Category Archives: Change Management

Disposable Business

A long, long time ago, in a galaxy far, far away, a family sat despondently in their family room. They didn’t know what to do. Their color television had for some reason stopped working. Since they had never felt the need to communicate with each other while the TV had worked, they were now horribly out of practice. What to do? Things looked bleak. It was time for action.

Now here is where things get really weird. The eldest male of the family, the nominal head of the family unit (I say nominal head as this was only a fictional title. He actually reported to his mate, the most powerful woman in the universe) stood up, put the non-functioning television in the family’s means of conveyance (re: minivan) and took it to a place that was known as the repair shop.

Yes, he actually took the TV in to be repaired.

I can actually remember back to a time when this would not have been a fictional story. The reporting structure of the family is non-fiction. Every male, nominal head of a family does in fact report to their respective specific most powerful woman in the universe. The rest of this story is border line science fiction. Today when something breaks we don’t seem to fix it. We don’t even seem to be inclined to try and fix it. We just throw it away and go get another, newer one.

What used to seem to be a society based on the utilization of durable goods seems to have evolved to society based on the purchase of disposable goods. We don’t seem to want to fix anything anymore. When something breaks our first inclination is to get a new one. If that is not eminently feasible, the next step is to call someone to have them fix it. It has become the societal norm these days.

Now let’s go to go to different galaxy that is not so far away. We still have a disposable versus a repairable product mindset, but now we will be talking about businesses, not products. In this galaxy there is a business that has been performing well for many years, making products that have been well received and are well thought of by their customers. I was going to say that they made high quality, repairable televisions, but that would have been just a little excessive in my opinion.

Let’s say something now happens to this business. For whatever reason it is now no longer performing as well as it did. Its products are no longer well received nor are they well thought of by their customers. For lack of a better description, this business can now be considered broken.

Are broken businesses as disposable as broken products? How does a business actually break anyway? In a broken product, it is usually a component that fails and brings down the entire product. What happens when the components of the business are all still operating as they did when the business was not broken?

We were a culture that used to fix our own cars, change our own oil, fix our own flat tires, do our own home maintenance and improvement work. Now we just get a new replacement or call someone to come fix it. How does this culture translate to our new business models? What do we do when the current business model doesn’t work anymore?

I am fond of quoting Albert Einstein. I think he is universally recognized as a pretty bright guy, with the theory of relativity and all that. One of my favorite quotes of his, and I have used it before is:

“We cannot solve our problems with the same thinking that created them.”

I have met a few leaders that could actually change the way they think. There have not been many, but there have been a few. Most of the time a manager learns a way to do something successfully gets rewarded for that approach and spends the rest of their career replicating that solution set. They continue to think the same way. They just try to apply the same methodology in different situations.

Think of the old phrase:

“When you are a hammer, everything looks like a nail.”

In effect, they were once successful as a managerial hammer, and seem to have dedicated the rest of their managerial life to finding another perfect business problem nail.

Businesses are not disposable, and can invariably be repaired. Repairing a business changes it. It takes a different mindset. You can’t just call someone to come fix it. You can’t call a plumber or electrician to come fix it for you. You have to understand the plumbing and wiring of the business yourself. You have to get back to the mindset of changing your own oil and fixing your own flat tires.

Sorry for the poor metaphors, but I think you get my point.

Part of the solution may be to get a good plumber or electrician on your team, and to listen to them when they give you their recommendations and opinions.

I think this is the essence of learning to change the way you think. Sometimes you are the proper hammer for the current nail. Sometimes someone else is the proper hammer. The key is not being locked into a specific method or process of solving problems, and being able to recognize when things have changed and some different thinking is required.

A broken business is made up of many “working” people. I think that despite the trends to the contrary, they are not disposable. If they are performing poorly it is usually not because they want to perform poorly but rather they have been given poor leadership and are focusing on the wrong issues (re: nails). Disposing of them and getting new people will not fix that problem.

Remember, the thinking of those that got the business into its current state will usually not be sufficient to get it out of that state. The way the business is being managed, or those that are managing have to change. It is difficult for a leader to recognize that they must change. I think it is almost impossible for a manager to recognize that they must change.

