Monday, 01 October 2012

Debate: How to cope with a changing world

There's just no let-up in the pace of markets and technology, and this brings challenges for every business. In association with The Storytellers, MT assembled a broad panel of practitioners to glean their secrets of how they manage constant upheaval.

Andrew Saunders: In business, you rarely hear leaders complain that there isn't enough change. It's axiomatic that the rate at which new things come along only ever gets faster and more frenetic. But, even so, we do seem to be living through a period of accelerated change at the moment where there really is a lot going on out there in the world. Organisations - and indeed their leaders - aren't always terribly good at coping when so many of the assumptions they have held for so long suddenly start to look as if they are built on sand. What tips and insights can we offer?

Dan Wagner: Change is good. It is the whole dynamic that creates successful companies in the first place, whether you are trying to do something differently or more efficiently, or something that leverages the technology that has become prevalent to do something better. The very nature of a start-up is change, but in the technology business - and that is really all I know - more established businesses also have to change. Some of the companies I created became much more established and larger. But it is a slightly different type of change. It is about enhancement. It is about redirecting your product offering, and adapting it for different developments. If you are the sort of entrepreneur who sets out a plan and then does not evolve that business, those are the ones that do not survive. I am not familiar with the sort of companies that set out a single vision and end up actually making a success of it, unless they come from a large organisation that has spent years understanding the market segment they are going to go after and then deployed resource after resource to make it work. That is not my world. My world is no resources; you are only funded by the customers.

Duncan Tait: It is always better to lead change than react to it, in my experience, because the later you leave it to react to change, the more severe your actions have to be. It can be terminal for large and small enterprises. If you look at failed companies like Kodak, why did they not change earlier? Quite often, I see large organisations where everyone knows that they have to change, but because it is disruptive for them personally and all the structures that they like, because it gives them comfort - 'I am going to do this job and that job and then I get the keys to the corporate bathroom' - they do not want to be disrupted. Now, for us at Fujitsu, we use change in a number of ways. One is that you have to change regularly regardless, because it extracts more operational performance. If you set the structures down in a certain way, eventually they get a bit fat and happy, so you have to re-orient the business and a whole bunch of cost falls out. You use change to extract better financial performance, but you also have to be conscious of what is going on outside your organisation, what is happening in the market and what your competitors are doing. We have been through a change over the past 18 months, which is that our industry and customers are moving from massive outsourcing deals that are (worth) between £2bn and £5bn; the customer just does not buy like that any more. When I took this role, it was clear that the organisation was set up to do those massive transactions, so we have gone through a period where we are re-orienting into company towers or service lines that can address a whole market pretty much on their own. Eighteen months later, our business is about £250m a year more profitable and we have doubled our order intake.

Andrew Saunders: So should you change anyway, even if there isn't a huge external pressure to do so?

Duncan Tait: It keeps tension in the organisation and shakes out all the stuff you do not need. It is about being fit to change - that is the term we would use. We did some research on major private sector and public sector organisations at CEO and board level. We got some really frightening statistics back, which said that only about one-third of them thought they could cope with the level of change they were seeing in their own marketplaces. That is pretty much two-thirds of FTSE-100 and 250 that said they did not think they were fit enough to change.

Rajesh Agrawal: Absolutely. Fifty years ago, nobody would have thought you could start a business and in seven years' time it could be worth $50bn (like Facebook), so certainly things have changed. In a very short space of time, you can create not just a lot of wealth but you can reach out to a great number of customers through the internet and so on. Change really is inevitable, one way or another; it is going to happen, for good or for bad. At RationalFX, we are bringing the change into the banking and financial services industry. For years and years, banks have been ripping off customers on foreign exchange. We are taking the same product and bringing it to the customers at a much better price. That has now resulted in banks tightening their prices, so on that side they are probably not liking the change. On this side, I am loving the change.

Claire Horton: In many organisations in my sector, there is a lot of resistance to change, particularly radical change. But external events can force them to change - clearly, the current climate and government cuts to much of the funding that charities have received have hit very hard. Those charities that are not reliant on statutory funding are all right and most of them are fighting on. But even so, donor profiles are shifting; the current economic climate has affected the way that people give. Often, a monthly donation to a charity might be the first thing to be cut in your household budget. Charities have to work very hard to retain support, and they also have to go out and start looking for new support. Very often, you are dealing with people who have been there many years - people will spend their entire working life in one organisation. They are all very dedicated and for them it is not about the profit line, it is about the beneficiaries and the cause. So there is a real emotional tie for the people who work in those businesses. Actually getting those people to change can be quite tough. You have to start selling in the real benefits to the organisation and the beneficiaries in a way that they buy into, if you are in any way to engage them and get them to come on board with what you are proposing.

