CAMBRIDGE ASSOCIATION OF MANAGERS GRADUATE DIPLOMA IN MANAGEMENT(GENERAL) CORPORATE STRATEGY

MANAGING STRATEGIC CHANGE Effects of employee perception of planned change strategy A Case Study of Blue Shield Insurance Company

Done By: Rose Wanjiru Candidate No.: CAM/2006/GD/KEN/00990 Purpose: Fulfillment of Cambridge Association of Managers Graduate Diploma in Management (General) (Corporate Strategy Module) Date: Presented to: Cambridge Association of Managers, International Examinations, Cambridge, UK.

Declaration I declare that this project is my original work and has not been exhibited or published in any way and has never been presented for any awards in any institution. Name. Signature.. Date.

This project has been submitted for examination with my approval as supervisor. Name.. Signature... Date.

This project has fulfilled the Quality Assurance Policy requirements. Name.. Signature.. Date... Head of Quality Assurance This project has been submitted for examinations with my approval as the moderator. Name.... Project Assessment Coordinator This project has been submitted for examinations with my approval. Dr. Humphrey Oborah Signature .. Date .. Signature.. Date.

Head of Missions and Curriculum Manager, Digital Advisory and Learning Centre.

ACKNOWLEDGEMENT

EXECUTIVE SUMMARY

TABLE OF CONTENTS Pages Declaration................................................................................................................i Acknowledgements..................................................................................................ii Executive Summary..................................................................................................iv Table of contents ......................................................................................................v CHAPTER ONE: INTRODUCTION 1.1 Background of the study...................................................................................... 1.2 Historic back ground of the institution................................................................ 1.3 Organizational structure of EABL....................................................................... 1.4 Department of concern........................................................................................ CHAPTER TWO: LITERATURE REVIEW 2.1 Theoretical review............................................................................................... 2.2 Empirical review................................................................................................. 2.3 Critical review..................................................................................................... 2.4 Missing gaps....................................................................................................... CHAPTER THREE: PROBLEM SPECIFICATION 3.1 Statement of the problem....................................................................................

3.2 Suggested solutions............................................................................................ 3.3 Objective of the study........................................................................................ 3.4 Specific aims...................................................................................................... CHAPTER FOUR: RESERCH DESIGN AND METHODOLOGY 4.1 Research design................................................................................................. 4.2 Sample population and population size............................................................. 4.3 Sampling Technique.................................................................................. 4.4 Data collection Methods.................................................................................... 4.5 Data analysis and presentation........................................................................... CHAPTER FIVE: FINDING, ANALYSIS CONCLUTIONS AND RECOMMENDATIONS 5.1 Findings.............................................................................................................20 5.2 Data Analysis.........................................................................................21 5.3 Conclusion.........................................................................................................24 5.4 Recommendations ........................................................25 5.5 Limitations and suggestions for improvement..................................................26 Implementation Plan27 Reference.................................................................................................................28 Appendices..............................................................................................................29

CHAPTER ONE 1.0 INTRODUCTION 1.1 BACKGROUND OF THE STUDY INSTITUTION Blue Shield Insurance is a composite insurer established in 1982. The Company was started with the goal of making insurance products and services accessible to a wide cross section of Kenyans. The origins of the company have endeared it to Kenyans as it is with pride that we say we are truly Kenyan. As one of the oldest indigenous owned insurance companies we have grown with many of our customers. With our head office in Nairobi, we have a countrywide branch network and a strong team of intermediaries who include brokers and agents. In the last 26 years, Blue Shield insurance has undergone significant growth. The company has authorized share capital of Kshs. 250 million and our asset base is over Kshs. 3.1 billion. The life fund today stands at Kshs. 260 million. The strong base ensures that we can underwrite any form of risk and adequately cover our obligations. Our unwavering commitment to client's needs and satisfaction make us the ideal partner for your insurance solutions. Vision To be the market leader offering world class, customized and professional insurance services. Mission Statement "To guarantee quality Insurance services to the delight of our esteemed stakeholders worldwide." Core Values

Team work, Integrity,

Customer focus, Commitment Professionalism. Established as a composite insurance company in 1982 Broad asset base of over KShs 3.1 billion Share capital of KShs 250 million Good corporate governance of observing best practice Elaborate and well managed country-wide branches network Elaborate reinsurance programmes Computerized and automated service delivery Qualified professional and highly motivated staff Easy premium payments through premium financing and credit cards To consistently grow our sales revenue through sales of our existing production development of new products and services and entering new products and services markets.

Our Core Strength

Corporate Objectives

To pro-actively manage, control and reduce claim costs through the promotion of modern risk management techniques and countering fraudulent claims through thorough investigations and effective legal representation.

