In almost all distressed situations an organization will need some operational restructuring. Restructuring means change. Macro strategies, the business model, business processes and the basic foundation of how the organization perceives itself in the market and its core beliefs might all need to change; and neither most individuals nor organizations readily accept change. In most distressed situations acting quickly and decisively is important, but the CRO needs to make the time upfront to carefully evaluate and understand the internal political landscape and determine an appropriate political style and strategy to unify the various internal coalitions in supporting and engaging in rapid implementation of needed change.
A Perception of Macro Strategy Versus Micro Reality
As head of the world’s largest economy and most powerful armed forces, it is fair to say the President of the United States is the most powerful person in the world. Despite the power afforded by the United States Constitution, the elected leader needs to apply the same political savvy that won the office to the task of implementing the expressed policies and changes on which he campaigned. Most presidents have found that the micro realities of differing and often hidden agendas, turf protection and the strong personal egos of other powerful people present significant obstacles to exercising complete authority to implementing their macro strategy. After former general Dwight Eisenhower’s presidential election victory, a prominent senator postulated to a colleague that “Ike is in for a surprise. He is going to give an order and not a darn thing is going to happen.”
While the responsibilities of a CRO are of far less significance than the responsibilities of the U.S. president, the political difficulties of implementing change can be nearly as acute. The opinions, agendas and other needs of directors, shareholders, senior executives, key cadre and the rank and file all need consideration. All of these constituencies have direct or indirect influence on what gets done or does not get done and they need to be dealt with. For most individuals, their livelihood and, perhaps even more importantly, their perceptions of their self worth and identity are tied to their positions in the corporate hierarchy. With this in mind, it is not difficult to understand that new strategies and plans of the CRO are likely to directly affect individuals in the organization much more so than the decisions of the U.S. president.
Organizations are human systems and are the sum total of each of its parts. Restructuring involves change, and individuals react differently to change. Some individuals recognize that all is not right with the organization and things need to change, will readily accept that changes need to be made and do their best to implement change. For others, their well-being and perception of self worth are tied directly to past successes and their role in such success. For these individuals change is not welcome. It is a direct affront to their very being; and they will resist it overtly and covertly.
The following expressions of individual feelings to a CRO by employees of a distressed business are recent examples of these factors…
* “I’ve been here for 25 years and I know the customers. I don’t need any help in doing my job. After you have been around here for 30 years, maybe I’ll listen to what you have to say.”
* “I know it might not look good from the outside, but there is a reason I do it this way.”
* “I understand you’re here to help us get better. I’m a single mom and I need this job, so please do your best. Let me know if there is anything I can do to help.”
Organizational performance is ultimately based on human behavior and improving organization performance needs behavior to change. In some instances the culture is so rooted in the ways of the past that effective internally driven change borders on the impossible. GM, Sears and IBM (pre-Lou Gerstner) are vivid examples of organizations that were unable to change even when the need to adapt to a changed marketplace was evident to all.
What political strategies work at one company might not be what will work at another company. The political game plan needed for a multi-billion operation with domestic and offshore operations will be different in scope and execution than the game plan for a middle-market business with one or two locations. Ideally, the effective CRO will be able to get all internal constituencies to accept a new direction, close ranks and move forward. Unfortunately, in many cases, it does not work that easily. While the position of CRO brings some power to mandate change, power is not absolute, and the difference between enthusiastic engagement and the appearance of cooperation can be stark as the difference between black knight to white rook. Understanding the organizations’ internal political systems is absolutely essential for the CRO to maneuver the company out of its malaise and toward recovery. Internal leaders are aware of the general political conditions, coalitions, and who has effective influence that either can create buy-in or create speed bumps and roadblocks.
Potential Political Strategies
In a typical scenario, the CRO arrives on the scene, perhaps with one or more support staff, assesses the situation and develops the revitalization plan on a top-down basis with only indirect input from the organization; and presents the plan to the organization, often with much fanfare. While this approach can and does work, it does not work as well if the organization creates the plan. The CRO is an outsider and the opinions of outsiders will not necessarily be accepted.
An easy trap to fall into is to assume that because the organization is distressed, its employees don’t know what the problems are or the potential solutions. The following action plan has proven to be a quick and effective methodology for obtaining organizational cooperation.
