Managing Organizational Change - Nestle

Managing Organizational Change - Nestle

Did Nestle undergo either first-order and/or second-order change according to the case? In answering list examples of types of change from case.

The most significant first-order change Nestle experienced was the decision to relocate executive offices from Switzerland to the United States, a bold yet necessary move given the threat of World War II in general and Nazi Germany nationalizing their company, as the Third Reich typically did in occupied countries. The decisions to acquire L'Oreal and Alcon Laboratories are also first-order change as both of these acquisitions could significantly change the nestle culture (Burrus-Barbey, 2001). The divestitures and smaller acquisitions consistent with the core business of Nestle are second-order change and therefore not as impactful on the company culture. Additional second-order change events include the more pragmatic and solution-focused approach to defining how Information technology (it) will be used in Nestle. Consistent with the culture of Swiss-based companies, the Nestle is risk averse and also takes on first-order change when it will augment their existing business models, extending the company into entirely new markets. First-order change is specifically used for creating greater opportunities for intelligent, planned growth that builds on the company's core strengths and competencies (Raisch, Krogh, 2007). This conservatism of first-order changes are seen as necessary for the survival of the firm and its position in rapidly expanding global markets while keeping the core of the company completely stable and capable of creating greater process-based competitive advantage over time.

Brabek-Letmathe emphasizes the need for an incremental approach to change. Do you agree that this is what he has done? Discusses the differences and similarities between his view and your view of what occurred at Nestle, both historically and in recent times.

The CEO of Nestle, Mr. Brabek-Letmathe, realizes that the resistance to change in his company is very strong and that too many first-order changes can completely confuse and create a chaotic situation for the company's many divisions and departments. Wisely Mr. Brabek-Letmathe chooses to minimize major disruptions to his company's operations as to alleviate undue stress on his employees, as with change there is the continual anxiety of whether one's job is safe or not. Employees react quickly and with great anxiety if they do not know why a new major strategy is taking place. Mr. Brabek-Letmathe has cultivated a style of transparency, accountability and the nurturing of ownership for his employees (Burrus-Barbey, 2001) and as a result is considered one of the most capable leaders in his the industries Nestle competes in.

Given the fact that Nestle concentrates more on explaining why it is making a decision for a first-order change to ensure a high level of accountability and transparency with its employees, it is clear why Mr. Brabek-Letmathe is apparently so risk-averse. One must respect a CEO that know his company so well as to not bring too much change to fast and risk alienating them in the process. Instead, Mr. Brabek-Letmathe concentrates on earning their trust through an intentional focus on being accountable, transparent and focused on making sure they know exactly why first-order change decisions are made (Burrus-Barbey, 2001). The bottom line is that the CEO knows that by keeping disruptions to a minimum he will ensure a higher level of productivity and profitability over time, and also lose less time to disruption from unnecessary confusion over change. Given the culture of the company it is completely understandable that he is taking such a conservative pace to change.

What implications for change managers would apply specifically to Nestle? Outline how the Nestle management team hay have reaction to each implication.

The first implication for change managers within Nestle is the need to be accountable, transparent and focused on how best to create trust between subordinates and management. From this foundation of trust, both first- and second-order change can be developed. This focus on being trustworthy to alleviate resistance to change and instead invite employees to "own" the change as well is a critical to making any organization resilient over time (Burrus-Barbey, 2001). The second implication for change managers is the pragmatism to look at what initially is perceived as a major improvement in execution and efficiency promised by it investments and concentrate on their real contributions to the company. Third, the implications of acquiring L'Oreal and Alcon Labs are diversions for their core business yet Nestle positions these as extensions of their core business of consumer products and succeeds as a result.