Organisational Change Of The American International Group

The American international group has a history that dates back to 1919. The company was started when Cornelius Vander Starr established an insurance agency in shanghai the capital city of china. Starr was the first person from the western to sell insurance policies to the Chinese. Starr sold policies until the company which is the current AIG left china in 1949. In the same year the company’s headquarter was moved to New York in United States from where it expanded through venturing into other markets in the parts of Latin America, Asia, Europe and Middle East.

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In 1962 the management of the company moved from Starr to Maurice Greenberg who diverted its concentration from personal insurance sales to high margin corporate coverage where he eliminated agents by bringing in independent brokers whom he used in selling insurance polices. This strategy helped the company to price insurance depending on its probable return even at times when there were reduced sales of certain products and for a long period and still incur very little extra expenses. After Greenberg took over the management of the company it sooner went public in 1969. Starting from 2005 the company was caught up in a series of frauds that were investigated by the justice department of U.S., the office of attorney general in new state and the securities exchange commission. The then CEO Greenberg was suspended and replaced by Martin Sullivan in Feb. 2005. In June 2008 some financial losses were disclosed which led to the fall of AIG share price in the stock market. This resulted to resignation of Sullivan who was then replaced by another CEO Edward Liddy in sep. same year. American international group is the biggest underwriter of industrial and commercial insurance. The financial scandals of 2008 led to great losses to the company which made it suffer a liquidity crisis as its credit rating was downgraded.
AIG it a globally recognized insurance company with branches in different parts of the world. Its vision is “to be the leader in innovative mortgage solutions” while its mission is “to be the mortgage insurer of choice through: professional and dedicated staff, entrepreneurial leadership, disciplined risk taking, customer satisfaction, and through solutions to facilitate Canadian homeownership”. The company’s global benefits network has lately introduced the AIG atlas as one of its strategies. This atlas is a basically a range of products meant to assist in meeting the unique benefit needs of the employees. This will then enhance the utility of the capability of the company’s employees in over 100 countries hence be able to provide the best services as well as cost effective solutions to its customers all over the world (AIG Group Management Division 2009). The unique benefits to the employees will include medical insurance, life insurance and long term disability insurance. The company also intends to provide full time services through charge-free phone number as well as management and monitoring of emergency medical cases.
Strategies of AIG
The company is one of the leading international insurance and financial organizations. It has partnered with several business groups including CRM, which is the number one credit management solutions provider in Europe. This partnership has enabled the company to provide better customer satisfaction and hence improving its sales of insurance policies while accomplishing efficiency gains. Currently, American international group operates in more than 130 countries while its member companies serve institutional, commercial, as well as individual customers through the widest property, life, and casualty of any insurer in the world (AIG Group Management Division 2009). The company is thus going through a period of drastic reviews of it’s of the processes and structure in all its centres so as to maximize and establish its B2C customer management. By making use of its resources more effectively the company aims to improve the efficiency of CRM and provide the best responsive customer care.
Having partnered with other outsourcers, AIG realized the importance of outsourcing partners with whom they can combine the breadth of experience by providing well managed and high quality services. In 2002 AIG and finalized a business strategy with Transom with outlined a number of challenges such as developing organizational skills to secure maximum profitability and customer satisfaction. The company also had to act according to the desired outcomes for improved organization, quality and management as well as provide cost effective high quality and fulfilment solutions (AIG Group Management Division 2009). Following the deal between the two companies Transcom began to handle the inbound customer care service on behalf of AIG. Transcom then enhanced the quality of services by dealing with the mistakes in the existing program of AIG.
Leveraging its long experience and first class technology, Transcom has been able to strengthen and expand the CRM activities of AIG through addition of telemarketing campaigns. Transcom has also succeeded in bolstering AIGs customer revenue and base through contacting its potential customers and presenting them with persuasive offers to coverage commerce. The general improvement in the quality of service of AIG has come from the enormous improvement in customer relations which has in turn strengthened AIGs image as a professional organization. All this was possible since Transcom kept within the service level boundaries as well as constant customer contact (AIG Group Management Division 2009)
Organizational Behavior Analysis
Organizational behavior analysis is an evaluation of the way individual work in an organization. The organization does not need to be a business institution like the American international group but can also be a religious institution. The ultimate goal of organizational behaviour analysis is to understand in a better way the relationships between individuals in an organization, the relationship of the employees and the organization and the organizations relationship with the rest of the society (Harigopal 2006). This information is then used by the management of organizations to increase the efficiency and productivity of and achieve the goals and objectives of the institution as a whole.
