Effect of Change on Stakeholders (VCE SSCE Business Management): Revision Notes
Effect of change on stakeholders
Introduction
When a business introduces change, it creates ripple effects throughout the organisation and beyond. Change never occurs in isolation—it touches everyone who has a connection to the business in some way. Understanding how different stakeholder groups experience change is crucial for successful implementation.
Stakeholders are individuals or groups who have an interest in or are affected by the business's activities. The key stakeholder groups impacted by organisational change include:
- Managers
- Employees
- Customers
- Suppliers
- General community
Each group experiences change differently and faces unique challenges and opportunities when transformation occurs within a business.
Understanding Stakeholder Impact
Successfully managing change requires recognising that each stakeholder group has different needs, concerns, and levels of influence. What affects managers may not impact customers in the same way, and suppliers face entirely different challenges than employees. Effective change management means addressing each group's specific concerns whilst maintaining overall strategic direction.
Impact on managers
The dual challenge managers face
Managers occupy a particularly difficult position during periods of change. They must navigate their own personal adjustment to new circumstances whilst simultaneously guiding their teams through the transformation process. This creates a challenging balancing act—managers need to cope with changes to their own roles and responsibilities at the same time as they implement change with their employees.
Many managers find themselves caught between competing demands. They face pressure from senior leadership to implement changes effectively, whilst also needing to support employees who may be resistant or anxious about the transformation. This 'stuck in the middle' position can be extremely stressful.
The Dual Challenge
Managers must manage two parallel processes simultaneously:
- Their own personal adjustment and adaptation to new circumstances
- Leading and supporting their teams through the transformation
This dual responsibility creates unique pressures that senior leadership must acknowledge and support.
Changes to management approaches
Implementing change often requires managers to fundamentally re-evaluate how they lead. Traditional autocratic approaches may need to give way to more participative or consultative management styles. This shift allows for two-way communication, group decision-making, and more decentralised authority—all of which help employees feel involved in the change process rather than having change imposed upon them.
New skills required
Change implementation demands that managers develop or enhance a range of critical skills:
- Communication skills: Clearly explaining the reasons for change and keeping all stakeholders informed
- Delegation of authority: Empowering team members to take ownership of aspects of the change process
- Planning: Carefully mapping out the change journey and anticipating potential obstacles
- Leading employees: Inspiring and motivating teams during uncertain times
- Decision-making: Making timely and effective choices when faced with complex situations
- Interpersonal skills: Building and maintaining relationships, showing empathy, and managing conflict
Skill Development Takes Time
Developing these management capabilities doesn't happen overnight. Organisations should invest in management training and development programmes well before major changes are implemented, ensuring managers have the tools they need to guide their teams effectively.
Ongoing responsibilities
The manager's work doesn't end once change is implemented. They must continuously monitor and evaluate whether new processes and procedures are working as intended. This requires vigilance, adaptability, and a willingness to make adjustments when things aren't working as planned.
Managers as stakeholders themselves
It's important to recognise that managers are also affected emotionally by change. Uncertainty about roles, shifts in authority structures, and changes to reporting lines can make it just as difficult for managers to accept and adapt to change as it is for their employees. Feelings of uncertainty and loss of control are common experiences for managers during transformation.
Impact on employees
The pervasive nature of change for employees
Employees are invariably affected when change occurs within a business. The impact can manifest at multiple levels—individual roles may change, team structures may be reorganised, or entire business operations may be transformed. The scope of change facing employees can vary enormously, from minor adjustments to fundamental shifts in how work is performed.
Specific areas of employee impact
Change within a business can affect employees in numerous tangible ways:
- Job positions: Roles may be eliminated, created, or significantly modified
- Tasks and responsibilities: The nature of daily work may change substantially
- Required skills: Employees may need to learn new capabilities or enhance existing ones
- Working hours: Schedules and flexibility arrangements may be adjusted
- Work location: The physical or virtual workplace may change, including shifts to remote or hybrid working arrangements
- Team structures: Employees may find themselves working with different colleagues or reporting to new managers
Varied reactions to change
Not all employees respond to change in the same way. Some individuals embrace transformation and see it as an opportunity for growth and development. Others find change deeply unsettling and may resist new ways of working. Many employees find change daunting because it disrupts familiar routines and creates uncertainty about the future.
