Raising Awareness

You’ll need to pierce through the denial and get everyone in the organization focused on preventing emerging problems from becoming much more serious. The following principles can help you alter the collective consciousness.

Emphasize facts over opinions. You can change the shade of your company’s culture from rose-colored to black and white simply by putting more emphasis on fact-based management and root-cause analysis. For instance, in Stefan’s early operational review meetings in North America, he and his team drilled down into issues where opinions were not backed up by facts. In those sessions, Stefan didn’t punish people for not having all the answers to his questions; instead, he firmly required that they go out and do some research to support or disprove their statements. His mantra was not “bring me answers, not problems”—a dangerous philosophy that can give team members a handy excuse for not raising tough issues. Rather, Stefan preached informed intervention: “Bring up issues early, and come prepared to talk about how you’ll diagnose root causes and begin to deal with them.”

Shift the focus outward. In realignments, it’s common for organizations to have become inwardly focused—relying solely on internal process performance benchmarks. To counter this, you’ll want to start bringing the outside world in, as much as possible. That might mean engaging in explicit benchmarking within your industry or even across industries. Stefan introduced explicit external benchmarking into the conversation at Careco’s North American manufacturing operations. He commissioned studies comparing the company’s manufacturing numbers and customer satisfaction scores with those across the industry. The studies revealed his organization was in the bottom quartile, which provided a big wake-up call.

Recruit others to help educate your people. As a new leader, you obviously need to force the people in the company or unit you’re joining to confront reality, but it’s always dangerous to be the sole source of pain in a group—you run the risk of becoming the main target for an attack from the organization’s immune system. One way to avoid this is to bring in outside voices—customers, suppliers, or even respected leaders from other parts of the business—to help say the things some people might not want to hear. Stefan greatly enhanced his efforts to raise organizational awareness about slack performance by bringing in impartial assessments from respected business consultants, drawing on expert voices from outside the company to help make his case.

Elevate the champions. More so than firms in need of a turnaround, companies requiring some sort of realignment typically still have a fairly strong pool of executive talent. So a powerful way to send a message to employees about the need for change is to elevate those people who exemplify the type of thinking you believe is necessary to lead the organization into the future. For instance, Stefan knew he’d have to make a few high-payoff changes within his team. Specifically, a few of the central positions in manufacturing required leaders with strong technical skills to support the systems changes he planned to make. Instead of looking outside for that expertise, however, Stefan promoted from within. People came to see that he wasn’t just focusing on the weaknesses of the business; he was also appreciative of its strengths.

Remove the blockers. Sometimes there is no substitute for the ritual sacrifice of an implacable opponent. In Stefan’s case, there was an influential manager in the North American supply chain operations who, despite Stefan’s best efforts, didn’t grasp the need for change; in fact, the manager’s inaction threatened to undermine Stefan’s plans and attempts to establish his leadership. That person’s departure sent a very important message to the rest of the organization.

Changing Attitudes and Behaviors

Research on human motivation has shown that the relationship between people’s attitudes and their behaviors is complex and bidirectional.¹ Changes in attitudes do lead to persistent changes in behavior—but the reverse also is true, and often the effect is greater. That is, if you can get people to act differently, it will lead them to think differently. Research suggests that people are uncomfortable when there’s a mismatch between their actions and their beliefs, so they inevitably correct for it, aligning what they think with what they do. Therefore, it’s critical for new leaders in realignment situations to focus initially on altering behaviors, understanding that attitudes will change over time. The following principles can help.

Engage people in shared diagnosis. If you gather people to work on a problem, they go in with certain assumptions—namely, that there is a problem. If you gather people to generally explore or diagnose a business situation, they don’t feel forced to reach conclusions about possible solutions, or about the depth of transformation needed, until they are prepared to so do. I call this an “entanglement strategy.”² You move people from point A to point B in a set of digestible steps rather than in a single leap. Stefan did this by setting up teams to focus on specific elements of performance across the supply chain rather than discrete “problem” areas. To lead the teams, he appointed people from each of the four operations segments whom he knew to be influential but who didn’t necessarily agree with him. As a result attention was focused on key handoffs between silos.

Change the metrics. People evaluate their performance according to a company’s or unit’s established metrics—for instance, number of products sold, amount of revenues earned, or number of satisfied customers. If you change those measures, you’ll inevitably change people’s behaviors (hence influencing their attitudes). The important point to note here, however, is that any change in metrics must be viewed by the team as necessary and legitimate. For instance, Stefan created a new, compact set of core metrics at Careco, shifting the emphasis from lagging indicators to leading ones. In this way, he was able to focus his team’s attention on overall supply-chain performance, rather than discrete, functional outcomes. And by shifting the group’s attention toward predictors of future problems, he ultimately affected how team members allocated their time.

Align incentives. If you reward people (through recognition, status, and advancement) for fighting fires, you shouldn’t be surprised if you end up with an organization of pyromaniacs. To get people more interested in preventing predictable surprises, Stefan had to get them moving in the same direction—providing positive incentives for avoiding fires and less-positive incentives for fighting them. This basic principle also extends to dealing with conflicts between units in your organization. You could easily attribute these tensions to mutual mistrust between groups or differences in personality. Most of these conflicts, however, are the result of differing incentives. To increase the peace among the supply chain units, and to reduce finger-pointing among team members, Stefan established “team incentives” directly linked to the new set of supply-chain metrics he had introduced. Initially, team members complained about being held accountable for others’ mistakes. Over time, however, they started helping one another. As their behaviors changed, so did their attitudes about the new setup of the supply-chain organization.

