A Tale
Here’s a tale of a new CEO, hired to get an organization out of trouble. Basically, results are bad and both customers and employees turn away. The company is near a collapse.
So what will you do?
The first thing I will do is restore profitability. The operational results have been bad for years and the company has been selling assets and used accounting tricks to pimp the results.
So how will you do that?
I will have to cut costs. So I have decided to reduce the overhead cost by laying off 20% of middle managers and reducing the number of employees by 15%. Moreover I will close offices and concentrate our activities in only a couple of locations. Next we will vacuum clean our expenditures. Unnecessary costs like magazines, free coffee, travel, employee benefits, … we will look into them. All these measures should restore our profitability and therefore the trust of our investors.
And next?
We’ll have to discipline the workforce. So we’ll implement lean six sigma, combined with an agile way of working. That should improve our operational performance even more.
How do you know it works?
Believe me, it does. It has worked in the previous companies I have worked for. So why would it not work here? These are proven methods that will restore the foundations of this company. There’s no reason to assume that this company is any different from the companies I have worked for.
How will you go about this plan?
I have created a task force called the “Brave Team”. These people will implement a new culture of performance in this company. They will refocus the people on what they have to do. But they’ll have to be brave because resistance will be high. This company has forgotten what it takes to produce results.
When I talk to people, what I hear is that they don’t know where the company is going.
True. There was no vision. No culture of excellence. No focus. But now they know. We’re going back to an EBITDA of 5% this year, 8% next year and 10% in 2021. And I want a high single digit growth already this year.
How will you know people will go for that?
Given the poor performance of the past few years, these targets are ambitious. And I have promised the board that we will deliver, whatever it takes. That’s why I am here. And I will leave no doubt that this is what we’re going to do in this company. And frankly, there is no choice. People will understand that it’s either delivering or losing their job.
Wow. That sounds like a threat.
It is. But it’s not mine. People will understand that there is an urgency to go back to these results. And I’m sure they will take on the challenge. That’s how people function.
I hear people are starting to leave. Your attrition rates are increasing.
I can understand that some people who have been spoiled in the past are leaving. And that’s collateral damage. But we will find other good soldiers who will deliver. There’s a new king in town who understands how the world works.
And how does it work?
That’s a broad question. But I believe in return. Everything you invest in, must yield a return. You invest in the education of your children, so that they will become powerful individuals. You invest in a company, to have a return that’s higher than the money markets can. So we are obliged to yield a return to our investors. It’s their money and their risk. If we don’t they will pull back and where are we then?
And what about employees and customers?
They are important in the sense that they are the levers for the return. Of course we need customers, but they come second. And then we need our suppliers, they come third. And employees are needed to do the work, they come fourth.
So, how will you convince the customers?
Once we have restored order in this house, our customers will notice the difference. But I read a book once with the title “The best service is no service”. We will organize ourselves in such a way that they won’t need to ask us. We will implement lean digital processes that will make the customer autonomous. Self-service is the name of the game. Believe me, there is nobody in the world who knows more about service than I do.
And how will you motivate your employees, who come fourth after the suppliers?
The ones that are motivatable will stay. The others should hide or leave. This is a matter of adaptation or death. If we don’t execute my plan, we are lost. And so they are lost. So I will ask people to sacrifice their perks for the benefit of the company.
Marissa Meyer asked Yahoo Employees to stop working from home and return to the office.
I think Yahoo is a good example of a company that lost its way. Like this one. So what she did is give a message that said that employees should stop putting their own comfort before the interests of the company. In this company, we will ask people to change their ways too. This company went too far. They’ll have to squeeze in less square meters. There will be less choice, more standardization. We will install a culture of performance.
How does one install a culture?
Culture is like the operating system of a computer. We’ll upgrade. We’ll add some code and rewrite some other code. We’ll get rid of bad habits and we will install new habits. For instance, this company has a habit of gathering people twice a year to discuss the results. No more of that. We will have a great intranet-site. Another bad habit is that people have a second job to earn some more money. That won’t be allowed anymore. I’ll ask them to focus. A third example is training. We will reduce training costs by 50%. I don’t believe in it. And the idea of working from home is causing so much waste, that we’ll have to end it.
What’s in it for them?
They’ll have a job and they will be proud of the financial results. Performance counts. Results are more important than values.
Read also the second version of this story.
About Strategy Execution
At otolith we know that strategy execution is determined by leadership behaviour. Leaders are put under a lot of pressure to deliver, especially in times of crisis. The above example is fiction, and any resemblance to existing people is coincidental. But you might recognise some behaviours. There are different ways to achieve results and to execute a strategy. The way as described above has the advantage that it is clear. And it might work. But collateral damage will be (unnecessarily) high.
There are other ways to build and execute a strategy. If you want to talk about it, get back to us.
Otolith – david@otolith.be
