Research Article: 2022 Vol: 28 Issue: 1S
Apinyaporn Sopa, University of Phayao
Citation Information: Sopa, A. (2022). Structural equation model of causal factors affecting change management practices on organizational performance in logistics service providers. Academy of Entrepreneurship Journal, 28(S1), 1-13.
The objective of this study of the structural equation model of casual factors that affect the change management and performance of logistics service companies was to conduct research to develop the structural equation model of the casual factors that have an influence on change management and organizational performance by collecting data from the personnel of logistics service companies in Phayao province, Thailand using a questionnaire and the data analysis with the structural equation model. From the results of the study, it can be summarized that the factors that drive change will lead to the practices related with change management, including diagnosis and placement, communication, leadership, and compensation and incentives, and the change management practices will provide organizations with improved operational performance. However, the factors, both the internal and external, that are the drivers of organizational change cannot directly affect an organization’s performance, which was a new finding that was beyond the expectations of the researcher. The findings from this research study can provide benefits to the academic community related to leadership and knowledge of change management to support research in business administration and related fields to further increase the body of knowledge. Also, entrepreneurs will be able to apply each component of change management in the model to use in strategic planning in accordance with various changes that occur in order to empower the development of organizations for strength and sustainable growth.
Rapidly changing establishments are part of the current economic trends in the era of globalization with the strengthening of the capacity of organizations that give great importance to the development of the ability of personnel, skills, knowledge and experience. Nevertheless, the ability to attain achievements in the performance of their organization is the main challenge that executives must face (Covey, 2004). Thus, organizations should set targets that will improve performance and production with strategies that are rigorously planned, while staff that have systematic thinking skills and creativity can help create results that are innovations for the effectiveness of organizations (Nyamache, 2003).
External changes that organizations currently face are the elements that organizations must take into consideration and search for methods to deal with these changes. Organizations in the present therefore have become increasingly aware of the importance of change management, in which the change management practices are the dimensions that that have an important effect on their performance (Almond, 2006). These change management practices comprise a model that repeatedly occurs, which is examined by academic scholars, experts and practitioners to observe which changes occur frequently and which are uncertain in the intense competition between companies and the customer service demands that are more advanced and have an effect on the managment of organizations. Change management is focused on the planning and strategies that are prepared internally according to the overall context and objectives of each organization in order to respond to the changing external environments of organizations, which are the methods that require interpretation and adaptation by practitioners in order to ensure that the most appropriate organizational strategies and roadmaps have been laid, so that a model of change management coordinates all of the duties that are performed in organizations in order to achieve the targets and is able to respond to the rapidly changing external environment (Armstrong, 2009).
Currently, the majority of organizations operate in the environments that are both friendly and unfriendly, of which some are potential threats to development or could reduce the chances for survival by both the internal and external environments that are the driving forces. The most important changes that have an impact on companies are the drivers from the environment that will create the positive or negative effects depending on the specific characteristics of organizations, and thus, having knowledge related with the internal and external driving forces has an effect on change management. Therefore, these are the factors on which executives should conduct a simple analysis related with the opportunities and threats of the environment that organizations face. In this way, they will be able to use the main strengths of the organization to solve problems and focus on the reduction of the weaknesses of their organization in order to improve results in terms of profits, customer satisfaction, and advantages in competition (Predi?can & Roiban, 2014).
