CHAPTER 4

Lead change

“Most of us are about as eager to be changed as we were to be born, and go through our changes in a similar state of shock.”¹

—JAMES A. BALDWIN

Ask any businessperson to name a superstar CEO, and Jack Welch’s name is likely to be one of the first mentioned. He became the chairman and CEO of General Electric in 1981 and held that position for two decades. During his tenure, GE’s sales increased fourfold, and its market capitalization increased from $13 billion to several hundred billion!² Those are two of the reasons why, in 1999, Fortune magazine named him “Manager of the Century.”³

Getting his leaders to change by facing reality was one of the hallmarks of Welch’s early years as CEO. He did that by telling and retelling the story of his first successful reality check, described in his book Jack: Straight from the Gut.⁴

In his first year as CEO, he was on a field visit to GE’s nuclear reactor business in San Jose, California. The leadership presented a rosy plan that assumed orders for three new reactors a year. Looking backward, that was a reasonable assumption, since GE had been selling three or four reactors a year since the 1970s. But the year was now 1981, just two years after the Three Mile Island nuclear disaster in Pennsylvania. What little public support there was for nuclear energy had vanished. And GE hadn’t received a single new order in the two years since.

Jack listened politely for a while and then dropped a bombshell. “Guys, you’re not going to get three orders a year. In my opinion, you’ll never get another order for a nuclear reactor in the U.S.” He told them they should figure out how to make a business out of selling nuclear fuel and services to the 72 active reactors they already built.

They were shocked. They argued that if they took those orders out of the plan, it would kill morale, and they’d never be able to mobilize the business again when the orders came back. Jack didn’t buy it. GE restaffed the business to focus on a service model and grew earnings from $14 million to $116 million in just two years. When Jack retired 20 years later, the company still hadn’t gotten a single new order for a nuclear reactor in the United States.

The first obstacle to change is getting people to accept that change is needed. Delivering a sobering “reality check” like Jack Welch did is one way to do that. This story teaches that as a leader you need to do likewise in your organization. But it has another use as well. Telling this story prior to delivering your reality check is a good way to prime your audience to accept and appreciate being dealt the eye-opening truth you’re about to deliver: “GE never did get another order for a nuclear reactor. And the reality for us is, we can’t expect another year of currency fluctuations to prop up our bottom line” (or whatever your reality check is).

* * *

Accepting the need for change is not the only barrier you’ll run into in trying to lead change. Even when people agree that change is necessary, human beings are still creatures of habit. Change is an unwelcome visitor. What is it about change that’s so unattractive? The following story from Seattle-based author and workshop leader Evelyn Clark offers a telling insight to the cause of and cure for human resistance to change.

Evelyn learned one of her biggest lessons about managing change during a retreat she was leading for a corporate client on the West Coast. The client was about to go through an enormous change. Previously, the job of the inside sales department was to wait for the phone to ring and process orders from whomever was on the other end of the line. But as any businessperson knows, that’s not sales. That’s taking orders. The new plan was for them to become a real sales department—to start placing proactive, outbound sales calls to generate more customers and more revenue. The call center staff was paralyzed with fear. The retreat was designed to find ways the sales managers could help them overcome that fear. Evelyn asked the participants to get up in front of the group and tell personal stories about change. What had they learned from their own experience about managing change in their work and personal lives? She believes telling stories of personal experiences helps people find creative solutions to business challenges. One participant told a particularly insightful story about his twin six-year-old boys that proved Evelyn’s theory.

As any parent knows, riding the school bus without Mom or Dad is scary enough for a first grader. But finding the way from the classroom to the bus at 3:30 by themselves is even more intimidating. There are so many buses! And they all look the same. His six-year-olds spent most of the school year getting comfortable with their exact route and pickup point every day. Then one day they were told their pickup spot was going to change. In the days leading up to the big switch, it became evident that one of the twins was very concerned, while the other seemed unaffected. Apparently, the new pickup spot was just outside one boy’s classroom. He could see it from the window. But for the other boy, in a different classroom, the pickup spot was even farther away, and in a different direction.