I think our disposable product culture has taken its toll on our ability to repair broken businesses. At the risk of sounding too trite we seem to be predisposed toward disposable businesses. We seem to have evolved a mindset that if the current compliment of people cannot achieve the desired goals that we should dispose of them and replace them (like our products) with newer models.

The problem with that thinking is that it seems to be some of the thinking that may have been responsible for getting the business into its current state, and as Einstein noted, that probably won’t be sufficient for getting it out of that state.

Attrition: Causes and Cures


Just as every leader understands that each assignment is a step in their career, they also need to understand that the same is true for each of their team members. It is sometimes too easy to fall into the trap of complacency when it comes to team members. As a leader you have spent a significant amount of time assembling the best, brightest and most skilled team possible. Your team consistently produces exemplary results. Now you notice that they are leaving, and not just a few at a time but in significant numbers. There is no question about it. You have an attrition problem. Now what?



As is usual in business if you are recognizing that you have a problem it probably already is too late. This truly applies to attrition. By the time you recognize that there are more people leaving than would be normally associated with standard career transitions, you will have almost assuredly lost more talent than you want from your team, and more importantly you will have a significant number of additional team members that are probably in one stage or another of their exit process as well. The time to worry about attrition is before it happens. I’ll talk about avoiding attrition later. The question now is what to do about an unwanted attrition issue. Once it starts attrition can and will take on a life of its own.




The key to calming an attrition stampede is to understand on what level the issues of discontent are rooted. Is it a corporate wide issue, a business unit issue, or an individual level issue? Is it based on rumor or actual business performance? Maybe they just don’t like you anymore. Whatever it is that is causing good people to leave faster than you want, you had better find out. I said faster than you want because as I noted above, each assignment is a step in everybody’s career. It is usually not their end point destination. There will always be people transitioning on to their next career step. This is healthy for them and the organization. As with just about everything else in the world today though, too much of a good thing can be bad.




If the issue is deemed to be a corporate wide issue, it will usually be caused by either conflicting or ineffective messages being sent by the corporation’s senior most management. In times of senior management change or poor corporate performance a very clear and concise set of messages regarding strategic directions and plans needs to be openly communicated. Team members understand that change may take time and can usually be patient in order to see the results of the changes, to a point. The more specific the senior management actions and activities that can be identified that are to be taken, the more patient the team can be. However the team will need eventually to be able to see and identify progress against the actions in order to feel secure enough to remain through the period of corporate instability.




If the issue is thought to be on a business unit level, a cause will also need to be identified. Business unit attrition related causes are usually attributable to the business unit performance. If the business unit team believes that the unit has been identified as a troubled or “problem” business, they will try to anticipate senior management actions associated with improving business performance (cost reductions, travel freezes, lay-offs, etc.) and look to transition to other opportunities in other businesses or business units that are not so troubled. Again communicating a clear and concise set of actions for the business may help stem the attrition stampede, but there probably truly is no way to stop this one. People usually like to feel that they are part of a winning team, and in this case they will always look elsewhere if they feel the chances for success on their current team will be limited by the overall team perception or performance.




If the attrition is truly localized into one specific organization then it may be an individual based attrition. This is usually the result of an interpersonal or management technique conflict between the team manager and the team. If it is happening to your specific team you had better be able to look in the mirror and ask yourself the difficult questions regarding you and your relationship to the team. If your role is to try and turn around an underperforming team and you are a change agent, then you can honestly expect that some team members may not be comfortable with the new direction and choose to leave. If you are picking up a new team that has been performing well and they are choosing to leave, then you had better understand those issues quickly. Issues such as frustration or a perceived slight at being passed over in the selection of a new leader can be a generating event in the starting of an attrition wave.




The time to worry about attrition, like forest fires and tooth decay is before it happens. Attrition prevention is far more preferable than having to rapidly implement corrective actions to try and stem the outward flow of talent. Attrition also requires an honest assessment of the issues. Too many times teams will try to equivocate and split hairs as to exactly how the definition, measurement or importance of attrition is to be set. Managers may have a tendency to try and justify higher levels of attrition as acceptable in light of certain factors. They may try to differentiate between attrition of people leaving the group for other groups within the same company and those that leave the company for another company. This direction is normally taken by groups that are suffering from attrition and either cannot or do not have the ability to address the underlying attrition causing issues. Regardless of how it is positioned, attrition is still the unwanted exiting of employees from a defined group or population.




