Leadership / Management

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By any objective measure, the amount of significant change in organizations has grown tremendously over the past two decades.  Although some people predict that most of the re-engineering, re-strategizing, mergers, downsizing, quality efforts, and cultural renewal projects will soon disappear, I think that is highly unlikely.  Powerful macro-economic forces are at work here and these forces may grow even stronger over the next few decades.  Because of this, more and more organizations will be pushed to reduce costs, improve the quality of products and services, locate new opportunities for growth, and increase productivity. 

To date, major change efforts have helped some organizations adapt significantly to shifting conditions, have improved the competitive standing of others, and have positioned a few for a far better future.  But in too many situations, the improvements have been disappointing and the carnage appalling with wasted resources and burned-out, scared, or frustrated employees. 

Unfortunately, it is these same employees the organization is counting on to lift it above the competition by creating new products and services, lowering costs, and increasing the value proposition.  What are the secrets to tapping the creative and critical thinking skills from all employees and focusing them on the challenges confronting the business?  How do we push thinking beyond the day to day operations and align thought processes toward future success?  Regrettably, there is no magic bullet or quick fix.  Changing behaviors especially when they are deeply embedded within the organization’s culture is never easy.  However, there are several known enemies to the process lurking within many organizations.  Are the following “enemies” allowed to flourish within your organization?

Enemy 1 – Allowing too much complacency. 

By far the biggest mistake people make when trying to promote strategic thinking is to plunge ahead without establishing a high sense of urgency in fellow leaders and employees.  This error is fatal because organizations will fail to achieve their objectives every time when complacency levels are high. 

When Adam was named head of the specialty chemicals division of a large corporation, he saw lurking on the horizon many problems and opportunities.  As a seasoned and self-confident executive, he worked day and night to launch a dozen new initiatives to build business and margins in an increasingly competitive marketplace.  He realized that few others in his organization saw the dangers as clearly as he did, but he felt this was not an insurmountable problem.  They could be induced, pushed, or replaced. 

Two years after his promotion, Adam watched initiative after initiative sink in a sea of complacency.  Regardless of his inducements and threats, the first phase of his new product strategy required so much time to implement that competitor counter-moves offset any important benefit.  Reorganization was talked to death by skilled filibusterers on his staff.  In frustration, Adam gave up on his own people and acquired a much smaller firm that was already successfully implementing many of his ideas.  Then over another two years, he watched with amazement as people in his division, with little sense of urgency, not only ignored all the powerful lessons in the acquisition’s recent history, but actually stifled the new unit’s ability to continue to do what it had been doing so well. 

Smart individuals like Adam fail to create sufficient urgency at the beginning of a business transformation for many different but interrelated reasons.  They overestimate how much they can force big changes on an organization and they underestimate how hard it is to drive people out of their comfort zones.  They do not recognize how their own actions can inadvertently reinforce the status quo.  They lack patience, “Enough with the preliminaries, let’s get on with it.”  They become paralyzed by the downside possibilities associated with reducing complacency.  People become defensive, and morale and short-term results start slipping.  Even worse, they confuse urgency with anxiety and they push people even deeper into their foxholes and create even more resistance to change. 

If complacency were low in most organizations today, this problem would have limited importance.  But just the opposite is true.  Too much past success, a lack of visible crises, low performance standards, insufficient feedback from customers, and more all add up to “Yes, we have our problems, but they aren’t that terrible and I’m doing my job just fine,” or “Sure we have big problems and they are all over there.”   

Without a sense of urgency, people will not give that extra effort that is often essential.  They will not make needed sacrifices.  Instead, they cling to the status quo and resist initiatives from above urging a shift to a wider view.  As a result, re-engineering bogs down, new strategies fail to be implemented well, acquisitions are not assimilated properly, and quality programs become more surface [and turf] talk than real substance.   

Enemy 2 – Failing to Create a Sufficiently Powerful Guiding Coalition. 

Major change is often said to be impossible unless the head of the organization is an active supporter.  What I am talking about here goes far beyond that.  In successful strategic plan implementations, the president, division general manager, or department head plus another five, fifteen, or fifty people with a commitment to improved performance pull together as a team.  This group rarely includes all of the most senior people because some of them just will not buy in, at least not at first.  But in the most successful cases, the coalition is always powerful in terms of formal titles, information and expertise, reputations and relationships, and the capacity for leadership.  Individuals alone, no matter how competent or charismatic, never have all the assets needed to overcome “the way we’ve always done it” except in very small organizations.  Weak committees are usually even less effective. 