The night before the big day, shortly after bedtime, Dad noticed one child sleeping soundly, while the other was restless. He got his nervous little boy out of bed and asked him what was wrong. “I don’t know what I’m going to do, Daddy.” So Dad dressed the little boy up in his school clothes already laid out for the next day, and they went on an imaginary journey. “Pretend you’re in class, and the teacher says it’s time to go. Walk out that door and show me which way you’re going to turn.” The little one did as Dad asked. “Now, let’s practice walking down the hall and across the parking lot to the pickup spot.” Two good attempts convinced both father and child that all was well.

“Now, who else in your class rides the same bus with you?”

“Johnny B. does.”

“Okay, then you pretend I’m Johnny B. You practice asking me if it’s okay if you follow me to the bus.” After two or three attempts, the boy found a comfortable way to ask. Now he had a plan B. After a few more words of reassurance, Dad tucked his confident young man in bed, and he fell right to sleep.

What Dad realized—as did Evelyn’s entire class from that story—was that people, even children, aren’t really afraid of change. They’re afraid of not being prepared for the change. Telling this story is helpful for an organization going through change in two ways. First, for the people in charge of the change, it’s a reminder of how important it is to provide enough coaching and training so everyone can navigate the change with confidence and success. Second, and probably less obvious, is that this story provides comfort and motivation to those going through the change. It tells them that their fear is really about their own preparedness, not the change itself. The harder they work to prepare for the change, the more their fear will abate. They’ll be more likely to attend the training classes, ask probing questions, and generally take ownership for their own preparation.

Everyone knows getting trained can help you be more successful. But some people are comfortable with their current level of success, so they might not be motivated to train too intently. But if they recognize that being better prepared can also help them avoid weeks of paranoia and sleep loss and fear, even the most apathetic of employees will be highly motivated to prepare.

* * *

The previous two stories help address mental and emotional barriers to change. The first helps your audience recognize and accept the rational need for change. The second gives both leader and employee emotional motivation to prepare for change. A third option is to change the environment so it’s difficult or impossible not to change. Done well, this method can be more effective than the other two combined. The following story is a simple but effective example.

Last year, file retention day was in May. The antitrust policy refresher course was in April. And sexual harassment training was in January. Each month, there seems to be at least one day dedicated to reminding employees of one corporate policy or another. This month, it was clean desk policy, which requires everyone to lock up any documents you wouldn’t want competitors to see. In other words, everything!

During their monthly meeting, the leadership team discussed ways to increase compliance with the clean desk policy, starting with a debate over where the biggest violations were. Since most people were good about locking up their desk drawers each night, they concluded the most violations probably came from documents left on the printers overnight. The vice presidents and directors took turns offering up ideas. One suggested writing a memo for the president to send out explaining why it’s so important to lock everything up. Another idea was to hold a contest for the “cleanest” department, or maybe audit the floor one night a month and offer a prize to anyone who passed inspection 12 months in a row.

When it was Martin Hettich’s turn to speak, he offered something very different. Over the phone from his office in Panama, he explained that last year his business unit was trying desperately to cut expenses. Someone decided they were spending too much money on printer paper. The solution was to charge each department based on the number of sheets its employees used. But since everybody used the same network printers in the middle of each floor, they needed a convenient way to monitor usage. Here’s what they came up with. Once you click the print button on your computer, you go to the printer and type in your employee number on the printer keypad. Then it would print out your document and send a charge to your budget. When people started getting billed for their paper, usage did go down, but only slightly—probably not enough to warrant the hassle this process created.

But there was an unexpected consequence of that policy, too, which turned out to be even more valuable than the money saved. The incidence of documents left out on printers overnight dropped practically to zero. It turned out that the main reason documents were left out wasn’t that people were too lazy to get them right away. It was because they just forgot about them after they clicked the print button. Now it didn’t matter if they forgot for a day or two. Their document wouldn’t print until they walked to the printer and typed in their employee number. Once they did that, they would just stand there and wait for it to finish printing and take it with them. They certainly didn’t want to walk to the printer twice for each document.