The solution to attrition prevention is very similar to the solution to attrition itself; communication. The difference is that leaders will actually communicate clearly to their teams the challenges in front of them as well as the specific actions that are being put in place and being taken to address them. Managers will usually wait until there is a recognizable attrition issue before communicating. Leaders will be proactive in acknowledging the business issues and position with the team and preparing them for the actions to be taken. In many instances the corrective actions that are outlined to the team may encompass some unpleasant but necessary business activities such as lay-offs and other cost cutting measures. By getting them out into the open early leaders can at least begin to control the realities of what needs to be done and the accompanying rumors (which are almost always worse than the actual truth) can be minimized.




Attrition is expensive in that when people leave they take all that they know and all they have learned with them. They take a proficiency that they have acquired over time that can only be replaced with a similar amount of time and experience. Attrition leaves the remaining team short staffed and over worked (two incremental issues that can add to the underlying attrition causes) while replacements are sought. Attrition reduces the efficiency of the entire team as the replacement is searched for, located, brought on board and then comes up to speed in the needs of the position. Transitions of any type, at the corporate CEO level or the individual contributor all go much smoother when they are anticipated, planned for and executed as opposed to responding to the unexpected exit associated with attrition. The time to plan for and implement an attrition strategy is well before any issues arise, and any attritions starts.

What’s Right?

Anytime you have a business or office environment, people will congregate to talk. It’s part of the social aspect of working in the office. These are euphemistically known as “water cooler” conversations (although I really suspect that it has been decades since there was actually a real live water cooler in an office). People will talk about many things, but if they are in the office at least some part of the conversation will usually be about the company that employs them. I have worked in several different companies and this is a fairly consistent topic for discussion, at least in my experience.



What I have also found is that these conversations normally migrate to, and revolve around the issues, challenges and problems that the business is facing. Company stock prices, competitors’ products and capabilities, pending or potential staff reductions, executive bi-play and office politics are all favorite topics for discussion. I think we have all been there, and probably even participated.




In short, most of these conversations are at best group reinforcement sessions for all that can be perceived as wrong (rightly or wrongly) about the business, and at worst become a functionally demoralizing aspect of the work day environment. Sometimes it appears that these meetings can become an opportunity for company bashing where the objective is to see who can relate the worst example of bad corporate behavior or malfeasance. It has been seen it in the boom times of the past and it seems to have taken on an even greater propensity in the difficult times of today.



This “what’s wrong” discussion concept got me to thinking, which is always a dangerous proposition for me. Why do we always tend to focus on the negative? Doing so has to have a negative effect on both ourselves and those we share the negativity with at the office. Surely something has been going right, and probably has been going right for some time, to enable the companies and business units we work for to survive and grow for the periods of time that they have been around. I decided some time ago that I would put this idea to the test at one of these negative conversations that I was party to. I asked:




“Okay, I have heard your view on what is wrong with the company, but can you tell me what’s right with the company?




People looked at me as if I had just come from another planet.




Instead of playing along with the rehashing of all the latest down side issues and topics that seem to be present in every organization, I had challenged people to at least try and define what was good about the place we all worked.




I was immediately challenged in return to see if I could actually start the list of what’s right. I think this was done as a delay tactic so that everybody else’s brain could do a cold restart in this new direction for the conversation. I started off with the most basic good thing about working for the company that I could come up with:




“My paycheck cleared and was deposited in my account at the bank.”




I assumed that everyone else’s paycheck had achieved the same status. This is a tough item to argue about. We all got paid. Something had in fact gone right enough that we got, and continue to get paid. I also assumed that everybody would like to continue to get paid. The focus now should be what else we need to do right going forward to assure that we continue to get paid. It was an interesting change to the standard conversation at that point. It also seemed to work. Several other right topics ensued. There were some good things out there if people just thought about them.




I am not a Pollyanna in that we must only look on the brighter side of things. If we do not acknowledge what is wrong we will never focus on it, and there will be no improvement. What I am saying that we do have a tendency to not just focus on, but to dwell on what is wrong almost to the point of discouragement. This means that occasionally we need to take a step back and look at what has been done right.



