Dr. S. Ramnarayan, professor at Indian School of Business whose areas of focus include organisational behaviour and change management, shares how entrepreneurs can bring about change in their companies effectively
MAHATHI R. ARJUN
Dr. S. Ramnarayan is a professor at the Indian School of Business, Hyderabad. Having completed his engineering and MBA, Ramnarayan earned his Ph.D. in Organisational Behaviour from the Case Western Reserve University, Cleveland, Ohio. After his initial years in the industry, he has been a faculty at the Tata Management Training Centre, Pune, for five years and then a professor at the Indian Institute of Management, Ahmedabad for 13 years. He has helped several organisations in the areas of change and organisation development. He has carried out research funded by Ford Foundation, World Bank, Commonwealth Secretariat, Department for International Development, Human Capital Leadership Institute and German Science Foundation. Apart from research papers, monographs and case studies, Ramnarayan has co-authored books on Managing Organizational Change, Changing Tracks: Reinventing the Spirit of Indian Railways, and Change Management: Altering Mindsets in a Global Context and co-edited books titled Organization Development: Accelerating Learning and Transformation and Managerial Dilemmas: Cases in Organizational Behaviour. He shares with us his views on how entrepreneurs can implement change in their organisation.
Often in a startup, it’s the founder/CEO who has to handle change management initiatives, as he/she cannot always put together a senior team of professionals. What are the basic guidelines he/she should remember when doing so?
Before developing basic guidelines for handling change management initiatives, let us look at why most changes fail. Often the founder or CEO wrongly assumes that if employees understand the change, they will support the change and be committed to its successful implementation. On several occasions, I have seen leaders starting the change process with a PowerPoint presentation on the new initiative with detailed slides on facts, figures and timelines. At the end, in the Q & A session, I have even seen employees raise a few polite questions. It all gives one a mistaken impression that all is well. It is only when you hear the whispers on corridors or tune into private conversations, do you realise that people have not surfaced real concerns, fears and reservations.
Many leaders don’t fully appreciate the power of fear. When there is a big change, people worry about their abilities, their future prospects, their families and their careers. When fears are triggered, people can’t hear what leaders are talking about. In particular, when the founder/ CEO adopts a paternalistic, condescending or arrogant approach, fears are pushed underground. This damages the likelihood of successful change implementation. Even a slight lack of trust and confidence in leaders can kill an otherwise fine idea. Gallup research (a research-based performance management consulting company) has shown that in average organisations, the ratio of engaged to actively disengaged employees is 1.5: 1. The same ratio is 8: 1 in world-class organisations. For successful change, engagement has to be assiduously built.
Thus for handling change management initiatives effectively, the first important guideline is to make a compelling case for change. The question of ‘why the change is required’ needs to be addressed before the question of ‘what needs to be done and how’. This requires commitment to two-way communication. A leader has to help employees see the challenges, trends and consequences the same way he/she views them. A major part of communication involves listening and building trust. It is important that a critical mass appreciates the need for change. Secondly, leaders cannot merely give lip service to engagement. They have to pay careful attention on whom to involve, how to get people engaged and what should be done to ensure effective dialogue. Third, leaders should continue to pay attention to change even after the initial hoopla surrounding the launch of the new initiative. There is a need to ensure that efforts are turning into real results. This requires clear decisions, creating ownership, allocation of appropriate resources and effective monitoring. Finally, when plans don’t work out as expected, action should be taken to get things back on track. This requires picking up early signals, quick diagnosis and corrective actions.
Scenario 1: When the CEO of a five-year-old educational services company suddenly quits, how can the top management team/promoters ensure a smooth transition until the next CEO steps in and at the same time, allay the fears of their 300+ employees?
I have actually seen such a case. In that instance, the CEO was well liked. He also happened to be a decisive and successful leader. His sudden exit had initially sparked ‘fight’, ‘flight’ or ‘freeze’ responses. People felt as if they were fighting for survival, or fleeing, or stunned into total inaction by the blinding headlights charging at them.