Problem solved.

Compare that solution to the other suggested options. First, the mental one—having the president send out a memo explaining why it’s so important to lock things up. Certainly some percentage of the employees would find that rationale compelling and would change their behavior. But many would remain unmoved. Option two was the emotional one—appealing to their sense of pride by offering prizes and recognition to anyone who complied. That might also win some converts, but not everyone. But Martin’s solution worked on just about everyone. It’s an example of what Chip Heath and Dan Heath call “clearing the path.” In their bestselling book Switch: How to Change Things When Change Is Hard,⁵ they discuss several deceptively simple ways to manage organizational change. One of them is exactly what Martin Hettich did.

Instead of using rational or emotional appeals, change the environment so it’s difficult or impossible not to change. In Switch, the authors offer a highly recognizable example for anyone who works in manufacturing—the secondary safety button. “Many factories use dangerous machines that have a bad habit of lopping off fingers or hands that are in the wrong place at the wrong time.” The solution is to design the machines so they can be operated only if two buttons are pressed at the same time—the main button, and the secondary. The second button is located far enough away from the main button that you have to use both hands to press them at the same time. If your hands are pressing both buttons when the machine is operating, by design neither one can be in the danger zone at the wrong moment. They offer other similar examples, such as ATM machines that make you remove your card before you get your cash, and cars that won’t shift out of park unless your foot is on the brake.

The bottom line is, rather than appealing to your employees’ hearts and minds, take the uncertainty out of your change leadership strategy. Make it impossible for them not to change. The next time your organization is facing a major change, tell Martin’s story to your leadership team. Then spend some time coming up with ideas to clear the path for your employees. If done well, you’ll get great compliance to the change, and without any fingers getting lopped off.

* * *

So you’ve convinced your team that change is necessary, they’re all well prepared for the change, and you’ve arranged the work environment so the path to change is unobstructed. Surely nothing can go wrong now. You’ve done everything, right?

Wrong. Murphy’s law knows no foreign lands. Unexpected barriers to change will always pop up. How you respond to them will determine your ultimate success or failure. A good leader navigates the obstacle and minimizes its impact on the organization. But a great leader turns those barriers into agents for change, as the following story illustrates.

In early 2001, the stock market was still reeling from the dot-com bubble and burst a few months earlier. The economy was uncertain, and even many traditional companies were in turbulent times. P&G was one of them. It had been less than a year since the company’s stock had lost nearly 40 percent of its value in a single week of trading. The business press was quickly losing its love affair with Internet start-ups and returning its interest to conventional businesses. So BusinessWeek decided to do a story on what went wrong with P&G.

After asking for an interview with a P&G official, BusinessWeek was offered Tarang Amin, the newly appointed marketing director of P&G’s Bounty paper towel franchise. The brand had just finished a tough year. Tarang represented a fresh and unbiased pair of eyes to talk about Bounty’s history and plans. A few uneventful weeks went by after the interview while the reporter continued researching the article.

On March 12, 2001, the article hit the newsstands, and Tarang got his first look. The title was “Can Procter & Gamble Clean Up Its Act?” The first sentence said, “For a glimpse of the daunting task facing P&G’s chief executive, look no farther than the paper towel aisle.” That first line hit Tarang right between the eyes. The article stated that Bounty had lost more market share in the past year than any of P&G’s top brands. It went on to outline an opinion of everything the brand had done wrong in humbling detail: getting beat on product and cost innovation by its competitors, cutting its advertising spending, raising prices too much, and cutting back its in-store sales force. The article even accused P&G of rotating through brand managers too quickly.

