Leadership — Managing Change

Planning and effective change management

The “no way out” reality is that that change is imperative and that it is existential. Forces are constantly changing around us all the time — and changing the rules of what it takes to succeed — constantly. We must go “further in.”

Good planning is, thus, the key to good change. Strategic, Annual and Operating Plans are needed.

Strategic planning is essential to prepare for change

Future Shock, a book written by futurist Alvin Tofler, noted the generation growing up in the 1970s (when the book was published) would see more innovation than all previous generations combined. The pace has only accelerated in the four decades since his work was published.

Change is continual and is generally caused by four key forces — competition, economic changes, technology and laws — in combination (see image 1).

Image 1: Different forces are constantly exerting pressures on our businesses to change

That means that we have to always try to predict what changes these forces will bring. You need to get the timing right on the introduction of products and services — which might take quarters or years to launch — relative to changes in demand, laws, the economy, technology, and competitors’ moves. Thus, forecast-based planning is needed.

In Positioning, authors Trout and Reis provide many value positioning constructs. Kenachi Ohmae’s (McKenzie) The Mind of the Strategist also provides guidance.

Recognize that just using internal views is selflimiting. The hidden, inherent “as is” (change resistant) bias versus the “could be” or “should be” (change causing) is a critical challenge to be overcome from the beginning. Many methods to do so exist, including using facilitators and outside experts.

An “outside-in” learning process needs to be used. Therefore, we need to set up processes for:

Customer inputs*

o Including their needs and wants*

Prospect inputs*

o Including their need and wants*

Partner inputs*

o Including their forecasts and plans

• External media articles, etc. summaries
• Sales force inputs
• Service personnel inputs
• Operating personnel inputs
• Think-tank/analysts’ inputs (often acquired)
• Other relevant inputs.

*Under a protective Confidentiality agreement so they will be more open and complete.

Some questions might include:

• What will be the major technology changes in the next ’n’ years that can affect us?
• How will that impact business actions?
• What will be the major competitive changes in the next ’n’ years?
• How will those impact business actions?
• What will be the major legal requirements changes in the next ’n’ years?
• How will those impact business actions?
• What will be the major economic conditions changes in the next ’n’ years?
• What “megatrends” are coming that will affect us?
• How will those impact business actions?
• Who are the three major competitors?
• How, in some detail, is the company strong or weak relative to them?
• Per the positioning graphic’s principles, what new solutions will be needed (for different target markets)?
• What will become obsolete?
• What are the company’s internal strengths?
• Weaknesses?
• What recommendations do you have?
• What are your Go-To-Market ideas and plans?
• What internal culture improvements are needed?
• What are your organization ideas?
• Who to lead?
• Resource needs?
• What should be the priorities?
• Other questions, general and/or specific, that should be asked.

The feedbacks will be eye-opening (and perhaps embarrassing, but get over it). Importantly, when changes are later made this participative process will have many change management benefits. It is easier to change to YOUR ideas versus others. Also, by this process they start to understand the external pressures and the validity of having to change relative to the pressures. They more easily grasp that the alternative to change can be worse.

Once this information is gathered and organized for consumption, and before proceeding, it is important to understand “as is” sales volume levels, gross margin levels, operating margins, capabilities, etc.

What objectives over the next ’n’ years will be set, using S.M.A.R.T. (Specific, Measurable, Action focused, Resourced and Time-based) goals?

With these outside and inside inputs, plus objectives, brainstorming on SWOT analyses can now be conducted, with a facilitator looking out for and guarding against turf protection and paradigm rigidity. Both will exist…which is certain since the participants are breathing.

What is our “Driving Force?” is a key early question to ask and address by consensus. It reflects our core culture and biases. Between eight and fifteen have been identified as possible and are provided in the full Primordial Leadership book. Dr. Terry van der Werff identifies the following three options:

1. Products offered — produces specific products (things) for its markets. Examples: General Motors, Coca-Cola

2. Services offered — delivers specific services (human efforts) for its market. Examples: Wells Fargo Bank, Charles Schwab

3. Market needs — focuses on meeting the needs of specific markets. Examples: Fisher-Price Toys, Seattle University

A specific agreement on the Driving Force(s) is needed as a key planning framework. Expect debates.

