Chapter 3
Set Expectations and Decide Where to Start
Transformational change always involves uncharted territory. The end goal—the benefit that change will bring—serves as your North Star, but there are many unknown coordinates along the way. As a result, a change leader needs to be comfortable with getting lost. She needs to be able to get her bearings quickly, make the needed course corrections, get the team's buy-in, and then move everyone in that direction.
No one is more comfortable with getting lost than a nearsighted person with uncorrected vision, which, as I've mentioned, was me until age 16. I couldn't see signs until I got right up to them. When going somewhere new, I'd leave two hours early just in case I missed the bus or got on the wrong one. I carefully watched the people around me, and I was never shy about asking where I was, where we were going, and what the next stop was. When I did get lost, I didn't freak out, because it was already part of the plan. It happened a lot, and I knew how to deal with it. Little did I know I was building executive management skills.
But it can't only be you who's comfortable with getting lost. You have to prepare every other stakeholder for that moment as well. If your team isn't prepared, they're eventually going to be making decisions in a state of panic, or worse, ignoring problems and hiding them from leadership.
Your bosses need preparing. At the beginning of every change initiative, you, as the leader, have to give preliminary estimates on how long it will take and how much it will cost. I've found that regardless of how much you put caveats on the dollars and dates, the initial numbers are the ones executive management will remember. That's why it's absolutely critical that you set expectations around the probability of hitting those estimates.
Typical project management methodologies look to ease this uncertainty via “risk management.” You're supposed to identify all of the potential risks up front, and then find ways to mitigate them. Sound nice, but guess what? It's impossible. The only thing you can control is how you, your team, and the executive management respond when the unexpected occurs, or when the expected occurs but differently than you anticipated. There is no way to identify and correctly assess all of the risks, especially with transformational change. There are too many unknowns. A traditional risk-management approach implies that you have your arms around the risks and have them under control. In other words, it sets exactly the wrong expectation.
A better approach is to make it clear to everyone up front that getting lost—losing control—is bound to happen. To ground everyone in this idea, I developed the Getting Lost with Confidence Matrix (see Figure 3.1). It helps people understand why we will get lost, the probability of it happening, and how we'll navigate our way back when the project loses its bearings.
Figure 3.1 Getting Lost with Confidence Matrix: Factors and Probability.
A Tour of the Matrix
The matrix identifies the two key factors—culture and infrastructure—that are involved in every change. Cultural changes are initiatives that affect the priorities, politics, and people within an organization. Infrastructure changes are those that affect the underlying processes and physical structures (buildings, factories, warehouses, data centers, computer systems, hardware, etc.) that provide the foundation for the culture.
The matrix shows the degree to which the culture (the y axis) and the infrastructure (the x axis) are affected based on the type of change. Where various initiatives sit on those axes tells us the type of change we're looking at and how likely it is we'll get lost. Understanding the type of change is not only important for setting expectations, but also for decision making—namely, where to start the process of change.
Incremental Change
Let's start with the easiest change: incremental change, in quadrant 3. This type of change has little impact on the culture or infrastructure. These are tweaks and small enhancements, and these are the only types of changes you see in the three dysfunctional organizational cultures I described earlier: the PowerPoint mafia, the firehouse, and the thumb-suckers.
Quadrant 3 changes are all within the existing mental and physical walls of the organization, such as process improvement initiatives in which existing processes are streamlined. Because there are essentially no unknowns with this type of change, the probability of getting lost is very low, less than 10 percent. There's benefit to incremental change, but no sustainable competitive advantage. Polaroid is a great example: The company was attracting attention for their process improvement initiatives even as the company went south. The photography industry transformed, and Polaroid's incremental changes were not enough to save it.
Transformational Change
Transformational changes fall in quadrant 1. This type of change is the direct opposite of incremental change. It involves significant changes to the culture and infrastructure. There are a lot of unknowns, and the probability of getting lost is 100 percent. Even with those odds, transformational change is worth the journey because it results in sustainable competitive advantage. Think of IBM and Xerox becoming service businesses, for example. Or think of Apple, Amazon, Quicken, and SalesForce.com, and the change they wrought on their entire industries.
