Leading Change – Part I of a Series

At a recent coaching session, our discussions turned to "leading change in an organization". My client is a small software company in a niche market. They have been successful growing the company by hiring junior staff. As a result, their average age demographic is well below 30. In benchmark comparison to other software companies, their revenue productivity per employee is low but offset by a majority of entry level salaries, resulting in a high energy, young company that  is cash flow positive, growing and successful.

Unfortunately, nothing stays static.  As the workforce matures, pressure is increasing on the cost of salaries. As well, the company needs to change in order to meet the demands of increasingly larger and more sophisticated customers. Due to its organic growth and history of hiring junior people into entry level positions, the company's go-to-market business processes are fairly basic and not scalable. Looking forward, the company is facing the challenge of either generating increased revenue per employee to fund a more sophisticated business model and higher salaries, or face greater attrition due to its inability to fund increasing salary demands of a young workforce.

My client is facing the classic change management challenge of transforming a company that on the surface is successful, but has underlying challenges that could cripple or stall its growth. Like many small companies with junior staff, the need for change is not obvious to employees because of their narrow experience in business. The question my client was asking was "How do you lead this change and get employee buy-in?"

Implementing organizational change requires employees to understand and accept the need for change. Humans love homeostasis. Change is threatening. Therefore, in planning any change, leaders must first answer these two questions for employees:

• Why is the change necessary?
• What does it mean to me, the individual employee?

Communicating the need for the changes that are required  involves walking a fine line between revealing too much information, exposing too much hard reality and potentially causing employees to lose confidence versus not revealing enough information to educate employees and get buy-in. I often hear executives say that they do not want to risk creating panic and have people abandoning the company. On the other hand, I believe the staff are generally smarter and better informed than management gives them credit for, and will see through any candy-coating put on the tough news they are given. By contrast, I often see an openness and eagerness on the part of younger employees to confront tough news in order to learn how to deal with it. Therefore, I am a subscriber to being brutally honest and candid in terms of delivering tough news but then providing an energizing future vision of where the change will lead. 

The second question a leader must answer is "What does it mean to me, the employee?". Once the employee has accepted the need for change, they will need to understand the personal implications of the changes on them. A simple example of this would be a company that has acquired another company and is merging them into one. That means sales teams are becoming one, the engineering teams are becoming one, and so on. Before they announce the new organization, they have to be prepared to answer what employees will be asking (or may just be thinking but won't ask):

• Do I still have a job?
• Will my pay be affected?
• Will my job change, will I lose the things I like doing and gain responsibility for things I don't like to do?
• Will my power (formal or informal) change?
• Will my role be less critical to the company?

Until a company has answered "Why change" and "What does it mean for me", initiating change  is like pushing a rock up a hill.

Stay tuned for some Change Management techniques in my next Blog