Logistics Service Providers (LSP) are companies providing various services in the field of logistics to customers, including customer service concerned with shipping, the managment of inventory, warehousing, goods delivery (cross-docking), freight management, packaging for transportation and logistics, and supply chain activities (Liu & Lyons, 2011; Hsiao et al., 2011). In terms of the global market, it can be seen that there have been important developments in the logistics service providers industry due to the business operators increasingly using the services of logistics service providers, which are increasingly improving due to the business demands to exclusively focus on the main abilities of organizations. With regard to the management of transportation, experts in this field should be assigned to handle this instead, which will result in the work having good quality and prices that are appropriate according to customer demand (Bourlakis & Melewar, 2011). Moreover, with the ongoing crisis of COVID-19, there have been major challenges to the ability in the supply chain management of businesses, in which methods to respond rapidly are the elements that have more value than previously due to retail store operators facing unexpected changes, as consumers have changed to buying goods online and emphasize the delivery of goods to their homes. Entrepreneurs must therefore rely on companies that provide logistics services to continually improve in situations such as this. By maintaining the good ability in delivery and the creation of confidence for customers, companies will be able to adapt to change and be prepared to provide service when there are purchase orders to fill (Saarinen et al., 2020). Thus, for this reason logistics servce providers must give importance to change management based on the various factors that organizations face in order to support customer needs appropriately and more quickly.
The trend of using the services of logistics service providers started spreading gradually to a number of countries in Asia that are changing to an economy based on industry and production. Thailand is one of these countries that are developing new industries and is one of the five tigers of the region of Southeast Asia. Moreover, the potential for exports of Thailand is still strong and will continue to grow in the future, so that the industry of logistics service providers is therefore expected to have an important role in the country’s development of this area (Setthakaset & Basnet, 2005).
The data above reflect the important reasons that the researcher studied the casual factors that have an influence on change management and the performance of logistics service companies in order to systemize the development of the potential of logistics service providers to be able to operate in accordance with the changes of the environment, both internal and external, in order to improve the chances for survival and gain advantages in business competition.
Change Management Practices
Planning has been identified as a guideline in the field of change management of all organizations involved with development that prepare the documents and objectives to be achieved in line with change and the methods needed to reach the targets of organizations. These are the important elements in successful change management and involve identification of successful and expected positions that will be required in the future after change has occurred. The details related with who needs to do what, when, where, why, and how for the changes that will occur should be recorded and put it into practice. The starting point and most important part of successful planning for change is having a clear vision of the scope and the effects of the state of change in the future, in which the practices of change management are as follows:
1) Diagnosis and compatability refers to the diagnosis and analysis of organizational systems and environmental analysis to identify the needs, the changes and the development of a new corporate vision. It can be considered that these practices involve planning what organizations must change and how the change is appropriate with regard to the characteristics of the people in the organizations (Buchanan et al., 2005; Raineri, 2011). This placement of manpower and the human impacts on change are the essential elements regarding the support for organizational change (Nyandoro, 2015).
2) Networking and communication that are used to create awareness and understanding of change for all organizations is another important practice that refers to sending out notifications related with the reasons and causes of the internal changes that must occur. Organizations must explain why the available methods for doing various things cannot be continued with intensive communication that can make staff members understand, eliminate doubt and reduce worry about change. Communication that executives send out to staff must be in line with the organization’s values, attitudes and corporate culture. In this way, resistance to change will not arise (Bourda, 2013; Wachira & Anyieni, 2017).
3) Leadership involves high-level executives with leadership ability who are committed with regard to change, which is a beneficial organizational behavior that can set an example for members to follow in order to make change successful. Change starts with the high-level executives of organizations who must be people who have a new vision of change that will occur in the future (Bastedo, 2004; Raineri, 2011).
4) Compensation and incentives comprise a system of compensation and motivation for new projects defined in the plan for change in order to make the process of implementing change efficient (Raineri, 2011).
Based on the factors mentioned above, it is possible to summarize the components of the practices of change management, namely 1) diagnosis and compatability, 2) communication, 3) leadership, and 4) compensation and incentives.
Relationships between the Factors Driving Change and Organizational Performance
For the factors that are the important drivers of change, both internal and external, managers must perform an analysis because this will make organizations successful, as the traditional methods of doing business cannot be used in the present environment and in the future, and managers should give importance to three issues, namely customers, competition and change (Hammer & Champy, 1996). In addition, the main internal forces that can drive change are the staff, managers, and the specific characteristics of organizations, such as strategies, organizational structures, information systems and corporate culture. These factors are the components that comprise the driving forces that allow organizations to achieve better preformance (Frohman, 1997).