Efforts that lack a sufficiently powerful guiding coalition can make progress for a while.  The organizational structure might be changed or a new effort might be launched.  But sooner or later, countervailing forces undermine the initiatives.  In the behind-the-scenes struggle between a single executive or a weak committee and tradition, short-term, self-interest, and the like, the latter almost always wins.  They prevent structural change from producing needed behavior change.  They kill the new initiative with passive resistance from top to bottom.  They turn quality programs into sources of more bureaucracy instead of customer satisfaction.   

As director of human resources for a large U.S. based bank, Claire was well aware that her authority was limited and that she was not in a good position to head initiatives outside the personnel function.  Nevertheless, with growing frustration at her firm’s inability to respond to new competitive pressures except through layoffs, she accepted an assignment to chair a “quality improvement” task force.  The next two years would be the least satisfying in her entire career. 

The task force did not include even one of the three key line managers in the firm.  After having a hard time scheduling the first meeting with a few committee members who complained of being exceptionally busy, she knew she was in trouble.  And nothing improved much after that.  The task force became a caricature of all bad committees by being slow, political, and aggravating.  Most of the work was done by a small and dedicated subgroup.  But other committee members and key line managers developed little interest in or understanding of this group’s efforts and next to none of the recommendations were implemented.  The task force limped along for eighteen months and then faded into oblivion. 

Failure here is usually associated with underestimating the importance of a strong guiding coalition.  Even when complacency is relatively low, firms with little history of transformation or teamwork often undervalue the need for such a team or assume that it can be led by a staff executive from human resources, quality, or strategic planning instead of a key line manager.  No matter how capable or dedicated the staff head, guiding coalitions without strong line leadership never achieve the power that is required to overcome what are often massive sources of inertia. 

Enemy 3 – Underestimating the Power of a sound value equation [Vision]. 

Urgency and a strong guiding team are necessary but insufficient conditions for critical thinking and strategic change.  Of the remaining elements that are always found in successful organizations, none is more important than a sensible value equation. 

The value equation plays a key role in producing strategic results by helping to direct, align, and inspire actions on the part of large numbers of people.  Without an appropriate value equation, a strategic plan can easily dissolve into a list of confusing, incompatible, and time-consuming projects that go in the wrong direction or nowhere at all.  Without a sound value equation, the new 360-degree performance appraisal from human resources, the plant’s lean manufacturing program, and the cultural change effort in the sales force either will not add up in a meaningful way or will not stir up the kind of energy needed to properly implement any of these initiatives. 

Sensing the difficulty in producing change, some people try to manipulate events quietly behind the scenes and purposefully avoid any public discussion of future direction.  But without a value equation to guide decision making, each and every choice employees face can dissolve into an endless debate.  The smallest of decisions can generate heated conflict that destroys morale.  Insignificant tactical choices can dominate discussions and waste hours of precious time. 

In many failed strategic initiatives, you find plans and programs trying to play the role of a sound value equation.  As the so-called quality czar for a communications company, Conrad spent much time and money producing four-inch-thick notebooks that described his plan in mind-numbing detail.  The books spelled out procedures, goals, methods, and deadlines.  But nowhere was there a clear and compelling statement of where all this was leading.  Not surprisingly, when he passed out hundreds of these notebooks, most of his employees reacted with confusion.  The big thick books neither rallied them together nor inspired creativity.  In fact, they had just the opposite effect. 

In unsuccessful strategic efforts, management sometimes does have a sense of direction, but it is too complicated or blurry to be useful.  

A useful rule of thumb, whenever you cannot describe the value equation driving a strategic initiative in five minutes or less and get a reaction that signifies both understanding and interest, you are in trouble. 

Enemy 4 – Under Communicating the Vision by a Factor of 10 or more

  Major success is usually impossible unless most employees are willing to help, often to the point of making short-term sacrifices.  But people will not make sacrifices even if they are unhappy with the status quo unless they think the potential benefits of doing so are attractive and if they really believe that success is possible --- and they won’t get hurt.  Without credible communication and a lot of it, employees’ hearts and minds are never captured. 

Three patterns of ineffective communication are common and they are all driven by habits developed in more stable times.  In the first, a group actually develops a pretty good strategic vision and then proceeds to sell it by holding only a few meetings or sending out only a few memos.  Its members, thus having used only the smallest fraction of the intra-company communication, react with astonishment when people do not seem to understand the new approach.  In the second pattern, the head of the organization spends a considerable amount of time making speeches to employee groups, but most of the managers are virtually silent.  Here, vision captures more of the total communication than in the first case, but the volume is still woefully inadequate.  In the third pattern, much more effort goes into newsletters and speeches, but some highly visible individuals still behave in ways that are in opposition to the vision and the net result is that cynicism among the troops goes up while belief in the new message goes down. 

