The Aid Association for Lutherans

Foteini-Eleni (Feli) Oikonomopoulou

Organizational change: Planning and Implementing

Teams at AAL and IPS

I. Introduction

The Aid Association for Lutherans (AAL) is a large fraternal benefit society with a large insurance business. The insurance business is controlled by the Insurance Product services Department. During the period starting in 1985, AAL and the IPS department specifically, went through an organizational modification, labeled “Renewal” and “Transformation”. IPS was originally a traditionally functioning, hierarchal company, which was remodeled into a relatively flat, regionally based and completely customer focused organization. Unlike the hierarchy before, the new work units were Self Managing Work Teams (SMWT), which provided all services to the field agents in their geographical area (being region based now). In this essay the process that the company followed during its organizational change, from the identification of the need to change to the implantation of the new strategy, will be critically discussed. Finally, suggestions for the improvement of the process will be introduced.

II. Need for Change

Corporate strategy is the overall, predominant strategy of the organization, which determines the direction for the total organization. As the company developed and new products were introduced, the company understood that there was a need for change in its corporate strategy. Diversification is a common corporate strategy, which involves adding products or services different from those currently in the firm. Firms may diversify for several reasons, but the primary one is to reduce overall risk by decreasing dependency on one or few product markets. However, the company soon realized that as a result of that strategy, it had a problem with shrinking margins in financial services and there was a need to restraint in expenses in order to stay competitive.

Moreover, the old president was about to retire and the new president, Richard Gunderson, who took over, had the vision to develop even further the company. He had the feeling that even if everything is going well, they had an even higher potential to reach. That was a good sign about the new management, as it foresaw the need for change in order to adjust to the rapidly evolved market conditions, even though no problem has yet occurred and at that moment the company was doing brisk business with its new universal like product.

The fact that AAL was not in crisis during its reorganization was one of the hardest parts about the change effort, as reported by its managers. As a result, they had plenty of time to reform and adjust to the new circumstances, but on the other hand, it was difficult to motivate oneself to go through the determination of change when things were going so well.

III. Identifying the problem

Fundamental change started by the identification of the problem. To determine the gap between where the company wanted to be and where it really was, they performed structured interviews through a diagonal cross section of the company. They used this as a tool to work on the employees and get them on board with the planned organizational transformation. Through the process of change at the corporate level, the inclination for restructuring at IPS grew. It was fully supported by the new management team. IPS had several concerns around which to formulate the reason for change. Then they redesigned the vision statement of the company and based on that they set some broad parameters, which they then deliberated into a detailed plan. Communication became the most important thing at this point, which they struggled with for a while, due to the sheer size of the department in terms of head count. The areas that needed to be reformed were: 1) the organizational structure and the management style, 2) the marketing strategy.