The importance of understanding and support
For change to be successful, employees need to understand two critical elements: why the change is happening and what's in it for them. Without clear answers to these questions, resistance is likely to increase. Employees want to know the reasoning behind decisions that affect their daily working lives and need to see the personal or professional benefits that change might bring.
Management has a responsibility to support employees throughout the change process. This support should include providing comprehensive information about planned changes, empowering employees to make decisions where appropriate, and maintaining open channels for two-way communication. When employees feel heard and involved, they are more likely to accept and even champion organisational change.
Employee Engagement is Critical
Research has shown that only around 5% of employees fully understand their company's strategies. This staggering statistic highlights why employee resistance to change is so common—how can employees engage meaningfully with strategic changes if they don't understand the overall direction of the business?
Clear, consistent, and repeated communication about both the 'what' and the 'why' of change is essential for reducing resistance and building support.
Addressing employee resistance
A major cause of employee resistance is simply a lack of awareness about what is changing and why. When employees are kept in the dark or only receive limited information, anxiety and opposition naturally increase. Research has shown that only a small percentage of employees (around 5%) fully understand their company's strategies, making it even more difficult for them to engage meaningfully with strategic changes.
Effective Strategies to Support Employees Through Change
Organisations that successfully navigate change implement these proven strategies:
Before Implementation:
- Gather employee feedback on proposed changes
- Identify potential concerns and address them proactively
- Involve employees in planning where appropriate
During Implementation:
- Actively listen to employee concerns and take them seriously
- Continuously seek input during the implementation process
- Encourage employees to share both successes and failures as change unfolds
- Regularly check that employees understand the changes and their implications
Throughout the Process:
- Recognise that employee experience either supports or undermines strategic goals
- Maintain open channels for honest feedback
- Adjust implementation based on employee input when feasible
Impact on customers
How customers experience business change
Customers can be significantly affected when businesses implement changes, though they may not always be aware of the internal reasons driving those changes. From a customer perspective, change might mean that favourite products are discontinued, services become unavailable, or the way they access goods and services is altered.
The critical importance of customer communication
Businesses must ensure customers are fully informed about any proposed or implemented changes. Clear communication about what is changing and, more importantly, the benefits those changes will bring is essential. Customers need to understand not just what is different, but how those changes might enhance their experience or provide them with added value.
Risks of ignoring customer preferences
When businesses implement changes without adequately considering customer wishes and preferences, they risk losing loyal customers who feel their needs have been overlooked. Sometimes changes are driven primarily by shareholder interests or internal efficiency concerns, with customers not receiving sufficient priority in the decision-making process.
Real-World Example: Toblerone Product Change
The Toblerone chocolate bar provides a cautionary example of how product changes can backfire when customer preferences aren't adequately considered.
What Happened: The company decided to change the iconic shape of its chocolate bar by widening the gaps between the triangular pieces whilst simultaneously reducing the overall size.
Customer Reaction: Customer reaction was overwhelmingly negative, with widespread complaints about the changed product and perceived reduction in value.
The Outcome: The company was forced to revert to the original shape (though in a larger, more expensive format).
The Lesson: This demonstrates how even seemingly small product changes can generate significant customer backlash if preferences aren't adequately considered and communicated.
Environmental and ethical considerations
Modern customers are increasingly concerned about environmental and ethical issues. Businesses like Coles and Woolworths have responded to customer pressure by discontinuing plastic collectible promotions in favour of more environmentally sustainable alternatives. Coles eliminated plastic toys like the Little Shop Collection, whilst Woolworths replaced plastic Ooshies figurines with vegetable and flower seeds. These changes show businesses adapting to evolving customer values, even when previous promotions had been commercially successful.
Changing Customer Values
The shift from plastic collectibles to sustainable alternatives demonstrates an important trend: customers increasingly expect businesses to align with their environmental and ethical values. Businesses that proactively respond to these changing expectations can strengthen customer loyalty and build positive brand reputation, whilst those that ignore evolving values risk customer backlash.
