Wednesday, February 6, 2013

Strategic Planning Analogy #488: Two Stories on Change Management

Turning a strategy into reality often requires significant change from the status quo. Unfortunately, whenever change is asked for, resistance will occur. If this resistance is not dealt with, the strategy implementation can fail.

In most cases, you should be able to come up with compelling arguments as to why the change is right and necessary. After all, if you cannot come up with compelling arguments, perhaps your change strategy isn’t as good as you thought it was.

But even when the argument is compelling, sometimes the resistance can be strong, particularly if particular groups feel especially threatened by the change. Just think about how strongly the unions in the US have reacted in recent year when state and local governments tried to come up with new solutions to fix the underfunded pensions for government employees. A change is clearly needed, but any change is being aggressively resisted. 

So the question becomes, what does one do when logic and reason will not sway the resisters.  The following are two options.


Option #1 Story

I’m sure most of you have heard the story of the frog in the pot of water. When scientists put a frog into a pot of boiling water, the frog will immediately sense danger and jump out of the pot.  However, when scientists put the frog into a pot of room temperature water, the the frog will stay in the water. And if you head the water slowly enough, the frog will not sense the danger and will remain in the water even as it approaches boiling. The frogs end up dying in that boiling water without jumping, because the change was too gradual for them to notice.

Option #1 Analogy
Like the frog who jumps when thrust into boiling water, people resist when they sense a large imminent threat. The way to keep the frog from resisting was to slow down the change to a pace that was imperceptible. That pace of change was so gradual that the frog did not realize it was eventually being boiled to death. So it did not resist.

In a similar fashion, if you make the timing of your changes gradual enough, you may be able to implement the entire change program over time without resistance. The idea is to package each change initiative in a bundle which is too small to trigger massive resistance. The change is slow and evolutionary. And if you have the luxury of time, this can be an effective tool.

As an example, look at the packaged food industry.  There are many reasons why it could be in the interest of these companies to convert their food products to a more nutritious formulation (less salt and fat). After all, there is the threat of governments creating “fat taxes” to punish non-nutritious foods. Or the governments could ban certain food formulations. Or public interest groups could file massive class-action lawsuits against companies deemed as harming the public through “unhealthy” formulations. The past experience of the tobacco industry in the US could eventually hit the food industry, if they do not change.

Unfortunately, if these companies make massive changes to their formulations, they can turn off their customer base who preferred the old formula. Radical formulation changes like “New Coke” almost ruined the brand.

One alternative is to make a series of small formulation changes over time, making them too small to notice or create an uproar. Then, over time enough salt and fat can be removed from the formula to remove some of the long-term threats mentioned earlier.  And because the taste changed so gradually, the customers were able to adapt without much resistance.  This is the strategy used by many food companies.

Another example of this evolutionary approach is to create change via attrition.  Treat current employees different from new employees.  Over time, the new employees (and their employment relationship) will replace the old in a peaceful manner.  Or gradually fire those executives who resist change and replace them with executives who embrace the change.


Option #2 Story

In 1519, when Spanish Conquistador Hernando Cortez landed in Mexico, one of the first orders he gave to his men was to burn the ships. Cortez was committed to his mission of capturing the treasure in the hands of the Aztecs. Cortez did not want to allow himself or his men the option of quickly giving up and going back to Spain. By burning the ships, he removed this option, and his men were forced to focus on how they could make the mission to capture the wealth of the New World successful.

Option #2 Analogy
If you don’t want your people to resist change by retreating to the status quo, you can stop that by eliminating that option. When Cortez burned the ships, he took away the ability to retreat. So the only option was to move forward.  You can do the same.

For example, if you sell or shut down the status quo business, then you cannot go back.  GE has a long history of selling off the businesses in industries no longer important to its strategy.  Once the business is sold, it’s very difficult to go back. 

Other companies set up the new strategy under a new legal structure.  The people transferred to the new strategy are now employees in the new legal structure and it becomes extremely difficult to get “rehired” back into the old legal structure. In essence, that pathway has been burned. You have to make the new strategy work or you are unemployed.

This second, more revolutionary approach is ideal when you do not have the luxury of time and when the transformation in front of you is rather daunting. The arguments for resisting go away, because even if the resisters could win the argument, it is a moot point. There is nothing to go back to. The option is burned. 

These two options seem rather extreme. This may create a desire to try something half-way in-between.  The in-between approach, however, may be the worst option.  If you speed up the transformation into larger, more painful chunks AND provide a path back to the status quo, you have the worst of all worlds:

1.      Irritated Resisters; and
2.      A way for the Irritated Resisters to regain control and take the company back.

No, the extremes are better.

When the normal process of change management does not appear to be an option, there are two other, more extreme alternatives.  The evolutionary approach is to slow down the change and make it evolve at a pace where each step of change is below the level that would create significant resistance.  The revolutionary approach is to abruptly eliminate the option to stay in place, so that the only option is to move forward. The worst alternative is to take a middle position, as it gives resisters both the motivation to resist and a pathway back to the status quo.

These extreme options may not be ideal, but they may need to be considered when normal approaches appear to be unworkable.

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