According to Harigopal (2006), by gaining and understanding this knowledge the employee are able to realize the contributions of their individual efforts to the bigger image of the organization. The progress and success of every organization rests on the philosophy of management as well as on its vision, goals and values. These factors then drive the organizational culture that is made up of the social environment, formal and informal organization. The culture then influences the type of communication, leadership and group dynamics within the institution. The employees or workers in the institution then take these aspects as the quality of their work life and therefore they determine their rate or degree of motivation. The ultimate results of these will be individual satisfaction, performance, personal growth and the general development of the organization.
Organizations are undergoing exceptional radical change in all systems of operation ranging from decision making to global competitive pressures and technology to acquisitions and mergers(Harigopal 2006). Organizations have therefore to respond quickly and effectively while remaining flexible and transforming themselves for the new world of work. Organizational behavior is therefore written with these changes and it explains through what leaders and managers need to know about organizations as they struggle to bring productivity and success in them. Organizational behavior and leadership development is institution wide responsibility that stretches across all functions and departments.
Culture is described as the conventional behavior in a given society that includes beliefs, knowledge, customs and practices. Although it rarely finds its way into the conscious mind, it often affects the behavior of human beings within a given society or organization. Employees in an organization like the AIG usually depend on its culture since its culture gives them stability, understanding, security and the ability to react to a given situation. Organizational culture creates a number of concepts, situations and strategies that affect every level of planning in any institution. Understanding the operation of culture and organizational structure and the machinery that it runs behind the scenes helps the employees to organize and strengthen the effective cultures and remove the bad ones thus establishing and environment that promotes success within the institution.
According to leadership theorists, diminishing and weakening of an organization together with the employees resistance to change is usually caused by ineffective leadership (Harigopal 2006). For instance the American international group underwent financial crisis in 2008 as a result of poor leadership. The bad culture of impunity that had been developed in the company led to corruption and mismanagement of funds as well and some other unscrupulous deals. Strong leadership and organizational culture are necessary for long term success in every corporation. However some institutions may show signs of success for a long time even without a strong organizational culture but when the culture starts to erode, the big organizations take only a short period of time to collapse.
Strong leadership is necessary for a strong organizational culture although the reverse is also true. Without strong leadership to maintain everything running, a strong organizational culture will only dull and eventually erode. Practising business people and theorists have found out that organizational culture and leadership are tightly intertwined. Leaders require having a clear understanding of the impact and identity of the organization culture so as to determine the kind of adjustments and management systems needed within the organization as well as have the right styles of effectively communicating their visions to rest of the institution.
The study of the operation of organizational culture and organizational structure makes the practical study of organizational culture and structure implications important. In all organizations from government groups to sport teams, the study of the impact of culture and structure on the general picture of an organization shows a better way of making an entity work. Good organizational structure ensures balanced distribution of responsibilities among the top management of groups as well as among the workers (Harigopal 2006 p.102). This has shown that good organizational structure with excellent personnel that ensure all are focused at the same goal, works well than excellent but conflicted personnel. Organization structure generally deals with the culture set up. It deals with the working of the management, the specific responsibilities of the supervisors, and the manner in which a complaint is passed through the ranks. Organizational structure ensures that.
Managing change in organizations
A significant change in an organization occurs when the overall strategy of an organization are changed for success, or when an organization adds or removes a major section or practice or when there is a change in the operation nature. Organizations develop by undergoing through significant changes at different points in their progress. Successful organizational change is usually very difficult to achieve thus it usually calls for skilful leadership in change management. In work organizations there are different approaches in guiding change whereby some are structured, planned and explicit while others are more unfolding, organic and implicit.
These approaches work in different styles. Some work from the future to the present for instance when an organization develops a vision to be achieved in the future and then lays down strategies on how to acquire that vision. Some other approaches will work from the present to the future. In this approach the organization will identify its current problems issues and goals and then lay down strategies on how to deal with those priorities and how to achieve them (Harigopal 2006 p.97). The variation in the type of strategies used depends on the culture of an organization or on the leadership style of the managers. When starting from the present to the future the organization looks at its past in relation to the present and then looks at the present in relation to the future and then evaluate whether it can still go on with its activities just like it has been doing.
For an organization doing business in this fast changing and advancing environment, doing thins like has been doing before may not help it compete fairly with others in the industry (Harigopal 2006 p.98). Even doing the same thing harder or even fine tuning it may sometimes make no difference. What organizations need to do keep doing things different as the changing business environment demands. In the daily operation of organizations the structures, methods, processes and technologies that were appropriate in the earlier market conditions may not be applicable in the current or future conditions. This implies that organizations may be forced to reset themselves on different assumptions and business prospects that are in accordance to customer focus, innovativeness, competitive intelligence, and competency base.