First and foremost, it is important to recognise that such strong emotional reactions are certainly not abnormal. Leaders must appreciate that employees may be experiencing deep emotions like loss and fear for their own futures. When other members of senior or top team adopt a calm, sensitive and thoughtful approach, people begin to find their emotional balance. By handling issues with transparency, leaders implicitly communicate respect for employees. When reality is not denied or messages are not sugar-coated, logic and rationality begin to assert themselves.
After the initial steps to help employees regain their emotional balance, the top team should develop and share a credible plan of how the transition would be handled, and what would be done to bounce back from the crisis. When people feel hopeful and optimistic, there is greater energy for successful change. Such positive feelings need to be consciously kindled and sustained.
Scenario 2: A three-year-old e-commerce venture is looking to streamline its technology process and the delivery system. It hopes to bring in better quality testing and checks in place that will ensure a faster response time. How can the founder influence this upgrade in technology among his core software team with minimal expenditure and lesser shuffling of the team members?
When the founder announces changes in technology process or delivery system, in a typical organisation, 20 percent tend to support and cooperate; 60 percent tend to be neutral; and the rest 20 percent tend to be against the change. Among the 60 percent who are neutral, some appear confused, some express reservations, a few say “yes” but do the minimum, and some may resort to negative corridor talk. When faced with such resistance, leaders typically respond by pushing the change even harder. They apply the force of reason. They may choose to ignore resistance. Unfortunately, these reactions only increase opposition. Resistance may assume passive forms, but it persists.
It is important to remember that people expressing resistance are not born resistors whose only mission is to ruin the organisation’s change initiative. Change management expert Rick Maurer states that there are three forms of resistance. At Level 1, people implicitly say, “I don’t get it!” At Level 2, the unsaid statement is “I don’t like it!” At Level 3, the unexpressed sentiment is “I don’t like/ trust you!” The first level pertains to the world of information – facts, ideas, analysis or logical arguments. At the second level, we are dealing with emotional resistance. As we have seen above, emotional resistance arises from fear – loss of face, status, control, or even their jobs and future well-being. We confront personally oriented resistance at the third level. This reflects absence of trust and confidence in the change leader. In organisations, employees couch their Level 2 and Level 3 resistance using words of reason and logic for their self-protection. But when you listen with your head and your heart, then you realise that there is more than what meets the eye.
Thus, the three types of resistance represent three different worlds of reason, emotion and trust. As a leader, when you encounter resistance, you should diagnose the underlying concerns correctly. Ask yourself: “What are the causes of this opposition?” Resistance should be addressed in the right way. To deal with emotional or trust issue, you cannot provide information or make logical arguments. In emotional or trust issue, the more you push with reason, the more people will get embedded in resistance. On the other hand, when you listen, recognise feelings of loss, appreciate the stakes, involve people or discuss what is in it for them, you would help people deal with their emotional resistance.
It is important to remember that perception is reality. People may read risks wrong, but in their minds, the danger is real. In a change journey, you should not run too far ahead of others in psychological terms. Stay engaged. Resistance can pop up anytime during the change journey. Stay in touch with the pulse of the organisation. Build in feedback loops to pick up early signals of waning interest or disenchantment. Ask why this may be happening, and initiate corrective steps.
Scenario 3: A chain of diagnostic services firm has been top-heavy in its structure in the past seven years. A family business, the founder’s scion wants to bring in a more horizontal structure that encourages its employees to share, provide feedback and be heard. How can he/she go about implementing this structure and make sure that it continues?
First and foremost, the younger member of the family should ‘sell’ the idea of a major structural change to the senior family members and people at the top. In the earlier top-heavy structure, they were the most powerful. The new structure requires them to ‘let go’ of their traditional authority and loosen up their control. Some people at the top would experience Level 2 resistance – ‘they don’t like it’, and possibly even Level 3 resistance. The youngster would be totally mistaken to assume that great arguments would win him support, or that he would be able to call a meeting and somehow get a favourable decision passed. Change involves a long and difficult journey. A one-time effort can create a ‘flash in the pan’, but no lasting change.
