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Analysing Organization Change at Tesco

INTRODUCTION

Tesco is a multinational chain of stores for retail with its headquarters in the United Kingdom. In2008, Tesco became the fourth largest retailer in the world, displacing the fifth largest distributor

Metro AG, the first movement of positions among the top five companies in the sector since

2003. Although originally specializing in food and drinks, it has diversified into areas such asclothing, electronics, financial services, selling and renting DVDs, compact discs, digital

downloads , Internet service , telecommunications , medical and dental insurance and software.

Companies that are able to compete successfully in today's rapidly changing businessenvironment, which is characterized by globalization of the economy, exploding information

technology, downsizing, restructuring, and new employer-employee relationships, must be ready

to make significant changes in the way they operate. Changes can be realized in a number of

areas. They can, for example, be observed in attitude or behaviour. Many major organizationalchanges, however, are technological ones. Sometimes these changes are not intended to change

behaviour, but they almost always do in some respect. Another type of change is replacement of

personnel; when top management is impatient with the pace of productivity, they often replacekey individuals. Changes also occur in organizational structure, formal roles and jobs, control

systems, work processes, and other elements of the organization's internal environment (Hough,

2003).

The motivation for change typically stems from the fact that something is not working (e.g.,continued negative feedback from customers, reduced profitability, threats of acquisition, or

other market pressures). For most organizations, a crisis is the catalyst for change. While a crisis

may be sufficient to initiate a change, it takes much more to successfully integrate the changeinto the work processes. Managers must have more than an extensive knowledge of the

marketplace, how to compete in it, and what internal structures must be in place to make the

company successful (Atuahene-Giman, Li, 2004).

SIGNIFICANT ORGANISATIONAL CHANGE AT

TESCO

Organizational change is defined as the ability to adapt to different organizations transformations

suffered by the environment inside or outside, through learning. Another definition is the set of

variations on the structure of organizations and suffering that result in a new organizationalbehaviour.

Recently, TESCO has come across a significant change in terms of introducing and

implementing a self-service check out system throughout its network. The implementation of thisnew payment system at Tesco is undoubtedly a strategic plan change. This is because the self-

check-out system is a new system that differs from normal or traditional payment terms in terms

of carrying out transactions. The cash payment required operating through a teller, but the


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checkout system does not need any cashier. This Self-service brings a new procedure or method

to facilitate the customers. The use of the new system serves customers in a better way and

provides better service without having to spend so much time in the store. When introduced intoTesco, this self-checkout system helps clients improve shopping experience and also facilitate

them for easy shopping. This was done to make customers feel part of Tesco. The customer in

store will select the shopping from the shelves and move to the self checkout, scan and pay forthe items. The intended effect is the synergy of both the self checkout and the cashier checkout.

The objective of this task is to investigate the Tesco self-service machine. This introduction of

self-service check outs was a strategic shift. It was first introduced in Dereham, Norfolk in 2003.

The purpose of the system was to accelerate check out processes and reduce labour costsassociated with retail outlets. This work is to study the triggers of change, the process involved

and the benefits for the organization.

MANAGING ORGANIZATIONAL CHANGE

Lately, TESCO has confronted a substantial change in terms of introduction and implementationof self-service check out system throughout its branch network. Organizational change occurs

when a company makes a transition from its current state to some desired future state. Managing

organizational change is the process of planning and implementing change in organizations insuch a way as to minimize employee resistance and cost to the organization, while also

maximizing the effectiveness of the change effort. Therefore, the objective of this report revolves

around the process used by TESCO to manage the implementation of the check-out system.

Today's business environment requires companies to undergo changes almost constantly if theyare to remain competitive. Factors such as globalization of markets and rapidly evolving

technology force businesses to respond in order to survive. Such changes may be relatively

minoras in the case of installing a new software programor quite majoras in the case ofrefocusing an overall marketing strategy. "Organizations must change because their

environments change, " according to Thomas S. Bateman and Carl P. Zeithaml in their book

Management: Function and Strategy. "Today, businesses are bombarded by incredibly high rates

of change from a frustratingly large number of sources. Inside pressures come from topmanagers and lower-level employees who push for change. Outside pressures come from

changes in the legal, competitive, technological, and economic environments." (Bateman,

Thomas , Zeithaml, 1989). In case of TESCO, both the internal and factors played their role inbringing about the change.

Organizational change initiatives often arise out of problems faced by a company. In some cases,

however, companies are encouraged to change for other, more positive reasons. "Changecommonly occurs because the organization experiences some difficulty, " Bateman and Zeithamlwrote. "But sometimes the most constructive change takes place not because of problems but

because of opportunities." The authors used the term "performance gap" to describe the

difference between a company's actual performance and the performance of which it is capable.Recognition of a performance gap often provides the impetus for change, as companies strive to

improve their performance to expected levels. This sort of gap is also where many entrepreneurs

find opportunities to begin new businesses (Bateman, Thomas , Zeithaml, 1989).


