Communication and Change Management at Lenovo

I.Introduction

Lenovo Group Ltd. is a Chinese computing giant founded in 1984 by eleven Chinese computer engineers and researchers with a vision to bring the advantages of information technology to the Chinese people. Just like its initial name, Legend, the company opened the new era of consumer PCs in China and thus affected the lives of millions of Chinese people. “It first introduced PCs to households, and then promoted PC usage in China by establishing retail shops nationwide. It also developed the pioneering Legend Chinese Character Card that translated English operating software into Chinese characters, and achieved breakthroughs like PCs with one-button access to the Internet” (Lenovo, 2006).
By 1994, Legend was trading on the Hong Kong Stock Exchange; four years later, it produced its one-millionth personal computer. In 2003, Legend changed its brand name to Lenovo, taking the “Le” from Legend, a nod to its heritage, and adding “novo,” the Latin word for “new,” to reflect the spirit of innovation at the core of the company. The company renamed itself as Lenovo a year later. In 2003, Lenovo introduced a self-developed collaborative application technology, which heralds the important role Lenovo is going to play in the 3C (computer, communications and consumer electronics) era. These and other market-leading personal computing products catapulted Lenovo to a leadership position in China for eight consecutive years with over 25% market share in 2004 (Lenovo,2006).
In May 2005, Lenovo paid US$1.25 billion to acquire the International Business Machines Corp (IBM)’s Personal Computing Division and the new Lenovo became a leader in the global PC market, with approximately $13 billion in annual revenue, products serving enterprises and consumers the world over, and more than 19,000 employees worldwide. Currently, Lenovo's executive headquarters are in New York, USA, with principal operations in Beijing, China, and Raleigh, North Carolina, USA, and an enterprise sales organization worldwide. The company develops, manufactures and markets cutting-edge, reliable, high-quality PC products and value-added professional services that provide customers around the world with smarter ways to be productive and competitive (Lenovo,2006).

II.Problem Statement

Since 2005, Lenovo has experienced major change brought about by its landmark acquisition of the IBM Personal Computing Division. Implementing the deep and large-scale change presented a colossal challenge for the company. When implementing the acquisition, the company might face many challenges or barriers at both organizational and individual levels.
First, as Einsiedel claims, the cultures of the two companies may have significant differences that can be serious barriers to fuller amalgamation (personal communication, Feb. 25, 2006). Stephen Ward, chief executive of Lenovo, characterized the cultural differences of the two companies as follows: “Lenovo: based in a fast-growing country, an innovative and aggressive company with an intimate knowledge of China and technology; IBM: a prudent, conservative company with a worldwide customer base of large corporations (Fallon, 2005)”. Integrating such contrasting cultures requires multicultural team-building from scratch.Managers at Lenovo must understand the culture of the two organizations as well as be skilled in creating a new culture in the merged organization.
Second, resistance to change is a natural reaction (Daft, 2004), especially when deep change happens. Uncertainty is also an integral part of any major change process (Callan, Latemore, &Paulsen, 2004). Thus, handling resistance to change as well as minimize uncertainty is critical to the successful implementation of the acquisition.
In a word, management of Lenovo was challenged to figure out how to successfully manage the organizational change and ensure employees have a shared attitude of direction, values, priorities and ways of working together during the change process.

