SMA Element 3 - Grade: B PDF

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S.I.D. #1517846/1 ELEMENT 3 (1,000 words): Leadership & Strategic Change – Case – Sergio Marchionne: Leading Change in Fiat and Chrysler INTRODUCTION ‘Leadership is the process of influencing an organization in its efforts towards achieving an aim or goal.’ By contrast, leadership is about coping with change, therefore strategic change is central to leadership (Johnson, et.al., 2014). For this element, the student would look at leadership and strategic change in relation to the case of ‘Sergio Machionne: Leading Change in Fiat and Chrysler,’ along with the use of academic literature and theories. Fiat, founded in 1899 and Chrysler in 1925, formerly two different companies, now under one alliance and presently known as Fiat Chrysler Automobiles. These two companies were brought together in 2014 with the help and support of the US and Canadian Governments and trade unions. CEO, Sergio Marchionne, worked tirelessly to get the organization to where they are today. By taking over as CEO at Fiat in 2004, by 2006 he was able to make a company that was unprofitable and had poor quality products profitable. However, in order for him to achieve such, he had to let go of some employees and over 2,000 employees retired early. He changed the management system and created a ‘Group Executive Council.’ In 2009, Chrysler was near bankruptcy, had no market value, investment slashed and over 300,000 jobs were on the line and Marchionne was appointed CEO of the company. Just like with Fiat, he had to change management and improve product quality, and by 2011 was able to achieve an operating profit of $2 billion as compared to the net loss of $652 million in 2010. In the discussion below, the student would discuss the types of levers for change Sergio Marchionne adopted and how and why he was able to lead these two companies that were in such turmoil to profitability.

DISCUSSION In order for Sergio Marchionne to rebuild Fiat and Chrysler into a top selling brand, he had to go through the elements of leading strategic change, which can be seen in figure 1 below.

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S.I.D. #1517846/1 Figure 3.1: Key elements in leading strategic change

Leadership and Change

Source: Johnson, et.al., 2014, p.466 By being appointed CEO, Marchionne had to undertake three key roles of envisioning future strategies, aligning the organization to deliver such strategies and finally embo

hange.

was able to bring the two companies to profitability, ed accordingly. For fifty days Sergio toured

Diagnosis

d analyzed the situation. During his tour how

Levers for change

pted an autocratic style of management. Senio ke decisions and everything was left up to the former CE dominated the company and it was Marchionne saw fault in Fiat's and 2,000 managers and s 20 new young leaders from away from the traditional routes

ngineers

who held senior management positions.

Managing types of strategic change

to let go of many senior managers new management. He appointed er geographical locations, taking level. He also moved the CEO office

from the top floor to the ground floor in order to be closely connected to his staff and thereby adapting a democratic style of leadership. By doing this managers and staff are now able to learn different aspects and areas of the business and give their input on what they think is wrong and needs to be improved.

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S.I.D. #1517846/1 Similar to Fiat, Chrysler functioned under a bureaucratic system. He also had to develop a new management team by firing old employees and hiring new people. He place 26 young leaders from below management and replaced the old senior managers. Here, he also moved the CEO office from the top floor to the ground floor where he and the engineers can easily interact. He these two hierarchical structured companies to a flattened out structured organization. In order for Sergio to lead the change of Fiat and Chrysler to profitability whether the change be planned or unplanned, he had to adopt various styles to lead the change and relate it to the companies. With reference to Balogun and Hailey's change kaleidoscope, as seen below, they can be used to give examples of contextual features and how they might require different styles of leading change. Figure 3.2: The change kaleidoscope

Time Scope

Power

Readiness

Strategic change programmes

Capacity

Preserva

Diversity Capability

Source: Johnson, et.al., 2014, p.472

With reference to the change kaleidoscope above, Marchionne, by taking time to analyse Fiat 3

S.I.D. #1517846/1 and Chrysler, was able to determine how many things needed to change and thereby was able to give a time limit to achieve such change. At Fiat, although some thought of it as unrealistic, Sergio came up with a business plan to reach a target of 2 billion euros from 2004 to 2007. Also with Chrysler, he came up with a plan to save $2.9 billion from 2009 to 2014 by sharing parts and engines with Fiat. What people thought was a short span of time, Marchionne expected that it would encourage managers to think differently from the old ways of production and to achieve integration and speed things up. In both companies, to encourage the sharing of new ideas for product development, he moved executives to different parts of the organization. By the use of his power tactics, and the on-going change at the companies, employees were beginning to see what the organizations were capable of and were motivated and willing to take part in the change. Product quality was enhanced and Fiat was able to develop and launch the new Cinquecento car in just 18 months. Chrysler upgraded 16 models in just 18 months. This encouraged employees to work even more by seeing the results and the management of the new leaders. Some even called it a revolution when they saw the progress of the companies Figure 3.3: Types of change Extent of change

Incremental

Realignment

Transformation

Adaption

Evolution

Reconstruction/

Revolution

Nature of change Big bang

Turnaround

Source: Johnson, et.al., 2014, p.483 In figure 3 above, of the on-going changes at Fiat and Chrysler, we can see how relevant these types of changes apply to the companies. Although at the start of the change where persons were laid off and retired and new staff were hired, the employees eventually adapted to the new change of management and working styles, moving from a theory E, hard approach to change to a theory O soft approach. Sergio changed the autocratic, bureaucratic structures to a flat,

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S.I.D. #1517846/1 democratic structure, thereby allowing employees input to help generate new ideas for the companies new and improved vehicles. He was also able to turnaround the companies by making them profitable and for Chrysler, having an operating profit of $2 billion in 2011 as compared to the net loss of $652 million they had in 2010. Kindergartens and groceries were opened next to the work sites, all with an effort to help employees balance their work and domestic life. This is all being done to help revolutionize the company and to get it to rank at the top of the lists, because the vehicles are still ranked the worst despite of their accomplishments thus far.

CONCLUSION To conclude, Sergio Marchionne was able to effectively lead the change of Fiat and Chrysler from being unsuccessful and almost bankrupt companies to a profitable company within just a few years. He used his power and leadership knowledge to completely change the management systems and get rid of old cultures and traditions. By moving his office to the ground floor it was easier for engineers to interact and communicate new ideas to him. Suddenly with a new management system in place, employees had a new outlook on the work being done and within short spans of time were able to produce new products and improve and upgrade existing products. The company hopes that in due time they can be stripped from their position in the ranking or the worst brands and one day be turned into one of the best car companies on the market. As long Marchionne is willing to effectively continue to lead the change within Fiat Chrysler Automobiles, it would not be long again until they reach the top. RECOMMENDATIONS It is recommended that Sergio Marchionne use force field analysis to identify any further blockages to change and potential levers for change. As well as a trend analysis based on historical data of the overall performance and trends of the market, in order to predict what would happen with stock in the future. Sergio and his team should also continue to change, improve and build new products in order to keep the brand interesting to consumers. By implementing new technologies into existing vehicles and improving product quality, it would influence persons to want to buy their product and thereby help Fiat Chrysler reach their ultimate goal.

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REFERENCE LIST Fiat Chrysler Automobiles, 2016. The Group. [online] Available at: https://www.fcagroup.com/enUS/group/Pages/group.aspx (Accessed 24th April, 2017) Huczynski, A. and Buchanan, D., 2013. Organizational Behaviour. 8th edition. Harlow: Pearson Johnson, G., et. Al., 2014. Exploring Strategy text and cases. 10th edition. Harlow: Pearson. 6

S.I.D. #1517846/1 Senior, B. and Swailes, S., 2010. Organizational Change. 4th edition. Harlow: Pearson.

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