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Wednesday, April 13, 2011

Western Union Re-structuring decision


 

1.      Why the restructuring was needed at Western Union – or was it?
Businesses have to be sensitive to the cultures and the people of the concerned countries where they operate themselves.  Furthermore, each person’s needs are different, and the business leader has to be aware and flexible enough to work with each person effectively. Decentralized company has advantage of competitive advantages because of its location of R&D facilities and other key functions in strategic locations around the world with commitment required by a corporation to have an effective and flexible international research organization. Beside this, if Western Union truly wants to be a global player in the international marketplace, and wish to compete in terms of both product quality and cost, then decentralized structure is necessary.
Almost all countries, most notably the developing countries around the world are facing external and internal pressures and needs to decentralize and are actually becoming dominant trend in the world business. Some of the causes for the decentralization are democratization and economic development. Beside this, the policies of opening up of economy and policies devised to deal with the challenges posed by new ‘globalized’ world are interacting with domestic political and economic institutions in such a way so as to create incentives for decentralization. In addition, there is external pressure coming from IMF (International Monetary Found) and WB (World Bank) who implicitly and explicitly have declared ‘decentralization’ as their most favored policy prescription especially for the developing world.
In addition to this, Western Union really wanted to reflect the global business and cut down on the idea of a domestic and international business. So, it became pretty obvious that they would choose a regional structure, but their organizational structure is constantly evolving.  Furthermore, Western Union before restructuring and decentralization was considered as US centric company. The way they do business in outside of US is similar to how they do business in the US, which was one of their major limitations they need to overcome and for that there is no way other than restructuring and decentralization. Therefore, to act locally and think globally in the market place, Western Union should change the way they do business. It is logically true that business should act locally no matter how big the business is.  Therefore, one of major reason for restructuring the Western Union is that it needs to think globally and act locally approach and for that staffs who are working in the opposite corner of the world needs decision making power so that he/she can give what the customers really wants form him/her and to have such right to make the decisions Western Union needs different structure.
Finally, when the company serves the global market then they should be a domestic company with local flavor in terms of doing business to meet the local needs in unique manner. Internationalization is no more a good way to be successful. People’s needs in the different country differ because the culture is different. Therefore, to provide quick and transparent service Western Union should delegate the decision making authority to lower level management within the regional functional unit and to do so they need to restructure the entire company so that they can delegate the authority or decentralized power to local level.

2.      What were the most important design changes that were made and what organizational activities are   likely to be more effective as a result of these changes?
To be very specific, the Western Union chose to reorganize the company into a decentralized structure covering three main regions that is the Americas; Europe, the Middle East and Africa; and Asia/Pacific. Therefore, the most important design change is having regional structures.  Another important design changes that were made within the Western Union is that they changed the regional level leadership of the company. Following are the activities which are considered as more effective because of the changed in the structure of the company.
a.       Shift of the decision making authority to lower level management and to the regional areas because in decentralized organization, because in decentralized company the top executives delegate much of their decision-making authority to lower tiers of the organizational structure.
b.      Change in leadership
c.       More localized company with focus on domestic culture and values with global thinking
d.      More flatter organizational structure with comparatively quicker decision making ability. 
The proposed geographic or regional organizational structure is especially helpful for the Western union because it helps in controlling its activities on a global level. Following are the activities are likely to be more effective as a result of change:
a.       After the structural adjustment and change the Western Union can provide quality products and customer service because narrow focus helps a division to create high-focus in their activities on a specific kind of good, service, or customer.

b.      Communication mechanism within the corporation will improve worldwide therefore there is improve in decision making functions, thereby increasing standardized performance.

c.       Customized management and problem solving - A new geographic structure of the Western Union puts managers and leaders closer to the operations. Therefore, regional managers are well positioned to be responsive to local situations such as the needs of regional customers and to fluctuations in resources. Thus regional divisions are often able to find solutions to region-specific problems and to use available resources more effectively than are managers at corporate headquarters that facilitates customized management and problem solving.

d.      Due to the decision making ability and decentralized nature of the corporation executives within each regional area are better able to pool their skills, knowledge and brainstorm new ideas with local flavor for products or improved customer service within region and facilitates teamwork.

e.       Most importantly new geographic structure facilitates decision making because divisions develop a common identity and approach to solve problems that leads to improved cohesiveness and improved decision making.

f.       Due to the divisional structure, it is relatively easy for Western Union to evaluate and reward the performance of individual divisions and their managers and to assign rewards in a way that is closely linked to their performance. Not only this but also, Corporate managers of Western Union can also evaluate one regional operation against another regional unit and then share ideas between regions and find ways to improve performance.

g.      Finally, regional managers and employees are close to their customers at local level and may develop personal relationships with their customers that may give those managers and employees extra incentive to perform well.