I don’t think it needs to be done all the time. A certain amount of venting with friends and peers is good to provide a healthy work environment. There have also been instances in these negative conversations that have germinated some of the teams’ better ideas and plans on how to improve the business as a result of hearing from others what they think is wrong with the business. However, I really do think that on occasion it is a good idea for the group to have the water cooler conversation taken in a different direction and talk about what’s right with the business.

Substantive Changes


I think we have all either been part of a business that was in a troubled condition, or been asked to work in a business that was in a troubled condition. Either way the objective was to improve the performance of the business so that it would no longer be considered a troubled business. Left to themselves troubled businesses will tend to continue to be troubled businesses. They won’t fix themselves. That being said, I have found that the only way to improve a troubled business is to make substantive changes.


 


I want to take a moment here to clarify the difference between substantial changes and substantive changes. Substantial changes are big, visible changes. They attract attention and provide the illusion of progress. Substantive changes are those that change the way the business operates. They are usually not nearly as big or seemingly apparent as the substantial ones.


 


Substantial changes tend to come in the form of reorganizations – groups are combined or divided in the hopes that the leader will be able to make substantive changes to the new combined or divided organization, executive programs – programs where new metrics or measurement methodologies for example are put in place to help better quantify the issues are put in place, or new processes and reviews – teams and meetings to help try and reduce poor business decisions or behaviors.


 


As I have said these types of changes tend to be showy. They tend to get a lot of internal corporate “press” and extol the business virtues that are trying to be maximized. They are usually accompanied by catch phrases such as “change our corporate DNA” and “improve our customer satisfaction”.


 


And in the longer run, it has been my experience that they usually don’t work.


 


Substantial changes also tend to communicate to the business that you have not identified what the real issues are with your business. For example, how can your “corporate DNA” be the root cause of your issue? Certain business behaviors possibly, but I don’t think the DNA is the issue.


 


The best business performance improvements that I have seen have been as the result of a careful analysis of what the desired business state or goal is, an understanding of what is currently being done, and even more importantly, why things are currently being done the way they are. By understanding the “why” of things you can get to the underlying reason for the improper behavior or performance.


 


Some of examples of this phenomenon from my experience include a business performance issue where inventory was deemed to be too high for the business. This tied up cash and affected both the balance sheet and the P&L. It was decided that greater efficiencies could be gained by putting the entire inventory function in one location. There were many reorganization announcements and a great deal of senior management attention was paid to the issue, but it didn’t seem to improve the inventory levels.


 


When a deeper analysis of the inventory was done it was found that the inventory levels were in fact at the appropriate levels for the products being supported. The real issue was that there were too many old products being supported. The issue was not really an inventory one; it was a product management one. Products were not being retired or discontinued in an appropriate or timely manner. Once that was resolved, inventory levels came down to a more acceptable level.


 


Another example was where the profitability of the entire business, not just the individual customer projects within it was called into question. An entire new system of reports was called for to help identify where the failings occurred. The frequency of reviews and the number of attendees was increased to catch the issues before they adversely affected profitability. A significant amount of management time and effort was expended but the profitability did not improve.


 


A deeper analysis here showed that the sales team got the same commission for the sale of an unprofitable project as they did for a profitable one. The real issue was not one of being unable to implement a project efficiently, effectively and profitably; the issue turned out to be the price for the deals that sales was quoting. They were simply reducing the price for “strategic” opportunities and making up for the reduced value of each by increasing the volume of sales. When the sales compensation plan was modified to include margin targets and incentives, the overall profitability of each deal and the business improved.


 


It is very tempting to make big, sweeping changes to a business to try and improve its performance. They tend to make a big splash but not much progress. It is much more difficult to try and understand why business is being conducted in its current manner, and then to make the substantive, but usually subtle changes that are required to correct business performance issues. It may take a little more effort and time, but it is much better for the business.

Significance

Are you significant? Are you relevant? I don’t mean these questions in some sort of cosmic, or existential sort of way. I am sure that to yourself, your family and friends, you are. At least I hope you are. I mean are you significant and / or relevant on the professional level to you individually, and also on the greater level to the business you create or lead.


 


Let’s say you lead an organization that is responsible for $25 Million in revenue. If the entire revenue of the business is $25 Million, then you are obviously extremely significant. If the entire revenue of the business is $1 Billion, then potentially, at only 2.5% of total revenues, you may not be very significant.


