CHANGE MANAGEMENT

When it comes to making changes in the business there are really two questions:

• What types of changes to you want to make?
• How do you make change really happen on the ground?

In some ways the first is actually the easier question to answer, with some general rules:

• Don’t forget the detail, but stay focused on the big picture – there will be a huge amount of detail and a wide variety of changes you may wish to put through. Don’t lose sight of these but ensure you remain focused on making the relatively small number of key strategic changes you want to make as quickly and as efficiently as possible so that the business is rolling forward on the track you want. You will have time later to deal with the rest as part of an ongoing business improvement process.

One way to prioritise actions is to use a matrix like the one below to plot your estimates of which actions will have the largest/fastest relative effects so that you can focus on the ones that will make a real difference.

• Focus on your long-term plan for the business – so for example if the long-term plan is to build and sell the business then you should have your exit strategy in mind in considering every change to the business.
• Don’t make unnecessary changes – don’t change the business name just to see your name in lights. You bought a business with an established market reputation so you have acquired all its investment over the years in advertising itself and getting its name recognised amongst its existing and potential customers. Why would you want to throw all this overboard just as you are at the most risky time for the business in terms of losing customers?
• No cost is too small to cut – it is worth reviewing all the overheads and suppliers for a number of reasons. Firstly this ensures that all the members of staff know that costs are going to be actively watched and managed. As well as establishing financial discipline generally, if it is known that the new boss is reviewing all purchase orders and asking awkward questions, this can make staff think twice about what they need to buy, which will help to reduce outflows in the initial phase.

But it’s also worth reviewing suppliers in general as many businesses are not good at purchasing and get into the habit of buying from the same suppliers without regularly tendering to check that they are getting the best price. Purchasing staff will also naturally build up personal relationships with suppliers and can as a result become unwilling to bargain hard or seek cheaper alternatives. In the worst cases these relationships can become actively corrupt with kickbacks that cost the business real money. So it is always worth undertaking a review of your key suppliers of both materials and services, as well as normal overheads such as utilities as a fresh and aggressive look may well enable you to make some quick cost savings.

• Avoid death by a thousand cuts – if you do have to make redundancies, it’s generally best practice to do it once, in order to get it over with. A drawn out process of redundancies saps employee morale as in this situation no member of staff knows whether their job is safe from day to day in which case the best employees are usually the most marketable ones. And you may well find that the employees you really wish to keep jump ship to your competitors, leaving you in the worst case with a demoralised workforce of poor performers.

If you are having difficulties in prioritising tasks or in thinking through the linkages between tasks and issues that will need to be addressed, try using the ‘sticky note consultancy’ approach:

• Buy a pack of different coloured sticky notes.
• Have members of staff brainstorm individually without discussion as many suggestions as possible regarding issues facing the business onto yellow sticky notes (if it helps you can set a target for a minimum number of suggestions). The suggestions can be single words or short sentences.
• As a separate exercise that can run alongside this approach and be referred back to the discussion as you go through it, try handing out different coloured sticky notes and asking each member of staff to answer the question, ‘If there was one thing I would change about this business to make it more successful it would be ...’
• Collect all the notes in, read them out to the group, and try to consolidate them into similar topics. Then use a different coloured note to summarise the subject of each topic into a single phrase.
• Taking each topic then discuss with the group the degree of impact that dealing with the issue will have and the ease and speed with which it can be dealt with, so that agreement is reached as to where the topic lies on the matrix shown above.
• Taking the high-impact high-speed segment as priority you should then be able to focus on a limited number of high-value priority projects on which you can then again brainstorm, each time using different coloured notes and grouping ideas generated into topics:
  • all the actions that can be taken in respect of these specific issues
  • all the blockages, difficulties or problems that might be associated with any of these actions
  • all the solutions to the blockages.
• Compare the actions that you generated through this exercise with the staff’s ideas as to the one thing they would change. Consider how the results compare and why.

For each project generated by this approach, appoint a champion with responsibility for delivery and have them use the material created to produce a project plan with a defined timeline and key milestones. This should then be published within the business, for example by being written out on a length of brown paper and posted up in the business, and updated by the champion so that staff can see when the milestones are achieved.

MANAGING PEOPLE AND THE PROCESS OF CHANGE

You have now set your business objectives, you have decided what changes are needed. Is this enough? Will the changes simply happen? Or not?

The answer is that unless you make them happen, there will be no changes. And making them happen can be difficult because there are many barriers to overcome, which tend to break down into the following major categories:

Or, in many cases, a combination of all three.

You will need to recognise that it is very difficult to change people’s beliefs. But by planning rewards and managing people you can significantly change their behaviours. And since it is their behaviours that actually have an impact on the business, this is what you want to focus on.

