Handling Change Management Right the First Time

As business leaders rush to implement cost-saving, productivity-boosting measures to survive the recession, daily news coverage shows that very few are thinking about the unintended consequences their change management actions will have on the relationships with those they count on most. But change management in any form sends powerful messages to key stakeholders, including customers, employees, business partners and investors in terms of whom and what an organization believes are most important.

Whether your organization is leveraging existing Lean Six Sigma and productivity programs or reacting quickly with limited structure to shed costs, either method requires you to consider your change management approach carefully. You must consider in advance not only your long-term strategy and growth path, but also who and what you’ll need to get there.

In this article, we share how business leaders can handle change management right the first time by avoiding common pitfalls, such as breaching trust with key stakeholders, taking on a "victim" versus "owner" mentality, losing sight of customer-and employee-centricity and creating critical talent deficiencies. By mobilizing mid-level managers, adapting your decision-making style and recognizing the ever-increasing importance of focused leadership, your organization can increase its chances of being among those who’ve done change management right the first time.

Building the Trust Bridge for Effective Change Management

The epidemic of low trust among workers is well documented. Just recently, for example, the 2009 Edelman Trust Barometer found that trust in U.S. business dropped to a dismal 38 percent—the lowest in the Barometer’s history, even lower than following Enron’s collapse and the dot-com bust.1

For the business leader poised to make significant organizational changes, this means you are starting at a disadvantage. The majority of employees have already determined your words alone cannot be believed. Rather, they will want to see proof in the form of congruency between your words and actions before they give their support to whatever it is you’re selling. In other words, if your company is cash strapped and you’re pushing teams to drastically reduce costs quickly, employees will want to see that you too are making personal sacrifices to cut spending.

Consider the public relations fall-out when the auto executives went to Congress to ask for public funds to plug serious immediate cash shortfalls and each arrived in Washington, DC, in a separate corporate jet. To them, this was the standard course of business. But to the public, it reeked of insincerity and, thus, fanned the flames of mistrust.

While most of your decisions and actions are not quite so visible (nor dramatic) as this example, they are clear indicators to employees about what you truly believe and intend. More likely than not, you’re facing tough decisions about when and where to reduce costs. If your organization plans to go through a layoff, for example, the method chosen to select those affected—as well as the way you carry out the effort—will send a clear message to the employees left behind.

Unfortunately, many companies are not using their Lean Six Sigma or business process improvement teams to help construct an execution strategy and are instead resorting to last in first out (LIFO) or first in first out (FIFO) approaches. Not only does this fail to demonstrate a clear line of sight to where these leaders are taking the business, the message to employees is clear: People are costs, not assets.

On the other hand, smart organizations are taking the approach of reducing unprofitable teams and keeping good players. Most importantly, they are linking their downsizing efforts to their core business strategies whenever they communicate with employees about the process.

Change management bottom line: During times of increased turmoil, every major decision is a signal to employees of your strategic intent. No matter how big or small, every decision is a chance to show the direction you are taking the organization. Without trust, the cost of sustaining relationships is steep. As trust grows in leadership, employees’ defensive postures fade and productivity soars.


Owner vs. Victim: Avoiding the Latter Mentality For Your Change Management Effort

When it comes to implementing change management, a very important group that must be mobilized is mid-level leadership. After all, they "own" most of the people who will be responsible for carrying out change-related activities. This also means, however, that they can accelerate or derail any major change management effort—sometimes without even knowing it. Thus, the ultimate success of your change management effort will be largely determined by whether mid-level managers choose to take on the role of owner or victim.

In the chemical industry, many of a company’s product costs are directly related to the price of a barrel of oil. In the last few years, this critical price variable has been highly volatile, making it difficult to pass the cost on to customers. It has also made for a tempting scapegoat for mid-level management whenever profitability or customer retention issues arose. In other words, at some companies, managers became the victim of what was happening in the oil market. They chose to see themselves on a dinghy in the middle of the ocean without an oar. But in other organizations, business leaders chose to take ownership of the problem. They used the market tension to propel their organizations forward by re-examining their product lines and supplier relationships. Some low margin products were quickly rationalized, suppliers were replaced and key customer account agreements renegotiated.