 


On the other hand, if the total earnings for the 1$ Billion business is only $10 Million, and your $25 Million revenue organization is responsible for $10 Million in earnings, you could be very significant, depending on the earnings and losses of the other organizations within the business. As you can see, there may be no hard and fast rules regarding significance and relevance for a business.


 


There may however be some indications about an organization’s significance and relevance to the business. What is the revenue trend? Is it up, down or flat? Upward revenue trending businesses are naturally more relevant as business growth is always a focus. What is the earnings trend in both real dollars and as a percentage of revenue? Of the two, real dollars are usually more important, but businesses like to see both earnings dollars and percentage of revenue on an upward trend.


 


As you can see, significance and relevance in business is usually measured with a number, and the number usually has a “$” sign in front of it.


 


Now there are some “significant” businesses that may not meet this acid test. These are organizations that are usually deemed either “strategic” or “investment” organizations. That means that the business is putting resources into these organizations with the expectation that they will become significant and relevant quickly. Usually very quickly.


 


With the increased demand for and the decreased supply of resources (money, time, people) in the business, strategic and investment organizations are becoming rarer, and those that do exist are having greater demands for more significant performance faster. As the owners of the business (Stockholders, either private or public) demand better performance, so must this be translated into increased demands on each of the business’s organizations for increased and faster improvements in their performance.


 


Now with all this in place, what do you do when you find yourself in an organization that seems to be neither Relevant nor Strategic to the business?


There are several paths that can be taken in this instance. The choice can depend on personal preference and personality, assessment of the overall business, and the willingness of the individual and organization to accept change. I won’t go into great detail here. I will leave that to the next Blog article, but the basic responses to being in an irrelevant or non-strategic organization are:



  • Move to a new organization that meets the requirements of either a Relevant or Strategic organization.

  • Accept the organizations status within the business and work to make it successful within the bounds and expectations associated with that status.

  • Make the changes required to make the existing organization relevant. This can include changes to products, people and processes. This would include making the required changes needed to make the organization relevant on either the Revenue or Earnings level, or moving it into a strategic role.


I have always tried to be a change agent within the organizations that I have been associated with, so you can suspect what choices I have made in the past. I will look at those options, and others in the next article.

Don’t Produce…..Create

Happy New year to all. Here is to working toward a great 2011.

We have all heard the statements regarding the need to “produce” results. In these days of ever tighter budgets and greater demands for profits and performance, the phrase “produce, or perish” might never be more accurate. It is possible that after so much time trying to improve and refine our production that it might be time for a new approach.

“Producing” results had normally come from finding a way to do an existing job or process incrementally better than it had been done in the past. This incremental approach to producing and improving results has a tendency to run out of momentum due to the law of decreasing returns. It eventually requires more and more incremental process refinements to produce less and less incremental results improvements. After several years in the current economic environment, it may be possible to say that we are in fact in the region of decreasing returns when it comes to incrementally improving, and producing results.

What is required today in the business environment is a quality that seems to be in short supply during tough economic times: Creativity. In down economic times the “Risk / Return” relationship in business seems to invert. That is to say that the “Risk” part of the equation takes on a greater and greater importance vs. the potential for the improvement of the return. In down times it assumed that the “Return” will be more and more difficult to attain, so the process focuses more and more on reducing the risk and in many instance the cost of the change. This process plays more and more into the “Incremental” approach to improving and producing results.

The time has come for businesses at all levels to start looking at the data differently; to rethink the processes and to “Create” new business and new ways of doing things, not incrementally producing and improving the current results. This is obviously much more easily said than done. You cannot command the team to just create new ways of doing things, but as the leader of the team you can become adept at recognizing what is incremental improvement and what is the creation of new ways of doing business.

Again it is usually easier to accept the incremental improvement proposals. Some may be valuable and can be implemented; however as they say “Necessity is the mother of invention”. If you can show the unwillingness to increment, and the willingness to implement and reward the creation of the new, you can start to change the way business gets done. The responsibility to recognize and foster the creation of new processes and business needs to be vested with those that have the authority to accept and make those changes.

The time has come for businesses and business leaders to stop producing results, and start creating them.