Another element of the strategic planning process is Target Market segmentation and selection. Over twenty key considerations are covered in the full Primordial Leadership book

Also important is the consideration of risk in possible strategic actions, be they organic, by acquisition, or a hybrid. Image 4 (below) is a simplified look at four quadrants, each with different degrees and types of risks. Specific risk assessments are thus needed also.

Image 4: Possible strategic actions you can take when planning new products or services for particular markets

A draft strategic plan can be produced including:

• Vision/Mission (and higher “meaning”)
• Objectives
• Key Success Factors
• Strategies (including target markets and value positioning differentiations)
• Tactics (including organization, resourcing, etc.)
• Financial Forecasts
• Policies, Procedures (that will incorporate the Primal Drives for execution motivation)

Then, it needs to be “socialized” with key stakeholders under an NDA to assess “fit” and other factors that affect success.

This strategic process is repeated at least each year, inclusive of an early assessment of how well the last planning results were in terms of accuracy.

Annual Plans

As noted, annual plans exist within the context of the Strategic Plan. The annual plan should first re-state the key elements of the Strategic Plan to link to the framework. A corporate plan needs to include divisions’ or departments’ plans.

This is an iterative process of working through:

• The Strategic Plan’s framework and its implications
• Initial Annual Goals
• Strategies and Tactics

o Including Competitive positioning

• Target markets
• Products/Services plans
• Operational plans:

o Organization plans

o R&D plans

o Pricing and related policies

o Marketing and Marketing

• Communications plans

o Operations plans (which will vary sharply by company type)

o Personnel plans are needed as well, as a critical resource (applying he Primal Drives)

§ With Compensation and benefits plans

• Capital plans
• Budgets projection (P&L, Balance Sheet and Cash)(Base, Good, Bad)
• Final Annual Goals
• Program plans

These culminate in the initial annual plan for the entity(s). Leaders’ rewards are often tied to reasonably exceeding the Base Plan/Budget.

Strategic versus organic growth

If acquiring another company (versus growing internally), integrating the acquisition is where the challenge is. As Mohamad Ali, HP’s Chief Strategy Officer (CSO) noted recently, “77% of acquisitions fail.” He explained that integration quality is the key failure point. HP’s approach is to begin the integration planning early in the discussions, per this overview.

I have been part of seven mergers, on both sides. I quickly learned that the smaller company was always concerned about their Primal Drives, especially Safety, even before the deal closed. Of the three key intangible assets (customers, partners and employees), the key one to protect is employees. If not the value that was purchased is consequently lost.

They key was to proactively put a high floor under the acquiree’s feelings of Safety, etc. Primordial Leadership book provides many how-to steps to take; and what NOT to do.

[Protect Your Acquired Employees

The acquired CEO, if still aboard, needs to be willing to proactively buffer employees from any stupidities by the acquirer. Keep the “bleep” from flowing downhill, even if it is job threatening. You owe your people that. If you then leave, they will follow you to a new company that can then kick the acquirer’s ___. Make sure your let the acquirer management know the costs of any stupid actions by them.

I had to do this twice; once effectively but not the second time. The stupidity was a tsunami that never ended due to childish power plays by the acquirer. I left after a few quarters.]

Change Management is too late and reactive

The only human that likes change is “a baby with a dirty diaper.” Thus, resistance is a pervasive threat to the needed change and must be avoided (if possible), overcome if it exists, and pre-leveraged if possible.

Some ideas of how to avoid resistance or to overcome it, and to even have it sought, are the subject of the below insights.

Sources of Change

Change can come with many faces. Just a few are:

• Lean programs
• Six Sigma programs
• Mergers
• Acquisitions
• Divestitures
• Joint ventures
• New business lines
• Eliminated business lines (e.g., Saturn being liquidated by GM)
• Reorganizations
• Globalization
• Right/Downsizing
• Outsourcing
• Technology re-tooling (e.g., robots vs. people)
• A combination of the above.

Each of these disrupts the status quo.

Resisting Change is Primal Drives Based

The brain processes information in several different ways. Different parts of the brain, for instance, are activated during different activities such as hearing words, seeing words, speaking words and thinking about words.

What is important is that the information is always processed through the Primal Drives. Some examples of negative Primal Drives reactions are:

Safety:

• Job safety?
• Role safety?
• Lifestyle safety?
• Local tasks control?
• Company safety?
• Destiny control?

