Change Management – A Problem at the Top?

By its very definition – turnaround involves change management. Despite an organization being in a challenging predicament – change management is still one of the key issues that needs to be overcome in a workout scenario. Surprisingly, the challenge is that the executives, board, and owners themselves are too often “fighting the change.” It is the adage – “if everybody else changes then I do not have to.”

I believe this is a result of three factors for the executives, board, and owners:

  1. They are seasoned business professionals and know the business on an intimate basis;

  2. Inability to recognize that their strategy was either incorrect, or more often than not –executed improperly; and / or

  3. Failure to appreciate that in the past decade, businesses experienced a dramatic leap forward.

Allow me to elaborate on each of the aforementioned factors.

They are seasoned business professionals and know the business on an intimate basis.

Without a doubt, that statement is accurate over 99% of the time. Even companies with seasoned, experienced executives, boards, and owners can “get themselves into trouble.” This predicament can occur not only from their inability to execute, but also from a myriad of events outside their control. Such as:

  • Growing too fast with inadequate financing;

  • Poor ERP / CRM implementation;

  • Economy as a whole is in peril;

  • Loss of a key strategic partner – e.g., customer, vendor, etc.;

  • Intellectual property infringement;

  • Sudden death or resignation of key player(s); and

  • Product is surpassed by the market.

The challenge becomes allowing an outside turnaround specialist to change their strategy. After all, they are the “experts.” Consider the company’s executives, board, and owners as the general doctor that knows the patient, and view the turnaround specialist as an ER doctor. They are trained and have the temperament, skills, and connections to quickly triage the necessary areas that require change. Doctors can make the worse patients, just as attorneys can make the worse clients.

Inability to recognize that their strategy was either incorrect, or more often than not –executed improperly

Strategy needs to change with time and technology, as will be discussed in the next section. If the organization does not have a formal, written, updated strategy – this is a momentum problem of its own. “Failure to plan is a plan for failure.” Psychologists have found that a person has a +70% improved chance of achieving their New Year’s resolutions simply by writing them down, and reviewing and updating them on a regular basis.

The execution of the strategy is critical. Execution being defined as “the gap between what a company’s leaders want to achieve and the ability of their organization to deliver it.” It is discipline or basic “blocking and tackling.” Too often the executives, board, and owners question the strategy, when it is the execution that is the issue. The executives, board, and owners are too close to see the situation.

Failure to appreciate that in the past decade, businesses experienced a dramatic leap forward

 

Processes and methodologies that may have been prosperous in the last century, require a complete evolution to accommodate today’s business milieu. Not since the industrial revolution have business processes and management required such an epic transference. Major changes in the way business is conducted include, but are not limited to:

  • Risk reward;

  • Working with human capital;

  • Communications;

  • Globalization;

  • Strategic Partnering - outsourcing;

  • Interfacing between business partners; and

  • Technology - The excuse that “we are not a technology organization.” First, failure to optimize technology is fatal, and second, technology is just a sliver of the major business changes that have and are occurring.

*****

“We change our processes, and products have been profitable for decades.” However, the world has changed around you. The Internet and technology are more than a “fad.” The origins of the Internet date back nearly 40 years, with the U.S. military's funding of a research network in 1969. Since then, the Internet has undergone more than just a name change. The number of computers / devices connected to the Internet has grown exponentially, while the number of users has risen from a handful of computer scientists to 2.7 billion users. The network's reach has expanded beyond the United States to every corner of the globe. But its popularity has a dark side, as it has evolved from a friendly research network to a hotbed of criminal activity including fraud and identity theft.

Today, it is a prerequisite to share information with vendors, customers, employees, etc. Leadership requires fostering change in the appropriate strategic direction. I believe Jack Welch put it most accurately- “Control your own destiny or someone else will.”

Looking for Strategic Partners and Capital? Lakelet Capital LLC >>