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executive
management
Lessons From the Real World of Major Business Initiatives
Mergers and acquisitions,
(including buying major product lines)
Major information technology (IT)
installations
Automating the delivery of
medicine
Changing customer sets
Transforming branch operations
Migrating from a centralized
decision-making organization to a decentralized
environment
Migrating from a centralized
decision-making organization to a decentralized
environment
What have these executives learned
about change management that can help you reduce
time-consuming surprises and achieve the results you
want? Some hard lessons, as it turns out, which this
early look at our interview data summarizes here.
Four Lessons Many of the executives we interviewed affirm that
initiatives often fail to reach their realization
potential. Their collective wisdom about how to
avoid this comes down to us as four key lessons.
Think of these as warnings that must be addressed
early and wel
1.
Define your criteria for success in advance
2.
Take an active leadership role
3.
Remember that people are your greatest variable
4. Correctly estimate your capacity for change
1. Define Your
Criteria for Success in Advance
The executives
who participated in the interviews issued a warning
about what the real risk is when executing critical
changes. What we heard was that major initiatives
usually don't "fail" outright as much as they
deliver less than the original promises. The
interviews draw a clear distinction between what
we'll call "installation" versus "realization." Mary
Anne Elliott, Executive VP of CIBC, pointedly states
that "we need to understand up front what we're
looking for, and be very concrete and specific about
what that looks like." Along these same lines, Robin
King, Vice President of Public Affairs at the
Aluminum Association, notes that "we've invested in
most of what we need; now we need to use it. It's
installed, people are trained, but we are not
realizing benefits yet." Success is not
defined merely by installing the applications,
acquiring the products or signing the merger
agreement. Success is when you realize the benefits
that caused you to launch the initiative in the
first place. The interviews provide a clear warning:
don't be seduced by installation success;
realization of your change objectives is what you're
really after.
Clear criteria
make it easier to garner support. Otto Salguero,Vice
President, Information Services, for Bon Secours
Health System told us that this multi-state health
care system business stumbled on the difficult
integration of newly acquired medical centers. He
explains that "we have been able to get the results
we expected, even with a lot of pain and a lot of
problems. We defined and achieved success in a
standard IT implementation across the entire system
of hospitals. We have been able to implement our
pharmacy on budget with high level of customer
satisfaction." Why? Because the criteria for success
were clearly defined and well understood by the
users, who became strong advocates for change.
When asked why
some things worked while others didn't during his
company's implementation process, Dr. Wayne
Hockmeyer, Chairman and Founder of MedImmune Inc.,
replies that the reason is "First the decision,
project or goal, must be clear, visible and well
articulated. People have to have a clear goal, then
you can be successful."
Although defining
the criteria for success can be a complicated and
difficult task, the downside is worse. Hockmeyer
cautions that "when you don't achieve all the goals,
or don't set them high enough, expectations start
going down." That is a spiral that can threaten the
entire business.
Once you have
clearly established your criteria for a successful
initiative, these executives suggest that active
leadership becomes important.
2. Take an Active
Leadership Role
How much of the
change initiative can you delegate? According to our
executive interviews, very little. It's your own
attention that's required. Mary Anne Elliott calls
this "active leadership."
Wayne Hockmeyer
is equally clear. According to him, projects that
didn't achieve the expected outcome lacked focus, as
well as personal intervention by two or three senior
people within the organization. He contends that
good people are not enough to guarantee success.
"Team members have to be very competent, skilled,
motivated and dedicated. But they also have to be
led well--not just managed."
Effective
management requires a single leader. "When we've
been successful, we had somebody, or a team, act as
the architect and oversee the whole thing and look
for integration points" adds John Madigan, Vice
President of The Hartford Financial Services Group,
Inc.
And it seems
crucial that the "somebody" be the senior-level
executive for important initiatives. "I say it over
and over again to people: I am going to be here on
this project, I approve your salary and increases, I
take an interest and I expect you to take an
interest. Expect increased focus from me," notes J.
Stephen Larkin, President of the Aluminum
Association.
Hockmeyer echoes
this. "The key is to get senior people sufficiently
engaged, to invest sponsorship and personal
commitment and accountability. They need to put
pressure on the organization and stay on it until
problems get resolved." He also observes that senior
management sometimes "trusts too much in structure
and normal function to take care of things.”
Active leadership
also means selling your ideas repeatedly. Tariq
Hassan, Global Head of Purchasing for Deutsche Bank
says that "nearly 50% of my time is spent selling
credibility, strategy, and the fact that this can be
done. They blow you off the first time, but the
third time they say 'maybe we can do it.'"
Although some
executives may think this level of effort should not
be necessary, our executive interviews clearly
indicate that change must be sold, resold,
emphasized and monitored throughout the change
management process. Each successful initiative
described in our executive survey required ceaseless
sponsorship and ongoing internal selling. People
need to be on board.
3.
Remember That People Are Your Biggest Variable
Nearly all change initiatives require major shifts
in thinking by employees (and sometimes customers).