This is in line with the work of Predi?can & Roiban (2014), whose results showed that the external factors include the changes in the needs of consumers, which have a positive effect on organizations, and the internal factors, namely awareness of managers related with new technology that is available in the market, which has a positive result that helps businesses continuously improve internal activities. For example, online businesses that have rapidly increasing trends due to lower operating costs make many managers decide to discontinue the use of the traditional methods of doing business to focus on global websites. In addition, Wang and Shyu (2008) also found that if organizations do not effectively manage human resources, they will lose effectiveness because their staff, which are considered an internal factor, need motivation from supervisors by providing incentives at work, so that the process of the the human resources managment of organizations such as hiring, training and the development of staff can result in higher net profits and better returns from investment.
Relationships between the factors driving change and practices of change management
In the constantly changing global economy, organizations must look for operational guidelines for the development of new abilities that provide advantages as the older abilities are being rapidly discontinued due to the environmental changes (Johnson, Scholes, & Whittington, 2009). This is a guideline in change management that can be referred to as the restructuring process to design new organizational activities in order to keep up-to-date regarding challenges and to respond to customer demand. With the environmental factors along with the various economic, technological, political and social drivers, these factors are an important source of information that will lead organizations to change and achieve survival through organizational learning (Moran & Avergun, 1997). The external changes that organizations are facing cause managers to consder ideas that can be applied as approaches to change with varying degrees of success.
This agrees with the work of Omari et al. (2013) who found that technology and customers expectations are important external factors that influence the approaches to change management as they are a reflection of the competitive environment. The internal factors, namely having the participation of staff and the leadership styles in organizations, also have an effect on change management strategies, similar to the work of Esparcia and Argente (2012), who found that the internal and external factors that drive organizational change are the most important sources for change. The approach that will help engender organizational change is to identify the various driving factors that have an impact on organizations in order for organizations to know for themselves what must be changed in which areas by considering the positive effects and avoiding the negative effects on the organization.
Relationships between Practices of Change Management and Organizational Performance
Due to the growth of technology transformation, the majority of modern organizations are motivated by external innovations more than internal movements. Due to the development of these technologies, organizations that are able to rapidly adapt to technology will create creative advantages for the organization, whereas any organizations that cannot adapt to technology that is continually undergoing development may be impacted by a loss of profits and market share (Briody et al., 2012).
Various organizations in the present have realized the importance of the approaches to change management and are increasingly aware that this system is an important dimension in helping organizations achieve performance (Edwards & Rees, 2006). This is in line with the work of Wachira & Anyieni (2017), who found that the results of change management practices have an effect on organizational performance, especially in the field of communication, which is one of the components of change management practices that have significant effects on organizational performance, which is to say that good communication within all departments helps improve work performance in each duty. This is similar to the work of Sikdar and Payyazhi (2014), who found that the process of change can result in organizations being able to achieve performance, and the work of Ng'eno (2012), who also found that the approach to strategic change management performed by banks had positive effects on performance with the percentage of profits increasing in a period of two years whereas before the implementation of change management, it was not very high in comparison.
From the results of the previous research, it can be summarized that the components of the factors driving change, both the internal factors and the external factors, have an effect on organizational performance, the practices of change management. Therefore, the hypothesis is as follows.
H1: The factors that drive change have a positive influence on organizational performance.
H2: The factors that drive change have a positive influence on the practices of change management.
H3: Change management practices have a positive influence on organizational performance.
From the review of the literature, the findings were thus applied to the conceptual framework of the research, as seen in Figure 1.