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Unfortunately, as Thomas (1993) noted in an article for HR Focus, statistics show that many

organizational change efforts fail. For example, 50 percent of quality improvement programs fail

to meet their goals, and 30 percent of process reengineering efforts are unsuccessful. The mostcommon reason that change efforts fail is that they encounter resistance from employees. Change

appears threatening to many people, which makes it difficult to gain their support and

commitment to implementing changes. Consequently, the ability to manage change effectively isa highly sought-after skill in managers. Companies need people who can contribute positively to

their inevitable change efforts. The management at TESCO developed a set of objectives sales

increment, cost effectiveness, customer satisfaction before implementing the change andmeasured these developed objectives to ensure success through the attainment of these developed

objectives.

AREAS OF ORGANIZATIONAL CHANGE

Bateman and Zeithaml identified four major areas of organizational change: strategy,technology, structure, and people. All four areas are related, and companies often must institute

changes in the other areas when they attempt to change one area. The first area, strategy changes,can take place on a large scalefor example, when a company shifts its resources to enter a new

line of businessor on a small scalefor example, when a company makes productivityimprovements in order to reduce costs (Bateman, Thomas , Zeithaml, 1989). There are three

basic stages for a company making a strategic change:1) realizing that the current strategy is no

longer suitable for the company's situation; 2) establishing a vision for the company's futuredirection; and 3) implementing the change and setting up new systems to support it. At TESCO,

the management has followed the same process and stand efficacious in implanting the new

system successfully.

DRIVERS OF CHANGEThere are four primary drivers of major work-place change. They are a change to the

organizational structure, a new product or service, new management, and new technology.

Organizational structure may change through major downsizing, outsourcing, acquisitions, ormergers. These actions are often accompanied by layoffs, particularly as certain positions

become redundant. A new product or service has implications for changes in production, sales,

and customer service. Additionally, by changing product or service the organization may facenew competitors or new markets. New management, such as a change in chief executive officer

or president, often brings a period of transition during which upper-level managers are likely to

alter existing business processes and personnel policies. Finally, new technology can create vast

changes to the organization. Technology can change the production process or the workingconditions (i.e., telecommuting), and these changes may influence the skills that employees use

on the job (Gioia, Dennis , Thomas, James , 1996). The changes are caused by the interaction of

forces, these are classified as:

INTERNAL DRIVERS


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Internal drivers are those from within the organization, arising from the analysis of behaviour

organizational and presented as alternative solutions, representing conditions of equilibrium,

creating the need for structural rearrangement, is an example of these technological adaptations,changing strategies, methodological, policy changes, etc.

EXTERNAL DRIVERS

External drivers are those from outside the organization, creating the need for internal order

changes are examples of this force: The government decrees, the standards of quality, limitationson the environment both physical and economic etc.

DRIVERS OF CHANGE IN TESCO

Over the years TESCO has been able to apply its strategies effectively and efficiently to become

one of the big Global retailers in the world. Both, internal and external drivers have played their

role in sparking the change at TESCO. The main triggers are discussed below:

CREATION OF VALUE FOR CUSTOMER

As part of TESCO strategy to retain existing customers and attract new ones, the Companydecided to create more value for its customers. This resulted in the Implementation of the self-

checkout system. TESCO wanted to make the shopping experience Exciting for the customers.

GROWING CUSTOMER BASE

The success of TESCO can be attributed to numerous factors one of which is its fast growingcustomer base. The self-checkout was implemented to ease congestion on Checkouts. With the

implementation of the self-checkout customers do not have to stand in long boring queues to pay

for their shopping. They can use the self-checkout which is simple and faster especially if the

customer has purchased only a few items.

TECHNOLOGICAL INNOVATIONS

In view of the growing age of technology, it is essential for all organizations to enhance their

technologies if they want to be successful. TESCO implemented the self-checkout to improve

upon its operational efficiency.

COMPETITION

Competition among organizations is one of the common triggers of change in most Industries.

TESCO implemented the self-checkout system to gain a competitive Advantage against itscompetitors. This also led to differentiation in the market as TESCO distinguished itself from the

other retailers by the use of the self-checkout System.


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COST OF LABOUR

One of the major aims of every business is to maximize profit. TESCO wanted to Increase its

operational capacity at the front end and at the same time saves cost hence the use of the self-checkout. For instance instead of employing five cashiers to operate Five cashier checkout, only

one cashier will be required to assist customers on five Self-checkouts.