To ensure proper cash flow management sustained by a good investment policy and proper asset mix. To always provide a personalized touch to our transactions by backing them with regular interactions with our customers and intermediaries and creating strategic relationships with our stakeholders and partners.

Documentation of Blue Shield Insurance Co. Systems and processes and adoption of operating manuals in order to enhance internal controls and productivity. To deploy an information and communications network that will offer a platform for the automation of all our operations, thereby moving most of the services and products online.

Continue taking an integrated marketing approach by participating in social and community services such as sponsorships, charities, donations, public relations, advertisements etc.

1.3 ORGANIZATION STRUCTURE

1.4 DEPARTMENT OF STUDY The department of study is the Human Resource Department. It is responsible for the recruitment and management of change in the entire organization. This department is involved with the strategic planning, training and personal development of the personnel.

CHAPTER TWO: LITERATURE REVIEW 2.0 THEORETICAL REVIEW 2.1.1 SCOPE OF STRATEGIC CHANGE According to Helios Group, scope of strategic change is critical during change management. It should establish the business practices, systems infrastructures, organization and partners that

need to be considered as part of the program. Further, it should illuminate the degree of impact in each area. It is important to find the right balance when defining scope. Narrow definitions can leave a program susceptible to unanticipated scope creep. On the other hand, broad definitions can dilute the programs focus by taking on increasingly unrelated problems and opportunities Many people mistakenly assume that once defined, scope should not change. However, most programs have an evolving scope and one of the most critical determinants of program success is how the evolution of scope is managed. See development fidelity below for further explanation. 2.1.2 CORPORATE BRAND AND ITS ROLE IN MARKET DRIVING While the traditional approach to corporate branding advocates the alignment of identity and image, and focuses on the balance of macro-dimensions (vision, culture, image), other studies take a more cautious approach and focus on the harmonisation of micro-dimensions such as brand perceptions by different stakeholders (Davies and Chun, 2002; Kowalczyk and Pawlish, 2002). Christensen and Askegaard (2001), argue that the alignment of identity and image is more about reaching a subtle balance, rather than reducing any gap, since these phenomena are inseparable by nature. Even though the level of analysis is different, the role of brand identity in influencing the brand image of customers and other stakeholders is emphasised. It is also stressed that although the link between identity and image is reciprocal, it is more beneficial to have a stronger identity than image (Davies and Chun, 2002). Despite the different approaches to corporate branding most authors agree that the corporate brand is a complex multidimensional construct of an intangible nature (e.g. Ind, 1997; Balmer, 2001b; Balmer and Gray, 2003; Brown et al., 2006; Pitt et al., 2006). Irrespective of the general conception of the corporate brand as a sum of values (Ind, 1997), a logical structure (Kay, 2006) or a bundle of associations (Brown et al., 2006), its ultimate goal is to create meaning and value through various relationships between the company and its multiple stakeholders. The ability of corporate brands to influence perceptions and behaviours and even channel consumer perceptions is emphasized by a number of authors (Chun and Davies, 2006; Kay, 2006). The central role of organizational culture in creating and implementing a market driving approach is discussed by Carrillat et al. (2004), while Kumar et al. (2000) argue that

organisations which activate the values that trigger innovation and change are more prone towards market driving. However, in order to be effective and to maximise customer value, brand values also need to be motivating for staff (internally) as well as relevant to customer needs (externally). When employees develop more pro-active attitudes towards customers, this triggers interaction and customer involvement with the brand, which, in turn, increases understanding and loyalty towards the companys products and services. The emphasis placed upon strong relationships with external business partners such as suppliers, when either pursuing a market driving strategy, building a strong brand or developing a high degree of market orientation in general (Elg, 2002; Siguaw et al., 1998) implies that networking aspects should also be considered more systematically in an internationalization context. If, for example, suppliers are to support a firms market driving approach, it is likely that inter-firm relationships should be based on a high degree of trust and commitment. A long- term orientation within a network relationship is often based on commitment at a personal level, and when both parties have a long-term interest in the relationship; suppliers become more dependent on the success of the firms market driving strategy (Ford et al., 1998; Hkansson and Snehota, 1995). 2.1.3 IMPACT OF ENVIRONMENTAL CONCERNS ON STRATEGIC PLANNING AND IMPLEMENTATION. Researchers have carried out studies into how national culture affects such factors as employee motivation, management style and organization structure. They have discovered identifiable differences in these areas between different countries. Management Differences in culture have implications for managers in multinational companies when they are deciding how best to implement strategic decisions across their different divisions. Two strategic considerations likely to be affected by national characteristics and culture are where the strategies are to be planned, and where an adaptive approach may be more successful. Planned strategies are most appropriate where uncertainty is dealt with by reducing it, and where the emphasis is placed on the hierarchy, the individual and the work tasks. Organizations which follow this pathway are seen to be proactive and in control. A good example of this type of culture is the USA. Here society is seen as championing individual rights and being tolerant of racial and religious differences. The Americans have strict job descriptions and set out to hire