For the best results in a change effort, the change agents should first of all have a comprehensive understanding of the context of the change effort such as the right strategies needed and the kind of results expected. This means that the change managers should have a clear understanding of the basic structures and systems in an organization as well as their typical terms and roles (Harigopal 2006 p.98). The leadership style and management systems of an organization in relation to its culture are also necessary. Change management encompasses thoughtful planning and sensitive implementation of necessary strategies. Before a change is initiated and during the change process the change leaders should conduct extensive consultations with the people affected by the change and also involve them in the change process. The managers should also find ways of aligning the aims of the business with the needs of their people.
The managers should check if the people affected agree with or at least understand the need for change and that they have a chance to decide or give views on how the change should be managed. The sensitive aspects of the change management should be handled through face to face communication so as to convey meaning and understanding. According to Harigopal (2006), managing change therefore demand establishing different management structures, like the interim structure to deal with the ‘business of the business’, the transition management structure to smoothen the change process and a structure to stream line the new state of the organization (p.95). Before starting the change process, an organization should be clear on its purpose, direction and vision as well as have a clear analysis of its prevailing strengths and weaknesses in relation to opportunities and threats. The dynaminism of business environment will then determine what should be changed and the required pace of change.
Impact of technology on business
According to (Håkansson, Waluszewski & Prenkert 2009), business today is inextricably entangled with technology starting from the smallest business to International Corporation with a number of monolithic applications of legacy. In today’s world one cannot be in successful business activities and fail to come across the issues of technology. This is because the way business processes are carried out today is very different from the way they were being carried out 30 years ago. Technological advancements have occurred in several areas from communication, stock market, travel i.e. by air, land and water and technology has also evolved around our lives.
Information technology has revolutionised the systems of business operation around the world. Local business have now gone international as a consequence of simple website information technology that than enabled them to advertise internationally (Håkansson, Waluszewski & Prenkert 2009). Information technology (IT) has helped in customer service where big organizations like Microsoft and American international group attend to needs of their customers through online services like email and chart. Internal and external networking in organizations has improved business operations around the world. Through networking staffs and clients in organizations can effectively get in touch with their leaders for feedback and updates on progress and extensions.
Communication within firms as well as between firms has really bloomed with the current developments in technology. Business between organizations has even become easier and more effective. For instance the American international group has been able to work with other organizations and improve its services due to improved IT and communication. However due to high technology computer systems in organisations today’s business calls for extensive and careful planning. This planning can be done on organised pattern, with formats schedules and Gantt charts. Due to improved computer systems huge data bases can now be managed and stored on network and back up drives for future records. Accessibility of stored data and files has also become easy with the discovery of a series of shared folders and password keys. According to Håkansson, Waluszewski & Prenkert (2009) Cash transactions are easily made hence reducing delay which then gives liquidity to business and makes the overall processes in business faster.
Information technology has enabled the businesses to put up an easier and effective coordination with their suppliers. This then has enabled them to benefit from production economics when they operate with the large specialized suppliers. Furthermore the drastic reduction of in the IT cost as well as the reduced risk of transaction in explicit coordination has been it possible for extensive application of explicit coordination with the suppliers. The resulting economized transactions and other factors thus enable a long term business partnership with a smaller set of suppliers
According to Johnson Redmon & Mawhinney (2001), communication is an essential part of any organization regardless of its operation size. It helps in building public relations via effective interpersonal relations and enhancing teamwork for high performance. Effective communication basically entails relaying messages in a clear and precise manner making it easy to be understood without altering the message being conveyed. Communication is composed of a couple of stages: sender as the source of communication, encoding involves the sender internalizing the message, channel of communication, decoding is relaying the message to the receiver. Receiver in this case is the intended recipient of the message and the reaction/feedback of the receiver completes the cycle. The effectiveness of the communication depends on both the degree of attention from both the listener and the recipient of the message.
For effective communication one strives to reduce the mistakes likely to occur at every stage of communication discussed above. Encoding involves synthesizing the information to be communicated. The precision and ease with which you communicate will depend on the level at which you internalize the message (Johnson Redmon & Mawhinney 2001). Special attention should be placed on the critical issues, the likely mistaken assumption the communication might generate and the missing information. One should understand well the message he wants to convey, project the likely impact and reaction it will be getting then relay it at the best time possible Wrong interpretations or assumptions may result to communication breakdown. Communication breakdown slows the implementation of ideas and creates stumbling blocks for the path towards the success of an institution. Both the sender and conveyer of the information should have the same understanding of the information. Well conveyed message helps the listeners understand your thoughts, your perspective on a certain idea.
