Making your way through the transition state is so precarious. As we've learned in our first couple of lessons. So many things can go wrong at so many different stages. In this lesson we're going to talk about some approaches that transition state is important to manage for the change initiative to be effective. Creating lasting change is a process that can take years to achieve. So let's start this lesson by summarizing some principles up front before we look at the models one normalized change by providing your stakeholders your employees with an understanding that they are now in the transition state, a state between the past and the future.

Secondly, make sure you take actions to redefine perceptions by putting change in a positive light. Thirdly, create temporary structures and systems as required to manage this transition state. in later lessons, we'll talk about how You can permanently embed change management into your organization. And finally, during the transition state, invite creativity, encourage people to use this as an opportunity to find new and better ways to do things. So now let's take a look at the models. We'll start with the Add car model developed by Jeff AI.

And as we've already learned, change management is largely a people driven initiative. If you fail to manage the people dimension, the project is often destined for failure. In a study of 248 companies, helping managers to be effective sponsors of change was determined to be the most critical success factor of the change initiative. The Add car model is designed to address this people challenge, people need to first be aware of the need to change. Next, people need to have the desire to participate and support the change, followed by the knowledge of how to change and what the change should look like. Then they need the ability to implement the change on a day to day basis and Finally, people need reinforcement to keep the change in place.

So that's the ad car model. Let's look at another approach and get back to our story about the fishing company that I was trying to turn around a few years ago. If you recall, we left off at the point where I just got myself appointed as CFO, and we had two co presidents that were promoted from within the organization. JOHN Kotter of the Harvard Business School and a leading thinker on change management has developed an eight step model to transformation, which is practical, if not insightful as to what to expect. Links to his books have been provided on the course page in the resource section located on the right of your screen. His website is Kotter international calm and is a wonderful resource for more information, and I'm not even getting paid for that plug.

Step one is the step one is to increase the urgency. Now, as you may remember, it wasn't until my boss declared that the business might be quote, better off dead than alive. unquote, did the Wari staff start really taking notice that the board was serious about making change, there may have been better approaches to establish urgency, as in this case, those words sent a number of people looking for other opportunities. But in the end of those remained we had a much stronger company. Now cars intention with this step is more along the lines of inspiring people to open themselves up to the prospect of change. Through a convincing examination of the brutal facts of reality.

This would include such things as your competitive position, technology trends, and financial performance, all of which were weak and weakening in my fishing company. Only if there's a compelling reason to act, will people be moved? change for the sake of change, or a thinly veiled strategy of just doing something won't lead to any lasting change? a staggering 50% of change initiatives fail on this first step of the journey. A second step of Carter's model is to create a guiding team or a coalition. You In other words, a group of people within the company with the power and the influence to establish support for the change initiative.

In the early going of our turnaround attempt, we did not have a supportive executive team and our working group lacked the authority to set the priorities of the rank and file, middle line managers and employees. This all changed when we promoted new leadership and brought in new people change requires broad support of not only the executives but the manager levels as well. The first order of business for the new executive was to gather all of the department managers together at a yacht club just outside of Boston for a day where we worked on establishing a team truly dedicated to implementing a turnaround strategy. What the research has shown is that weaker approaches rely on a single person, a weak task force or committee or a complex governance structure, a lesson I got to learn in the field. The next step of the model is to develop a vision and the strategy to achieve that vision, that is the plan.

In our case, the vision of our company was to become a market leader in the seafood industry. That never changed. But before we could ever fulfill that vision, we needed to solidify the business we already had and show that we could run a profitable seafood company. The CO presidents used the yacht club meeting to roll out a very smart and articulate strategy for the coalition to follow, quite simply to centralize, simplify and standardize the business without vision a transformation effort easily dissolves into a list of confusing incompatible and time consuming projects leading either in the wrong direction or nowhere at all vision guides decision making, and if it's clear, it can avoid interminable debate. Oh general rule of thumb is to ensure that you can describe the vision of the change initiative in five minutes or less. If you're relying on a fat binder full of detailed plans and a sweet looking budget.