Robin King puts it this way: "The biggest variable
for us has been the human side, especially the
inability to understand and embrace change."
However, the CEO of a European pharmaceutical
manufacturer argues that "success requires
people-great people, with the interpersonal and
organizational skills to put whole shebang
together."
Indeed, our executive panel noted over and over that
systems are often easier to change than people.
Salguero of Bon Secours Health System found that
while "the system worked flawlessly, the human
beings were prone to error." He explains that in
selecting advanced clinical information systems, "we
run into a lot of issues that are no longer about
systems but about transforming the way we think and
operate. What should have taken 9 months takes 18
months and is still ongoing. We underestimated the
difficulties employees had in learning to work with
systems that require new ways of thinking and
skills."
Hockmeyer believes his company, MedImmune, Inc., has
done well because it understands the human variable.
"In the most severe conditions, we did some of our
best work. Not because of great environment or
pressure, but because people felt like a community
with common goals and objectives."
So
what is the best way to manage the human side to
change? To get the results that you want, King
asserts that "you have to have a better
understanding of the human landscape. Recognizing
that it is different for different people and groups
because the values of the desired model vary from
the values of old model. Even within a small
organization you're speaking in many different
contexts and languages." So how do you get that
better understanding?
4.
Correctly Estimate Your Capacity for Change
What is your capacity for change? Do you really
know? According to these executives, you need to ask
sooner rather than later. For the Managing Director
of a European investment bank, the issue wasn't
resistance or wrong solutions. The issue was that
"we didn't have core skills. We hired people who
were pretty good at strategy and vision and setting
out the right kind of agenda, but we didn't have
doers to execute what had been articulated."
Execution trips up many projects, argues Jack
Tootson of the Internal Revenue Service. "Decision
making isn't bad, the execution aspect of it is."
Complexity makes the condition worse. Crossing
oceans is an example. The head of one global
technology firm notes that "when you go around the
world and try to execute globally, you tend to
underestimate the differences in the market and
investment that it takes to deploy locally."
The result? Unpleasant surprises that delay or block
realization of key objectives. King observes that at
the Aluminum Association, the company president's
time line for a major project would be six months;
his more like a year. "We're roughly at two years
now," he adds.
No
initiative happens in a vacuum. As an initiative
unfolds, the rest of the business has to continue,
complicating the process of change. John Madigan of
The Hartford has been involved in major change
initiatives, including "a full consolidation of two
separate IT infrastructure organizations, and an
acquisition that includes the integration of staff
and information systems. Since some of our affected
business lines have daily SEC reporting
requirements, there’s really no possibility of
shutting down to accomplish these changes. We are
changing the tires while the car is in motion."
Juggling multiple business functions impacts the
change effort and can result in delays. It can also
be hard on people. Larkin explains that "change has
come so fast and variety is so great, you have
people who understand intellectually but their
reflex action is in the 1970s." Madigan notes that
success happens more quickly when you take the time
to put all change activities into a single context.
"The human capacity to absorb changes is reduced
when those changes are not seen as integrated, not
part of one new approach to things." When people
cannot absorb change, change does not occur.
Hockmeyer summarizes the strategy that worked best
for MedImmune: "You have got to be truthful with
yourself about what is just not reasonable." He
states that "where most people fail is in thinking
they can do something no one else has ever done.
They kid themselves into thinking that won't have a
consequence." In Hockmeyer's view, executives need
to be objective about organizational capacity so
they can accomplish the impossible sometimes.
"Determine your capacity before you start," he
warns. And part of that capacity is your ability to
conduct normal business while you handle complex
changes. This is one of the overall recommendations
that come from these interviews.
Their Counsel: Ask Key Questions to Help Facilitate
Change
Many executives emphasized the lesson of asking the
right questions often and early. Before you start a
key change initiative, a best practice is to ask
both yourself and your organization:
1. Have you clearly defined your criteria for a
successful initiative? Will everyone know the
difference between installation and the realization
of the initiative?
2.
Are you and the rest of the executive team willing
and able to invest personally and often in the
success of the initiative?
3.
Have you: anticipated what resistance will surface?
Developed a strategy for building commitment?
Determined what impact the culture will have on
success?
4. Have you measured your capacity for change? Does
that capacity include your ability to change tires
while you are in motion?
Major change initiatives may strengthen or grow your
enterprise, but they can also cause extensive
disruption, added expense and user dissatisfaction
if not managed correctly. These preliminary
interview results show that the linchpin of
successful change is active executive involvement.
Success starts with asking the right questions and
insisting on answers. Senior executives need to
define success, stay actively involved, assemble the
right people with the right skill sets, and
realistically estimate their capacity for change.
When you decide to undertake change, these
executives would counsel that you need to ask these
questions and to demand answers. Only by learning
these hard-won lessons can you lead your enterprise
through major change initiatives that realize the
objectives you originally envisioned.
Copyright 2003 by the Meyer Group, All Rights
Reserved
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