This case is about a successful car dealership, Car Destination, that is looking to changing its existing model to adopt The no-hassle Destination model. This new model comes with various changes on the company’s operations such as introducing salaries in place of commissions, more focus on customer service and selling of the cars at fixed prices. The employees are reluctant about this change because they believe it will result in poor performance and low job satisfaction.
In case the company decided to go ahead with this change, there are techniques that have been outlined and could reduce this resistance such as communication, involving employees in the change, showing support and negotiating with the employees. However, looking at the possible negative effects this model presents, it is recommended that the company could consider concentrating on enhancing the customer service of the business and leave the business to continue operating as before. Such a strategy would create positive benefits in the form of high customer and employee satisfaction and improved productivity
Case Problem: Resisting Change at Car Destination
Car Destination Inc is a high performing car dealership that has been recording high profits even in the recession. The company under the leadership of its CEO, Doreen has been one of the profitable car businesses dealing in the sale of both new and second-hand cars. Just recently, the CEO felt that there is a need to change the current model of the business and try something different. Since its inception, the company has been paying its sales representatives on a commission basis and on top of it there has been a small fixed salary. This traditional method also allowed customers to negotiate with the representatives on the prices. The model worked in favor of the representatives as they could record a high number of sales, thereby earning huge commissions.
The Chief Executive Officer is looking to introduce a new model, The no-hassle Destination, whereby the new and old cars will be retailing at a fixed price and it will begin paying the sales reps a fixed salary without commissions. The company will also cease from operating as a sales-oriented company to customer-oriented business whose employees’ main focus will be fulfilling the need of the clients. From the looks of things during the time the CEO was announcing this change, It is evident that the employees are hesitant about this change. Some of the employees who gave their opinion already showed their disapproval of this new strategy. Employees are resisting this change because it means they will be earning way less than what they have been getting before,
Change is something that occurs in almost all organizations and it is usually in response internal or external aspects, In this case, Doreen feels that the organization ought to change to meet the changing customer’s preferences. She feels that gone are the days when sales representatives were the only source of information to a customer and could influence their purchasing decision, but now with technology that is in the customer’s hands, they can search the internet for specifications and prices and once they come to the dealership, they no longer want to haggle about the price, all they need is the car they identified through the internet. The availability of technology is changing how many businesses operate and this is because it has changed customer behavior. It has brought about convenience as clients can get all the information they need on a product online.
Change is inevitable for every business and the growing focus on customer service in almost all industries is the reason that the CEO wants the company to adopt this strategy too. The plan for this model is that the sales associates will be focusing on customer satisfaction. It is a strategy that is expected to cultivate a customer-oriented services culture in the business. This CEO understands that culture is critical in this business as it will influences the conduct of the employees both in the short term and long term (Shah & Jain 3). Additionally, the culture of good customer service also assures the business of high productivity since it positively influences the customers purchasing decision and their satisfaction.
The employees at Car Destination are resisting this change because they are afraid of its effects. For years, the sale representatives have been earning lots of money through commissions. Sales commission is usually the additional amount paid to a sales representative depending on the level of sales made. The higher the sales, the greater is the commission paid to an employee. The case study has explained these representatives have been earning a lot of money in the form of commissions. They are afraid that changing this model would affect their ability to earn. The commission has been an incentive for the employee’s performance. Staff requires to be highly motivated to support the goals of the organization and if this motivation is not there, it translates into low profitability of a company and employee turnovers (Shahzadi et al.161). If the company removes the commission, there are high chances of the best sales rep leaving and the profitability of the company might decline.
The element of sales commission that the company has been offering the employees over the years has been one of the core reasons for its high profits. It has been a form of reward to employees, that has helped to enhance their job satisfaction and motivation in the company so far. Job satisfaction plays a crucial role in influencing the organization’s performance (Latif et al.166). A company can only retain its employees if they are highly satisfied. It is important for every business to know how they can keep their employees motivated to achieve extraordinary results. Because of the high satisfaction of the sales reps at Car Destination, the company was able to record high profits even when the economic conditions were harsh and the competitors were performing badly. Changing the ways the employees are paid could create negative repercussions in the business eventually affecting its profitability.