Build bridges from the past to the future. In realignment situations, where things haven’t completely broken down yet, it makes sense to build on the organization’s strengths in order to fix its weaknesses. This means building bridges (from where people are to where they need to be) rather than just jettisoning people and ideas. To kick-start the transformation process, for example, Stefan convened Careco’s top 150 supply chain managers in a series of sessions in which they collectively examined the company’s core systems, skills, and culture. They were challenged to identify strengths that could be leveraged and weaknesses that should be addressed. Among the cultural strengths the participants identified were deeply held values around both teamwork and responsiveness. The corresponding cultural weaknesses were tendencies to ignore problems until they became very serious and to engage in too much firefighting. Armed with this insight, Stefan and the managers were able to have progressive discussions about how to preserve the productive elements of the culture while uprooting the dysfunctional ones.

Secure and celebrate early wins. When you’re trying to change behaviors and attitudes in a realignment situation, it’s critical to achieve momentum—generating movement in promising directions and leveraging small gains to accomplish still more. So the instant you achieve some significant, measurable progress, you should declare (interim) victory and celebrate. This provides both visible acknowledgment that early efforts are beginning to bear fruit and an opportunity to recognize specific individual and team efforts that exemplify “right thinking.”

Heroes and Stewards

In organizational turnarounds, leaders are often dealing with people who are hungry for hope, vision, and direction—which necessitates a heroic style of leadership, charging against the enemy, sword in hand. People line up behind the hero in times of trouble and take direction. Clearly, this was the case for Stefan in Europe. A heroic leader by nature, he immediately took charge, set a course, and made some very painful calls. Because the outlook was bleak, people in the business were willing to act on his directives without offering much resistance.

Organizational realignments, by contrast, demand something from leaders more akin to stewardship—a more diplomatic and less ego-driven approach that entails building consensus around the need for change. Stewards are more patient and systematic than heroes in deciding which people, processes, and other resources to preserve and which to discard.

Accomplished heroes and stewards share many important attributes: they are typically grounded in basic values that people admire, such as a strong work ethic and a sense of fair play. Both types of leaders are perceived as committed to solving their organizations’ problems. They challenge others (and themselves) to achieve the highest possible performance. They clearly communicate what needs to be done, forge connections with the people who work with them, and courageously pursue needed change. (See the graphic summary in figure 7-2.)

But, depending on context, heroes and stewards also need to exhibit fundamental differences in their approaches to leading change. What if Stefan approached his new role in North America as “Stefan the Knife,” and tried to set a new direction and make painful changes using the same heroic strategies that made him successful in Europe? Chances are great that his ideas (and even the man himself) would be rebuffed, particularly because he’s coming from the outside: a foreign organism that triggers a powerful reaction from the organization’s immune system. The result could be disabling, or even fatal, to his ambitions. So the natural hero must, when confronted with a realignment situation, tap into his inner steward. In his North American appointment, for instance, Stefan needed to make careful assessments of the situation, move more deliberately toward change, and lay the foundations for sustainable success.

Conversely, leaders who are more naturally stewards can struggle in turnaround situations. People in crisis are hungry for hope and direction, not necessarily for involvement and consensus. The situation usually calls for quick action, not systematic deliberations and discussions about shared visions and support. So the natural steward must, when confronted with a turnaround situation, tap into her inner hero—critically, while still preserving the basic management skills and approaches that have made her so effective as a leader.

Building Complementary Teams

While you’ll need to adapt elements of your leadership style to the business situation you face in your role, you obviously can’t be something you’re not. There are, after all, limits to leadership alchemy; and whether you are a hero or a steward, you won’t easily be able to tear down and then rebuild the foundations of your personal leadership style.

What you can adjust, at least to some degree, are particular aspects of your basic leadership approach. For instance, how do you learn in new situations? In the European turnaround situation, Stefan needed to rapidly assess the organization’s technical dimensions—its strategy, competitors, products, markets, and technologies—much as a consultant would. In the North American realignment situation, however, Stefan’s learning challenge was markedly different. Technical comprehension was still important, obviously, but cultural and political learning mattered more. Internal dynamics are usually one of the root causes when successful organizations begin to drift toward trouble—and getting people to acknowledge the need for change is much more a political challenge than a technical one. Particularly for a newcomer to the organization, as Stefan was, a deep understanding of the culture and politics is a prerequisite for leadership success—and even survival.

Moreover, you should seek out team members whose skills and styles complement your own. If you are reflexively a hero but the situation you are in demands more stewardship, you should identify those people in the organization for whom stewardship is more of a natural role. Indeed, at the core of all great leadership teams are two or three executives who exhibit the right mix of heroism and stewardship—taking the pressure off any one to play multiple roles. The steward helps to curb the worst impulses of the hero: impulsivity, micromanagement, and, in the extreme, narcissism. Meanwhile, the hero can counteract the steward’s tendencies toward risk aversion and perhaps too much consultation and consensus building.

The roles each leader will play are likely to be obvious, based on individuals’ tendencies, but the mix of styles necessary will change as the business situation does. In the crisis management phase of a turnaround, for instance, there is obviously a need for directive, heroic leadership. But once things have stabilized, the senior team will want to quickly cast its focus forward, toward tasks such as building leadership capacity in the organization—the work of stewards. Likewise, once the deliberations have been held and diagnoses discussed, every realignment scenario will have initiatives and programs that will demand bold and decisive action—work that calls out for a hero (or two).