Channels of communication vary from electronic communication electronic communication (fax, internet, video conferencing) face to face, telephone, mails, reports, memo and notices. Choosing an appropriate channel adds value to the information being relayed since each channel has its advantages and weaknesses. Decoding of the message by the listener also requires skill. One should be keen in order to note things like the mood of the sender the feelings in the message and its relevance. Poor decoding which mostly arises from lack of deep understanding of the issue at hand limits the importance of the message. Feedback by the receivers both verbal and non verbal helps in assessing how effective the communication was received. Upon failures it might be important to repeat the message. Circumstances at which you relay your information has impact on the communication.
Many organizations like AIG have maintained success and goals achievement due to use of effective communication methods which have enabled participation of all employees towards accomplishing common goals. Removing mistakes from all the stages of communication is very important. The message should be organized, summarized and with minimum or no errors at all.
Recent studies point out that communication skill both written and spoken is the biggest factor in isolation that is used in determining managers of cooperation. This is a major boost on the ability to relate well with your subjects and respect you. Poor communication skills will lead stand in the way of career progression as it leads to poor coordination of ideas.
Conclusion
In today’s world, whether an organization is a profiting or non-profit making, it very important that the organization motivates and utilizes its talent. Understanding the organizational behaviour is a major factor for increased opportunity and chances of success in the business world (Johnson Redmon & Mawhinney 2001). On the other comprehensively understanding the organizations culture ensures continued growth in a diverse manner. In order to attract talents and high quality skills into an organization there is need for a culture of open communication and diversity. Once the institution has the best culture it needs in its activities then it can improve its efficiency and have more widespread viewpoints from which it can learn from hence expanding its systems and operations. However there should be good care to ensure that the organizational culture and structure are in accordance or compatible with the strategic goals of the organization.
In today’s fast moving global world fro business, organizations need to quickly learn their threats and opportunities and adapt to them. The rate at which an organization learns these factors, affects the speed and efficiency at which the organization handles these opportunities and threats. Effective communication is also a very important factor in the productivity and success of every organization (Johnson Redmon & Mawhinney 2001). Communication can either be formal or informal which are both used in all institutions whether directly or indirectly. Formal channels of communication in organizations usually follow the chain of command which is usually from top to bottom. On the other hand the informal channel tends to be more open and spontaneous. Gossip is some form of informal communication. The informal communication is a very effective method of communication and it’s mostly used by small companies.
Investments aimed at increasing the level of explicit harmonization with the outside agents has resulted in enhanced risk to organizations. This has traditionally made organizations to avoid this increased risk by under investing in coordination. However information technology has been found to have the ability of reducing coordination cost without increasing the associated risk of transactions resulting in more outsourcing and less vertically integrated firms. Lower relationship specificity of IT investments and better capability of monitoring, means that organizations can safely invest in information technology. This will then enhance coordination between firms than in traditional investments.
The rate and importance of organizational change has not slowed in the past years but it has actually been improving. The continued rapid technological innovations are bringing in changes in organizational processes and systems. The faster growth in internet has enabled much easier and faster access to information and knowledge which has then changed the way people operate businesses. The expectations of employees in their movement from one organization to another have also increased hence necessitating more and more organizational changes so as to meet the current market demand. American international group is a constantly changing organization due to the changing customer demands among other factors.
According to AIG Group Management Division (2009), the rate of change portrayed a good culture of AIG that does not show resistance to change in the organization. Although the company experienced some hard times in 2005, its culture of good change enabled it to come out of the crisis. Organizational change has seen the abolition of some of the international market barriers which has then helped many organizations like AIG to venture into partnership with foreign institutions thus improving its market and services. This therefore illustrates the importance of constant organizational change.
In spite the importance or organizational change not all the undertaken changes that deliver the expected benefits to the organization. This is the reason why any change in an organization should be carried out through the right procedures. Strong leadership qualities for the managers are also necessary for successful organizational change (Harigopal 2006). Failure for organizational change to deliver is usually brought by reasons such as absence of a change agent with qualifications or the change agent being too junior in an institution. Lack of support by the senior management and their committed executive should be available in any organization. Poor definition of organization objectives and diverse dimensional solutions helps in building confidence in the involved participants hence enabling them to take part in every process of the change.
Failed organizational change initiatives do a lot of harm to the employees both in their spirit and strength which creates more difficulty in the accomplishment of the consecutive change initiatives. Actually today’s managers face a great challenge in managing change. In order to ensure success therefore all managers are required to understand their organization together with their real needs. According to Harigopal (2006), the change leaders should also understand that bringing positive change in any organization is primarily about changing the employee’s behaviour in certain ways. Leadership, and powerful management skills like visioning, planning, prioritizing, giving feedback and rewarding are key issues in the success of any organization.