people who fit them. But despite this emphasis on individualism, and particularly on personal development, American companies seem to strive also for homogeneity: dressing in the "company style" for example. Americans generally adapt very readily to working in teams and can quickly establish rapport with one another when brought together for a joint project. (They are often issued a team shirt, to help build this spirit.) An adaptive strategy is likely to be found in cultures which accept uncertainty more readily. In this case the organization has less control and is reactive rather than proactive, and the tendency is to look towards the group rather than the individual. The Japanese provide a good example of this type of culture with their emphasis on teamwork. Japanese managers are well known for their ability to motivate their employees and create harmony, intense involvement and a deep commitment to the company's goals. Europeans, like Americans, are tolerant of racial and religious differences in general, and even more tolerant of individual differences. European employees tend to be less willing than Americans to conform, and tend also to show a lack of respect for authority. It may be argued that this natural dislike of authority can produce advantages for an organization, with managers delegating decision-making downwards. This encourages staff at lower levels to be creative, and this in turn increases their confidence in their ability to change things which "matter". When appointing staff, European managers are less rigid than Americans and are more likely to "adjust" the job description to fit it to the individual hired. European companies have a looser concept of corporate culture than exists in the USA or Japan. Dress codes are also much less controlled. European managers are trying to learn from the Japanese how to encourage and improve teamwork with their staff. One of the factors making this difficult is that of the culture and education system which encourages people to compete against one another in order to achieve success. Finally, Drucker has even suggested that management is itself a "culture", rather than a discipline, and as such has its own set of values, beliefs, tools and language. The real challenge for management, then, lies not in coping with the different cultures of the Germans, Japanese, etc. but in overcoming the limitations of its own culture. The problem is not a simple one, and neither is the solution to it. It lies not in tackling problems in a piecemeal uncoordinated way,

using techniques such as quality circles, team-building programmes etc., but in creating an overall fit of all the managerial parts. Developing Plans We considered in Unit 7 the different structures which multinational organisations adopt. Starting from the simplest, where overseas subsidiary companies are controlled by direct contact between the manager in charge of the subsidiary and the chief executive of the parent company, towards the setting up of international divisions dealing with overseas trade, there is movement from centralised planning at "home", towards devolving responsibility so that planning can take place within the overseas culture. Transnational company structures, as suggested by Bartlett and Ghoshal, move further towards planning on a local basis taking precedence over a centralized "head office" structure. Where authority and power is decentralised, planning will also be decentralised. Johnson and Scholes see the issues of structure and control at the corporate level and relationships between businesses and the corporate centre as being a major strategic problem for multinational firms. This is due to the firm being involved in a range of businesses of different types in the form of subsidiary companies in a holding company structure or divisions within a multidivisional structure. The issue of centralised planning and decision-making versus decentralised has never been resolved. On the one hand it seems that those on the ground at the sharp end of the business, i.e. those based locally, are best placed to do so. On the other hand, an activity in one part of the world must be consistent with corporate policy and so the autonomy of companies established within nation states is subject to the overriding policies of corporatemanagement. As the role of the corporate decision-maker has grown it has also become more distant, and key decisions about plans and strategies, although formulated at "local" levels in overseas divisions, often have to be referred to a central office. Structure Many organizations adopt an organizational structure which reflects geography to some extent. This may apply both,

Domestically, where branches are grouped by area and region, and Internationally, where branches and divisions are grouped by country or by groups of countries.

Grouping by country within an international network makes sense for a number of reasons. The organization may have to report to local regulatory and tax authorities, which requires a "country head office" to consolidate the information required. Organisations increasingly attempt to align their internal structure with the markets they serve, so that customers will find themselves dealing with staff who are aware of the particular requirements of that market. In the multinational organisation this is usually best served through a divisional structure. An example of a highly successful company which has always been at the leading edge of innovative organisational structure is Matsushita Electric, which is amongst the fifty largest corporations in the world, and markets its products under such well-established brand names as National, Panasonic, Quasar and Technics. In the 1930s the founder of the company, Konosuke Matsushita, organised it in terms of divisions, in order to keep the company small and entrepreneurial, and to provide clarity and control. Each division was set up on its own, at a time when the company was involved in manufacturing radios and other small consumer appliances. Matsushita himself was attracted to the divisional structure because he saw the behavioural advantages, with each division led by a manager motivated to keep a sharp eye on the marketplace, rather like the captain of a ship keeping a look out on weather conditions. Matsushita was motivated in this decision by four factors: desire to have independent divisional managers whose performance could be clearly A measured. Due to their self-sufficiency, managers would be driven to establish a strong consumer orientation. This would gain the advantages of small companies, in particular their flexibility. Specialisation of divisions would train managers much more quickly, thus providing a pool which would be needed as the company expanded. He balanced this move towards decentralisation by centralising some key functions: a comprehensive accounting system a company "bank" into which profits from the divisions were paid, and from which they could apply for funding for capital improvements centralised personnel function

