then infrastructure and facilities. More involvement of staffs..	Reducing the management layers means loss of job and it may not motivate staffs to work effectively.
SHARED VALUES	Cost reduction and operational effectiveness.	As a private company, Babcock Marine may seek more money which may damage the company reputation.

Table: 3 Resource Based View and Competence Analysis of Faslane (2002-2010)

                       

Resource Based View Analysis
	Before 2001	After 2002
Valuable	Buildings, infrastructures and facilities were valuable. Resources could be easily copied.	Human resources, flexibility and achieving goals are more valuable. Resources are hard to copy such as management skills and change management.
Rare	Lack of rarity in human skills.	Employees were brought who already faced changes. Heterogeneous management skills.
Inimitable	Lack of inimitable resources	Unique management skills. Knowledge about change and adaption.
Non-substitutable	Infrastructures and facilities were non-substitutable because the organization was a Naval based industry.	Employees were substituted by Babcok with skilled human resources. Human resources and infrastructure are non-substitutable.

Competence Analysis
	Up to 2001	After 2002
Physical resources (Tangible)	Infrastructures and facilities were seen more important.	After the reconstruction, improvement in the infrastructure. Capacity has increased.
Financial resources (Tangible)	Government budget (taxpayer’s money) Over spending	Government budget. Able to minimize spending.
Human resources (Tangible)	Knowledge about running naval base.	Expert of change management. Heterogeneous management skills.
Intellectual capital (Intangible)	Buildings and infrastructures. Stakeholder relationship.	Unique management and organizational structure. Home base for entire UK submarines fleet.

Managing change at Faslane

Strategic Leadership style at Faslane during 2002 to 2010

During the period of 2002 to 2010, Faslane had two managers and both were team of Babcock Management. John Howie was the Babcock Marine Managing Director from 2002 to 2006 and Craig Lockhart takes up from 2006. But both the directors follow the same protocols of strategy to make the change successful in Faslane.

Faslane change was successful because the management team brought people who dealt with change before and helped them implement changes. It was successful because employees were involved; they were told that things have to changes and asked for their opinions. The management team was motivated to make changes because of the earning they will be making as a result of cost savings. One important thing that contributed to their success was that Babcock was a company from the private sector where thing are very different (more competitive, better structured, different stakeholders, different targets, etc.)  compared to the public sector where people were relaxed because of the notion of jobs for life, they never considered that one day the government will not have enough money to pay for their services.

Let`s compare the Babcock management leadership style with the Five elements of Successful and Effective Strategic Leadership model (Lynch Model). According to this model, 5 elements of successful and effective strategic leadership are:

1)      Developing and communicating organizations purpose.

2)      Managing human resources and organizational decisions.

3)      Setting ethical standards

4)      Defining and delivering to Stakeholders

5)      Sustaining competitive advantage over time

This model can be presented in the figure as:

Figure 4: Five elements of Successful and Effective Strategic Leadership model (Lynch Model).

           

Lynch, R., (2009) Strategic Management, 5th Edition, Prentice Hall, chapter 16, pp619

1)      Developing and communicating organization purpose: These elements describe that the leader should develop the goal and certain set of objectives for the company. And then communicate these objectives all over the staffs effectively. This is what exactly   Babcock management did. Employees were told that the organization cannot function in the way it used to, things have to change. They were also asked to create their own teams so that they can increase productivity and operational effectiveness. Some workers lose their job but the purpose and vision of management team and leaders was clear.

2)      Managing human resources and organizational decisions: Human resource management and decision making is key part of any leaders in this world. Babcock management team reduce the number of employees, reappoint the job and reduce the review period to 6 days which contributed a lot to the decision making process and cost as well as operational effectiveness.

3)      Setting ethical standards: According to Lynch model, leaders are responsible for setting and monitoring ethical standards and corporate social responsibility. I think is the big reason to bring Babcock in Faslane, to restructure the organization so that they can spend less. It was unethical to spend the tax payer’s money, so they maintain the ethics as well.

4)      Defining and delivering to Stakeholders: Leaders need to maintain good relation with stakeholder inside and outside the organization. Babcock management team did a great job by over delivering year on year. They managed to save much more then the given target. Stakeholders were truly satisfied. As a result of this great performance the entire fleet moved to Faslane.

5)      Sustaining competitive advantage over time: Leaders and managers are considered to be responsible for maintaining as well as preserving organizational competitive advantage over the long period of time. In the case of Faslane, Babcock management and leaders are able to reduce the cost, over the time and these savings gave them a great competitive advantage (the entire UK submarine fleet was moved to Faslane). Faster decision making process, small teams of people working together, all these contributed to their competitive advantage. One great thing that Babcock has managed to achieve was to transfer the culture of a private company to a publicly owned organization which resulted in greater competitiveness between the employees themselves and other organizations.

Conclusion and Findings

Babcock`s ability to successfully go through the process of significantly reducing the cost and improving operational effectiveness of its naval bases in Faslane required good management team with skills and experience. In 2000 when the MOD had decided to significantly reduce the cost and improve operational effectiveness of their naval bases in house management would find it difficult given the restrictions they operated under as part of a wider civil service, so they established partnering arrangements with industrial firms. In 2002 they signed a contract initially for a five year period to deliver £76 million of cost savings without affecting the service provided to the navy.

Despite being a naval base, the staff saw buildings and infrastructure facilities as more important than supporting the Navy. Babcock management team believed the key was to change the mindset of employees. They managed to change the management structure from seven layers to a maximum of four making it less hierarchical. They implemented management structural changes early, they implemented all the low level changes that allowed them to deliver £14 million of savings in the first year exceeding the 3 million target. They changed the structure to make it more profitable by reducing the management team by half. By the end of year 5 they had delivered around £100 million against the £76 million target. That`s over 20 % reduction in annual running costs, by the end of year 10 they hope to have saved £280 million equating to 38.2 % of savings. They have delivered both cost reductions and service improvements.

Reference         

     ·         J. Balogun and V. Hope Hailey, Exploring Strategic Change, 3rd edition, Prentice Hall, 2009

• Hayes, J. (2002), The Theory and Practice of Change Management, Palgrave, New York, N.Y.

·         Clarke, C. J. (1997) ‘The Strategic Planning Society – The First 30 Years’ Long Range Planning 30(3) pp 327-333

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

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

·         MindTools.com. (2007).  The McKinsey 7S Framework. Mind Tools Ltd. Retrieved July 18, 2008 from: http://www.mindtools.com/pages/article/newSTR_91.html