Philips Case Study Analysing The Organisational Behaviour
Task: This study focuses on the way in which Philips has transformed its organisation and culture in order to flourish in the modern competitive world. Organisations today operate within an environment of change. As this environment is so dynamic, it is crucial for organisations to constantly ‘reinvent themselves.’
The biologist Brian Goodwin drew a parallel with the natural world when he said of organisms - “what you do not want to do is to get stuck in one particular state of order.” It is important, therefore, to continually adapt and move on. Nowhere is this more true than in the modern business environment, where today’s technology becomes out-of-date within a short span of time and in which there is intense global competition as firms jostle for the new “huge markets” that are opening up.
Turning things round
Philips is one of the world’s leading electronics companies. Its products are diverse and range from coffee makers to silicon chips, from recordings of Mozart’s symphonies to cancer screening systems. Philips has been at the forefront of electronic innovation since 1891, registering some 65,000 patents and has been responsible for many of this century’s greatest, most useful products:
- Electric Shaver
- Audio Cassette
- Video Cassette Recorder
- Compact Disc
- Energy Saving Lamps
The 1980s was a significant period for the electronics industry over which enormous changes took place worldwide. These included:
- a period of high growth for the consumer electronics market.
- innovative new products were introduced, many driven by Philips, such as VCRs and CDs.
- the actions of newer competitors, many of which were entering the electronics market for the first time, were underestimated.
This rapidly changing industry was signified by better quality products with higher reliability and value for money. Many of the competitors, particularly from Japan, had advantages over Philips and this was particularly marked in TV sets, a traditional Philips marketplace. These Japanese companies gained economies of scale to provide them with a volume advantage, which enabled them to reduce their prices. The net result was that many well-established companies were simply swept aside, such as Thorn and RCA. This meant that only Thompson (in France) and Philips were left as major consumer electronics companies in Europe. This was a difficult time for Philips. Over this period it continued to innovate, which helped it to survive many of the threats and challenges to its competitive position, but barely grew. New products such as the Video 2000, a video system developed to compete with Betamax and VHS videos, failed because Philips had begun to lose touch with the market. Market share was falling, as were shareholder returns and share values, which meant that external investors and analysts were becoming more critical.
There was a sense of complacency inside the company - ‘we will survive because we always have and we are Philips!’ The warning signs were largely ignored. Approaching 1990, the company was faced with a serious financial crisis, posing a real threat to the future of the business. The crisis triggered a change of leadership with the appointment of Jan Timmer as Chairman, who embarked upon a reappraisal of the inefficient structure of the company.
Jan Timmer called the top 100 managers of the company together for the first time, which included the Board of Management, Product Division and Country Managers. They decided to benchmark the performance of Philips against their competitors. This involves comparing key indicators against those of other organisations. They were forced to conclude that drastic changes were required as Philips’ performance did not measure up to the competition. Three main steps were initiated:
1 Restructuring and cost-cutting. The first and most painful step was to do more work
with fewer people. Changes were to reduce the number of staff by around 15%, roughly
45,000 people. The changes also involved product rationalisation. The company was
simply involved in too many product areas and the business justification for this was
2 Creating a movement for change - the Centurion programme. There was a need for a fundamental change to the way the business did things in order to get a reasonable return on capital employed. At the heart of this was a return to the basic principles of cost management which involved making products which customers wanted to buy and earning a margin. There was also a need to increase the accountability of individual business units. At the same time it was important that individuals should become aware of customer needs and then recognise the need to achieve world-class performance. Throughout this period the establishment of benchmarks helped to identify and sharpen activities so as to achieve this. ‘Operation Centurion’ led to the creation of a smaller business with more focused activities, its central theme though was to influence the way Philips was managed. New styles and attitudes to management were needed.
3 Implementing change. Change projects were developed at all levels from corporatewide task forces at the top of the organisation down to local change projects on the shop floor. For example, company-wide task forces introduced ‘Customer First,’ aimed to make staff aware that customers’ needs are the number one priority and this led to many initiatives, including ‘Customer Day.’ Local projects included reducing the backlog of orders.
