Critical Literature Review


The problem I have identified is the difficulty that our firm faces while planning for the change on how to increase our market share. This is because our firm needs more funds in order to increase new innovative products that will help us to gain more market share. The source of these funds will be obtained by either cutting down the number of staff in order to reduce staff costs. In addition to this, our firm has an option of seeking external funds from other financial institutions that will help us have enough funds for creating public awareness on the new products of private investments equity that will be offering. The challenge of adopting this option as our strategic plan is that it will increase our gearing ratio and threaten our going concern (Bryson 2011). In order to examine this issue facing our firm, I want to review two steams of literature. The first stream of literature is why to improve employees in strategic financial planning and the other stream is on change and crisis management. The purpose of this literature review is to find out what other scholars have discovered why to improve employees in financial planning, change and crisis management and whether this issue is relevant for future research.

Re-defining the problem

The European debt crisis and the recent economic recession really affected the private equity investment firm that I am employed in. This is because these crises reduced the consumer purchasing power. Due to this, our firm lost the number of new clients seeking investment services in our company. The management knew that it needed to come up with new cheaper and innovative products that it would offer to new clients. After considering what I learnt from the change and crisis management, I have re-framed this issue and discovered what the management needs to consider is how to conduct strategic financial planning while involving all the employees. This is because from the learning of change and crisis management, I discovered that it was hard for employees to accept major changes, especially if it affects the organizational structure or their job security. The next section of this report examines literature on employee involvement on planning for major financial changes in the workplace.

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Employee’s involvement in planning for financial changes

Researchers have concentrated on the necessity of involving employees in major organizational changes, especially if it affects the employees in one way or another. Research has shown that employees easily lose their trust in management if it does not seek their opinion on planning for sources of finance if it affects the capital structure of their company. According to Briner, Denyer and Rousseau (2009), some employees believe that organizations keep decisions on plans a secret since the plans may have adverse effects on the employees. They argued that employees feel transparency in their organization if the management tells them what their plans are. Naslim and Sushil (2011) supported the argument of the above scholars by stating that if management does not involve their employees on important organizational plans, then there is a possibility that the management will have only one angle in decision-making process. This is a risky action since the parameters for the decision for change might change and this may affect the outcome that the management had anticipated. In the case of our company, if our management involves all the employees on decisions on how to raise finance for increasing the products on private equity investments, the employees will come up with diverse opinions on different sources of finance. This will benefit our organization since the management will have different alternatives in case when one source of finance fails due to high transaction costs or interest rates. Lentz claimed that if management does not involve employees in planning, the employees would feel that the management does not value their decisions (Lentz 2009). He further added that the employees feel that they influence the organizational success if they identify their efforts to a particular organizational success. In addition, he stated an organization reduces its employee turnover rate if the employees become motivated by knowing that the management values their decisions. He also stated the organizational working environment improves if the employees are involved in planning for major organizational changes.

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 Millner (2007) argued, if employees are not involved in planning, they will resist the change that results from a particular plan due to fearing that they may lose their control. He argued that most employees feel powerless when the organization tells them to change how they conduct their operations. It is thus necessary to consult the employees first before conducting a major change that may affect how they conduct their operations. Cumming and Worley (Cummings and Worley 2008) supported the argument of this researcher by stating that if employees are not involved during the planning process, they may resist the strategic plans of an organization since they may feel that they will fail under the new plans. This is because the new plans may result to the introduction of new methods of productions or technology that the employees may not be competent. In addition, the new plans may set targets that the employees may not be able to achieve. Due to this, they argued that it was necessary for employees to be involved in the process of planning since it would help the employees know what would be expected of them while implementing the new plans. It is thus very necessary to involve the employees in planning since the employees are able to find out the skills they should have while implementing the new plans. If the employees find out that they do not possess certain skills for the new plans, they will opt to undergo training in order to upgrade their skills. In addition to this, they have an opportunity of researching on different methods they can use to achieve the new targets set by the proposed plans.