One of the finest CEO’s I know admits to failing here in the early 1990’s.  “At the time,” he told me, “it seemed like we were spending a great deal of effort trying to communicate our ideas.  But a few years later, we could see that the distance we went fell short by miles.  Worse yet, we would occasionally make decisions that others saw as inconsistent with our communication.  I’m sure that some employees thought we were a bunch of hypocritical jerks.” 

A useful rule of thumb is to answer the questions people are asking and remember, just about the time you are exhausted from answering questions and communicating the vision is about the time it will begin to be understood and accepted. 

Communication comes in both words and deeds.  The latter is generally the most powerful form.  Nothing undermines success more than behavior by important individuals that is inconsistent with the verbal communication and yet this happens all the time, even in some well-regarded companies.   

Enemy 5 – Permitting Obstacles to Block the New Vision [Value Equation]. 

The implementation of any kind of strategic initiative requires change from a large number of people.  New initiatives fail far too often when employees, even though they embrace the vision, feel disempowered by huge obstacles in their paths.  Occasionally, the roadblocks are only in people’s heads and the challenge is to convince them that no external barriers exist.  In many cases, however, the blockers are very real. 

Sometimes the obstacle is the organizational structure.  Narrow job categories can undermine efforts to increase productivity or improve customer service.  Compensation or performance appraisal systems can force people to choose between the vision and their self-interests.  Perhaps worst of all are supervisors who refuse to adapt to new circumstances and who make demands that are inconsistent with the vision. 

One well-placed blocker can stop an entire strategic effort.  Ron did.  His employees at a major financial services company call him “The Rock,” a nickname he chose to interpret in a favorable light.  Ron paid lip service to his firm’s strategic efforts, but failed to alter his behavior or to encourage his managers to participate.  He did not reward the ideas called for in the vision.  He allowed human resource systems to remain intact even when they were clearly inconsistent with the new ideals.  With these actions, Ron would have been disruptive on any leadership team.  But Ron was not in just any leadership position — he was the number three executive at his firm. 

Ron acted as he did because he did not believe his organization needed major change, and because he was concerned that he could not produce both strategic change and the expected operating results.  He got away with this behavior because the company had no history of confronting personnel problems among executives, because some people were afraid of him, and because his CEO was concerned about losing a talented contributor.  The net result was disastrous.  Lower-level managers concluded that senior management had misled them about their commitment to the vision, cynicism grew, and the whole effort slowed to a crawl.   

Whenever smart and well-intentioned people avoid confronting obstacles, they disempower employees and undermine the changes required for strategic success. 

Enemy 6 – Failing to Create Short-Term Wins.

  Real transformation takes time.  Complex efforts to change strategies risk losing momentum if there are no short-term goals to meet and celebrate.  Most people will not go on the long march unless they see compelling evidence within six to eighteen months that the journey is producing expected results.  Without short-term wins, too many employees give up or actively join the resistance. 

Creating short-term wins is different from hoping for short-term wins.  Hoping is passive and creating is active.  In a successful strategic plan, leaders actively look for ways to obtain clear performance improvement, establish interim goals in the yearly planning systems, achieve these objectives, and reward the people involved with recognition, promotions, or money.  In initiatives that fail, systematic effort to guarantee unambiguous wins within six to eighteen month is much less common.  Leaders either assume that good things will happen or become so caught up with a grand vision that they do not worry much about the short term. 

Nelson was by nature a “big idea” guy.  With assistance from two colleagues, he developed a conception for how his inventory control (IC) group could use new technology to radically reduce inventory costs without risking increased stock outages.  The three managers plugged away at implementing their vision for a year and then two.  By their own standards, they accomplished a great deal — new IC models were developed, new hardware was purchased, and new software was written.  By the standards of skeptics, especially the divisional controller who wanted to see a big dip in inventories or some other financial benefit to offset the costs, the managers had produced nothing.  When questioned, they explained that big changes require time.  The controller accepted that argument for two years and then pulled the plug on the project. 

People often complain about being forced to produce short-term wins, but under the right circumstances, that kind of pressure can be a useful element in the process.  When it becomes clear that quality programs or cultural change efforts will take a long time, urgency levels usually drop.  Commitments to produce short-term wins can help keep complacency down and encourage the analytical thinking that can usually clarify the vision. 