The overall approach to managing change is to:

• Take active steps to break old habits and introduce new ones.
• Provide clear objectives that are communicated to staff clearly so they know what they are.
• Give them role models that they can follow, people who live the behaviours that you want who are placed in very visible positions so everyone can see them. This, by the way, implies that the culture and behaviour of staff must become one of your key recruitment and promotion criteria as opposed to purely technical merit or other qualifications.
• Give meaningful, generous and very public rewards – financial and recognition, promotion and new work opportunities to people who show the required behaviour.
• Be consistent and keep the messages (e.g. ‘be customer focused’) and your policies (e.g. managing people to ensure that they are very compliant with detailed company rules and procedures) consistent with each other (so how does a member of staff know what to do if satisfying a customer complaint involves doing something that goes against company procedures?).

HOW CAN YOU MAKE CHANGE HAPPEN?

Existing habits are hard to break. Making change happen requires applying effort to overcome often deep-seated resistance to change, in order to break out of existing ways of doing things and create new healthier habits.

Creating effective change therefore usually entails going through a process as illustrated below:

Your staff can be reluctant to change for a wide variety of reasons:

• psychological – uncertainty, fear, disorientation (so change needs to be as swift as possible to avoid nagging doubt, but slow enough to bring everyone with it)
• personal attitudes and beliefs – ‘We cannot deliberately underquote in the initial stages of an assignment (like everyone else in the industry does) to get the work as it just isn’t right’
• group loyalty – the sales team may fight like cats and dogs but just watch them stick together if you try to put production in charge
• habit – ‘but we’ve always done it this way’
• politics – ‘not if Joe is going to be in charge’
• physiological – the new roster of 20 consecutive night shifts is unacceptable.

To unfreeze existing behaviour you therefore often need the heat of external pressure (a ‘burning platform’) before people will realise the need to move to a new position. But you cannot simply rely on external forces to provide sufficient pressures, as few of your staff will have a real immediate appreciation of your position.

You will therefore also need to signal major change and make it real by doing something that really makes people sit up and take notice.

‘Barnstorming ideas’ and shock tactics (and the messages they convey) can include:

• slaughtering sacred cows – everything in your business is potentially up for radical change
• killing something big – is there a large visible project that can be axed (without threatening future development)?
• clearing out non-performers – you cannot afford passengers
• breaking a blocker – if someone is actively blocking change, they cannot be allowed to win; either they are with the changes and where we are going or they are against us.

Obviously, if you can get your staff to want to change (’buy in’) they are obviously a lot easier to manage and motivate than if you need to force them to change. Unfortunately the management style required to get change to happen tends to be dictated by the degree of urgency and speed of response needed.

In the initial phases of a takeover, speed of change tends to be of the essence and periods of uncertainty have to be minimised. This tends to require a highly centralised and directive management style to deal with this phase, which then needs to evolve to a more empowering one allowing more autonomy and room for employee innovation and experimentation.

A compromise approach that can be very effective in empowering a team to direct a swift pace of change is the ‘weekend workshop’, where you get your line managers together as a group for a summit. There the team really thinks out, in a concentrated and intense atmosphere, what the situation is, what needs to happen, and who is going to do what. When this is done right, the team becomes a powerful committed force and never forgets, ‘Our twelve-hour day when we sorted out how we were going to really fix this business.’

You will need to give the team time to gel, however, as to become a team, the group has to go through a team building process of forming, storming, norming and performing as discussed in Chapter 3.

As you move through the process, the ways of effecting and fixing change will start with a very directive style of fixing new habits, by for example:

• issuing instructions; and then
• checking up every day for 21 days that the instruction is being followed that day.

By the end of three weeks:

• the new way of doing something will have become the new habit
• your staff will know that once something has been decided, they need to do it because there is no hiding place and you will not be going away.

You can then relax your enforcement and policing on this item significantly.

This approach is highly time consuming and your efforts will therefore need to be clearly prioritised, but in a small company which does not have a tier of strong operational management there really is little alternative but to be involved on site every day to make any changes stick.

Over time you can move to a more empowering mechanism for changing the culture using other skills to manage the culture:

• Walk the talk – leading by example.
• Shared values – including attitude as a basis for recruiting like-minded staff to reinforce the culture. Defining ‘antisocial behaviour’ (e.g. rudeness to customers, laziness) for ‘our culture’. If everyone is living the culture, the ‘antisocial’ can be dumped without remorse or protest.
• Training – the values of the organisation should be specified and incorporated into training and staff development.
• Rewards – reward employees who act the values.
• Value staff – treat them like winners and care.
• Celebrate success – identify wins (especially early quick ones), make success very visible (e.g. a bottle of champagne to people who achieve targets).
• Celebrate creative failures – better to try and not succeed than not to try at all, so long as the risk and downside of failure is limited.
• Cultivate identity – promote the values as part of your brand and make it real by way of uniforms, corporate colours, emblems and slogans (visit a Kwikfit).
• Customers first – make the job worthwhile.
• Tight culture, loose management – give staff discretion but within the bounds of a firm set of corporate values.