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Allwood (2011) argued that it is important for the organization to learn the psychology, strengths and weaknesses of all their employees. Further, he stated that management could only learn these factors if they involved their employees in planning process. During the planning process, the management will be able to know how different employees react under pressure. In addition to this, it will know the creativity of different employees in raising solutions to different problems. The management will know thus if it can trust a particular employee to deliver certain results if it assigns this employee to a particular task. In addition, the organization will be able to know what the employees like about the management styles of this organization and what the employees would like this management to change. From the problem of involving employees in planning for financial changes, I developed questions on whether the literature on change and crisis management could explain why management needs to involve employees in planning for changes.

Change and Crises Management

According to Hendy (2004), it is difficult for employees to cope with change. He stated that employees viewed change as stressful since they continuously evaluated if the change was relevant to their well-being. He argued that employees first conduct a primary appraisal in order to determine what they would gain from a change, what they would lose, whether they would benefit from a change and if they will benefit from the change. Thus, it is important for the management to involve the employees in the change process since it will affect how they react to a change. He also claimed that management needed to consider two factors before conducting organizational changes, especially in financial sector industries. These factors include task performance and contextual performance. Task performance involves factors related to the job while contextual performance involves working with the team members and the environment. It is thus important for management to consider including the employees during the planning process in order to learn these factors.

Van de Ven and Poole (1995) developed the theory of teleology that sought to explain why an organization undergoes change. In this model, the changes and developments in an organization proceeds towards a predefined end state or goal. They argued that it is important for an organization to consider its resource constraints and environment for it to achieve its predefined end state goal (Van de Ven and Poole 1995). Thus, it is important for the management to involve its employees while planning under its limited resource constraints. They also stated that influences within the internal environment might cause an organization to lose its equilibrium. Caldwell proposed that change teams are important agents for change since they helped in reducing the central hierarchical controls. He argued that if the management included internal inside specialists, external consultants and employees during the process of planning for change, then it was likely that this organization would develop a successful organizational plan (Caldwell 2003). He also claimed that teamwork and the changing of line management in decision-making process was necessary if the management of an organization wished to change its quality control standards, customer care and productivity.

Armenakis and Bedeian (1999) argued that for managers to implement change successfully, they needed to encourage all their employees to welcome new behaviors. They stated that it was very common for the employees to welcome new behaviors such as denial, resistance, stress and cynicism when an organization forces changes that the employees do not support. They also claimed that it was very necessary for the management of an organization to understand the context and process considerations that may affect employees’ performance during the change process. This would help to reduce the stress levels of employees associated with the change process.

Wilkinson and Mellahi (2005) argued that for an organization to learn from its failures, it was important for the management of this organization to learn the root causes of the crises that may affect this organization. They stated that organizations progressed in four stages of failure that included decline, response invitation, transition and outcome. It was thus necessary for management to plan carefully so that it ensures that it manages in escaping these for stages. Pauchant and Mintroff conflicted with the argument of the above scholars by stating that the management needed to understand organizational culture in order to manage crisis effectively. They categorized organizational culture into humanity relationships to nature, the nature of reality and truth, the nature of human nature, the nature of human activity and the nature of human relations.

Reflecting on the issues

From my research on the works above, scholars on change and crisis management, I came to know how important it is for management to plan and manage change and crisis. In addition, I came to learn how different scholars developed different models that tried to explain why organizations had to undergo the change. In my case, I appreciated that our company had to change the type of products that it offered in order to attract more clients that sought investment opportunities on the private equity investments. I discovered that it was my responsibility of encouraging the employees to raise their own ideas about how we would successfully implement the change. I knew that the employees would not welcome the changes since the management had proposed of reducing the number of employees in order to save costs. Furthermore, the research I conducted made me realize the importance of employee involvement while planning for an organizational change. This is because employees feel that the organization trusts them if it involves them in major organizational decisions. In addition to this, employees become more motivated when they are involved in organizational planning.

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Conclusions and actions for future

To conclude, the learning on change and crisis management made me re-define my problem from difficulties faced by our management while planning for change to employee involvement during change. This is because I learnt that our management needed to build trust on its employees in order for the employees to welcome change. In addition to this, I came to learn that if employees saw their efforts contributed to the success of a business, they would not opt to transfer to other organizations and this would reduce turn over costs. Researchers need to conduct future research on ways that an organization can adopt to encourage employee participation on formulating organizational plans. Research also needs to be conducted how to encourage management to allow employees to participate in major organizational plans.

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