III.Literature Review

Having summarized the communication challenges that faced by the organization in the previous section, we review some literature regarding change management, the role of communication in the change management process and strategies for implementing change in this part.
A. Understanding organizational change and change management
Research on change management has grown exponentially over the past decades. Change, not stability, is the natural order of things in today’s environment (Daft, 2004). This mirrors Micklethwait’s (1999) thoughts that in this new dynamic environment the “only constant is change”. Thus, it is essential for organizations to “build in change as well as stability, to facilitate innovation as well as efficiency” (Daft, 2004). Most organizational change is incremental. However, there is a growing emphasis on the need for radical change (Daft, 2004). Especially, mergers and acquisitions (M&As) are increasingly seen as “a relatively fast and efficient way to expand into new markets, to acquire new competences, to create economies of scale, to globalize, to spread the risk or even to dominate existing markets” (Papadakis, 2005). As large-scale and radical changes, M&As are “a formidable challenge for change management” (Demers, Giroux, & Chreim, 2003). The successful implementation of an M&A can be influenced by a range of factors, including external corporate environment, the characteristics of the M&A itself, the characteristics of the acquiring company, and the handling of human resource aspects, e.g., communication strategy (Papadakis, 2005). According to past research, up to 70 percent of change programs failed and the most commonly cited reason for failure was unrealistic expectations, poor planning, poor communication, cultural clashes, talent lost or mismanaged, changing external environmental conditions, or integration difficulties (Daly, Teague, &Kitchen,2003).
B. The role of communication for change management
“Communication is the tool through which companies announce, explain or prepare employees for change” (Anonymous, 2002). Its critical role in the implementation of change is supported by many researchers (Proctor & Doukakis, 2003; Papadakis, 2005). In particular, at the individual level, it helps to reduce uncertainty and enables to understand the necessity of change and convert resistance into a perceived need for change (Proctor & Doukakis, 2003). At the organizational level, increased frequency of communication could contribute to the creation of a common and clear vision (Gall, 1991; Bijlsma-Frankema, 2001). It also could lead to better understanding of the cultural differences (Gall, 1991) and the appropriate communication is vital in bridging the differences in culture (Smith and Hershman, 1999). At a result, during the implementation of change, managers at Lenovo should use suitable communication strategies to manage the change at both organizational and individual levels.
Furthermore, many researchers have noted the communicational dimension of W&As (Demers, Giroux, & Chreim, 2003). Some state that the communication program could be vital to implementation of the M&A” and “a poor communication program may create significant problems and may lead to the failure of the M&A” (Papadakis, 2005) . Especially, the idea that internal communication plays an important part in the successful implementation of change is often cited in the literature (Harshman & Harshman, 1999; Daly, Teague, & Kitchen, 2003). Therefore, the new Lenovo needs to take an overall approach which integrates both external and internal communications, not only to communicate with the public and shareholders but also to communicate with their own employees who would be most intimately involved and most affected by the change.
C. Strategies for communication and change management
1. Adopting a suitable organization structure
Nearly all organizations need to undergo reorganization to help meet new challenges. The change of organization structure is required to response to organizational change (Daft, 2004). According to Daft (2004), there are two dimensions of organization structure: One is vertical dimension, which emphasizes vertical linkages such as hierarchy and formal information systems. The other is horizontal dimension which emphasizes horizontal communication and coordination. Since the environment of the new Lenovo is both complex and uncertain, a large amount of coordination and information processing in both vertical and horizontal dimensions are needed simultaneously. To become an effective and contemporary learning organization, mangers at Lenovo should try to find the correct balance between vertical control and horizontal coordination. One way to achieve this is adopting matrix structure. In the matrix structure, both product division and functional structures (horizontal and vertical) are implemented at the same time because “the product managers (horizontal) are given formal authority equal to that of the functional (vertical) (Daft, 2004)”. It has been reported that Liu Jun of the Lenovo Group was considering “adopting a matrix structure in managing Lenovo China and Lenovo International” (Einsiedel, personal communication, Mar. 11, 2006). We believe the matrix structure would work well in the new Lenovo in terms of organizational communication and change management because it establishes and supports a strong form of horizontal linkage (Daft, 2004)”.
2. Managing the cultural differences:
Bijlsma-Frankema (2001) states that “cultures in organizations are about the way members make sense of their experiences in the organization, the way they define and interpret the situations they are in, in order to be able to act in a meaningful way”. He also argues that “the cultures of the merging firms will differ from each other and may even clash (Bijlsma-Frankema 2001)”. As we defined in the first section, the new Lenovo was formed out of two formerly independent companies with different cultures. When the two companies, one Chinese and one foreign, run the business together, the cultural differences might lead to conflicting views and perhaps deadlock over how to approach an issue and enhance management. There is a high chance of “them-and-us” feelings simmering between employees of the merging firms. Without proper management, these feelings do not disappear and will affect the performance of the new company in a negative way. According to Bijlsma-Frankema (2001), “cultural integration is furthered by mutual trust”. Trust can be built or enhanced by shared goals, by regular dialogue, by looking for shared norms, monitoring and handling deviance. These factors influence each other in a cycle of growing trust. Trust in managers and colleagues, in turn, brings about psychological safety, a necessary condition for openness on which dialogues and monitoring are thriving (Bijlsma-Frankema 2001). Dialogue or communication is a key in trust building and cultural integration process.
3. A linear approach to change
According to Callan, Latemore, &Paulsen (2004), large-scale change is a process and it can be viewed as a series of events that can be managed. They suggest that adopting a stage-like approach to devising and implementing large-scale organizational change allows managers to plan and to attend to important challenges that will arise in most change processes. Probably the best-known linear approach to change is the eight-step model of Kotter (1996), which suggests managers to plan their change in the following order: 1) establish or increase a sense of urgency; 2) build a powerful guiding coalition; 3) define a right vision; 4) communicate for buy-in; 5) empower action; 6) create short-term wins; 7) don't let up; and 8) make change stick. He further argues that large-scale organizational change does not always occur as planned, or always in a predictable, orderly, and linear manner and more than one phase can occur at the same time.
4. A useful change communication model
Goodman & Truss(2004) present a useful change communication model, the change communication wheel (see Fig. 1), which can be used to help mangers communicate effectively during a major change initiative.