Christoph Loch: There is a famous old saying which says that if you are 20 years old and you are not a revolutionary, you have no heart. If you are 50 years old and you are still a revolutionary, then you have no brain. What that refers to is that change depends on how much you have to lose. For a start-up, people want change because they have nothing to lose. The only ones who could possibly lose something are the others, so let us go for it. However, if you are a big business, you have to be careful because you can really destroy the brand and the spirit of your workforce. That does not mean you do not change, but you have to do it in a slightly different way. Coming back to the question, change management is about ways to manipulate people into being willing to acquiesce when you have change. People are distrustful and reluctant for good reasons, because the powerful parties who are engendering the change very often do it for their own motives. So it is very important to have a clear picture of where you want to go that gives people a positive reason to look to you, even if it is avoidance of being destroyed by an external event. Then you must be transparent about how what you do is related to this, because if you are not transparent, then there is that inevitable psychological tendency to become suspicious. That comes right back to storytelling as a way of creating transparency, because people can relate to stories better.

Alison Esse: We have worked with a lot of organisations where we create the narrative of the change journey, the vision and so on - just in the way that you articulated. But a lot of people resist, because they feel that change is imposed on them, that it is something that is being done to them. They do not have a say in it and, actually, they do not necessarily agree with what they are being told to do - they are the people at the sharp end of the business who really know what is going on in the organisation and they know their customers. A big part of our approach at The Story-tellers is about empowering people so that they understand and believe in the journey. If you insist on micromanaging the change, people will just constantly resist it. There is the need to empower people at every level of the organisation, particularly the middle managers who we call the permafrost, the marzipan layer or the granite wall. It's where messages tend to get diluted or distorted or just ricochet off and go somewhere else. They cherry-pick the messages and form their own version of that narrative, which is going to be completely different.

Duncan Tait: Honesty is really key to the whole thing. I get to see about 4,000 of our people face to face every year. For the rest, we have to use other processes. I will go on a roadshow with 100 people in the room. There will be at least one person who will say: 'Is this the end of the change?' No, just get used to it. We are going to change like this every few years.

Dan Wagner: But what do you do with something that has no future? Quite a few years ago, we came into a business which had a CD-ROM division, where you put data on CD-ROMs and sent them out. That sort of business just doesn't exist now. It was a fairly big business, £25m a year. It was very profitable but the revenue was going down and I was just thinking, I have to get rid of this business. It is over. It was very difficult, because the CEO and the people there were proud of their achievement, and quite rightly so.

Alison Esse: We had a client, a smartphone software business. It was doing very well, there was no need to change. They were quite complacent; they were just fixing things as they went along. The senior leadership team looked into the future and they saw what was going to happen with Android and Google coming down the line, and what the implications were going to be - not tomorrow, but in five years' time. They had to create a burning platform where there wasn't one. That is one of the toughest things, because you have to sell that burning platform to people who are quite comfortable.

Christoph Loch: People who resist are 10% of the organisation at most. In every organisation, this is a rule of thumb that is very robust. Those 10% you need to manage. With the rest, there is a silent majority that you can convince.

Alison Esse: Absolutely, but there are what we would call the terrorists - the people who are always going to try to undermine the change no matter what you do. They probably need to go. You also have cynics in an organisation and they can be the most powerful advocates if you can actually turn them round. Cynics should not be mistaken for terrorists.

Rajesh Agrawal: You have to identify within each group who is the leader. That person may not be the manager of the department, but there is one leader, one gossip-master who has got a strong water-cooler influence on everybody and can make the whole mood more positive or negative. You have to identify those people and then, as long as they buy into the idea, they will spread the word.

Duncan Tait: It starts and ends with leadership, in my view. When people on your team do not demonstrate the right level of leadership and do not change, you do have to part with them. So, Dan, you might sell the business. My view is that when you get someone who is not up for it and might even be briefing against you - and I have had a few of those - you have to get rid of them immediately and fairly publicly.

Dan Wagner: You do have an obligation to communicate and try to convince people, such as the management team and your employees, that the direction you are going to take is the right one. You can bring along all of them or most of them if you are an effective leader, because that is the job. But it comes to a point where you have to say: 'We have had this discussion, why are we having it again?'

Rajesh Agrawal: Different things work for different people. I chat to people informally, one on one. I build the context quite a lot and I do not actually make a proposal myself. If you build the context enough, often they will think it is their idea. Some people will agree because they are convinced, others because greed kicks in. Different things make different people tick.

Claire Horton: Many charities are volunteer-led. We have about 1,000 people working in my organisation, and two-thirds of those are volunteers. Some of the volunteers give more than full-time hours every week. They are totally dedicated and they are very hard to deal with when they are dissenting, because their passion is driven by the fact that they absolutely believe they are right. So when we talked about how we were going to take the transformation of this organisation - and we have been very successful and doubled the income in the space of 18 months - we brought those people right into heart of the strategy, right into the heart of everything we did. Small wins turn into big wins, success follows and the organisation starts to become something quite different. There's nothing like it, you can really see the results.

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