Greed:

• Present pay?
• Potential pay?
• Promotion?
• Bonus?
• Career?

Hope and Transcendence:

• Company stability?
• Company growth?
• Promotion?
• Harder tasks?
• Retirement?

Ease and Speed:

• Work harder?
• Work longer?
• Learn new tasks?
• Find new job?
• New training?

Trust and Honesty:

• Are they lying to me?
• How long have they known?
• What are they not telling me?
• When will the other shoe drop?
• Who can I trust?

Sociability:

• Lose my friends?
• Have to make new friends?
• Will they accept me?
• Family’s reaction?
• Friends’ reaction?

Obviously change can engender many Primordial concerns that must be pre-considered. (Applying the Judo Principle for having these change issues work for you is overviewed later.)

Of special interest is research by Larkin and Larkin in Communicating Change, where first level employees want the information to come from direct supervisors, followed by middle management. It seems as though through more frequent interactions they have calibrated them more, so have more trust as to reading them. C-level leaders can follow up, but the first contact should be with first line supervisors.

Of course, this means supervisors and mid-management must be pre-empowered with the Why?, What? and How? of the change, and the worse impacts of not changing. They must believe in it also, so time spent answering questions is time well spent. If unionized, arming them and HR to overcome possible union resistance is often a key need as well. They will have ideas of how to do so, thus careful listening and reaction are needed.

Contracts with unions, customers, distributors, suppliers, etc. should be pre-evaluated before a change.

The “Muddy” or “Frozen” Middle (managers) must be managed also

Middle managers are caught in the unenviable “shock absorber” position between management and the doers

Probably the major elements of mid-managers’ concerns are:

• Do no wrong (make no mistakes); and
• Avoid losing power (title, turf, budget, people, control, etc.) in a shuffle; and
• They generally go through the same Primal Drives concerns as above.

Way John Kotter is a recognized change expert, with eighteen leadership and change books. His famous book Leading Change laid out an 8-step process for successful change leadership. These steps were:

1. Establishing a sense of urgency
2. Creating a guiding coalitions to foster acceptance of change and to overcome resistance to it
3. Developing a vision and strategy
4. Communicating the changed vision
5. Empowering broad-base action
6. Generating short-term wins
7. Consolidating gains and producing more change
8. Anchoring new approaches in culture

However, I believe numbers 3 and 4 must come first; developing and communicating a vision and strategy. Without these the above steps 1 and 2 are harder. Steps 5 through 8 can then follow.

For people’s Primal Drives, one can Judo-leverage each of the above fears, and should. In summary the needed actions are needed:

[Focus on the Donut, Not The Hole

This was a successful message I gave to employees of one company that was acquired by a larger company. The Primal Drives-based benefits were reviewed, and the alternatives that would occur without the deal.

I told them to focus on the donut, not the hole. The message was well received and resulted in no voluntary turnover. All parties won.]

Building a Change Resilient/Change Seeking Culture

Gaining change acceptance has several stages where you move from preparing for the change, accepting the change and committing to it.

These few steps, regularly and consistently practiced, will insulate the change impacts. These will help align Primal Drives to change.

“Knowledge is power!” Relative to change’s imperative, educate, educate, educate. This includes on the Why? What? and How? levels.

Openly and often acknowledge our natural, Primordial, emotional resistances to change. Regularly communicate, top-tobottom, that change is the #1 competitive Critical Success Factor. Who manages it best wins, and vice versa.

Note that competitors’ employees are the same, so this is a change competition between us and them to best self-manage. “Let’s beat those guys!”

Educate about the worse-evil costs of not changing.

Constantly communicate the changes going on around the company, especially outside, and the impacts.

Several other needs and ideas are detailed in the full Primordial Drive book.

Summary

Change is inevitable, and must be Judo-leveraged versus resisted.

Planning is a key, at all of the Strategic, Annual and Operational. Several requirements and processes exist for each. Such planning(s) need to be done correctly. An error in these will have major negative impacts.

Forecasting surrounding change forces over time (often three years) is important to the correct vectoring of competitive positions.

Plans can include organic (internal) ad strategic (acquisition) growths. Careful thinking is needed. For acquisitions, proper integration will protect the value acquired. Much risk exists.

Many types of changes will be needed, continually. Overcoming change resistance is vital. Even better is achieving a change resilient culture. Even better is achieving a change seeking culture.