Sample Group and Data Collection
In this research study, the data was collected from groups of personnel involved with the change management of logistics service companies in Phayao province along with the staff and entrepreneurs of these companies by sending out a questionnaire by mail. The number of completed questionnaires that were received was 331 sets. From the general data of the respondents to the questionnaire, it was found that the majority of the sample group were male, aged between 25-34 years, single, with an educational level of vocational certificate or a diploma, and having a monthly income of 15,001 - 21,000 baht and an average work experience of 3 years.
Measurement Variables in the Research
For the tools in the data collection of this research study, the researcher conducted the development from review of the related theories and literature in order to set the indicator variables based on the characteristics of those indicators using a 5-point Likert scale with “the least”=1 and “the most”=5. Also, the researcher performed the Exploratory Factor Analysis and examined the measurement of Reliability with the details as follows.
The drivers of change that have an impact on the management of organizations and comprise the drivers of change in this research study were applied from Predi?can & Roiban (2014) with two dimensions, which are the internal factors and the external factors, with Cronbach’s alpha values of 0.83 and 0.75, respectively, with a total of nine indicator variables.
Change management practices involve the planning of the implementation of the objectives for achievement in accordance with change and the methods to achieve these organizational targets, which were applied in this research study from Raineri (2011), Buchanan et al. (2005) and Wachira & Anyieni (2017) along with four dimensions, namely 1) diagnosis and compatability, 2) communication, 3) leadership, and 4) compensation and incentives, which have Cronbach’s alpha values of 0.68, 0.74, 0.68, 0.71, respectively, with a total of 15 indicator variables.
Organizational performance includes the results that are measured compared with the required results, such as returns on assets, returns on investment, sales, market share, customer satisfaction, shareholder returns, and economic value added, with a total of four indicator variables, which were developed from the questions from Richard et al. (2009); with a Cronbach’s alpha value of 0.69.
Statistical analysis was conducted with program R by examining the correlation coefficients of the Variance Inflation Factor (VIF) and Tolerance variables. Following this, confirmatory factor analysis to verify the accuracy of the convergent validity and discriminant validity and the analysis of the Structural Equation Model in order to test the conceptual framework of the research were conducted.
Analysis of the correlation coefficients of the VIF and Tolerance variables was conducted, and it was found that all variables have positive relationships with each other that are in the same direction by the value of the correlation coefficients of all pairs being lower than 0.80. In addition, all variables have a VIF value of less than 5.00 and a Tolerance value of more than 0.20 (Hair et al., 2010); showing that all variables have little correlation. Thus, the problem of multicollinearity was not encountered.
From the confirmatory factor analysis examining the accuracy of convergent validity by consideration of the Composite Reliability (CR) and Average Variance Extract (AVE) values, it was found that all of the indicator variables have a CR value of more than 0.70 (Bagozzi & Yi, 1988) and an AVE value of more than 0.50 (Fornell & Larcker, 1981; Henseler et al., 2015), which are within the acceptable criteria, demonstrating that all the indicator variables have validity and intrinsic consistency, as shown in Table 1. Following this, testing of the discriminant validity by consideration of the square root value of AVE (√AVE) was performed, which showed that all of the latent variables have relationship values between variables that are less than√AVE. This is an indication that each group of indicator variables has differences in variable measurements and there are no problems regarding covariance, as shown in Table 2.