The top 100 managers of the company continued the process by holding discussions and decision-making meetings with managers at the next levels (Centurion II and III) until thousands of managers were involved in a worldwide cascade of meetings. At ground level within the organisation this then translated into “town meetings” eg: meetings between everyone in a particular unit. The heart of these meetings was the two way communication process (up and down). All employees were asked to raise challenging questions, to express their opinions and make suggestions. Managers gave information, answered questions and made decisions - on the spot.
The series of meetings and the communication process that was created by Centurion acted as a catalyst and created a framework for thousands of improvement projects by teams at all levels. At Centurion I meetings, task forces were appointed to create sweeping changes on company-wide issues. Managers at the next level made a commitment to improving business performance through ambitious breakthrough projects. Town meetings and team discussions generated a stream of local improvement projects. As a result, thousands of projects to improve business performance were launched....a cascade of initiatives! What the Centurion project was actually doing was encouraging a cultural shift in the way the organisation operated by encouraging employees to take more responsibility for decisionmaking at every level - this process is described as ‘empowerment.’ Empowerment is based on the belief that if you allow individuals who are directly involved in production processes to contribute their knowledge and expertise to decision-making, then the results are likely to be much better than if everything is dictated downwards by management. The benefits of such empowerment resulting from Centurion can be highlighted by two examples:
Reducing an order backlog
At a critical point one section of Philips had £20 million worth of overdue orders. This meant many dissatisfied customers. In addition, Philips was faced with cash flow problems as they could not bill their clients. As a result, Philips assembled a project team with members from every department involved in the delivery process. The team appointed an owner for each overdue order, sorted out the immediate problems, looked for causes and found solutions. Delivery reliability improved by 75% after one year.
Shorten development time
The development of a critical new product was seriously behind schedule, so that a year’s delay was expected. At a Centurion meeting the urgency of the situation was recognised and a task force set up. The task force quickly identified key problems and set up cross-functional work groups to solve them. The new product was launched six months ahead of schedule and became a tremendous success! A number of company-wide issues were identified at Centurion I meetings and these came to shape the focus of areas of company policy. For example, the initiative “Customer First” was set in motion to ensure that all Philips people focused their work on satisfying both internal and external customers of the organisation. Other key initiatives were:
- Emphasising ease of use as a key feature of all Philips products.
- Carrying out initiatives to develop the capabilities of managers.
- Upgrading the Philips image and unifying the “look and feel of its products.”
- Focusing on dealing with only the best suppliers.
- Taking positive measures to ensure a smooth cash flow for the business
At the end of 1992 a survey was carried out of the Centurion project, involving 1,500 Philips people in 15 countries. The results of the survey were mixed: On the critical side - the evaluation showed that there was still a long way to go in managing cultural change, but at least the benefits were starting to materialise. This can be seen by a number of financial indicators. Philips decided to move Centurion forward into a new phase of development. It was felt that the change process should be simplified so that people could understand it better. Philips decided to take fewer new initiatives and to place more emphasis on making existing initiatives work, they began to realise that looking at issues across departmental boundaries (process management) is a key determinant for success. The new emphasis was on creating a clear set of values that would focus on the most important factors for the company: Without customers there is no business. Therefore customers’ needs influence all of Philips’ decisions and actions. Within the organisation today there is a strong recognition that everyone contributes to the satisfaction of customers as part of a process which supplies value to the customer. Hundreds of customer surveys are carried out every year. All of this is made possible by creating a highly motivated workforce. ‘Philips people are the company.’ Dedication, imagination and creativity bring competitive advantage. Philips recognises that people contribute their best when they know that they are appreciated for what they do. By setting up work teams, individuals have scope for growth and development within a framework of mutual support. Employee surveys have been carried out throughout Philips from 1994 onwards.
Philips has set out to create excellent value for customers by setting up a detailed quality framework to systematically assess business performance. In terms of profits, financial results are checked at every level and in all units of the organisation. In terms of enterprise, Philips is continually finding new ways to serve customers, improve quality and make money.
In September 1995 Philips introduced “Let’s make things better,” its new global communications strategy. Philips’ image as a provider of technically advanced, quality products remains relatively strong. The company believes, however, that its new “Let’s make things better” campaign can further strengthen brand image in the eyes of tomorrow’s consumer. An essential aspect is that this strategy is not about communicating differently: it is about thinking and acting differently as a company and as individuals. The words “Let’s make things better” embrace a duality: a desire to make better things through innovations and products so that people will say “I want to buy that”; and also a commitment of the entire Philips organisation to continue to make things better and affect people’s lives positively.
