Welcome back. In this lesson, we're going to talk about the challenges to implementing change. In fact, getting a change initiative even started can be difficult. So let me tell you a little story. Now it all started well over a decade ago when a group of strategic investors took a controlling stake in a floundering Fish Company. The target company was one of the world's largest fishing companies with nearly a billion dollars in sales, but a negative bottom line.

It's such a shame when a company works so hard to achieve that level of sales, but has absolutely nothing to show for it at the end of the year. The initial idea was to consolidate the fishing industry however, politics ran deep with this particular company and the law was changed to prohibit any merger for coming to fruition. A second idea was to spin off parts of the company to realize value, but again, politicians sank that idea with another stroke of a pen. So after several years of failed strategies, one of the silent investors became well, less silent. I worked for him. He quickly gotten self appointed, the Board of Directors said we were often running, acting as an activist catalyst investor in the most hands on approach you could ever imagine.

Now my job at the time was to help management implement the directives from the board, and my boss's primary focus was on the US operations, the largest subsidiary of the company, which was struggling to achieve profitability. Its operations were essentially to convert raw seafood into a variety of processed seafood products that you would find at any of your local grocery stores or your Applebee's. If it helps. Think of fish sticks and all the other seafood that you see boxed up in your local grocery store. The employees of this company were fiercely loyal. Many of had worked for decades for this company.

The fishing industry is notorious for cyclicality that rises and falls with exchange rates, fish stocks, and political whim. One of the darkest hours for this company was the revelation in the early 1990s that the cod stocks off Canada's East Coast were suddenly gone. Overnight, the company's primary source of raw materials was eliminated. So for many of the company's employees, no matter how bad things looked, they had seen much worse. Compounding our challenge was the fact that my boss and I were new to the company and new to the industry. We didn't know a thing about fish fish sticks or any of the other hundreds of varieties of seafood seafood was not like chicken, beef or pork in that regard.

These factors created a huge barrier for us to initiate any change. But that wasn't all the employees that already lived through two failed strategic attempts in the past five years, and having another group of outsiders come in to rally them once more to execute a new strategy was not initially the top item on their list of daily priorities. Three of the lead board members including my boss formed a special Select Committee of the board and effectively took over the leadership function of the company. A special working group comprised of a representative group of managers from each of the major subsidiaries and head office was formed to respond to the new board directives. My job was to chair this working group in the weeks and the first few months that follows the barriers we faced included unsupportive executives that had already set strategies contrary to the board that they were unwilling to let go of, and undermining our progress to fulfill in the latest strategic plan.

You can see this lack of support through their actions, their allocation of resources and the prioritization of the board directives, the initiatives coming into the working group. We're simply getting lip service and little else. early in the process, it was determined that the executive team that led this company into crisis was not going to be the same one that would lead it out. And this triggered a series of executive departures replacements departures again and vacancies lasting the next six months, but it was the middle management group who were actually the ones most needed to bring about the desired changes. These managers themselves were leery after the two previous failed strategic initiatives, resulting in a risk adverse culture. This left them less than enthusiastic about taking on the perceived flavor of the day.

But that was before they got to know my boss a little better. And below the managers, the employees themselves were disengaged employees didn't understand the bigger picture. In fact, few were aware of the severity of the situation itself. The last mandate they had was to try to sell as many fish products as possible to grow the top line. In fact in our early discussions with each sales channel, Director, each channel believes that they're actually making money because they didn't have a full picture of the corporate results and overhead. Only the executives seemed to know that they weren't making any real money on the bottom line.

And they had grown accustomed to losing a few million dollars a year and borrowing excessively. As the working group outlined its plans and communicated the objectives of the select committee to management employees, it became very clear that they were struggling with trying to run the business as usual, along with being responsive to the initiatives of the working group. It just wasn't possible to do both in any given day, particularly given the pervasiveness of the changes contemplated by the select committee. For instance, in the North American value added division, one of the major strategic initiatives was to take this one giant division and split it up into four separate strategic business units, all acting at arm's length from one another. Now, this is no small undertaking for any company. So you can imagine that Sort of cultural shift that was contemplated by decentralizing all the business activity.

The vision was to have the sales and marketing organization segregated by country and dealing with the supply chain organization as they would any other supplier to help drive efficiencies in production. A diabolically different approach to managing the business is one strategic business unit. It wasn't long before we ran into initiative gridlock. We have more than 30 initiatives ongoing across the company. And while some of these initiatives only required a few hours of attention, there was very little getting done as the bureaucracy got in the way of making real progress. Focus was fleeting his higher priorities were always submarine the initiatives of the working group.

In short, one month slipped into another and results continue to disappoint the select committee has escalating hostilities both on the board and inside management. I was fortunate enough to see both sides of this battle for change. The one thing my boss was very good at was making decisions that no one else had the guts to make. He had a knack of getting people to focus their energies in just the right place. And I recall a couple of turning points, which in hindsight, allowed us to turn the corner. And they also nicely illustrate getting past the three biggest challenges to accepting change.

The first happened during a meeting we had with the vice president of the supply chain, my boss tells the guy to stop buying raw material not to slow down not to cease procuring only certain raw materials. His directive was to stop purchasing raw material. The VP must have questioned that directive 10 times in the conversation that followed it with something like this, you do realize that we have a global supply chain and you just can't shut it off like a light switch. my boss's reply was no more procurement. You realize that in the next few months, we'll have no raw material to be able to produce our finished product, my boss's response. Sure, you will You've got so much inventory on hand that we don't need anymore.