The other reason that could be making employees to resist this change is because the CEO said that with the new model, the prices of the cars will no longer be negotiable, but fixed, This will hit hard on the employees as one of them has mentioned that customers purchasing second-hand cars are prone to negotiating, It is evident that the employee also derive lots of satisfaction from being able to meet a customer’s need for negotiating. If the prices are fixed, it means that it will be a situation of “take it or leave it.” The prospective customer will be denied the chance to quote their price as was before. Such a strategy is contrary to the culture of customer service that the company is looking to build since it will lock out this group of customers out. This will also result in lower employee satisfaction and ultimately, the performance of the company will be affected to a great extent.
If the company is going to insist on this change, there are strategies it could employ to eliminate the resistance and to implement the new model although it might mean losing some of the employees. Among the effective techniques the company could use is maintaining communication with the workers. In most instances when change is happening to an organization, it is the leaders who have the information and they withhold it from the subordinates. In such instances, the employees are left in the dark and unaware of what is happening and this could result in failure of the change. When there is communication, it means that all the participants to this change understand the objectives the company is hoping to achieve, the possible challenges that they may face on the way and the plan for resolving them (Islami 1124). For instance, in the case of this car dealership, employees are guessing what could possibly go wrong with these changes because the CEO is not giving clear information on how this model will work and make everyone happy. If such information is clear, they would not worry so much and would support the transformation.
The commitment of the employees to the adjustment in the company can also be improved through participation. Including employee in the planning and implementation of change is one of the best strategies to overcome their resistance. Involving the workers makes them feel valuable to the organization and they own the change. In this case, the CEO could consider involving some of the sales reps in deciding on the new path of the company. The employee may contribute important insight that would help in developing the appropriate plan of change.
The other strategy that an organization may apply to make the employees accept the change is to provide relief and support. This is most effective if the resistance is out of fear of the unknown as it is the case with the employees of Car Destination. They are afraid that the new model will lead to poor performance and low pay. What the company can do to rid of this fear in the workers is by assuring them that the change will bring better results than before. The company leaders can also take to offering the workers advice to reassure them that everything will work out fine.
Negotiation is the other technique of overcoming employees’ resistance to change. Negotiating is whereby the leaders of a company enter into an agreement with the individuals that are resisting change (Islami p.1124). For example, the influence of the sales representatives in the company is significant and they may resist this change for various reasons, one of them is changing their role into salaried associates. The company could resolve to negotiate the amount of salary they will be earning to prevent them from joining the competing firms paying in commissions. Through negotiating, every party will be satisfied since their worries are addressed.
Looking at the situation in the company and how the no-hassle Destination model is expected to work, and the possible outcome, it is advisable for the company to rethink about implementing this model. It is a risky model and there is no certainty that the company will continue making profits as some of the companies that have tried this model have failed. To begin with, this model places the company at risk of losing performing sales reps since they know they can earn tons of money through commissions, they may never agree to receive a fixed salary, they would rather look for another company that will meet this need. As mentioned in the case, offering commission has helped the company to keep their salary costs low, but if they begin offering fixed salaries, this cost will increase and affect the company’ profitability.
The other disadvantage of the suggested model is that the business risks losing its customers if it begins selling the cars at a fixed price. Customers appreciate discounts since it offers them value for their money. As said earlier, second-hand cars prices have always been negotiable and if the company is not able to offer this, then customers might choose to buy from other dealerships. Even though technology has provided the prospective customers with access to information such as the price of a car, it does not necessarily mean that when they come to the dealership they will not be looking for a discount on the car. The other effect of selling cars at a fixed price is that it will negatively affect the satisfaction of both the employee and the customer.
The only change that the company should concentrate on is on customer services. Car destination should focus on developing a team that is committed to providing high-quality customer service. Customer service will unlock better performance of the company as it will enhance customer loyalty and improve its ability to attract new clients. It will be an environment where all the customer needs are met. The way to enhance customer service is through carrying out training on the sales reps and other employees about strategies they can use to improve their customer service.
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