THE PROCESS OF ORGANISATIONAL CHANGE

Every change effort should be accompanied by an action plan. Once a compelling reason tochange has been identified, it is necessary to create a picture of what the change will require,

how the organization will effect it, and what the organization will look like when the change has

been implemented. Although each action plan for change will be unique, all plans should followa basic structure: (1) identification of a course of action and allocation of resources to achieve the

organization's change goals; (2) designation of the authority, responsibility, and relationships that

will drive the change efforts; (3) determination of who will lead the change effort and thespecific roles and responsibilities of these individuals; (4) a description of the procedures and

processes that will expedite implementation of the change; (5) identification of the training that

will be required to enable people to incorporate the change into their work processes; and (6)

identification of the equipment, tools, or machinery that will affect the way work isaccomplished (Atuahene-Giman, Li, 2004).

Many organizational changes are initiated and implemented through the authority of top levels of

management. The problems are defined and solutions are developed by top-level managers basedon information that is gathered by others with help from a limited number of people. Once a

decision is made, the changes are often communicated to people in the organization through

memo, speech, policy statement, or verbal command. Since only a few people, usually at the top,are involved in making the decisions, the change is usually introduced very rapidly. However,this strategy has proved to be largely ineffective in dealing with organizational change processes,

particularly for successful integration. A common misconception about carrying out a change is

that it must be directed from the top. The foundation of successful change management lies ininvolving the people who will be affected by the change.

Sharing responsibility for change is a process whereby those at the top and those at lower levels

are jointly involved in identifying problems and/or developing solutions. Virtually continual

interaction takes place between top and bottom levels. The shared responsibility or participativeapproach can be addressed in several ways: (1) Top management defines the problem and uses

staff groups or consultants to gather information and develop solutions. These identified

solutions are then communicated to lower-level groups in order to obtain reactions. The feedbackfrom the lower levels is then used to modify the solution, and the communication process starts

again. The assumption underlying this approach is that although involving others in the

definition of the problem or its solution may be impractical, the solution can be improved andcommitment obtained by involving lower levels. (2) Top management defines the problem but

seeks involvement from lower levels by appointing task forces to develop solutions. The task

forces provide recommendations to top management, where the final decision is made. These


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task forces are composed of people who will be affected by the change and have some level of

expertise in the areas that will be affected by the proposed change. The assumption here is that

those who have the expertise to solve the problems are those groups that are closer to thesituation. Also, the group's commitment to the change may be made deeper by this involvement.

(3) Task forces composed of people from all levels are formed to collect information about

problems in the organization and to develop solutions. The underlying assumptions in thisapproach are that people at the top, middle, and lower levels are needed to develop quality

solutions and that commitment must build at about the same rate at all levels. These approaches

emphasizing shared responsibility usually take longer to implement but result in morecommitment from all levels of the organization and more successful integration of the change

into the work processes (Hough, 2003).

CHANGE MANAGEMENT OBJECTIVES - TESCO

Before, implementing the change, TESCO devised the following objectives to measure theeffectiveness of the organisational change. The developed objectives were:

A significant increase in customer satisfaction

To achieve cost effectiveness

A substential increase in sales

THE IMPLEMENTATION PROCESS

The implementation of the TESCO self-checkout systems could be said to be a strategic Change.

This is because the self-checkout is a new system which differs from the Normal checkout interms of the way transactions are carried out. The cashier checkout requires a cashier to operate

but the self-checkout does not require a cashier. The self-checkout brings a new procedure ormethod of serving Customers. The use of the self-checkout and the normal checkout give the

customers an enhanced service without having to spend so much time in the store. The self-

checkout when introduced in TESCO was to help improve upon the customers Shoppingexperience and also to make the shopping very easy. This was done to make the customers feel a

part of TESCO. The customer in store will select the shopping from the shelves and move to the

self-checkout, scan and pay for the items. The intended Effect is the synergy of both the self-

checkout and the cashier checkout.

RESISTANCE TO CHANGE

Understanding the factors that drive change and how people react to change is critical to the

successful implementation of change. It is part of human nature to resist change. People prefer

the security of familiar surroundings and often do not react well to changes in their work orsocial environment. Resistance to change often takes some typical forms. One typical reaction is

denial, which individuals use to protect themselves.