MANAGING AND MOTIVATING STAFF TO CHANGE

When managing staff it is important to recognise that your staff will have a variety of personality types and will be motivated by, and fear, different things.

Two types of employees – ‘round pegs’ and ‘square pegs’

You as an entrepreneur may be driven by success (and fear failure). Some of your staff may seek praise and recognition and fear rejection. Both you and these types of employees may often be quick to take decisions, and are restless, active and open for change (call them square pegs). Others of your staff, however, will value security and structured policies within which to work (’so they know where they stand’) and fear change, uncertainty or conflict (call them round pegs).

You therefore need to be careful in normal times that you manage your staff in a way that is appropriate to them. So your production staff may be round pegs, in the round holes of structured work and be managed in a round peg way (e.g. with detailed instructions on how to do their particular job). Your sales staff, however, will tend to be square pegs, in square holes, who need to be managed in a square peg way (e.g. with clear targets of sales to achieve and lots of praise for success).

This also means that you need to manage the way you go about changing things to match the needs of your staff:

Particularly with ‘round’ staff, managing change can be about building confidence in their ability to change. This is helped by:

• providing support through training and information
• building trust through two-way communication, avoidance of criticisms of the past, allowing failures, and appreciating that success may take time
• providing appropriate rewards.

Different motivations

Rewards are not always a simple matter of cash recognition. Different things motivate different people, and security, a feeling of being valued, or a team atmosphere can each be as important for some people, if not more so, than cash. You should therefore reward people in the way that is most motivating to them. So ask yourself:

• What reward structures do you have in place to encourage specific behaviours (by making it in your staffs interests to do what you want them to do), e.g. commission for salespeople?
• Do you understand what motivates your workers? Which of praise, security, power, excitement or cash will motivate which best?
• Have you identified which of your staff naturally tend to fill which team roles in a team (the new ideas person, the boss, the project manager, or the tidier up of loose ends)? Are you using them to their best advantage?
• Are there personality issues which are leading to conflicts (e.g., where the salesman who hates paperwork drives the production department up the wall because of failure to properly record and specify what the customer wants)? What are you doing to manage these sorts of issues?
• What is your natural management style? Direct (a spade is a spade, be it good or bad); influencing (lots of praise for good behaviour, coaching for bad); formal, by the book, with written memos, etc.? Does your style work equally well on everyone, or would it be more efficient for you to use different styles to manage different personality types?

Businesses run most efficiently:

• with round pegs in round holes
• when managers know who is round and who is square, and manage them in round and square ways appropriately
• by ensuring that systems mean that round and square individuals are used to complement each other and not to cause conflict.

This can best be achieved by using some basic psychometric tests to assess personality types and preferred team roles.

REDUNDANCIES

In some cases there may be no option but to make redundancies and if so you should consider in advance what the cost implications of these might be.

The cost of redundancies comprises a basic level of statutory payments, together with any contractual arrangements that are on top of this. The DTI publishes a guide which will allow you to calculate the statutory payments (which is available from www.dti.gov.uk/er/redundancy/payments-p1808.htm). Part of your due diligence exercise should be to obtain the required information for employee contracts to calculate redundancy costs in respect of each employee in case they are ever needed.

When making redundancies you will need to take care to meet current standards and legislation in respect of:

• consultation with employees
• grounds for redundancy
• selection of employees.

The consultation process

If you’re planning to make 20 or more redundancies from any one establishment, the employer has a statutory duty to consult a recognised trade union or in their absence, appropriate elected representatives of the affected employees. The greater the numbers of employees being made redundant the longer the period of consultation required.

The consultation process involves the provision of disclosure, giving:

• the reasons for the redundancies
• the number and descriptions of the employees that are to be made redundant
• the total number of each type of employee at the establishment in question
• the employer’s proposals for:
  • selecting the employees to go
  • carrying out the redundancies
  • timing of the redundancies
  • calculating any payments other than the statutory minimums.

The consultation must be conducted in good faith and include discussion as to any ways in which the redundancies can be avoided or minimised and the effects mitigated. Failure to conduct consultation in line with the legislation can mean that any dismissals will be deemed unfair and the company liable to pay a protective award to each redundant employee. And if a complaint is brought to an industrial tribunal it is up to the employer to prove that the relevant rules have been satisfied.

It is best therefore to obtain up-to-date advice from your solicitor or a specialist firm of employment advisers such as Peninsula (www.peninsula-uk.com).

Since employees generally have the right to bring a case to an employment tribunal within six months of dismissal at little or no cost to themselves there is always a risk that, even having followed all appropriate procedures, the company may still find a claim being made.

One way of avoiding this is by use of a compromise agreement where under a contract the employee agrees to give up their rights to bring such a claim, in return for some consideration. For such an agreement to be effective the employee must have taken independent legal advice, and it is normal for the employer to agree to pay for a solicitor to advise the employee on the agreement.