Impact on suppliers
The significant challenges suppliers face
Suppliers can experience substantial effects when businesses they supply undergo change. The impact can range from minor adjustments to contract terms through to complete loss of business relationships. Changes might include the business no longer requiring their products or services, modifications to existing contracts, or new supplier specifications that require adaptation.
Power imbalances in supplier relationships
The situation can be particularly challenging for smaller suppliers who have limited control or influence over their relationship with larger businesses. When a major client implements changes, smaller suppliers may have little choice but to accept new terms or risk losing valuable contracts. This power imbalance means suppliers are often in a vulnerable position during periods of business transformation.
The Vulnerability of Small Suppliers
For small suppliers, a single large business customer might represent a significant portion of their total revenue. This dependency creates vulnerability—when the large business implements changes, the small supplier must adapt or face potentially catastrophic loss of income. This power imbalance highlights the importance of ethical business practices and fair treatment of suppliers.
Codes of conduct and supplier requirements
Many large businesses now impose codes of conduct on their suppliers, establishing standards that suppliers must meet to maintain the business relationship. Australia Post provides a comprehensive example, requiring suppliers to demonstrate compliance across multiple areas:
Australia Post Supplier Requirements
Ethical and Legal Standards:
- Compliance with laws regarding bribery, corruption, and prohibited business practices
- Conducting business in an ethical, fair, and courteous manner
- Timely disclosure of material legal, ethical, social, and environmental matters that might affect supply
Employment and Labour Practices:
- Commitment to human rights and fair employment practices
- Ensuring all labour is freely chosen with freedom of association and collective bargaining respected
- Providing safe and hygienic working conditions
- Paying fair wages with working hours and conditions that comply with regulations
- No discrimination in hiring, training, promotion, or termination
Transparency and Accountability:
- Reporting on compliance with code of conduct elements
- Allowing independent and unannounced audits of facilities
- Environmental protection considerations in business operations
New suppliers to organisations like Australia Post must undergo assessment of their practices and join platforms like the Supplier Ethical Data Exchange (SEDEX). These requirements can necessitate significant changes to how suppliers operate their businesses.
Positive and negative impacts
Whilst codes of conduct and new requirements create challenges, business changes can also benefit suppliers. New contracts might offer opportunities for growth, stronger relationships might develop, or changes could open doors to supplying different products or services. The impact on suppliers is therefore not uniformly negative, though it always requires adaptation.
Impact on the general community
Community-wide effects of business decisions
The general community experiences significant impacts when businesses implement changes, particularly in local areas where businesses operate. These effects extend well beyond the immediate workforce to touch entire neighbourhoods, towns, or regions.
Relocation and closure impacts
When a business decides to relocate to another area or state, the consequences for the local community can be severe. Beyond the direct loss of employment, the ripple effects include:
- Other businesses in the area may struggle as there are fewer residents requiring housing, retail services, and hospitality
- Local infrastructure and services may deteriorate without the economic activity the business generated
- Property values may decline as the area becomes less economically vibrant
- Community organisations may lose sponsorship and support
These impacts can be particularly devastating for rural towns and regional centres, where a single major employer might be the economic anchor for the entire community.
Expansion and growth impacts
Conversely, when businesses expand or establish operations in an area, communities can experience positive effects:
- Increased employment opportunities for local residents
- Greater demand for housing and services, stimulating economic growth
- Enhanced infrastructure as the area develops to support business needs
- More diverse products and services available locally
However, expansion can also bring challenges such as increased traffic congestion, greater demand on natural resources, and potential environmental impacts that affect community quality of life.
Scale of impact varies by business size
Small and medium-sized businesses typically have more localised impacts on their immediate communities. A rural town or regional centre might be significantly affected by changes in a local small business that provides essential services or employment.
Large businesses, by contrast, may create effects that ripple across entire states, throughout Australia, or even internationally. Their decisions about where to locate operations, which products to produce, and how to distribute goods can have far-reaching consequences.
Contemporary Example: COVID-19 Pandemic Impacts
Since 2020, the COVID-19 pandemic has triggered widespread business changes that have profoundly affected communities across Australia. Many businesses have shifted to online sales and distribution models, whilst numerous employees have transitioned to working from home or in hybrid arrangements.