While incremental change happens within existing walls, transformational change tears them down. Typically these changes make it easier for the company to connect with its customers, suppliers, and employees.
The politics of transformational change are dramatic because you're making fundamental changes to both culture and infrastructure. Silos are broken down and kingdoms fall with them. As a result, the “kings” resist or look to stop the change. Others may agree that transformational change is needed, but they disagree about how it should be done.
Transitional Change
If we land in quadrant 4, we're looking at transitional change. This type of change sets the stage for a transformational change. It involves a significant degree of culture change but limited infrastructure change, reducing the probability of getting lost to 50 percent. Here you're breaking down the mental walls to prepare for the physical changes.
Earlier I told you about how we consolidated the data centers while I was at Medtronic. We started the process with a transitional change initiative by putting all the physical locations under one person (organizational change) and then by restructuring the employees' priorities and metrics, job grades, and levels.
The politics of transitional change are high because it alters power structures while creating broad change in people's job descriptions. Plus, people realize more restructuring is on the horizon and start resisting.
Conversional Change
Initiatives that fall in quadrant 2 are conversional changes. Similar to transitional change, this type of change sets the stage for transformational change, in this case by changing the underlying infrastructure—tearing down the physical walls—while waiting on the culture changes. The probability of getting lost is again 50 percent, and politics are high because people recognize cultural change—reorganizations, downsizing, and more—is next.
Figuring Out Where to Start
The probability of getting lost in any quadrant is directly correlated to the probability that your initial estimates of the time and dollars required to implement the change will be wrong. It is also directly correlated to the level of politics you will face. In other words, in a transformational change project, there's a 100 percent chance that your initial time and dollar estimates are wrong, and the resistance you'll face will be intense. How you launch the initiative will determine whether the politics and inevitable detours derail your efforts. That includes deciding where to start, who to partner with, how to fund the effort, and how to communicate it. It's not one size fits all; each type of change warrants its own approach.
Starting a Transformational Initiative
Again, this type of initiative is guaranteed to face intense politics along with detours from “the plan.” For this reason, start small with a pilot site away from corporate headquarters. Headquarters is inevitably where the politics are the fiercest and have the most dedicated players. Choose a site that is as far away from you as possible. I'm not kidding about that—for example, when I introduced the idea of a central online customer service portal at Medtronic, we went all the way to Europe for our pilot. There was a very strong belief among the company's executive team that our products were too differentiated for such a plan to work. I couldn't change their minds regardless of how much analysis we did, so instead we found a testing ground in one of our European sites that was out of sight, out of mind, but significant enough that our results would be taken seriously.
Once you've chosen your pilot location, you'll need a partner. Find a hub at the site who has already identified the opportunity but hasn't had the resources (dollars or people) to do it. As I've said, don't put the hub on the core team; he or she is an informal partner whose influence will limit local resistance.
The next decision you'll make is how to fund the initiative. Don't ask either the local site or corporate. Use your own budget. This approach will keep the spotlight off what's happening until you are ready. If you have to use third parties or technology, find suppliers who will subsidize their participation in the initiative until it is successful. That's their skin in the game.
How you talk about the project will help keep the pressure off and the scrutiny low. Don't call it a project or a pilot; call it a proof of concept (POC). That lets people on the project know you don't have all of the answers and there will be a high learning curve. It also suggests that it doesn't cost much, so people are less likely to ask for the budget. Don't give the project a name and don't send out status reports—the goal is for it to slip under the radar of corporate. At the local site, hold weekly status meetings so that you can quickly discover when you are lost and make needed adjustments.
When your POC is successful, spread the word companywide, but make the hub and local site leaders the heroes, not you and your team. That lays the groundwork to scale the change across other locations because other leaders see you as less of a threat to their power or prestige.
If you're part of a mid-sized company, you may not have the luxury of a tucked-away site to launch a pilot. Here you need a different approach, as I did when I was asked to lead change within local sites at GP and Medtronic, which were run as individual profit centers. When a company is small, nothing you do can be low key or under the radar. Instead, run the idea by the most connected person in the company: the site's hub. (All companies, regardless of their size, have hubs.)