3.      What difficulties can be expected as a result of these changes and what can management do to prevent major unintended consequences?
The biggest hurdles to overcome when doing business internationally often have less to do with technology than with culture. Therefore, the best things to do are realize that business etiquette changes from country to country and find local guides who can help the business.
Some difficulties or challenges that Western Union may face in the international market are:
a.       Management of human resources in global corporations, including issues of expatriation and repatriation.
b.      Implementing corporate global strategy by adapting appropriate human resources management practices in different national, economic, and cultural environments.
c.       Adopting labor relation practices in each subsidiary that matches local requirements.
Beside this, just restructuring and decentralization is not everything for Western Unions success rather more important is having a global human resource strategy that manage the entire human resources of the corporation located in thousands of location around the world.
Because decentralization within regions could add to significant increase in infrastructure cost, one of the major difficulties that the organization will face is high operating and managing cost because each regional division has its own set of functions and operating costs. Beside this there is big challenge for the Western Unions to have brand consistency across the globe. Another key hurdle is that regional managers or management team sometime make the decision without understanding the big picture of the broader corporation or the mother company. On the other hand, top level management doesn’t have enough information about their local or regional unit. Beside this, they may face the difficulties regarding the coordination among autonomous unit. Two main responsibility issues which will arise in the change process is that about leading issue, that is who will lead the development of new products and the profit and loss responsibility in the organization.
4.      How well-aligned is the new structure with the six core strategies?  What improvements and problems do you anticipate?
Six core strategies of the Western union are:
a.       Develop a global brand
b.      Enhance global network distribution
c.       Expand adjacent markets such as Western Union.com and prepaid services
d.      Develop future business leaders within the organization
e.      Increase productivity
f.        Execute on service excellence
Though the Western Union is doing huge campaign with a slogan of, "Uniting People with Possibilities," which is a symbolic first step in a worldwide initiative to increase awareness and expand Western Union's brand equity beyond that of a money transfer leader. Some of the key attributes of the Western Union is “Speed, reliability, convenience and trust which are also the key pillars of the brand of the company. According to Christina Gold Western Union is now building on that foundation to create a global brand framework that relates to people on a more personal level. These new brand initiatives are some of the company’s extensive efforts to create a single global brand platform that communicates globally consistent and relevant messages that can be easily adapted in local markets worldwide.
But developing a global brand is not an easy task. One reason for this is that world market is not a single market in terms of culture. They way people do business and perceived business in Asia is entirely different than in USA. On the other hand, Western Union is now a decentralized company with regional divisions, so it is difficult to manage consistency among the hundreds of thousands of location worldwide.
In my opinion, the strategy of enhancing global network distribution is in some extent aligned with the new structure because each and every location throughout the world have some sort of authority and decision making right due to the decentralization. But still we cannot say there is 100 percent alignment due to the cross cultural phenomena and individual country’s business legislation that restricts the policy implementation designed by global business corporation like Western Union. Beside this, decentralization provides local units or management a discreaton and scope which is needed to take a lead role in responding to the challenges of local economy, local environment and social and cultural values and hardship which enhance the productivity of the organization.
Strategy of adjacent market such as Western Union.com is one of the successful strategies of the Western Union which is the powerful mechanism to integrate the regional divisions scattered around he world.  Furthermore, decentralized management philosophy helps in developing the future leader locally because decentralization helps employees to go close to the customers and helps better understand what the customer really needs and they can develop their own policies and procedures to cater the unique needs of the local customers. Not only this, but also employees are can exercise their rights in developing and designing services in such a way that is suitable for the local customers which ultimately enhance their leadership competencies.   
Finally, increase in productivity and service excellence both are supported by the decentralized structure of the Western Union because employees are encouraged to apply local way of doing things in which they are competent and motivated.
One of the major problems Western Union will face after restructuring is HR problems. They needs to have

References:
Phatak, Bhagat & Kashlak, International Management, 2nd ed., McGraw-Hill Irwin, 2009        




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