Leading Change – Putting it all together

This is the fifth installment in my series on Change Management: 
Chapter 1: Leading Change – Part 1 of a Series
Chapter 2: Leading Change – The Art of Change Management
Chapter 3: Leading Change in a Perfect Storm
Chapter 4: Leading Change – The Need for Speed

By the end of 2003, PeopleSoft's Global Services Group had grown to a $1B business but some cracks were starting to show. Throughout 2003, the price competition for PeopleSoft software and services had been intense and margins had fallen. Like many businesses, we had taken steps to reduce costs, which had affected employee morale. There had been cutbacks in training, reductions in bonuses, and a general slowdown in salary increases and promotions. In addition, in June 2003, we had announced that PeopleSoft would be acquiring J.D.Edwards,  which was immediately following four days later by Oracle's announcement that they were launching a hostile takeover of PeopleSoft. By Q1 2004, consultant attrition in most of the US regions was over 30% annualized. At the same time, as PeopleSoft continued to release new advanced products, the Global Services team, which operated as seven semi-autonomous regions in North America, was struggling to develop consulting skills to support these new products. This problem was being further exasperated by high attrition level.  In short, the Consulting Resources Organization (the regional teams responsible for managing the consultants) was viewed as a failing organization.

I was as a member of PeopleSoft Global Services leadership team and in March 2004, was asked to lead a small team to look at this problem. For a number of reasons, PeopleSoft Canada was not suffering to the same degree with the issues of attrition, degrading margins or new product skills shortages, which is probably why I was tapped to look for a solution.

In early April, we recommended a strategy to reorganize North America. The geographic regions would remain customer facing organizations, responsible for professional services sales and program & project management. Consulting Resources (approximately 1400 consultants and their respective 80+ managers, directors, vice-presidents and administrators)  would be pulled out of the regions and re-formed into a North America organization,  and realigned into teams reflecting PeopleSoft's four product suites (Human Capital Management, Financial Management, Supply Chain and Customer Relationship Management) plus a fifth team representing Technology. In following two weeks, we completed the final business case, obtained CEO approval, and announced the new organization on April 26th. The task then fell to me to create and lead this new organization which included all the personnel from the seven regional Consulting Resources teams plus the Global Services Product Line Management team and the Global Platinum Services Team; all totaled approximately 1400 people.

 We had set three objectives for the new North American Consulting Resources team:

1. Reduce attrition to the 10 to 15% range
2. Fix the skills issue so that we could support new products
3. Remove redundancies and save $10M annually in expense

At the time, there was also a perception that the Consulting Resources VP team that had managed these regions had not successfully met the challenge and leadership changes were required.  With 30+% annualized attrition, as well as a skill shortage preventing deals from being sold and delivered, there was urgency to fix the problem.

I met my new VP team in Chicago during the first week of May at a meeting that felt like a game of musical chairs. There were seven Consulting Resource VP's but only five available VP jobs, and some of those positions would have to be filled by new blood. Further, there were currently over 45 consulting managers reporting to them and our new plan called for only 34 in the new organization.

This first meeting was the critical one. Being a Canadian, I was an outsider and not well known by my new US team.  These executives were competent professional services executives and I needed them to carry the weight of the reorganizational activity. They had all the working knowledge of the people currently in the division and commanded the loyalties of their respective teams. Yet, there was no way of candy coating the bad news that most of them would not be part of the new Consulting Resources organization. In many ways, these executives were scapegoats for circumstances that  were not entirely within their control.

I started the meeting by asking them why they thought we faced with our current problems. The answers were startling. They knew all the issues that I had uncovered during March and had most of the right answers. I then asked if they knew all the answers, how had they let the problems happen. There was a general feeling that they were the victims. They had predicted to their bosses what would happen due to the actions and cuts of the previous year but they felt that they hadn't been listened to.  In their minds, the blame for the current state of affairs shouldn't stick to them. They had made the right recommendations but their recommendations had been turned down, so it wasn't their fault. Most of them had never "bought into the Plan" that they had been given to execute.

I listened, questioned and then came to what I believe was the turning point in the whole project. I asked them if any of them had threatened to quit if their recommendations weren't acted upon. Had they been willing to "bet their jobs" on what they believed in? Did they have that level of conviction in their recommendations? The room sank into silence. I asked them if anyone had really enjoyed the previous year. It had been a tough business year and they had a lot of scars on their backs from it. I told them that in my experience, when faced with objectives that I do not believe are achievable, there are two choices:

• Accept the risk of being fired for telling my boss that what they want me to accomplish is impossible
• Accept what I believe to be an impossible goal, and then spend a painful year not being successful and risk being fired regardless.

Either way the outcome is likely the same yet the former avoids the failure and likely will force your boss to re-think their demands. "Betting you job" sends a powerful message. I told them that I believed their failure had not been a failure in doing their jobs but rather a failure in courage and conviction.

The mood in the room changed very suddenly. The denial and anger seemed to pass. This was a failure and criticism they could wrap their heads around and accept. Now we could start to plan the reorganization.

Between early May and the end of June, I interviewed over 30 candidates for five VP roles that would be my direct reports. Once selected, this team, hand-in-hand with the out-going team, interviewed and selected the 34 consulting managers. A total of 1400 consultants were reorganized into five product line teams. Over 50% ended up with new managers. Significant effort was also expended to match out-going VP, Directors and Managers against open needs in other parts of our consulting business.  All previous leaders (VP's, Directors and Managers) moved into new roles, some as Delivery Engagement Directors, one into an HR Director position and others into roles as senior individual contributors.

In addition, during this period, all of our administrative processes for hiring, on-boarding, matching consultants to projects, administering time records and the overlaying financial management processes and controls were re-developed.  On July 1st, we went live with the new organization.

Immediately, we hit the road to start selling the changes and to stem the attrition. We used face-to-face meetings (Consultant nights out at local restaurants or bars near their consulting engagement), phone-in Town Hall meetings, speaking at training classes and written communications to get the message out. We picked some high impact irritants to morale and quickly fixed them to show that we were serious about change and making this new organization better. We identified quick hits and long term plans, and communicated both so that expectations were properly set.  Most of all, we walked the talk, admitted where we had screwed up in the past and demonstrated that we really understood the issues and solutions. By October, attrition had dropped to below 15% and was continuing to trend down. We were growing and had 12 full-time recruiters on-boarding over 30 new consultants per month.  We had removed $10M of annualized cost from the business while increasing revenue and promoting consultants to higher positions. Finally, we established critical mass in areas of sparse skills and were on our way to fixing this issue.

In looking back, this project was a classic change management effort. It started with dealing with denial and anger that often accompanies change, gaining acceptance of the problem by dealing with it in candid, blunt dialogue and then setting a vision and big goals that all could embrace. We then rallied everyone to a common plan. We over-communicated and engaged all stakeholders in multiple ways (face to face, by phone, by email). We backed up our rhetoric with actions to demonstrate commitment. We set a fast paced cadence and hit every deadline.

Next time: What do these lessons in Change Management mean for smaller companies?