Quick takes

Citation

Randall, R.M. (2002), "Quick takes", Strategy & Leadership, Vol. 30 No. 1. https://doi.org/10.1108/sl.2002.26130aae.003

Quick takes

Editor's note

"Quick takes" presents the key points and action steps contained in each of the feature articles. Catherine Gorrell prepares these summaries.

Page 4Rip the band-aid off quickly: why "fast, focused and simultaneous" works best in corporate transformations

Stan Pace

If your company is facing a situation that demands transformation, learn from those who have done it successfully. Too frequently, CEOs and management teams do not move far enough, fast enough, or broadly enough to truly reposition their businesses. In their attempt to minimize the pain of change, these managers actually create more of it. By contrast, companies that implement change programs that are fast, focused, and simultaneous have the chance to create enormous and long-lasting shareholder value.

Bain & Company's study of 21 successful turnarounds offered evidence that four principles provide a simple and consistent framework for organizing and executing actions.

1. 1.

   Reward managers for hitting strategic targets, not for constructing elaborate change management processes. The best transformers are companies that focus first on developing a clear strategy; second, on establishing non-negotiable goals (financial and non-financial) to support that strategy; third, on incentives to reinforce those goals. They then step back and let their managers figure out how to get the results. The key is not to tell people what to do; instead find ways to keep them focused on actions that support the business model.

2. 2.

   Remove under-performing senior management, the burned out fuses. Removing under-performing personnel is a key component of successful turnarounds. But do not make the mistake of pursuing widespread employee layoffs if the real root of the problem is at the senior management level. Who you lay off is most important to company performance. The most meaningful replacement targets are senior managers who are burned out "fuses".

3. 3.

   Challenge managers to achieve higher performance levels: turn up the voltage. Require the employees who remain to perform at a higher standard. Motivating a demoralized workforce to meet new stretch goals entails many steps. Removing incompetent or untrustworthy employees; communicating a simple, powerful set of messages; and giving them something to believe in are three elements.

4. 4.

   Do it fast and all at once: rip off the band-aid quickly. Implementing changes as fast as possible and all at once proves much better than easing the change into the organization. Successful transformers target turnarounds in two years or less. The window for the opportunity to create value is brutally narrow in most cases. Every day of delay makes it harder to catch up to competitors.

Page 10Strategy development for the real world: a metro newspaper has no where to grow and lots of "new media" bompetition

John Sterling

This insightful case study examines the strategic planning process of a respected metro newspaper company. The newspaper needed to confront significant market change and eroding profit opportunities. Its response: gather together a broad cross-section of its management team to craft a new and innovative strategic game plan. This case demonstrates four lessons for business leaders.

First lesson: even when a company is pushed to improve operational performance, it still cannot ignore the need to create a distinctive strategic position in its market.

New competitors and technologies are changing the fundamental drivers of revenue and profit. Crafting new strategies, that balance the need to run a tight ship and truly distinguish the offering from other sources, begin with revisiting long held assumptions and stretching the management team from a short-term mindset to long-range thinking. Details are presented to highlight key techniques and concepts.

Second lesson: even when a company enjoys a leading market position, it cannot afford to relax its commitment to operational excellence.

The perils of the marketplace are described to reinforce the need to avoid dangerous "traditional" beliefs, such as"cost cutting shores up profits." In fact cost cutting alone would likely start a destructive cycle: eroding quality and reliability leading to eroding customer base, leading to declining revenues, requiring more cut backs, leading to future erosion. Equally true is the need to avoid complacency as new media and new competitive forces threaten to destroy the company's profitability.

Third lesson: conduct a strategic planning process that results in strategies to keep profits flowing in an increasingly competitive market environment.

The case study shows how a strategic planning process can be produced in a short timeframe, focused to create goals that are aligned with strategies and implementing actions, and built on a factual basis. To understand how their new strategies would play out in a future business environment the management team used scenarios as a tool to think about the long term.

Fourth lesson: plan quickly, communicate widely and start implementation immediately. Speed, clarity, and results are essential characteristics of a dynamic process.

The outcome for the newspaper company is that it has become a more flexible, focused and strategic organization. And despite times having gotten even tougher, its profits have continued to be strong.