It's not going to resonate with your broader employee audience. The fourth step is to create In the vision, the coalition force becomes the poster child for spreading its word and living by it. Our simple message of centralized, simplify and standardize the business was taken to the employees in a series of formal and informal meetings. The vast majority of my time in the months that followed, were spent walking the halls, talking to managers and frontline staff about the business, the issues, their challenges, and what we could do better. You can't underestimate the amount of communication required to effectively lead change. It just can't come from the top, and it can't be communicated in a memo.

And those in a leadership position have to live the vision and reinforce the communication every single day. In the words of Kotter and Cohen. The goal is to induce understanding, develop a gut level commitment and liberate more energy from the critical mass of people. Now the first four steps are intended to prepare the organization for change. This literally took us almost six months to do. I like cotters description of defrost in New York.

Organization to accept the change. But then come Step five, and this is where the floodgates open. At the same time we were communicating our centralized, simplify and standardize strategy. We were empowering the managers to challenge every one of our business practices, and enable them to finally ask themselves the right questions, which centered around whether the activities performed in their department were truly adding value. And were they being performed in the most efficient, effective way possible. One of my primary job responsibilities was also to remove obstacles, the largest of which related to the fact that we were a subsidiary of a public company, because we're using an enterprise system and many of our challenges pertain to that system.

I needed to convince the corporate head office to make changes to the system that potentially impacted other divisions in the company. Obstacles came in many forms, and I had to stick my neck out a few times to reinforce to the employees in our group that we were truly going to make a difference this time. It certainly helped them I had the board of directors above me providing air cover, and allowed me to be the good cop, and I let the select committee the bad cop as necessary if we found ourselves getting stuck, those are the head office were convinced that we in the US were going a little rogue, in part because we were, it was a conscious part of the change strategy to evolve from a centralized organization into a decentralized one. In doing so I knew we had to take some chances along the way, we needed to start achieving some wins and fast.

One of our biggest challenges was that our systems were just not giving us good information. Worse yet, our systems were literally costing us money. Because of certain pricing structures and commission rates that weren't being calculated correctly. The sales guys had come up with pricing and discount schemes that were so complicated that the system was incapable of processing the information. I can remember spending a Saturday night having a conference call with the folks from head office, implementing a system change that they were concerned with muck up the whole accounting process. It was designed by my own controller in the US, who was one of the few knowledgeable people we had left in the company who knew the ins and the outs of the accounting modules.

I had a promise to the corporate controller that if anything went wrong, my own controller would be responsible for fixing it. She approved the system changes right in the middle of a cocktail party that she was hosting at her home that evening. That's an indication of the extent to which we were driven to get these changes done. We implemented that patch and wouldn't you know it, it mostly worked, but not quite. My controller wasn't all that happy having to help both the corporate and the other subsidiary controllers with the manual fixes we had to do at the end of the month. But personally, I saw that as a turning point of sorts with my old controller, we were going to make the right decisions for the business and be damned to the naysayers.

We did work out the books and in the ensuing months, we did break that once giant division that spanned two countries and two manufacturing plants into four separate strategic business units. These wins enabled us to finally get insight into the business that we needed to begin making changes realizing saving and improving operations, centralized, simplify and standardize became our mantra. And we had results that were starting to show that was working. Short term wins reinforce to the people the direction of the change initiative. Without them people lose faith in the long term vision. Ideally, these happened within the first six to 18 months.

The absence of winds, fuels arguments from the cynics, the critics and the skeptics. I love working in this company because the winds were so easy to achieve. There were so many ways for us to be more efficient that finding wins for us was relatively easy. Once we did achieve the first five steps, our financial results started surprising to the upside rather than downside. So back to my list of 100 items to do with the US company. I told my boss at the time that whether I was president or CFO, it really wouldn't change the list.