Tarang was crestfallen. Although he was expecting a negative article, the story was much worse than he had thought. It would surely disappoint and possibly even embarrass the hundreds of employees who work to make and market the Bounty brand. More importantly, having it come out while they were in the middle of the turnaround risked undermining the plan and having people lose confidence in what they were doing. His only hope was that nobody would read the article and it would just pass over unnoticed. That hope was dashed when he arrived home at the end of the day and stepped out of his car. His next-door neighbor yelled over the hedge, “Hey, Tarang, that was a terrible article about you today, huh?”

That evening, as Tarang mulled over the article, he thought about writing a letter to the editor to complain about some of the facts that maybe weren’t quite right, or statements that seemed out of context. But he thought better of it. The thought of going to work the next day and facing his teammates was overwhelming. What he really wanted to do was bury his head in the sand and pretend none of it ever happened. What he did instead was to write a memo to everyone on the team, which he titled “Bounty BusinessWeek Article—My Perspective.” In it, Tarang admitted he was originally disappointed in the article, knowing how hard everyone on the brand had been working in the past year to put the business back on track. Yet, he had to admit, many of the points in the article were correct. For example, “We did let our price get out of target range,” and some of “our key innovations didn’t make it to market.” In fact, several of the points laid out in the article were exactly what the brand had identified itself in defining its new strategy to return to growth.

Therefore, rather than get defensive, Tarang insisted people view this article as reinforcement that they knew exactly what their issues were and how to fix them. He reminded them of their plans to return to innovation leadership, and that they had already lowered Bounty’s price to be more competitive. He concluded the memo by restating his confidence in the people and plans and his aspiration to make their great brand even greater in the year ahead.

Tarang’s memo quickly circulated around the building, at first among Bounty team members but soon to other teams. His general manager sent it to the most senior executives in the company, many of whom forwarded it to people on their brands as well. Their purpose in sharing it broadly was primarily to give a response to the questions on everyone’s mind, “What does management think about this article and what are we doing about Bounty’s situation?” It answered both those questions brilliantly. But it did something even more important, I think. It showed business leaders how to turn a demoralizing event into a critical agent of change. Over the next few months, and even years, that BusinessWeek article—and Tarang’s response—would get pulled back out of the file drawers. They served as a rallying cry for change. In the decade since that article was published, Bounty’s market share has grown 10 points, to 46 percent, and the brand’s sales have grown by two-thirds.

Today, as CEO of Schiff Nutrition International, Tarang Amin tells that story to colleagues when they’re going through a tough or embarrassing situation and they want to hide under a rock. The lesson they learn is to not hide from it. Instead, publicize it. Turn it to their advantage. Use it as a tool for change and galvanize the organization around it.

SUMMARY AND EXERCISES

1.  The first step to change is getting people to admit change is needed. Delivering a “reality check” like Jack Welch usually works. Tell Jack’s story of the nuclear reactors; then deliver your own reality check.

2.  People aren’t afraid of change. They’re afraid of not being prepared for it. Prepare them. And when you do, tell them the story of the “twin boys at the bus stop” so they can take comfort that their trepidation is only because they aren’t prepared yet. After the training you give them, they know they will be.

3.  Change the environment so it’s nearly impossible not to change. Use these examples as inspiration to help you think of a way to do that with the change you’re leading: Martin’s printer codes, the secondary safety button, ATM machines, shift lock on a car’s gearshift.

4.  Barriers to change will pop up. Instead of ignoring or hiding them, turn them into change agents. An example is the BusinessWeek article on Bounty.

Notes

1.  Larry Chang, Wisdom for the Soul: Five Millennia of Prescriptions for Spiritual Healing (Washington, DC: Gnosophia Publishers, 2006), p. 114.

2.  “Past Leaders: Jack Welch,” General Electric company website: http://www.ge.com/company/history/bios/john_welch.html.

3.  “Fortune—GE’s Jack Welch Named Manager of the Century” (April 26, 1999). Timewarner.com. Retrieved July 12, 2010.

4.  Jack Welch, Jack: Straight from the Gut (New York: Warner Business Books, 2001), pp. 100–103.

5.  Chip Heath and Dan Heath, Switch: How to Change Things When Change Is Hard (New York: Crown Business, 2010).