|Table 1 Intrinsic Consistency|
|Indicator variables||Factor Loading||α||CR||AVE|
|Internal Environment (IE)||0.828||0.852||0.538|
|Your company has the ability to search for methods to solve problems from various perspectives. (IE1)||0.778|
|Your company gives great importance to customer satisfaction. (IE2)||0.803|
|Your company applies modern technology for use in work. (IE3)||0.745|
|Your company’s managers and staff always agree to use the correct work methods. (IE4)
Your company has an official/unofficial system to provide good cooordination between various departments. (IE5)
|Indicator variables||Factor Loading||α||CR||AVE|
|External Environment (EE)||0.753||0.719||0.625|
|You think that the changing needs of consumers make organizations need to change. (EE1)||0.608|
|You think that the change in the purchasing power of consumers make organizations need to change. (EE2)||0.637|
|You think that the uncertainty of markets makes organizations need to change. (EE3)||0.639|
|You think that the number of competitors makes organizations need to change. (EE4)||0.617|
|Diagnosis and Placement (CD)||0.677||0.814||0.524|
|Your company has analyzed the strengths and weaknesses in order to face change. (CD1)||0.697|
|Your company has considered the opportunities and obstacles that are present in order to develop change. (CD2)||0.781|
|Your company has analyzed the work processes in order to identify the activities and areas that might be impacted by change management. (CD3)||0.750|
|Your company has appropriately considered planning for the resistance that occurs during change. (CD4)||0.664|
|Your company has identified the objectives in change management clearly for all the company. (CC2)||0.721|
|Your company has announced the plan for implementation for change to inform all members of staff. (CC3)
Your company has tested whether the staff have a good understanding of the plan for implementation or not. (CC4)
Your company regularly has communication in order to ensure that the staff have understanding of and support the changes that occur. (CC5)
|0.787 0.747 0.695|
|Change Leadership (CL)||0.683||0.834||0.627|
|Management of changes that occur is applied by personnel that have high levels of reliability within the company. (CL1)||0.760|
|Executives in your company have shown a commitment to change to all of the people in the company. (CL2)||0.858|
|The leaders who drive the process of change in your company have personalities that are charismatic. (CL3)||0.754|
|Compensation and Incentives (CI)||0.708||0.824||0.542|
|Your company have adjusted the compensation system in order to foster accountability and new job requirements. (CI1)||0.676|
|Your company has created a system of incentives for new behaviors according to the company’s expectations, such as giving rewards to the people that participate in the invention of new methods of working, etc. (CI2)||0.772|
|Your company provides rewards for the successful achievement of several targets in an appropriate direction. (CI3)||0.818|
|Indicator variables||Factor Loading||α||CR||AVE|
|Your company gives rewards to staff when they are able to achieve the targets of transformation projects. (CI4)||0.668|
|Organizational Performance (OP)||0.678||0.796||0.514|
|Your company improved performance in operations through adaptation to change. (OP1)||0.651|
|In the past, you have seen operating costs reduced. (OP2)||0.697|
|Your company can reach the work goals of each staff member in line with the objectives of the organization. (OP3)||0.786|
|Your company is a company that customers are quite satisfied with due to the good service. (OP4)||0.677|
|Table 2 Discriminant Validity|
|CD||0. 410||0. 439||0.724|
|CC||0. 353||0. 294||0. 410||0.738|
|CL||0. 281||0. 314||0. 288||0. 505||0.792|
|CI||0. 322||0. 240||0. 237||0. 357||0. 506||0.736|
|OP||0. 215||0. 282||0. 359||0. 287||0. 401||0. 431||0.705|
Regarding analysis of the structural equation model with the R program when considering the compatibility of the model with the empirical data, from the results of the first analysis, it was found that the structural model did not have compatibility with the empirical data (χ2=950.545, df=341, χ2 /df=2.787, p-value=0.000, CFI=0.822, TLI=0.750, NFI=0.750, RMSEA=0.073, SRMR=0.070, GFI=0.844 and AGFI=0.814). The researcher therefore performed improvement of the model (Model Modification) by consideration of the Modification Indices (MI). When the model was adjusted, it was found that the model had appropriate compability with the empirical data with the values χ2=266.255, df=253, χ2/df=1.052, p-value=0.271, CFI=0.996, TLI=0.994, NFI =0.930, RMSEA=0.013, SRMR=0.044, GFI=0.948 and AGFI=0.916, as shown in Figure 2.