And fortunately, the CO presidents were both in agreement with the items on the list. So as soon as we scratched off one item, three others were already underway, and we just moved on. to the next, we never stopped. Some of them had to do with logistics, others manufacturing it sales finance marketing. I can't recall a single department that didn't require changes of one sort or another. One of my big initiatives was to get control over the sales organization.

Because from what I could tell, there was no rhyme or reason behind how we restructure our deals. I created what I call the sales Bible, and had the cover printed up in a biblical sort of font. The pre text contained the 10 commandments of what the Salesforce could and could not do. The sales Bible made its point and with that done and moved on to product rationalization, the more products we sold, the more money we lost. So we knew there had to be customers and or products that were selling at a loss. We literally discontinued hundreds of SK use as a result of getting a deeper understanding of our cost structure and our pricing schemes.

Momentum needs to be sustained after early wins that list of 100 things to do. He kept me going for the entire year and a half I worked in the business and even when I left I'm was only halfway through that list. But after 15 months of working in the business, my boss sold his interest in the company and resigned his position on the board, a sale of the company was imminent. I stayed on with the US subsidiary on a transitional basis for another three months. And at the last executive meeting I attended, we finally delivered what I thought in my judgment was a robust analysis of the month the results of the sales and marketing organization fully separated from the manufacturing results. And in the recent months, we are now consistently beating our budget, not on volume, but on profitability.

People need to be convinced that changing their behavior and the way they do work has improved performance change needs to be incorporated into the performance management system that evaluates rewards and promotes employees. In the year I left. That business was nearly one third smaller than it had been two years prior, but the company realized a record level of profit. While the turnaround was never fully completed, it was sufficiently complete to attract the sale of the company. On block to a strategic buyer, and it turned out that the strategic buyer was a smaller player in the US market. So the acquisition of our company turned out to be favorable for many of our staff a reverse takeover of sorts at least organizationally, the sales director turn co president was appointed as the Chief Operating Officer for the US operations.

The one supply chain VP turned co president was appointed to act as the global vice president of supply chain for the acquire. These two individuals were able to sustain that momentum even under new ownership, and the business has grown profits threefold in the year since, and more importantly, in the year since the company has acquired several other large players in the seafood industry, and is now one of the world's largest seafood companies and rapidly closing you know, fulfilling the vision that was first initiated over a decade earlier. Sustaining change requires recruiting the right individuals and weaving change into the corporate culture. Culture, it can take anywhere from three to 10 years to make changes to corporate culture, that susceptibility to regression is a very real risk that needs to be addressed to make changes stick. The challenge for most companies is that they operate with a much shorter time horizon than three to 10 years, which makes change initiatives difficult to see through to fruition.

In the year and a half, we were involved with this company, the value our investment tripled. While our change management plan didn't follow cotters eight step approach explicitly, I can now see more clearly the key turning points which ultimately led to our successful turnaround. I love that assignment. It was my first CFO assignment and I learned so many lessons, which I've used in jobs since and shared with other professionals to help break through any barriers that have been holding them back. So let's summarize the lesson. Number one, you need urgency.

Perhaps the message that you're worth more dead than alive is not quite the right way to put it, but you need something catchy. that illuminates the circumstances warranting change. You need leadership, you need vision, you need a simple emotional message that plays to the hearts of all staff. This needs to be communicated personally and continuously. You need to empower the staff of the organization. leadership can create the coloring book, but let the staff choose the colors when early when often but never stop starting new initiatives.

Hmm, what do I mean by that? Well, as soon as you finish one initiative, start the next one or haven't already started. You need to be relentless. And you want to avoid any pauses along the way that can cause you to lose your momentum. And finally, make it stick in who you hire, what values they embody, and how people are rewarded. It's been a long lesson, but I think with these points top of mind, you greatly improve your chances of success.

So until next time, don't stop to get stopped because it's time to stop.