Today, Philips operates in a way which is quite different from the way it did in 1990. Today the emphasis in Philips is very much on its people, who are the driving force behind an organisation which is geared towards the customers and providing quality products. Today it is not technology but people who are at the heart of Philips. Its advertising is, therefore, more than just a campaign. It is not surprising that the advertising centres on the people who personally “make things better” in their work; the story is that of Philips as a whole – the values and beliefs of a winning company, with an unequalled record of innovation. People today have begun to look at Philips not as just another manufacturer, but as an organisation made up of people with a mission, with know-how and ideas that make a positive difference in their everyday lives
After five years of focusing on internal restructuring to make Philips lean and competitive, it was felt that the time was right to “go public” with a simple, hard-hitting expression - “Let’s make things better.” What this statement says about Philips is that at Philips:
- they strive to be the best at what they do and refuse to accept that their best efforts cannot be bettered.
- they value the contribution of each individual and the power of a team with shared ideas and beliefs to make a real difference.
- they recognise that as a world-class company, Philips has a wider responsibility to customers, partners, local communities and shareholders, than simply meeting the needs of the balance sheet.
- that they accept that Philips must continually evolve to meet the changing needs of customers and that they are prepared to put themselves and their reputation on the line to do so.
“Let’s make things better” is the new company theme worldwide. From now on Philips will speak with one voice and show one face to all target audiences across all product groups and regions. Source: http://businesscasestudies.co.uk/philips/making-things-better/introduction.html accessed 13 August 2019 The following journal article is included in your resources: Karsten, L., Keulen, S., Kroeze, R., & Peters, R. (2009). Leadership style and entrepreneurial change The Centurion operation at Philips Electronics. Journal of Organizational Change Management, 22(1), 73–91. https://doi-org.libproxy.ara.ac.nz/10.1108/09534810910933915
Please note the marking for the following is based on the depth of answer, and upon appropriate contemporary references.
1. Critically analyse the change events at Philips. Your answer should include:
- Outline a Lewin’s force field analysis to identify and explain the driving and restraining forces relevant to this change.
- Discuss the organisational change strategy including details of key stakeholders, the timeframe, dealing with resistance to change and leadership strategies.
- Evaluate the outcomes of the change strategy.
2 Critically evaluate the effects (consequences) of the change for:
- individual employees
- departments/countries/teams and
- the organisation
Organisational behaviour illustrated in this Philips case study considered to be the study for individual and group performance as well as activity in a company. The particular area based on the study is known to examine human behaviour within a working environment along with determining the impact upon performance; leadership; job structure; motivation and communication as well. Hence, the present assessment focuses upon the Philips case study, the company of Netherlands (Company - About | Philips. 2019). This is considered to be a Dutch multinational conglomerate corporation which is headquartered within Amsterdam and is also renowned as the largest organisation of electronics within the whole world which recently emphasizes upon the area of lighting and healthcare as well.
1. Critical analysis of Change Event
(a) Lewin’s Force Field Analysis for identifying and explaining restraining and driving forces.
In order to evaluate organizational transformation effectively, the Force Field Analysis is essential as it helps to identify effect of transformation successfully. Based on application of Force Field Analysis of Lewin, it has been identified that driving forces and restraining forces both are having significant importance for implementing changes effectively. According to Lewin driving forces always try to initiate changes effectively and on the other hand, restraining forces try to protect change (Mansouri, Singh & Khan, 2018). Based on Philips case study analysis, it has been found that in the modern changing environment, the company has tried to provide diversified products to the customers. The particular industry is known to be changed in a rapid manner which has been signified through good quality products with higher value and reliability regarding money. However, it has also been evidenced from the present Philips case study that in the year of the 1980s, enormous changes have taken place within the industry of electronics which are mentioned below:
- A period based on higher growth for the market of customer electronics
- The actions related to newer competitors most of which has entered the market of electronics which were underestimated.
- Introduction of new and innovative products from which, most of it has been driven through Philips like CDs and VCRs.
