Posts Tagged “C-Suite”

Transformational change results in lower productivity. People are worrying about jobs, who is getting which job, how they will work in the new job, and a gazillion other things. Every level in the organization is wondering, “What’s in it for me?”  The wondering and worrying translates into lost productivity – and large opportunity costs. What value would employees create if they weren’t worrying about the big change?

It would probably take a doctoral study to analyze the numbers comprehensively, but some directional assumptions point toward a scary story. The spreadsheet below takes some average numbers for revenue and costs per employee, and estimates the value created by each employee.

The logic continues that if the average employee’s productivity falls 10% during the change, the company has foregone $2,070 in value. Because the employee contributed 10% less, less value was created. People aren’t creating new products, selling to new customers, analyzing trends for opportunities, negotiating better prices, etc… They are too busy wondering and worrying.

Carrying the logic all the way out, if the change program lasts 12 months and the company has 1,000 employees, the company has an opportunity cost of nearly $25M. 

$25M is a big number, and one would naturally ask, what can be done to reduce it?

The two options are “faster” and “better.” Faster says: get the 12 month project done in 11 months. Better says: get the project done in a manner whereby productivity is preserved. (This productivity preservation requires change management approaches.) Based on the assumptions I used, “better” is clearly – well… better.

A couple comments in closing:

• To repeat – these numbers aren’t an analysis. These numbers are directional estimate based on some reasonable assumptions. Using the mildest of assumptions, however, shows that productivity losses extrapolate into some large foregone value.
• If you would like to try your own numbers, you may download an Excel version of the Change Initiative Cost Estimation Worksheet.
• The figures regarding revenue and costs per employee in the spreadsheet come from PriceWaterhouseCoopers – Saratoga’s 2007 / 2008 US Human Capital Effectiveness Report.

I was recently asked by a Human Resources professional how he could help their company become better at managing change.

I felt a little bit like the doctor answering the question, “I have a bad headache, what’s wrong with me?”

Without a lot more information, the answer will be simple, “Take two aspirin, and call me in the morning.”

Resisting the urge to encourage him to call my office, I gave my diagnosis-free prescription: “Improve senior management leadership capabilities.”

Without a doubt, the approach will help. As detailed in a prior post, CEOs believe senior manager skills and experience stand in the way of implementing change. Not only are senior manager skills an opportunity, but improving their capabilities will give you leverage in future initiatives.

The better diagnosis would come after some frank conversations in the C-Suite. Six topics should be covered:

1. Please tell me about the largest change initiatives you have gone through in the last five to seven years.

2. What went well with those initiatives, and what did not go as well?

3. How likely are we to go through large-scale change in the next three years?

4. How likely are we to repeat the positives and negatives of your previous experiences?

5. How well prepared are our senior and middle managers to lead future changes?

6. What should we do now to best prepare for the future?

After having this conversation with each member of the C-Suite, I would identify the common themes and report back to them as a group. The report would have three elements:

• What did they say?
• How does their collective view compare to best practices and experiences in other organizations?
• My recommendations to address the opportunities.

Those recommendations could cover a wide range of options, but people-related opportunities are likely to dominate. The best part of approach is that the go-forward plan will be largely of their creation. They will give you a charter to prepare for change and become your guiding coalition in that journey.

Perhaps I should give my acquaintance a call and give him some new advice. He needs to go have a frank conversation with the C-Suite.

I continue to work on material for several speaking engagements and am currently focused on “what is on the mind of the C-Suite.” The methodology is highly informal, but some clear trends begin to emerge:

• Economics – Today’s economy has made it all the harder to continue prior trends. Credit is challenging, commodities have sky-rocketed, inflation has awoken, the housing bubble is deflating, the dollar has slid greatly, confidence is weak, and the tax code likely will be changing next year. Good news is limited and some potential risks have turned into realities.
• Agility and Innovation - Companies that can move quickly win. How does a business create new products and services and implement more productive ways of working quickly and effectively? How does an organization spark and nurture collaboration and flexibility?
• People – The data is clear. Engaged people create superior results. How does a C-Suite attract, identify, hire and motivate the highest quality talent? Millennials have different expectations of their employer. Long-term employees are leaving with years of knowledge. Engagement is a here-and-now challenge. Tapping the supply of talented people that can lead and execute well in the new world will only get harder. How can they make people a competitive advantage? How can they effectively manage the employment brand proposition?
• Community Responsibility - Whether the issue is climate change, sustainability or corporate social responsibility, there is an expectation that employers contribute positively to the communities in which they do business. It isn’t just nice-to-do anymore.
• Corporate Governance - Enron and Sarbanes-Oxley may be distant memories for you, but you probably don’t sign and certify your company’s governance structure. More than one C-Suite member has voiced a worry about “their signature,” and “on my watch.” It may not be sexy, but it does take time.
• Constituency Management - Will there ever be enough time to pay attention to shareholders, regulators, customers, suppliers and employees while staying at the forefront of personal and professional development? Don’t forget – the C-Suite also must demonstrate – occasionally – the merits of work-life balance as well.

Even if the list is not perfect, the reality is that there is a lot to worry about before looking at today’s sales, tomorrow’s advertising, or next year’s business plan. Today’s CXO needs people who can execute well so that they can address long-term opportunities for the business.