Based on the analysis of Research hypothesis 1: The factors that drive change (FT) have a positive influence on organizational performance (OP), the test results indicated that the factors that drive change do not have a significant positive influence regarding organizational performance (β=0.022, p=0.694) (not supported). Regarding Research hypothesis 2: The factors that drive change (FT) have a positive influence on change management practices (CH), the test results indicate that the factors that drive change have a significant positive influence regarding the change management practices (β=0.480, p<0.001) (supported). Finally, for Research hypothesis 3: Change management practices (CH) have a positive influence on organizational performance (OP), the test results indicated that change management practices have a significant positive influence regarding organizational performance (β=0.435, p<0.001) (supported)
The factors that are the drivers of change have an effect on the change management practices, which in turn have an effect on organizational performance. As a result, when both the internal and external factors that are drivers cause change, organizations need to operate in accordance with the change management practices in order to improve their performance, and when organizations perform according to the change management practices, it will have an effect allowing organizations to improve their operational performance through the adaptation regarding change, reduced operational costs, the work targets of each member of the staff being in line with objectives of the organization and becoming the organizations with which customers have high levels of satisfaction due to good service.
The results of this study are in agreement with Omari et al. (2013), which found that technology and the expectations of customers are the important external factors that have an influence on the approaches to change management as a result of being a reflection of the competitive environment, and internal factors such as having the participation of the staff and an organizational leadership style in organizations affecting the strategies of change management, similar to the work of Esparcia & Argente (2012), who found that both internal and external factors that drive organizational change are the most important sources for change as the approach that will help engender organizational change. This leads to the need to identify the various driving factors that have impacts on organizations so that organizations know for themselves what must be changed in which areas by considering the positive effects and avoiding the negative effects that impact organizations, which is in line with the work of Wachira & Anyieni (2017), who found that the results of practices in change management affect the organizational performance, especially communication, which is one of the components of change management practices that have a significant effect on the performance of organizations, which is to say that the good communication within all departments helps to improve work performance in each duty. This is also in agreement with the work of Sikdar & Payyazhi (2014), who found that the process of change can allow organizations to be able to achieve good performance. Moreover, in the work of Ng'eno (2012), it was also found that the approach to strategic change management performed by banks had positive results on performance by the percentage of increased profits in a period of two years before implementation of the change management, which was quite low when compared with the two-year period following the implementation of change management.
Nevertheless, the factors that drive change do not affect the organizational performance, which was a new finding that surpassed what the researcher had expected, and was caused by the both the internal and external factors are the drivers of change in the context of Thailand, which thus cannot directly affect the efficiency of the organizations. However, organizations must adapt to the prevailing circumstances along with operating in accordance with the environmental factors that change all the time; thus, the organizational performance will be able to improve. This finding is consistent with the research of Predi?can & Roiban (2014), which explained that the internal and external environments of organizations are the elements that cause organizational change, in which organizations must adapt to the internal and external environments first. This will therefore naturally improve the work’s efficiency, and thus, the environmental factors occuring both inside and outside organizations cannot directly affect the organizational performace, similar to the research of Zeng et al. (2011), who found that the drivers of organizations do not affect economic performance as the drivers are the government, the markets and society.
For application of the results of this research in policies and practices, the public sector and related agencies should encourage organizations to formulate policies related with the plans for the change management in order to add value and reduce the costs of business groups, which is the development of the level and strengthening of the value of industries in order to have stability, excellence and sustainable growth. Furthermore, entrepreneurs will be able to apply each component of change management in the model for use in strategic planning for dealing with the changes that occur in order to empower the development of organizations to be strong and grow sustainably.
In this research, the factors of change management that were applied to the study have a limited number of variables, which are diagnosis and placement, communication, leadership, and compensation and incentives, whereas there are perhaps other variables that can have effects on organizational performance. Thus, the research conducted in the future should apply the factors of change management, such as the management of knowledge and communication through technology, etc. In addition, this study used a sample from the business group of logistics service providers, which may not apply to other industries. Research in the future should therefore study the model of change management with sample groups in other business groups in order to be able to explain the relationships covering all business groups.
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