Change Implementation Techniques for Forming Transitional Team, Creating Alignment, Maximizing Connectedness and Creativity

Section 10 - Findings from Case Studies

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Case Study 1 - Answers to Case Study 1

Ingredient 1 ‐ Laying The Foundations Of New Ways

(New behaviours to demonstrate that old ways changing)

GM removed

Current GM sacked and replaced with new GM (me) on a short-term contract (3 years). Staff thought that my position was permanent

Social occasion/gathering

Every section/division/branch organized a social occasion/gathering so that GM could meet staff and their partners. They chose the venue, date etc and there were no limitations on costs, ie food and alcohol, as the organisation paid for these social occasions/gatherings. Most chose a restaurant on Friday and/or week-end

Following on from the success of the occasions/social gatherings, staff wanted to meet other staff from different geographical areas. So a family day (including BBQ and "cricket/tennis" matches) was organized for all staff and families

GM - one-to-one, face-on-face, confidential staff interview

GM visited all staff for one-to-one, face-on-face, confidential interview at their worksite (not coming to GM office at Head Office)

Redesigned office

Redesigned office to be non-confrontational, ie desk was replaced with benches and coffee table

After-hours meetings

Changed from staff paying for food and refreshments at after-hours work meetings to the organisation paying

Rotated chairperson and site of management monthly meetings

The senior management monthly meetings were rotated by site and chairperson, ie the local manager would chair the meeting at his site. By not chairing these meetings, the GM was able to more closely monitor the performance of the meeting, including the dynamics and nuances, etc

Hindsight point!!!!!

With the benefit of hindsight, the GM should have spent more time with good clients; most of his time spent with clients who were with "delinquent" clients, ie slow payers

Ingredient 2 ‐ Establishing A Sense Of Urgency (Many and Everywhere!!!!!!!)

Bad debt ($1M)

$1 million potential bad debt that was unsecured - it took 6 months to collect; furthermore, kept the client but with different trading terms

Inventory loss ($1M)

$1 million of stock missing (physical v. computer) - resulted in many stocktakes and visits by leading accountancy/auditing firms ‐ took 8 months to solve, ie sometimes goods were sold before the purchase price had been finalized. This resulted in stock being kept in a variance account. At times, the figures from the variance account were not transferred once the purchase price was known

Margins falling

Margins (sales price minus cost of goods/sales*100) were falling from around 18% (5 years ago) to being under 10%

High staff turnover

Staff turnover was 25%

Bank reduces overdraft

Owing to the financial collapse of a closely-related company (similar industry and shareholders, same directors, same bank providing finance and same computer system, etc), the bank reduced credit facilities by 30% overnight. This was at the time of peak on-lending to major clients, ie providing them with credit facilities

Administrative problems

Administrative procedures (including the computer system and staff) were unable to handle the explosive sales growth, ie most paperwork was a mess. This resulted in inaccurate financials for the organisation, ie financials not finalized up to 6 weeks after the close of the month. Yet a 1% change in margins could change the profit by $1 million. Furthermore, most monthly statements to clients were inaccurate and needed to be corrected. The patience of the clients was amazing

Limited multi-skilling (when the computer operator left, head office came to a grinding halt)

Higher debt level, ie much financial borrowing by the organisation that had to be handled and serviced

Initially 15 staff reported to the GM (this was reduced to 6, ie 2 regional managers, 2 senior divisional heads, a financial controller and an operations manager). The 2 regional managers resulted in adding an extra layer of management

Board divisions

Divisions within the Board, ie continual conflict between original owners and private equity group representatives. The only thing the Board agreed upon was to maximise dividend payments, ie one year took out 90% of post-tax profit as dividends. Story - investment opportunity of $0.5M


E-commerce was a threat to the traditional way of doing business


One of the senior managers had recently left to set up his own organisation in competition to the largest branch. He had taken some good staff and several large clients with him; some of these were shareholders

More competitors entering the industry. These were small firms, ie a couple of staff, that did not have the administrative overheads of larger organisations

External issues

Environmental issues (chemicals, water, land degradation, etc)