In Nelson’s case, that pressure could have forced a few money saving corrections and speeded up partial implementation of the new inventory control methods.  And with a couple of short-term wins, that very useful project would probably have survived and been beneficial to the company. 

Enemy 7 - Failure to properly value strategic thinking. 

If you truly value strategic thinking, it’s not enough to say it; you must be prepared to respect it by matching reward systems to the value.  Strategic thinking may produce big ideas or large quantities of smaller ones.  Not all of them will result in big wins for the company, but all have value and should be recognized for their contribution.  Some may even result in additional costs or lost opportunities.  However, if reactions to these are perceived as punitive, it will send a sure and swift message and will limit the willingness of employees to bring forward creative or innovative ideas in the future.

Am I suggesting that inferior performance should be rewarded?  Absolutely not, but it’s entirely possible for a great strategic idea to fall short of the desired financial results.  A talented design team recently created a system prototype to revolutionize the way the company tracks its finished goods inventory.  Long hours of hard work generated an approach totally different from current methods which could result in reduced manpower and increased inventory accuracy.  Ultimately, the board of directors voted against funding the project for a variety of reasons outside the inherent value of the project.  Should the design team be denied their incentive bonus for the period?  Only if you want to stifle the creative process and limit the strategic thinking which led to the design. 

Conversely, employees who are not open to strategic changes should not be treated the same as those who are actively engaged in the process.  Implementation of a multi-million dollar enterprise software system was stymied at a large manufacturer when key employees failed to change status-quo behaviors in spite of extensive training and communication efforts.  The company contributed to the calamity by failure to adjust the reward system.  Employees who are not adopting new ways of working should expect personal financial consequences.  They should not enjoy the same level of compensation as those whose thinking and performance align with the organization’s goals. 

In spite of speeches and posters on the wall, employees are usually astute when assessing what the organization truly values.  They look no further than the corporate checkbook.  If you value strategic thinking, be prepared to write the check.

Enemy 8 – Neglecting to Anchor Strategic Thinking Firmly in the Corporate Culture. 

In the final analysis, strategic thinking sticks only when it becomes “the way we do things around here,” and it seeps into the very bloodstream of the work unit or corporate body.  Until new behaviors are rooted in social norms and shared values, they are always subject to degradation as soon as the pressures associated with the change effort are removed. 

Two factors are particularly important in anchoring new approaches in an organization’s culture.  The first is a conscious attempt to show people how specific behaviors and attitudes have helped improve performance.  When people are left on their own to make the connections, as is often the case, they can easily create inaccurate links.  Because change occurred during charismatic Linda’s time as department head, many employees linked performance improvement with her flamboyant style instead of the new “customer first” strategy that had actually made the difference.  As a result, the lesson imbedded in the culture was “value extroverted managers” instead of “love thy customer.” 

Anchoring strategic thinking also requires sufficient time be taken to ensure that the next generation of management really personifies the new approach.  If promotion criteria are not reshaped, changes rarely last.  One bad succession decision at the top of an organization can undermine a decade of hard work.

Smart people miss the mark here when they are insensitive to cultural issues.  Economically oriented finance people and analytically oriented engineers can find the topic of social norms and values too soft for their tastes so they ignore culture, at their peril. 

The Eight Enemies. 

None of these factors would be that costly in a slower moving and less competitive world.  Handling new initiatives quickly is not an essential component of success in relatively stable or cartel-like environments.  The problem for us today is stability is no longer the norm.  Over the next few decades, the business environment will only become more volatile.

Failing to defeat any of the eight enemies of strategic thinking can have serious consequences.  In slowing down new initiatives, creating unnecessary resistance, frustrating employees endlessly, and sometimes completely stifling needed change, any of these mistakes could cause an organization to fail to offer the products or services people want at prices they can afford.  Budgets are then squeezed, people are laid off, and those who remain are put under great stress.  The impact on families and communities can be devastating. 

While these enemies are lurking within most organizations, succumbing to them is not inevitable.  With awareness and skill, they can be avoided or at least greatly mitigated.  The key lies in understanding why organizations resist needed change, what exactly is the multistage process that can overcome destructive inertia, and most of all, how the leadership that is required to drive that process in a socially hearty way means more than good management.   

Notes

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For more information about Ken Chapman and Associates’ Leadership Development Programs, contact Ken Chapman at 205.366.0265 or email Ken at kchapman@leaderscode.com.

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