Nevertheless, when the company launched new products such as video systems for competing with the VHS videos and Betamax; these failed as the respective organisation was found to lose its touch within the market (Centre, 2019). Hence, this crisis of the Philips triggered the change in leadership along with an appointment associated to Jan Timmer being as a Chairman who has been embarked within reappraisal for inefficient organisational structure. Thus, the driving forces of the particular company can be explained through the application of Lewin’s force field analysis. The company made use of this analysis which was created by Kurt Lewin and the idea for this analysis is known to be the situations which are generally maintained through an equilibrium within the forces which drives changes as well as others which can resist change (Larijani & Saravi-Moghadam, 2018). Thus, the purpose for making use of this analysis within the company was for distinguishing upon the specific factors in the organizational structure and to analyse these factors for informing decisions which are able to make the changes much more acceptable.
(b) Organisational change strategy
As it has been evidenced from the Philips case study, Jan Timmer was appointed as a Chairman for making changes within leadership and also involved the Board of Management; Country Managers and Product Division. It was decided by them to benchmark Philip’s performance against the competitors. This has included the comparison of key indicators over the other competitor companies. Hence, through this, they have been forced for concluding about the drastic changes that were required as per the performance of the respective organisation that did not even measure based on the competition. The initiation of three steps is mentioned below:
Cost cutting and restructuring was the first discussed step in this Philips case study which represented most of the work to be done without adequate workers (Adegbite et al., 2018). The changes have been to reduce the staff numbers over 15% that came to be 45,000 which also involved the changes leading to product rationalisation.
Creation of the movement for a change has also been renowned as Centurion programme which was formed for a fundamental change regarding the ways through which businesses were known to do things for getting a reasonable return upon the employed capital.
Implementation of the change led to the project change that has been developed within all levels through the corporate wide forces of task within the top of the company over the local projects leading to change upon the shop floor (Barbaranelli et al., 2019).
Apart from these changes, the company explored in this Philips case study has also undertaken the changes in leadership and culture which helped the company to rise within the market. Thus, through all these above variations, the organisational change strategy took place for the concerned organisation. Based on the strategies that have been applied for a change in the organisation, Philips also emphasized upon the communications strategy which focused upon the slogan which is “Let’s make things better”. The company had believed about this respective campaign that can strengthen the image of the brand for the customers (O'Grady, 2018). The significant aspect based on this particular strategy discussed in this Philips case study does not simplify about different communication rather, it emphasized upon acting and thinking in a different manner as the individuals and the company itself. Thus, this innovation upon the strategy resulted in a commitment for the organisation for continuing about the things to make it better and this also affected the life of the people in a positive manner. Thus, the organisational changes and strategy involved the stakeholders of the company along with the timeframe which dealt with the resistance within leadership strategies and change in the company. This ensured the organisation regarding the effective maintenance of the company processes and the teams as well.
(c) Evaluate the outcomes of the change strategy
As per the views of (Olivier-Pijpers et al., 2018), a restructuring based on the marketing plan and business of the organisation is considered typical for achieving a significant objective. A strategic change may involve shifts within the corporation policies; mission of the organisation; target market and organisational structure. Change management strategy is able to increase the effectiveness of the work processes that may be made for satisfied customers and employees as well. Managed change is also beneficial for minimising the change resistance. This improves the quality and productivity of the work along with the morale. However, collaboration, cooperation and communication are also improved as well as the planned approach for change also minimizes anxiety and stress. Thus, as per the above change strategies that have been applied in the Philips case study, it has been evidenced that in the recent scenario, philips is known to operate in such a way which has been quite different as compared with the operations in the year of 1990. Currently, the emphasis of the organisation is known to be within its people who seem to be the driving force beside any company which has been geared for the consumers and is also known to provide quality based products as well. Now it is considered to be the people rather than the technology which leads the concerned organisation.
2. Provide a Critical evaluation of the effects of change in the Philips case study
(a) Individual employees
It has been observed from the Philips case study that, before leading to any organisational changes within Philips, the employees of the company were asked for raising certain challenging questions for expressing their opinions along with making suggestions. The managers were found to provide information regarding the questions and also made spot decisions. Based on the Centurion Project of the respective company, it was found that the managers within next level had made decisions for commitment towards improvement of business performance regarding ambitious projects (Paull & Whitsed, 2018). Thus, conducting this particular project was known to encourage the cultural shift within the operational way of the organisation through the encouragement of individual employees for taking more and more responsibility regarding the decision making process in each and every level. This specific process has been termed as empowerment of the individual employees for being involved directly within the production process for contributing their expertise and knowledge for decision making. Hence, the change within the concerned organisation also empowered the employees of the company and as a result, the customers are known to look into the organisation as working with the people rather than the technologies.