Figure1. The change communication wheel (Goodman & Truss 2004)

As we can see in figure 1, the center of this model is a wheel which is divided into four quadrants, message, media, channel and approach. These are the four aspects of communication where change managers must consider carefully.
The first quadrant, message, presents communication content that concerns what information is conveyed to employees before, during and after the change initiative, as well as what information is sought from employees. According to Kitchen and Daly (2002), there are three types of information that affect employees during change: first, what employees must know, including job-specific information; second, what employees should know, including desirable information about the organization, and finally, what employees could know, including relatively unimportant office gossip. Goodman & Truss (2004) indicate that change managers should understand which pieces of information fall into which category when determining priorities. Kotter (1996) argues that communicating to employees the need for change and how it can be achieved is critical to the successful management of change. In addition,“messages must be well considered, concise, consistent and ubiquitous” (Babcock, 2005).
The second quadrant is media. Multiple media, including verbal, written and electronic are likely to be used in a major change program (Klein, 1996). According Balogun and Hope-Hailey (2003), the choice of media depends on the significance and complexity of the message and the stage in the change process. These media need to be considered alongside the channel that is chosen (Goodman &Truss,2004).
The third quadrant is channel, which is particularly critical to change management (Klein, 1996). It has been show that managers need to use multiple channels of communication to reflect the complexity of change, but “the most popular channel being face-to-face communication with their supervisors and managers” (Callan, Latemore, & Paulsen, 2004). In addition to the formal channels, managers should pay attention to informal communication networks during change programs (Kitchen and Daly, 2002). These can develop through work-based teams or through online communication (Lok and Crawford, 1999). Research also highlights the importance of establishing two-way communication (Croft & Cochrane, 2005), which ensures feedback loops are integrated into every channel.
The fourth element has to be considered is approach. Balogun and Hope-Hailey (2003) argue that the approaches to change communication vary from highly coercive to highly consultative. The approaches that are deployed depend on the context of the change program.
Finally, we can see four contextual features in the model: the organizational context, the change program characteristics, and the purpose of the communication and employee response. In change program communication design, managers must not only achieve an effective match between all four quadrants of the wheel but also take account of the four external elements (Goodman & Truss, 2004).