Change management bottom line: Don’t let your team believe they are powerless to change their circumstances. Mid-level leaders must be held accountable for taking ownership of problem solving, and they must be allowed the opportunity to provide input to influence the direction of the company. After all, people are more passionate about executing ideas they help generate.

Empowering this group may mean you need to create special communications vehicles especially for them. Standard all-hands communications won’t allow for the detailed two-way conversations that are necessary to create the level of engagement you seek. Continually ask yourself: Are you leveraging the right people? What best practices have worked elsewhere? What signals are you sending?

Customer and Employee Centricity: Maintaining This Focus For Your Change Management Effort

During these tumultuous times, it’s easy to slip away from customer-and employee-centered efforts. The need to cut costs and strengthen balance sheets seems to supercede all else. But at what cost to your long-term strategic position?

Consider this example. One now-defunct retailer had claimed its competitive advantage was to offer the best customer service and product support in its industry. But when faced with the reality of several consecutive quarters of losses, the first thing its executive team did was cut costs by eliminating its most senior—and therefore most knowledgeable—customer service people. Customers soon found themselves dismayed by junior staff who lacked product knowledge or the experience to make well-informed recommendations, and, not surprisingly, they took their business elsewhere. The retailer traded its commitment to customers to save a buck and, in the process, once again proved the adage, "If you don’t take care of your customer, someone else will."

Similarly, when it comes to employees, if you don’t communicate continuously and effectively during times of significant change, they will fill in the gaps with their own ideas of what’s happening. Negative influences will take greater hold. Employee engagement will fall. And, ultimately, good employees will either "quit and stay" or leave outright and your productivity will suffer.

Maintaining employee-centricity means there must be more to employee communications than simply, "we have to cut costs and here’s how we’ll do it." Rather, employees need to understand why the decisions are being made, how those decisions support the company’s long-term vision, and what the changes mean for them personally.

Change management bottom line: Despite the pressing financial demands brought on by today’s global recession, this is a time to focus even harder on the employee and customer perspective. Failure to do so will leave your organization at a significant disadvantage as customers and employees alike will look to your competitors to meet their needs.

Your Change Management Effort Should Not Lead to a Diminishing Talent Pool

As companies are struggling to find the best answer to today’s challenges, their talent pool is shrinking or becoming marginalized. As a result, a talent war will surely come into the picture as the economic crisis subsides.

For starters, many companies have existing talent gaps that will be made worse by the economic crisis. Some healthcare organizations, for example, are postponing the back filling of nurse vacancies due to the long time it takes for them to complete training in order to become qualified to work on their own. This shortsighted perspective fails to take into account that this will only make the problem worse for the future. The catch up costs will be staggering.

Meanwhile, prior to the recession, many companies identified an aging workforce and massive retirement of experienced workers as a looming challenge. While some of those retirement plans have been put on hold temporarily, they will appear later in even greater numbers. Unfortunately, many knowledge transfer process and technology improvement programs have been delayed or canceled. This will become a major problem as the recession subsides and the need to access business specific knowledge increases. The cost to rebuild lost knowledge and acquire the talent to execute will be huge.

Change management bottom line: Invest in talent as soon as you can; it will make a big difference in your performance now—as well as when the economy turns around. When that happens, competitive advantage will be about the best talent, not just talent in general. Now more than ever, talented people can deliver smart solutions faster than before. Think ahead on how you can take greater advantage of this before your competition does.

Unintended Consequences of Change Management Efforts

It has been said that a ship takes on the personality of its captain. You as the leader influence the outcomes your organization achieves through the day-to-day decisions you make and the behaviors you exhibit. Be aware of unintended consequences of your change management actions—now and in the future. Consider whether you are putting enough thought into how the major change management decisions will play out beyond the quarterly numbers.

Identify your core values and purpose and then steer the ship to them. If your core value and purpose aren’t well defined, spend time defining them better. Above all, ensure you have a clear path to your future and that the decisions you make—and consequently the messages you send—will help you get there.

12009 Edelman Trust Barometer. Edelman. http://www.edelman.com/trust/2009/