Along with encouraging individual employees within the organisation regarding the development of business performance, Philips has considered the cost cutting and restructuring policy. This policy discussed in Philips case study has negatively impacted employee performance to some extent as Philips Company has adopted the strategy of reducing employees of 15% for managing their organisational performance. Hence, based on evaluation of change in organisational performance of Philips, it has been identified that the changes have both positive and adverse impact on individual employees. The evaluation reveals changes in strategies have created complex situations as mentioned in this Philips case study and both positive and negative steps have created new business policy to the company. The termination of employees has not been positively accepted by employees and it has created conflict in the organisational environment.
(b) Departments/ countries/ teams
As per the benchmarking performance of the Philips case study, it has been evidenced that incorporation of change in leadership led to contact with Jan Timmer being a chairman of the company who has called 100 managers for the organisation and also involved Country managers and product division along with the Board of Management for deciding to benchmark company performance against the competitors of Philips. This had involved the comparison within the key indicators over the other companies (Hadi Abdullah & Atshan, 2019). Hence, according to them, drastic changes were needed within the performance of the company which did not measure in competition. However, reduction of order backlog also took place in the company where the organisation has faced the problems of cash flow due to not billing their clients in a proper manner. This resulted in assembling a team for Philips as project team along with many members through each department of the organisation within the delivery process. This team was found to appoint an owner regarding the overdue orders and also sorted immediate problems as well. Furthermore, the particular team also looked for the causes as well as found solutions to it. As a result, the delivery reliability was improved through 75% after a year.
Apart from this, according to the Philips case study, Philips was found to decide for moving the Centurion forward within the new phase based on development. However, it was evidenced that the process of change needed to be simplified for making people understand in a better manner. This made the company to take certain initiatives and to emphasize more for making the existing initiatives work in a proper way and this made the organisation realise about looking towards the issues of departmental boundaries that is process management which has been a key determinant regarding success. On the other hand, as per the effects of change, it was also evidenced in this Philips case study that the series based on communication process and meetings created through Centurion has acted like catalyst and also created the framework regarding several improvements within the projects through the team over all the levels (Engelbrecht, Kemp & Mahembe, 2018). Thus, as a result, by fixing teams of work, individuals had scope related to development and growth in the framework based on mutual support. On the basis of the overall evaluation, it has been identified that changes have been implemented in case of various types of projects. This is because the company wants to improve the project performance of their organisation and the evaluation clearly reveals that changes have been effectively implemented by Philips for enhancing their performance in the market.
(c) The organisation
As per the views of Tsai, (2018), without the customers, there cannot be any business within any organisational culture. Therefore, the needs of the customers influence all the decisions of the concerned organisation along with the actions. Based on the organisation, in the current scenario, as per the effects of the changes there has been a strong recognition about everyone for contributing towards the satisfaction based on the customers for the part of a certain process that is known to supply value for the customers. In terms of the organisational profits and the financial results based on the change of the organisation, it has been evidenced in this Philips case study that the company seems to set out for creating an excellent value regarding the customers through setting up detailed framework quality for systematically assessing the performance of the business. Hence, as a result of the changes that have been made in the particular organisation, it is found in the current scenario that Philips emphasizes upon its people who seems to be the driving force based on the organisation that has geared up towards providing quality based products to the customers. Thus, people are found to look towards the concerned organisation as such a company which is made up of mission and people along with innovative ideas for change that makes a positive difference within the people. The overall evaluation of the Philips case study reveals that a positive change has been made by the company for enhancing growth of the business of Philips in the competitive market. The restructure of business regarding product rationalisation has been positively accepted by employees and other stakeholders but the termination policy of employees has not been positively accepted. Hence, the restructure policy of the company mentioned in this Philips case study has both positive and negative impact on the organisational performance.
As evidenced from the above discussion, the study has dealt with the Philips case study and highlighted the change events occurred within the organisation along with the effects faced from the particular changes. It has emphasized upon the internal restructuring of the company for making it competitive in the market and also to strive for being the best company. However, the Philips case study also mentioned about the Lewin’s Force Field analysis along with organisational change strategy as well.
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