Page 18The reinvention and sale of J.C. Penney's Direct Marketing Services unit

Adrian Slywotzky and Michael Weissel

This case study chronicles the changing of J.C. Penney's Direct Marketing Services unit's business model, organizational model, and mindset. The reinvention process started when CEO Bob Romasco realized this insurance company was not as healthy or thriving as it outwardly seemed. The turnaround of this company hinged on changing the vision, the business design, and rejuvenating the basic organization mindset.

The problems

Analysis showed that the DMS business model was not able to sustain profitable growth. This was a consequence of a series of tightly interlocked problems. For example, the marketing and customer service functions were mostly outsourced to dozens of agencies. As a result no one at DMS was in control and, equally perilous, managers had lost their connection to the needs of the marketplace. Compounding matters, the organization was ingrained with a "command-and-control" mindset that muted innovation, creativity and individual responsibility.

The corrective actions

Saving a company that is in trouble often requires change along several dimensions: strategic, organization, and cultural. Tangible examples of how to enact these changes are cited in this case study, with concluding lessons suggested by CEO Bob Romasco:

• •

  Break the silence. A dysfunctional company needs to learn to talk about "forbidden" topics, such as that the business model is broken.

• •

  Lead by everything you do. Because every action a leader takes in a time of crisis sends a message to employees, make sure that the actions the leadership takes reflect the messages they wish to send.

• •

  Move people's behavior from passive to active. DMS employees thought of the business as something that happened to them rather than something they did. Only when the mindset of the employees changed did the company begin to move forward. Challenge your employees to take the lead; the best will respond and pull the others with them.

• •

  Enlist the people two levels below the top. They are the key agents for reaching the rest of the organization. Transmitting the change message and engaging the employees to be proactive requires consistency and perseverance.

• •

  Nurture two-business models – present and future.

• •

  Plans for remaking the company will have to be changed as setbacks and opportunities arise. Expect the unexpected and build enough flexibility into your systems to adjust as needed.

Page 23In a downturn do you cut pay, slash the workforce or protect precious talent?

Patricia K. Zingheim and Jay R. Schuster

Little research has explored how best to reduce labor costs when the economy turns down. A recent telephone survey of CEOs and senior executives at 20 "Fortune 100" companies suggests that they are now concerned and confused about what strategy is best for shrinking their workforce. It also indicates that, although they would rather use layoffs than pay cuts to reduce labor costs, these senior executives realize that they cannot "shrink to greatness." Eventually these successful companies must again begin to add staff. Planning strategically now for both the growth and shrinkage of the workforce is essential to providing a high-performance workforce and workplace.

Experience with the tactical choices

• •

  Layoffs: most preferred to make staff cuts, to accept the negative internal and external publicity, and to get on with running the company. The layoff generates major cost savings and can be done quickly. The difficulty centers on determining the appropriate level to cut, the criteria for who goes, and how to handle the turmoil that follows.

• •

  Pay cuts: most pay cuts are general, across the board, rather than specific. This "social justice" approach fails to acknowledge the unequal value of the people with market-scarce skills who leave rather than accept a pay cut.

Strategy imbalance

Most executives surveyed felt that they had a strategy for workforce growth but not one for workforce reduction. Other weaknesses cited were poor hiring during growth (failing to focus on quality versus quantity), and a lack of performance management process to know which employees were adding value and which were not.

Two of six cited guidelines

1. 1.

   Strategy drives tactics. Create a staffing strategy that guides the business through good times and bad. The plan needs to describe what new staff must deliver to the business, complete with specifics about the types of people that are needed, and how they will be paid and rewarded.

2. 2.

   Create a practical evaluation tool. All workforce reductions and/or pay cuts need a solid basis for evaluating the human asset value-added criteria. Emphasize key skills so that those with the critical business skills are favored; spend your talent dollars on people who will give you the most business value.

The executives suggested that force reduction decisions should be guided by whether the result produced the best business place to work, not the best place to work.