Learn What the Organizational Thinking Is
Scratch the surface of any organization and the ills of the organizations as well as the potential solutions come gushing forth. With this in mind, an effective way to jump start understanding the organization, its informal power structure and the relative strength of key cadre is to have all key employees provide their opinions (on a confidential basis) to the questions raised by the typical “SWOT” analysis; but, add the additional question of: “What you would do if you were in charge?” In many, if not most cases, this is the first time the rank and file has the opportunity to express their views. This step has immediate benefits:
- The CRO has the benefit of all of the thinking and views of the heart of the organization (in one notable case, a mid-level employee developed what turned out to be about 90% of the final turnaround plan)
- When the organization as a whole understands that it is their plan, implementation will most likely be swifter and smoother.
- Key employees are not being told what to do, they are asked: “What should we do?” Again, the wheels of implementation are greased.
- Diehard malcontents who resist change, even in the face of strong evidence that they have weak positions, have a much harder time in arguing weak positions once it is evident the weight of the organization is not in their favor.
- Uncover the natural leaders and influencers in the organization, the individuals who, if they become convinced changes need to be made, can persuade others to follow their lead.
Feedback to the Organization
Once all of the responses are reviewed, summarize the major findings and submit to all key employees and ask where they agree or disagree. Then, rank all of the internal recommendations in priority order. This exercise will indicate where there is consensus and where there is disagreement. At this point, in addition to his or her individual assessment, the CRO should hold counsel with key employees and determine the specific actions of the plan, and establish who is responsible and accountable for implementation.
Have the Organization Put it in Writing (Unless Commitment is Made, There are Only Promises and Hope, But no Plans)
Most companies of any size have position or job descriptions generally describing the overall responsibilities of the job, reporting relationships and necessary experience and skills. In many, if not in most situations, the position descriptions are rarely looked at or updated. After key employees have provided their thinking on what the problems are and what are the potential solutions, each key employee should prepare a one-page bulleted summary on how their positions will support the action initiatives.
Place the Head of Human Resources on Point (Appointing Your Wingman)
In a distressed situation, most CROs consider the CFO as being the most equal among equals. While the CFO is certainly a key player in a distressed situation, the experience of many CROs is that the person who needs to be on point and firing on all cylinders is the head of Human Resources (HR). While the CFO has the platform to delve into all areas of the company from a numbers standpoint (key metrics, variance analysis, planning, etc.) the head of HR has a similar platform to be involved in all areas of the company from an organizational effectiveness perspective. The head of HR has the platform to talk to everyone on what they think, what problems they are encountering, how is morale, who is fighting with who, etc.? From a political standpoint, empowering the head of HR and then putting her or him on point provides several advantages:
- Establish needed indirect communication with the cadre without the CRO going around the “official” chain of command
- Obtain the pulse of the organization
- Become the eyes and ears of the CRO throughout the organization
If the head of HR is not either an officer level position or a direct report, that is one of the first changes the CRO should make. The larger the organization, the more important it is that the CRO is able to rely on a strong head of HR and empower this individual to move seamlessly throughout the organization.
Maintain Support of the Organization by Continuous Communication
Effective communications — sound simple? However, it is not uncommon for a CRO to arrive on the scene and learn that few people in the organization know what the strategic plan is, or if there is a strategic plan, let alone what their part is in implementing the plan. A political style that embraces timely and realistic communication (tell it like it is) has proven to be an effective method to garner organizational support.
Find and Empower the Political Influencers (Spread the Gospel)
All but the smallest organizations will have some individuals (typically within the mid-level cadre) that have earned wide respect for their strength of character, performance excellence and management style. They tend to be apolitical. Such individuals have influence that extends well beyond their direct sphere of management control. It behooves the CRO to take the time up front to identify these individuals, and make sure that they buy in to what changes need to be made.
Successfully managing a distressed situation is never a sure thing. By the time the CRO arrives on the scene, the organization has endured much turmoil and its future might be in doubt. The initial efforts of the CRO are consumed with worrying about cash and the wants and needs of the external constituencies. Nevertheless, taking the time up front to establish an internal political platform and style, which engages the entire organization, should be one of the top initial priorities.
Ken Naglewski is a principal of Seabiscuit Partners, LLC, a provider of strategic advisory and other services to both healthy and financially distressed businesses as well as capital formation and investing in distressed situations. He has been a CEO, COO and CRO for several companies and a frequent speaker and author. The subject matter of the accompanying article is taken from a book he is co-authoring entitled: The Philosophy, Psychology and Politics of Change. He is a CPA, CIRA and CTP. M&A Advisors named him Turnaround Consultant of the Year for 2008. He can be reached at 615-491- 7331, or by e-mail at firstname.lastname@example.org.