IV.Case analysis

Previous literature on communication and change management has presented us with a general picture of how communication strategies may be deployed in support of the change management. In the following section, we will analyze and illustrate how management of Lenovo to successfully communicate and manage the big change with the help of strategies for communication and change management we reviewed above.
We suggest managers of Lenovo to use the Kotter (1996)’s eight-step model of planned organizational change to plan and manage the change. As we talked earlier, it involves the following stages:
1. Establish a sense of urgency
The core idea of Kotter's important first step is to build the case for change and to engage people in being committed to the change (Callan, Latemore, &Paulsen, 2004). Managers and employees at Lenovo need to understand the drivers for change and thus create a sense that the acquisition is necessary to the company’s development. As China's biggest computer maker, Lenovo dominates the Chinese retail PC market with a 25 per cent share. However, as a Chinese company with little-known global reputation and with little experience running operations overseas, it is hard to find a quick entry points into the global market. The acquisition of IBM, a well-established and household-name multinational company, would enable Lenovo to add IBM's global sales and distribution capability, and leverage IBM's international management expertise. The merger would lead to a greater understanding of how the Western world's business model works and how it delivers competitiveness at a micro economic level. Therefore, it is essential for Lenovo to acquire IBM to enhance its performance in the global market and realize its global ambitions.
2. Build a powerful guiding coalition
Since the scale of the change is so large that would affect the whole company, we suggest that the company should create a strong coalition which includes at least 12 employees, including 2 senior mangers, 5 middle mangers and 5 lower-level supervisors (such as team leaders ) from across the company. The members of coalition should have enough power to direct the change process as well as present different interest groups throughout the company.
3. Define a right vision
At this stage, the top management must bring the guiding coalition together to formulate a competitive and clear vision to guide the change process. To ensure make a clear sense of where to go and how to reach there, the guiding coalition should met weekly to discuss how to manage the big change during the whole process. At these meetings, they should do the following things: draw up a realistic, step-by-step plan of action; make key decisions, such as new organization structure and policies, staffing (including possible impending lay-offs and salary adjustments) and the timing of the change; bring up their difficulties and sense of confusion, then develop solutions to the difficulties; review obstacles that need to be overcome, the effects of changes thus far, what individuals are going through, the changes they would be making in the next phase, and what sort of support would best enable them to make the transition, and the next areas for consideration.
4. Communicate for buy-in
As we reviewed above, communication plays an important role in the change management process. Numerous researchers on change management stress the importance of clear and constant communication as a lever in the success of change programs (Atkinson, Scotland, & Kamp, 2003). At this critical stage, we strongly recommend the company to adopt Goodman & Truss’s (2004) change communication model to communicate with their employees. That is, the management should consider the following four aspects of communication based on the organizational context (as we mentioned in section 1), the change program characteristics (large-scale and radical), and the purpose of the communication (to overcome barriers to change and to ensure employee buy-in to the change) and employee response.
Massages: Klein (1996) has argued that employees will want to know as much information as possible in order to minimize uncertainty. The content of the messages should include the rationale for the acquisition, how it can be achieved, and prospects for the future. Explaining about the “why” and “how” of the change can greatly reduce the uncertainty during the deep change. Communicating positive outcomes that were expected of the change enhances the morale of employees and decreases the resistances to change. In addition, provide timely and accurate information about the personal effects of the proposed change, including major restructuring of departments and work groups, new policies to be implemented, and possible salary adjustments, allows employees to confront change in a more active way. Furthermore, reiterating the corporate vision, the organizational objectives, and the execution plan improves the sense of shared goals, knowledge and norms between different groups thus help to build mutual trust and facilitate cultural integration. This kind of message also gives employees a framework within which to operate. Then managers can link the framework by communicating specific actions and tasks expected of each employee.