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Many managers assume that if people think the change is a good idea, they will not resist it. Why

would the work force resist changes if the changes will fix what they wanted fixed? People may

want change, but not necessarily the changes that have been identified in the plan. Workers mayhave their own ideas about what should change, and frequently the changes they think fix the

problem involve someone else changing, not them. In addition workers may think the ways to

make things better is simply to adjust and manipulate their work processes, not to implement thedrastic changes identified in the proposed plan. Alternatively, workers may not think that is

wrong with the current way of working. Often the process of changing looks too hard, looks like

it will take too much energy, and seems confusing. A strictly structured change process oftenignores the ingrained human resistance to change. When that happens, people who are affected

by the change end up expending most of their time and energy figuring out how to stop the

change or altering the change until it looks like something they can live with. If the desired

change is not very desirable to the work force, managers need to find out why. Insufficientinformation about the driving force behind the change and the benefits expected from it is likely

to cause distress among those affected by the change. People tend to act in their own perceived

self-interest. Managers often think of change initiatives in broader terms, while the work force

tends to think of it differently, in more narrow terms of how the change will affect their work.Sometimes managers forget or overlook this reaction to change. Effective strategies for

organizational change involve an understanding of the human beings in the work force.

RESISTENCE MANAGEMENT AT TESCO

Effective planning is imperative in any organization if it is going to be successful in Its activities.

The management of TESCO had to decide on the number of self-checkout they were going to

begin with and in which of their stores they would be introduced first. The checkout leaders weretrained to operate the self-checkout as they would be assisting the customers to use the new

system although the self-checkout has a screen Demo which makes the system user friendly and

easy to understand and operate. Some cashiers thought that the self-checkout was going to putthem out of their jobs As automation of a system normally leads to the elimination of the manual

aspect of The system and this made them insecure with their jobs. The managers had to educate

the cashiers on the purpose of the self-checkout and the Potential benefits it was going to bring to

both customers and the organization as a Whole. The purpose was to motivate the cashiers to beconfident and welcome the Change. The initial implementation was a form of feasibility studies.

The customers were encouraged to use the self-checkout with the assistance of the trained front

end Leaders. Management observed the system for a period of time to determine the Number ofcustomers that patronized it and also to get feedback from both the Customers and staffs. The

positive feedback gave management the green light to introduce the self-checkout in other

TESCO outlets.

EXTENT TO WHICH CHANGE WAS SUCCESSFUL IN

MEETING ITS OBJECTIVES

This change management process (implementation of the self-checkout) has had an immense

effect on the entire organization as it serves a major role in the customer Shopping experience


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and also impact positively on the sales of TESCO as an Organization. The major benefits of the

self-checkout will be discussed below.

INCREASE IN SALES

In this marketing era where the customer is the focus of most companies, customers will alwaysgo to shops where they can get a good and timely service. TESCO being one of the worlds

leading international retailers currently has 3000 self-checkouts in 750 stores. This is a great

improvement since the self-checkout was first implemented. The number of self-checkouts instores attracts more new customers as they know They can always leave the store in time through

the use of the self-checkout. This Increases customer base which impacts positively on sales.

25% of TESCOs UK Transactions are through self-checkout (TESCO plc). This means that aquarter of UK TESCO sales can be accounted for by the use of the self-checkout systems. This is

represented in the pie chart below as blue.

COST EFFECTIVENESSThis is an important factor to consider when planning any change management Process in anyorganization. According to TESCOs annual statement 2005, the self-checkout was introduced

into 130 stores and over 850,000 customers use them every Week. The use of the self-checkout

helps to save on labour cost as a number of the self-checkout systems could be operated withoutthe need for a corresponding number of Cashiers. The self-checkout can compensate for the

shortage of staff. However a Trained supervisor may be required to assist customers with the

self-checkout in case Of any malfunctioning.

CUSTOMER SATISFACTION

The self-checkout has brought about good customer services as customers dont have To spend

time in the store queuing to pay for their shopping. Datamonitor (2008) stated that the use of

technology is one of the greatest ways to improve upon customer Satisfaction. This helps to builda good relationship with the customers which results in customer loyalty. In TESCOs annual

report and financial statement, 1.5million customers prefer to use the self-checkout in more than

200 stores weekly. This shows that customers are very satisfied with the system and this also has

a huge Impact on sales.

CONCLUSION

Although the self-checkout has been well received by retailers and their customers, there are a

few challenges with the system. When customers buy loose items like tomatoes in a small bag

without a barcode, it will be priced by the weight. The customer has to go through the menu ofthe self-checkout which often gets customers confused and frustrated especially those without

any IT knowledge. Another problem is when a customer has only one item and scans it the

system gives a warning if it is not placed in the bagging area. This often irritates customers.


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Minors also use the self-checkout to purchase alcohol and this could result in Tesco losing its

License to sell alcohol.

NEED FOR FURTHER CHANGES IN THE FUTURE

In light of the difficulties discussed above, it is suggested that a supervisor or expert staff ispositioned at the checkout area from the maiden of the store to closing to assist customers who

come upon any difficulties using the system to circumvent any delays in transactions and also to

check the id of anyone alleged to be a minor. The self-checkout should be upgraded to make itfurther users friendly and also to lessen the rate at which it reports errors.

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