Page 27Five myths that blind high-growth companies: the case of "RosyOpticals.com"

Doug Randall

This case study is a cautionary tale. It follows the life of a dot.com company, one that that initially gave its innovative consumer service away, through 18 months of rise and fall. Its management's motto of GOBOSH (go big or stay home) was exciting and energizing. But when the investment environment changed and the firm's motto reverted to MQ (Monetize Quickly), there were no realistic alternative business plans in place.

Looking at the history of RosyOpticals.com from start-up to present it seems hard to believe that management could raise so much capital so easily with a business model – a valuable Internet service free for all, with no strings attached – that bore a striking resemblance to the Indian rope trick. Why didn't the board of directors or venture capitalists demand evidence of solid strategies? And, what blinded everyone to the risks of failure? The problem can be traced to management's conviction that unfettered growth should be the prime directive. Over time this conviction generated a set of myths that proved to be wholly or partly false, but top management could or would not renounce them. Five myths led this growth driven culture into deep trouble:

1. 1.

   The more entrepreneurs you hire the more your organization will thrive. A top-down culture of rampant entrepreneurialism can devolve into mere expediency. This devalued strategic insight and the actions needed to build long-term staff capabilities, scan the environment for warning signs, and create products that were sustainable.

2. 2.

   If you are creating a radically different future, the old business models and metrics do not apply. Some people were so excited by the creativity being injected into traditional businesses that they lost sight of fundamental business analysis, logic, and common sense.

3. 3.

   A brilliant strategy won't be widely understood. Experienced managers know that it is essential that they make the company's strategy tangible and understandable to everyone involved. Otherwise, no one knows where to focus resources.

4. 4.

   Élite teams create great strategies. The "brilliant" strategists failed because they did not focus on process – such as scenario planning – and on involving the rest of the company's managers responsible for implementation.

5. 5.

   The only raison d'être, a growth company needs is financial success. Ultimately success requires a passion for building an enterprise that is worthy of great effort. For high growth companies this passion must be equally committed to business basics and to stretching for financial goals that may seem unattainable. But financial leaps of faith that are not based on realistic strategies and sound business practices should be disdained.

The speciousness of the five myths seems obvious now, but in the fast paced world of a high-growth company, even the best managers can be blinded by the false hopes. A sound business model, classic leadership, and good old common sense were missing at RosyOpticals.com.

Page 32Civic scenarios as a tool for societal change

Adam Kahane

The civic scenario process is an innovative tool for solving stalemated social and political conflict. Examples in this article are drawn from pioneering projects in two countries that made remarkable democratic transitions in the 1990s: South Africa and Guatemala. In civic scenario projects, a group of influential leaders, drawn from a broad range of sectors and organizations, works together to understand what is happening, might happen, and should happen in their city, region, or country. They then act in concert on that shared understanding and vision.

Results of the process

The scenario process – in both corporate and civic contexts – can produce four types of results:

1. 1.

   Reframed mental models. Creating alternative stories (scenarios) helps us to improve the quality of our mental models by articulating them; sharing them with others of different perspectives; and trying our new models together. The process creates a shift in how we look at what is going on around us.

2. 2.

   Shared commitment to change developed through dialogue. No one person alone can effect societal change. Scenario processes open constructive conversations among stakeholders and build mutual understanding, trust, and sense of community.

3. 3.

   Regenerated energy and optimism. Achieving collective forward movement requires energy, which in turn requires hope.

4. 4.

   Renewed action and momentum. Ultimately change requires not only new thinking and relationships and energy but also the new action that these developments allow and catalyze.

Overview of the process

Scenario projects – like the better futures they aim to bring forth – come to pass because asmall group of passionate advocates dreams of them and works to bring their dream into reality. The process is an expanding circle of dialogue, trust, understanding and commitment, starting with the advocates who assemble the board of directors. This group invites the scenario roundtable, who in turn engage each other and with the larger system which they wish to influence. There are three phases that last over a year or more:

1. 1.

   convening and organizing;

2. 2.

   uncovering and constructing;

3. 3.

   enacting and engaging.

The ultimate objective is to engage the whole society in the process of creating a positive future. The civic scenario work has been most effective in "reframing" mental pictures of the world–a shift that has resulted in challenging and bettering civic institutions.