Community Impacts Observed:
Melbourne's CBD:
- Substantially fewer people commuting daily has affected public transport usage, parking demand, and city-based retail and hospitality businesses
- Many cafes, restaurants, and retail stores faced reduced foot traffic and revenue
Neighbourhood Shopping Centres:
- Increased activity as people shop closer to home rather than commuting to city centres
- Local businesses benefiting from residents working from home
Residential Patterns:
- Growing numbers of people relocating to outer suburbs or regional towns
- Seeking more space and better lifestyles now that daily commuting is less necessary
Regional Communities:
- Some have experienced revitalisation as city workers relocate
- Others face challenges adapting to changed circumstances
- Increased property prices in popular regional areas
Small business closures and community vitality
Small businesses contribute significantly to community life through:
- Provision of essential goods and services
- Investment in local sporting and community groups through sponsorship
- Creation of employment opportunities for local residents
- Contributing to the vibrancy, character, and distinctiveness of the area
When small businesses close, communities lose more than just shops and services. They lose:
- Diverse and distinctive retail offerings that give the area character
- Local employment and training opportunities, particularly important for young people entering the workforce
- Speciality independent businesses that larger chains cannot replace
- Essential services that may not be commercially viable for larger operators
- Local capability and capacity, weakening the community's economic resilience
- Connections in local supply chains that support other businesses
The Vital Role of Small Business
Supporting local businesses through government initiatives, community campaigns, and consumer choices has become increasingly recognised as vital for maintaining healthy, vibrant communities. When consumers choose to "shop local," they're not just purchasing goods and services—they're investing in their community's future, supporting local employment, and helping preserve the distinctive character that makes their area unique.
Summary of stakeholder impacts
Comprehensive Overview of Stakeholder Impacts
The table below provides a comprehensive overview of how different stakeholder groups may be affected when businesses implement change:
| Stakeholder group | Possible impacts |
|---|---|
| Managers | • Adoption of consultative and participative management styles with two-way communication, group decision-making, and decentralised authority • Development of skills including interpersonal communication, decision-making, delegation, and strategic vision • Increased focus on managing the implementation process effectively • Potential appointment of new senior managers bringing different management styles and corporate cultures • Personal adjustment to changed roles and responsibilities |
| Employees | • Greater emphasis on work groups and team-based structures • Recruitment focusing on skills alignment, with enhanced career development and retention strategies • New training and development programmes as job requirements evolve • Decentralisation of power and decision-making with increased employee accountability • Changes to job descriptions, tasks, and responsibilities across the organisation • Award restructuring and introduction of collective agreements aligned with industry standards |
| Customers | • Changes in product or service availability and choice • Discontinued products or services they previously relied upon • Alterations to how they access goods and services • Potential price increases or decreases • Changes in quality or features of products and services |
| Suppliers | • Introduction of codes of conduct establishing operational standards • Changes to conditions of supply or product specifications • Restrictions on how and what can be supplied • Opportunities to develop stronger business relationships • New contract terms that may be more or less favourable • Requirements for greater transparency and ethical practices |
| General community | • Creation or loss of employment opportunities in the local area • Changes to availability of services and products • Alterations in community support and infrastructure • Environmental impacts from business operations • Changes in local economic vitality and growth • Shifts in community character and vibrancy |
Remember!
Key Points to Remember:
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Change affects everyone: No stakeholder group escapes the impact of organisational change. Managers, employees, customers, suppliers, and the general community all experience effects, though in different ways.
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Managers face a dual challenge: They must manage their own adjustment to change whilst simultaneously implementing change with their teams. This requires enhanced skills in communication, delegation, planning, and interpersonal relationships.
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Employee engagement is critical: Employees need to understand why change is happening and "what's in it for them". Open two-way communication, empowerment, and ongoing support significantly reduce resistance and increase acceptance.
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Customer consideration is essential: Ignoring customer preferences when implementing change risks losing loyal customers and damaging the business's reputation. Clear communication about changes and their benefits helps maintain customer relationships.
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Community impacts extend widely: Business changes create ripple effects throughout communities, affecting employment, local economies, infrastructure, and community character. These impacts can be positive or negative depending on the nature of the change and how it's managed.
Key terms: Stakeholders, participative management, consultative management, two-way communication, employee resistance, supplier code of conduct, community impact, decentralisation, empowerment