Equipment is Becoming a Commodity

It used to be that if you made the best products, you had a distinct competitive advantage. However, today it appears that things have changed. If you are not making the best products, you are not at a competitive disadvantage, you are out of business.

Off-shoring, and its new euphemism “Right-Shoring”, have reduced the costs of everyone’s products. Moore’s Law (the doubling of technology’s capabilities approximately every 18 months) is well understood, and in some quarters is thought to be close to having run its course. With so many open standards, products are no longer comparable, they are virtually interchangeable.

As China emerges on the technology scene as an economic super power, it is using its competitive labor advantage (most technology based companies have their products manufactured in China by various Contract Manufacturers), and its technical parity to try and make every customer’s buying decision a price based one. In trying to make every buying decision solely a priced based one, it is in effect “commoditizing” the equipment.

If there is no ability to differentiate equipment, other than price, what can be done? The obvious choice is to start focusing on the non-equipment differentiators: the level of relationship and trust between the customer and vendor, ease of equipment installation, ease of product maintenance, warranty length and breadth of coverage, etc. In short Service.

As products become more technically capable, they can have a tendency to become more complex to operate. Their installation and implementation have become more specialized. Their maintenance and the ability to trouble shoot their problems require much more training and specialized support.

Customers do not seem to buy technology for technology’s sake. They are buying a “use” or application to fulfill their specific need. The ability to simplify and reduce the customer’s perceived risk associated with the implementation and operation of their equipment in the delivery of its functional usage can be significant equipment decision differentiators.

With it becoming so difficult to differentiate commoditized equipment, it will pay to try and differentiate the ease and simplicity of product usage, the depth and breadth of support, and the comprehensive level of service that will accompany the equipment. When the competition is trying to make the customer’s buying decision a price based one, you will need to try and make it a service based one to change the decision criteria back in your favor.


No More “Work Arounds” – Enforce Change

We have all been in the position where an unexpected issue arises. It can be a product capability shortfall, or a process application mismatch, or just about anything in between.  Our first impulse is to find a “work around”. Something quick and dirty that will get the job done and allow us to move on. We have all done it.


 


The problem with this approach is that it requires two “fixes”: the initial “work around” and then the revisit of the issue to put in the correct long term change. The “work around” allows us to stay with the existing process or capability, when by the very nature of the need, we are seeing that we need to change. In today’s short resource, profitability and resource challenged environment, the “work around” has become too expensive.


 


The normal issue with a “work around” is that since it is working, we never seem to get around to implementing the correct long term solution. Change doesn’t (need) to occur and the “quick and dirty (re: inefficient) becomes the accepted process. It becomes the standard by default and gets (re)coded into the process going forward. The quick and dirty has solved a short term need, but has not generated the needed change to achieve long term efficiency and profitability.


 


In today’s economy when you encounter an issue, more often then not the correct course of action is to implement the long term fix – make the change. It may take a little longer than the quick and dirty fix to the existing system, but the end result is a cleaner, longer term solution. The business also ends up stronger, more efficient and more profitable.

How Resolute are You?

In every assignment you will see that there are things that will need to be changed. They can be large or small items, but you will want them done your way. The issue will arise from the fact that they are not currently being done your way. They are being done some other way. Further complicating the issue is that the people currently performing these tasks in some other way than your way are comfortable and capable of doing them that way.


 


Now if you were able to follow all that you are doing well.


 


The point here is that any change that you may want to make to your business will be met with a built in resistance from within the organization itself. People may understand that what they are currently doing may not be the optimal or even correct course of action, but it is something that they know how to do. When you ask them to do something else that they may not have done before, you will meet up with resistance. You will be asking them to leave their current comfort zone.


 


The greater the change that you want the greater and more widespread will be the resistance to it. The success of proposed change will be directly proportionate to how resolute you are. It may actually come down to your force of will. If you show a willingness to accept anything short of the new level of performance that you want, then that is what you will get. The closer people can stay to the status quo, the closer they can stay to their current comfort zone.


 

Resolute leaders make the changes they want. They don’t accept anything less. Resolute businesses get changed only incrementally, if at all. They have a built in impedance and resistance to change. How resolute you are, when it comes to changing the way your business runs will have a greater impact than the type of changes you decide to make.