If possible, the larger change can be broken into three or four phases that are dealt with sequentially. This approach helps enhance focus and thus, makes the process more manageable. There is a need to deal with the political aspects of organisational change, and this requires understanding the psychology of persuasion, the art of building coalitions and the knack of negotiating agreements. He needs to pay attention to building clarity of new roles and expectations at senior and operating levels; consultation and decision making processes; new working relationships to be created or strengthened; and new information flows. Decisions need to be delegated and the information to make the decision should be made available. Formal mechanisms and informal processes should be set up to reinforce appropriate new behaviours.
The next challenge is one of changing mindsets at employee levels. Employees need to be trained and supported to take decisions at their level. Most importantly, their confidence in themselves needs to be developed.
Scenario 4: A two-year-old IT product company has realised its futile attempt in trying to scale a niche product, which is not bringing in any revenues. The entrepreneur wants to put this product on the backburner for the time being and focus on a product that has mass usage and thus, easier to scale. How can he ensure his team to shift focus to developing this new idea without getting discouraged of their earlier attempt and thus, lessening any attrition he might face?
As we have seen earlier, the challenge requires the entrepreneur to address the question of why before addressing the question of what. This requires the leader to function as a broker of ideas and aspirations. This is best done by helping the organisational members discover the new reality rather than merely make a presentation. As the Greek philosopher Aristotle pointed out several centuries back, persuasion arises from three categories of appeals – Ethos, Pathos, and Logos. First, leader should be credible – someone who can be trusted and is worth listening to. Second, the message should appeal to the employees’ emotions. Finally, the communication should persuade by the use of reasoning.
The entrepreneur should possibly lead a problem-solving session on how to retire the niche product. The communication should be framed in such a manner that it emphasises that doing so is not an admission of failure, but reflects good management. The discussion should be facilitated in such a manner that the key members of the employee group realise the dysfunctional aspects of escalating commitment, when the writing on the wall is clear. As an approach, the entrepreneur could brainstorm with key employees on the following questions: (a) What did we learn from our earlier experience? (b) How can we develop new ideas? (c) What do we feel good about from our earlier experience? (d) What will we do differently? and (e) What will we retain from the previous experience?
Scenario 5: A BPO services firm has been showing declining productivity levels among its various business units, primarily due to poor coordination and governance. How can its chief delivery officer bring about better synchronisation of his middle management team and ensure employee accountability, without creating people issues?
While the chief delivery officer may have already reached a firm diagnosis and solution, it is important that he/she helps the middle managers discover this reality. As we have seen earlier, this is a better approach to creating ownership than making a one-sided presentation of both the problem and the solution. The leader may constitute a small cross-functional team or task force of competent, committed and credible middle managers, who can study some high-performing BPO services firms and examine the best practices to enhance productivity levels. The leader can also bring in data that show that the keys to success in a BPO are: (a) market orientation, (b) learning orientation, and (c) a quality culture. The organisation must learn from the market, customers and competitors, and disseminate this knowledge widely in the organisation. It must create best practices by sharing knowledge. It must focus on continuous improvement through cross-functional teamwork. If the task force also supports this conclusion, the chief delivery officer might seriously think about initiating a quality programme such as Six Sigma.
Scenario 6: A four-year-old integrated mobile solutions provider has been concentrating on pushing its brand and thus, focusing more on marketing and pushing sales. But the founder duo now wants to bring back innovation to the forefront and allocate more resources to the R&D team. How can they ensure that their team’s outlook and goals are realigned with theirs?
Several of the approaches that we have discussed earlier also apply to this scenario. It is important for the founder duo to have a series of meetings to bring home the new reality. By discussing the experiences of other successful organisations, they can make their staff aware of product lifecycles and how these are getting shorter in their industry. The lessons from experiences and discussions should emphasise the need for continuous innovation to bring new products and services into the market. Another key message should be that innovation is not the responsibility of R&D alone – everyone plays a part. They should communicate relentlessly to build and reinforce a culture of innovation through continuous improvement, cross-functional collaboration and breakthrough ideas. The founders should set specific targets in terms of sales revenue from new products. New information flows, control mechanisms and monitoring systems should be aligned to new priorities.