 centralised training. Over the years the company has been flexible in terms of centralisation and decentralisation as the founder deemed necessary in the prevailing environmental conditions, but throughout the centralisation of the four key functions has remained. EMPIRICAL REVIEW In its first strategic plan (1999-2003) it was pointed out that Co-operative Insurance Companys strong market share in the cooperative sector was under threat from competitors who continued to make in-roads into the sector. Further, it was noted that CICs operating environment was fast changing which necessitated that the company acquire an internal capacity for proactive planning by setting performance standards and putting in place a mechanism for continuous monitoring and evaluation. The 1999-2003 strategic plans were an attempt by the company to be proactive in its performance management and be in control of its activities. The successful implementation of this plan saw CIC grow and expand tremendously. The 2004-2008 strategic plans were developed with one of its thematic concerns being to transform the organization to accommodate the fast and vast growth of CIC and adapt to the changing operating environment. The Cooperative Insurance Company of Kenya Ltd adopted a planned strategic change program in order to be responsive to the changing business environment. CRITICAL REVIEW The industry generally has been faced with turbulent and rapid changing external conditions that are translated into complex, chaotic, multifaceted, fluid, and interlinked stream of initiatives affecting work, organizational design, resource allocation, systems and procedures in a continuous attempt to improve performance. According to Burnes (2004), the magnitude, speed, unpredictability, and impact of change in the external environment are greater than ever before. Local markets are becoming global markets; protected markets are being opened up to fierce competition and as a result, organizations both private and public, large and small, including those in the insurance industry have suddenly felt the pressure to improve on their products and services, and the efficiency and effectiveness with which they are offered to meet world standards and customers expectations. MISSING GAPS There is perception as a process in which one interprets sensory inputs such as sight, sound, smell or feelings. The human factor in organization has become a subject of debate for some

time in the organization. Individual change is at the heart of everything that is achieved in the organization. Once the individuals have the motivation to do something different, the whole world begins to change. Employees are complex beings. Their interest does not necessarily coincide with that of an organization. This is because human beings act on the basis of perception. The managers are not aware of the perceptual difference between themselves and that of the employees, which may give rise to organizational conflict. The view of their objective environment is filtered by perception, which is the unique way in which each person sees, organizes or interprets things. CHAPTER THREE PROBLEM SPECIFICATION In todays economy, employees are a critical asset in ensuring an organization has a competitive edge in the market place. An appreciation of what would affect their current and future performance is therefore of great concern to decision makers. Unlike other resources in a firm, employees have to be motivated to be effective and efficient in their work. Njoroge (2003) therefore argues that managers need to be interested not only with the physical presence of the employee in the work place but more importantly their emotional presence. Policies and structures must also be able to generate commitment and enhance individual and group performance. A critical factor that can greatly influence performance in that respect is how they perceive various initiatives, that management introduce in an effort to enhance the competitiveness of an organization. A critical initiative being undertaken by management today is strategic change management, aimed at making implementation of firms business strategies more effective. PROPOSED SOLUTIONS (a) Managing Intrapersonal Conflict Intrapersonal conflict is predicated upon an incongruity between individual needs and organizational requirements. Intrapersonal conflict unfolds over time and manifests itself in a complex and multiform range of attitudinal and behavioral consequences. When a person experiences an inner conflict and feels that he can not master his situation, or change his environment, a number of methods of conflict management can be employed. Cognitive strategies, often called defense mechanisms, help an individual to falsify, distort or deny a particular conflict. Cognitive strategies represent an attempt to control or manage

negative and disturbing feelings associated with conflict and to allow an individual to carry on with his normal activities. Cognitive strategies include repression (an attempt to push conflict out of existence), rationalization (hiding the truth from oneself), fantasy or even denial of reality. Behavioral strategies for coping with intrapersonal conflict include escape, withdrawal and aggression (especially against convenient targets).
(b) Locating a superordinate goal.

Superordinate goals are goals which are greatly desired by several departments and can only be achieved by combining the energies and resources of all involved. The introduction of a superordinate goal (e.g. developing a new product-line which would attract great customer demand) will create a cooperative context in which departments may interact on problems of joint interests, develop favorable attitudes and seek to achieve solutions that are mutually satisfactory. The introduction of a superordinate goal converts a conflict between departments to friendly interactions. PROJECT BROAD OBJECTIVES The objective of the study was to identify whether employee perception affects the success of strategic change management.

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