Remember, business owners are always looking for ways to grow their revenues, lower their cost, and improve their return on assets. The greater the potential impact of the idea, the greater the likelihood they will listen. The hub will give you great advice on how to position and communicate the idea in a way that will resonate with the leader. Try to think like the site's leader, who has to decide at any given time where to focus the company's priorities. Why should your idea be the winner? To answer that question, you have to project the potential financial gain. A hub is a great partner for that.
If you take it to the leader and he or she says “not now,” recognize that small- and medium-sized companies have limited resources. Continue investigating to see if the idea could be tested at a lower cost or in a shorter time frame. And finally, don't hesitate to bring the idea back to the leader a second (or third or fourth) time. Your persistence adds weight to your idea and suggests that you have what it takes to see it through.
An Incremental Initiative
Incremental change is low risk, with little political pressure. Therefore, you can start anywhere in the company, partner with anyone, and draw as much attention to it as you see fit. The most important departure in how you get an incremental change project up and running is in its funding: Do not fund it with your own budget. Have the person with the idea fund it or have him or her go to corporate to ask for the dollars; this type of project isn't that expensive and it's easy to make a case for because cost savings won't be far off. Spend your own budget on the three other types of initiatives since they position you to make real impact. If you have to use third parties or technology to make incremental change happen, pay them based on key deliverables being met. And again, once it's successfully implemented, you're not the hero; celebrate whoever had the idea.
A Transitional Initiative
Transitional initiatives should start at corporate. Because the cultural change will be significant, you want it to start at the top as an example for all to see. The politics will be fierce, but it is best to take it on early because ultimately this change will involve a major organizational restructuring.
Your partners in transitional change are the CEO, CFO, COO, and HR leader—again, the change needs to come from the top, and you'll need their authority to make it happen. Funding should come from the CFO, since the majority of it will be directed into severance pay when the company reorganizes.
Unlike with a transformation project, which starts with an almost “secret” pilot, here you want to turn the spotlight way up from the get-go. The entire organization should know how the company is changing. Hold town hall meetings and send out monthly status reports to the entire organization letting everyone know how things are progressing, including any adjustments made along the way. These initiatives don't need a project name so much as they need a defining slogan that focuses on the behavioral changes you want to institutionalize. For example, when I first became CIO at Georgia-Pacific, we launched a transitional initiative to tear down the silos between individual IT groups. The team referred to the effort as “One IT,” and with that as our rallying cry, we got the corporate and functional groups to stop fighting and start working together.
A Conversional Initiative
Conversional change also starts at corporate. Again, the politics will be high, but it is best to take it on early given that you're launching a major physical restructuring, such as consolidating or outsourcing manufacturing sites, IT systems, or warehouses. Again, you'll need C-suite partners and funding from the CFO, because your own budget is unlikely to be significant enough to fund an infrastructure project. (For example, implementing an ERP system at Medtronic was almost a $400 million project.)
Again, communicate the changes broadly and frequently, through town hall meetings and monthly status reports. It's fine to give the project a name and announce start and end dates. Finally, make sure you have identified hubs anywhere the initiative touches. You'll need their practical knowledge and their influence to implement change on time and on budget.
Plan for Change in Every Quadrant
The Getting Lost with Confidence Matrix is an important tool in kicking off any initiative—it reveals how you should approach the initiative and sets expectations with everyone else. But there's one more way to put the matrix to work. Good companies have a balance of the four kinds of initiatives, and the matrix can be useful in that, too. Executive management can plot all of the funded initiatives on the matrix. It will give them a good visual of how the company is being positioned for success. If all of the initiatives are in the incremental quadrant—which is exactly what you'll see in the broken company cultures I described earlier—the organization is resting on its past success. A painful wake-up call is in its future if leaders don't embrace more in-depth change now.
In the next part of the book, Politics, we'll learn how to deliver difficult messages effectively, so that priorities shift to creating healthy progress.
Coaching Moments
All “no” answers need to be addressed.
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