Usps and Sony Struggle to Create Lasting Organizational Change free essay sample

When Bill Henderson, postmaster general of US Postal Service (USPS), turned up at the Tour de France in July 1999, things could not have been better. After making loss upon loss, his organization had finally turned things around. USPS was in profit with a strategic five-year plan that was set to see it prosper for years to come. And just to make things even greater, the athlete USPS had sponsored (the guy who was told he would never compete again after being diagnosed with testicular cancer in 1996), had just won the worlds most prestigious cycling competition. What a difference three years can make. On a downward trend Since that summers day, USPS has free-wheeled downhill in spectacular fashion. In the fiscal year ending September 2001, profit had turned to loss of around $1. 6 billion (less than projected but hardly a success), Budgets were cut and capital spending halted. Then came the terrorist attacks of 11 September and the subsequent anthrax assaults on employees of USPS. This only served to make matters worse for the postal firm and so once again, it was back to the drawing board. Failing to sustain change initiatives And USPS is not alone in its failure to implement a successful change initiative. According to recent research by Change Management Online, UK businesses undertake at least three major change projects a year (at a cost of approximately 52 billion in management time alone) yet half of these programs fail to make any lasting impact whatsoever. Whilst USPS faced a bigger challenge than most by attempting to turn the whole organization around (the ultimate change initiative), the fact that it made such a strong start left executives wondering, when things went awry, where did it all go wrong? Admittedly, transforming USPS into a profit-making outfit looked like something of an impossible task due to its unusual position. The USPS is a huge regulated monopoly and consequently has a number of legal obligations (e. g. new products and services cannot be introduced without lengthy discussions). In addition, competitors such as FedEx and UPS continue to offer more than just regular delivery and in doing so, justify the premium prices they charge. But despite these potential obstacles, executives at USPS realized that without some fundamental changes, the company was sure to go under. Initially, back in 1992, postmaster general Martin Runyon had tried to cut costs through staffing cutbacks however this approach had failed. Consequently, in 1994 Runyon decided that the way to achieve success was by setting aggressive operational goals that would improve efficiency and service. Improving service, improving profits To this effect, USPS launched a website containing useful information such as ZIP codes and pricing lists, experimented with internet kiosks, created a system for issuing electronic postmarks and began to develop an overnight shipping program in order to speed up deliveries. These initiatives paid off and between 1996 and 1999 the organization enjoyed a relatively stable period that also saw Bill Henderson take over from Runyon as postmaster general in 1998. Five-year plans were published and USPS moved towards its vision of becoming a twenty-first century growth company. Factors for failure So what went wrong? In between 1998 and 2001, USPS plummeted from a net income of $550 million to losses of approximately $1. 7 billion. Robert Reisner, former vice president of strategic planning for the company, identified a number of underlying problems that contributed to the failure f this promising turnaround: * USPSs new approach was disorienting to many managers. Some senior executives believed the aggressive targets set by Runyon were impossible whilst others felt that the organization was not focussing enough on its core business; * Despite the high morale that existed within USPS around 1999, senior management failed to capitalize on this momentum and missed out on the opportunity to secure support of employees throughout the company; * Some managers simply resisted the change. These executives felt that electronic services were unlikely to pose a major threat to the postal service for many years to come and consequently saw experiments with the Internet and electronic signatures as a waste of resources; * Ever present were the constraints of being a regulated monopoly. For example, a lucrative deal with Amazon. com was impossible due to regulations and meant that it was UPS and not the postal service that reaped the benefits of such a strategic alliance; and * Despite its impressive jump into the black, USPS had not actually made any structural, cultural or strategic transformations. By improving its service it had simply made incremental changes. This meant that threats such as email technology were never fully addressed. Reisner points out that, ultimately, USPS did not look to the long term, nor did it effect the necessary strategic changes. Without such a transformation it was inevitable that this turnaround would not be sustained. In many senses USPS is back to square one. It may have slightly improved its services, but the threats that were looming as far back as 1994 are still as real as ever. Sonys need for change Perhaps Sony, another organization currently in such a predicament, could learn a few lessons from USPSs mistakes. Although the electronics giant is not suffering from turnaround trauma, it is in the process of transforming itself in order to survive. However Sony may also be running the risk of shortsightedness. Why? The business is currently in limbo. Aware that there is little mileage left in some of its products, it is ready to leave its past behind, yet the future it desires (that of broadband domination) is not quite upon us. According to Business Week, most analysts are forecasting a 40 percent decline in the companys operating profits to just $1 billion on flat sales. It is becoming increasingly clear that Sony needs a new business model, broadband or no broadband. Turning around To combat this dilemma, the organization has: * started to shift its emphasis from making low-margin consoles to selling movies, games and Internet services; * shut down a number of factories in 1999 and pledged to reduce its workforce by 10 percent over the next three years; centralized management of all Sonys factories across the globe, cutting costs by 10 percent; and * started looking towards strategic alliances as a means of increasing revenue. But is this enough? Sony is still a sprawling conglomerate. Business Week likens it to other Japanese electronic giants such as Toshiba or Hitachi, describing them as jacks of all trades and Microsofts of none. In addition, the company still runs many of these smaller businesses (su ch as TVs and cathode tubes) at a loss. Sonys core is still in consumer electronics but this industry is fading fast. The market is already saturated and Sonys core electronic division (about 63 percent of its overall sales) was in the red for the first half of last year. In light of such a dilemma, corporate giants need the help of the Welchs or the Gerstners of this world to shake things up and streamline the business, yet Sony opts instead to promote from within, running the risk of becoming insular in its management techniques. And not only do some critics believe Sonys management system is wrong, they also feel that the brand has lost its technological edge, lagging behind innovative competitors such as Samsung. Incremental changes just not enough Many analysts feel that without radical changes in personnel and structure in the very near future, the star qualities of the Sony brand will gradually fade out altogether. It is encouraging that Sony has started to address these issues, yet whether it is too little too late (the cliche that rings true for so many change initiatives) remains to be seen. One thing both Sony and USPS know for certain is that sustained success is not going to come from a few incremental changes to systems and processes. If you do not change the mindset of your organization, then you are unlikely to after the fortunes of your business, no matter how established you are on the corporate ladder. Management implications The experiences of these two corporations provide some valuable lessons when it comes to sustaining change: To alter your fortunes on a permanent basis, you must change the culture of your organization; Secure the support of as many senior executives as possible. Those who are not happy about the changes you propose may need to re-consider their position within the business; * Do not market your strategy as a one-off change program that will guarantee success forever. Change needs to be continuous in order to maintain competitive advantage and one-off schemes tend to fizzle out after the honeymoon period; * Keep involved with the initiative for as long as possible (we are talking years not months). A common complaint from employees is that once an initiative has been rolled out and sustained for a couple of months, senior management lose interest. Whilst it is not always practical to maintain the same involvement you had at the beginning of the initiative, staying abreast of developments will reassure employees that this change more than just empty management rhetoric; * Know where you are going. Set realistic targets that are sustainable. For example, there is no point growing by 50 percent if the quality of your product will suffer and force you to scale back three years down the line. Comment This review is based upon: When a turnaround stalls by Reisner and Can Sony regain the magic? by I. Kunii et al. When a turnaround stalls is a well-written case study on the mixed fortunes of USPS. Reisner, former vice president for strategic planning within the company, candidly points out how USPS failed to embrace the technological future or gain the support of all its senior management. The article about Sony contains many useful facts and figures that all point to the need for change. As well as focussing upon previous transformational attempts, the authors offer some suggestions on how this electronics corporation can remain in the black.