Media: considering the significance and complexity of the message, we suggest the company use multiple media, including staff meetings, telephones, emails, intranet, bulletins on notice boards and staff newsletters, written memos and official documents to communicate those messages. Since employee response is one of the contextual features of the model, we especially recommend interactive media such as face-to-face verbal communication to build feedback loops and facilitate two-way communications.
Channel: “People trust communication from their immediate supervisor more than from someone higher up” (Callan, Latemore, &Paulsen, 2004). So during change processes, the leaders of change should brief and encourage their first line supervisors to be the most visible communicators with employees (Callan, Latemore, &Paulsen, 2004). To ensure immediate feedback, we suggest they communicate face-to-face where possible. Supervisors and staff can discuss their future expectations of each other through two-way communication channels. This can help increase employees' feelings of personal control during the change process, and actually improved their levels of job satisfaction. Social networks also can be used as an informal channel to communicate the change.
Approach: Goodman & Truss (2004) state that the way in which organizations communicate with their employees during a change process has significant effects on the success of change management, in particular on individual commitment, morale and retention. They also suggest that communication needs to be context specific in order to be effective (Goodman & Truss, 2004). According the context of Lenovo, we suggest the company take a consultative and reactive instead of coercive and directive approach to communicate the change, inviting employee involvement and consultation in a consistent manner, asking for their views on the impact of the change on their day-to-day activities, and incentivizing positive employee contributions. In addition, messages about change need to be communicated regularly to all levels in the organization because it is human nature to believe messages which are heard again and again.
When using the model to communicate the change, it is very important to consider the four elements within the wheel holistically and try to achieve an effective match between all four quadrants of the wheel, while taking account of the four contextual features (Goodman & Truss, 2004).
5. Empower action
Implementation is the most important and difficult part of the change process (Daft, 2004). At this stage, management should forge the link between what gets said and what gets done. After mapping out the execution of the acquisition strategy with senior executive team and defining expectations and requirements clearly, strategy and vision can be translated into a realistic step-by-step action. Stephen Ward, who has a deep understanding of the cultures of two merged companies, could be appointed to facilitate the emergence of a new corporate culture. Other mangers skilled in change management also should be appointed to deal with new organization structure.
6. Create short-term wins
Although no dramatic improvements should be required in a short period, it is important for the company to create short-term wins to encourage spirit, validate the vision of change proposed by management, promote trust between management and stuff members, and influence cultural commitment of organizational members to the new structure in a positive way. Reinforcement mechanisms, such as a rewards system, needs be put in place to incentivize staff who has made a contribution to the effectiveness of the change.
7) Don't let up.
The M&A process sometimes requires years of effort. Culture integration speed would be gradual because the employees from different cultures need time to share knowledge about similarities and differences in norms and expectations, make agreements, and establish a new way of working together. This can only be done pragmatically, step-by-step after the acquisition and little-by-little taking things that can be effectively used in the new organizational environment. So, do not give up before you reach the goal.
8) Make change stick
When implementing change, do not forget that long-term success is built on the ability to accomplish and sustain change.

V. Conclusion

As Kotter states, managing change is not a simple activity, but a complex and challenging process, with each stage offering its own special challenges (Callan, Latemore, & Paulsen, 2004). It has long been recognized that appropriate and effective communication is an essential ingredient in achieving successful change (Kotter, 1996). According to Einsiedel (personal communication, Feb. 25, 2006), “communication is not a panacea, but effective communication strategies increase the chances of identifying, anticipating, or solving problems during the mergers and acquisitions” . When the new Lenovo was formed out of two formerly independent companies with different structures and cultures, we believe effective communication is a key factor in dealing with the issue of uncertainty, resistance to change and greater organization cultural diversity during the change management process. Through effective communication, new culture as well as the new structure would have chances to be created, learned and adapted by organizational members.

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