And then I've got a team of 12 people working on procuring inventory all over the world. What are they going to do the resupply, have them sell the inventory we've got, it finally sunk in and that the Royal we had to break this cycle of just doing the same thing. As we've always done. The first challenge of change is getting people to let go of the old getting people to let go of the old is a challenge because perceptions get deeply rooted through time. senior managers and directors responsible for managing organizational change, do not as a rule, fear change, they generally thrive on it. So remember that it's your people who do not relish the change.

They find change deeply disturbing and threatening. Your people's fear of change is as great as your own fear of failure. Now, some actions that we can follow to help people let go of the past include identifying who is losing what and determine the details of the change itself. Expect your people to overeat react to the changes suggested, including dealing with anger and sadness and anxiety. All things that we'll discuss in our next lesson, define what is and isn't over, treat the past with respect. And that includes any layoffs or retirements that are necessary to affect the change, mark the ending with celebration, but initiate action for the next phase at the same time, and continually demonstrate how change fits with the overall picture.

It's consistency with mission, vision, values and corporate strategy. You should even apply these principles to very tough change type decisions like making people redundant and closing and integrating merged or acquired organizations. changes as a result of bad news need even more careful management than that of routine changes. Hiding behind memos and middle managers will only make matters worse, consulting with people and helping them to understand does not weaken your position it strengthens IT leaders fail to consult and involve their people in managing bad news are perceived as weak and lacking integrity, treat people with humility and respect and they will reciprocate. Now at this stage of the game, it was clear that there was a lot of confusion about why any change at all was necessary. After all, the fishing business is cyclical.

And many people have seen much worse times before. If I hear about the cod moratorium of 1993. One more time, my lifetime, I'm going to puke. So the attitude of the majority of staff was why change why now, around the watercooler the whispered conversation was this too shall pass. This is where things got interesting. My boss gathered all the employees together, and he's a rather charming individual with the transparency of a pane of glass.

At the town hall style meeting. He laid all his cards on the table with the entire employee group gathered, and he said a lot of nice things about the company and its history. But there was always one phrase that everyone remembered from that meeting the exact words he use where this company is better off dead than it is alive. And that was the truth. from his perspective, the company's stock was trading at nearly half of its book value. By liquidating the working capital and selling off the fishing fleet, we can make a nice return on this investment.

So as implied in not so subtle terms that either the employees open themselves up to the possibility of change, or he shut the whole thing down. Talk about getting people's attention. Now, I'm not sure to this day whether that was perhaps the most eloquent approach to initiating change management, but it was definitely memorable and those words haunted the halls and the watercooler for months to come. Now we lost a lot of employees because of those words, and the uncertainty it created. But at the same time, many of the people who remained were determined to prove him wrong. The second challenge of change happens when employees misunderstand the necessity for change.

The plan we had was the same plan we had developed six months earlier. But now people knew we were serious about making change. My boss is a big believer in empowering people and finding talent from within the organization to lead the turnaround. So let me tell you a story about how we entered into the true transition state. When I first started working with the company six months earlier, there was a director of one of the sales channel that particularly impressed my boss. So after the Executive Vice President of Sales was relieved of duty.

This was the guy that got promoted to fill that seat at the executive table. Now, six months later, we had reached an inflection point. After two presidents we still hadn't found a leader for this us subsidiary, and it was becoming painfully obvious that this was desperately needed if we were going to make any serious progress on the change. Frustrated by this lack of progress. I wrote my boss a memo which titled 100 things to do. It was quite literally a list of 100 changes, I thought were necessary to get this company turned around.

He asked me what I wanted. And I told them I said, I want you to make me president of the US subsidiary. So we fly down to the US Office, my boss gathers all the executives around a boardroom table. And he outlines his plans to make me officially their boss. He then asked for their opinions. And I've sat through the whole thing, which was the most bizarre experience of my whole business career.

Almost unanimously, everyone was against my appointment as President. I didn't know anything about the business. I didn't have any industry experience. I didn't have any experience as a leader and the list went on and on. The only person who was for my appointment was the head of finance, because he knew that if I wasn't appointed president, then I was going to be named Chief Financial Officer as the backup plan, which happened a few moments later. As an aside, that's also how I got my first CFO appointment, which was still pretty cool.

As for the presidential position, my boss elected the VP of sales, who only six months earlier, was buried down in middle management, and the VP of the supply chain, who I introduced to you earlier, to become co presidents of the company. Not only did everyone at the table, do a double take at that decision. The two of them wondered as well. In fact, they asked him just to pick one of them to become president, but not both. But he refused. And he made both of them co presidents of the company, our leadership issue was in his mind settled.

So now we had two co presidents as myself as CFO. And at this point, we got focused really quick on the business at hand. Which brings us to our third challenge, and that is managing the transition state can be extremely challenging. It's been a bit of a long story, but I think it perfectly illustrates the barriers to transformation you need to anticipate change can be stifled by anyone in the organization from an unsupportive executive to a misaligned middle management to a disengaged employee group. And unless you help your employees manage both their day jobs and the change initiative, one or the other is not going to happen. You might as well try to sail straight into the wind, and you'll find you won't get anywhere fast.

In this lesson. We also talked about the challenges of change, including getting people to let go The old explaining the necessity for change and managing the transition. We will pick up on these topics again when we start talking about an approach to dealing with change management in future lessons. But next, let's spend a moment looking at change from the employees perspective. And that's the topic of our next lesson. So until then, don't stop to get to the top and get to the top.

Don't stop.