Commodity prices


As the organisation belonged to a buying group that had grown into the dominant player in the industry, many suppliers were giving preferential treatment to competitors to counter-balance the buying strength of the buying group

Furthermore, some traditional suppliers were hostile to the organisation, ie refused to deal with the organisation and one supplier had initiated court action against the organisation

Ingredient 3 ‐ Forming A Transitional Team

Initially 3 people (MD, GM and marketing manager who was also manager of the largest branch, ie had around 30% of the organisation's sales)

After the retreat, this was increased to 7, ie 2 regional managers (the marketing manager became a regional manager), 2 senior technical/sales staff, chief accountant and operations manager (recently promoted) plus MD and GM

(NB with the benefit of hindsight, it should have included some staff from lower levels of the organisation, ie a more representative slice of the organisation)

All members of each team were full-time in their organisational jobs and only part-time in the transitional team, ie meet monthly with many phone link-ups between meetings

Ingredient 4 ‐ Creating Alignment

Each staff member produced a SWOT analysis of the organisation which was independently summarized for each branch/division and organisation. Despite staff being trained in the technique, middle management was cynical about the capabilities of staff to perform a SWOT. One of the junior staff's SWOT was 16 pages long!!!!!

Using the summarized SWOT analysis as a basis, a 2.5 day retreat was facilitated by an outside, independent consultant. Attendees included representatives from both the formal and informal structure of the organisation

This was the first time that the organisation had conducted this type of retreat and involved management in reviewing and developing ways to handle strategic issues that would impact on the organisation

Despite the initial reservations by attendees, most returned to their respective positions with an understanding of, and enthusiasm for, the common focus and direction of the organisation that they had helped generate

Ingredient 5 ‐ Maximizing Connectedness

Decentralised decision-making

Most decision-making become localised to the branch level. Some branch managers liked the status and symbols of being a branch manager. On the other hand, some found the responsibility and accountability hard to handle, and would continually contact the GM to ask him to make decisions for them. The GM had several simple indicators, such as sales, margins, costs to operate branch, debtors' analysis, stock levels, etc, calculated on a monthly basis that he used to evaluate performance. The GM mainly focused on monthly averages and not individual sales

Decentralised into profit centres so that each branch/division was treated like a separate company with its own financials (profit and loss, balance sheet, cash flow, capex, etc). Each profit centre was charged a commercial rate of interest for the use of the organisation's assets, such as inventory, vehicles and debtors (over 90 days)

Changed the name of Head Office to Branch Support Team (BST), ie staff in head office are only there to support the branches. Furthermore, BST had to be self-financing, based on the interest charged to the branches for the use of the organisation's assets. This minimized the uncontrolled growth of BST. Furthermore, the usual disagreement between BST and branches was reduced, ie the branches claiming that they would make money if the BST was not there!!!!! If branches wanted to reduce the size of BST, they had to get their stock levels, debtors, etc under control so that they were paying less interest to support BST

Staff changes

The financial controller and his senior accountant preferred centralization and their behaviours, especially their poor people handling skills, did not support the new direction. As "blockers" they needed to be replaced.

The first to go was the senior accountant. Despite the financial controller agreeing to replace his senior accountant with an experienced person, he selected a recently-graduated accountant. The financial controller was not keen to have a competent person immediately under him as this person would be a threat to his position

The previous year, the financial controller had been paid a significant bonus as the Board was pleased with his performance, ie had apparently saved the organisation, but the GM felt that it was more "smoke and mirrors". To support the case for removing the financial controller, when the financial controller asked for a month's holiday, he was granted it. The Board members were angry about this as they feared the financial performance of the organisation during his absence. In other words, they implied that my position as GM was under threat if the financial accounts, etc were a mess during his absence. Luckily, everything ran smoothly and the Board agreed to the staff change. If you are serious about change it is risky and requires bold leadership, especially when senior management must be removed

Multi-skilling was introduced at all levels

As most staff were technically very competent, more non-technical training was introduced, including tools and techniques of TQM and creativity (deBono); how to handle difficult clients, etc. All senior management attended a seminar by Edward deBono. Initially the MD thought that it would be cheaper to fly deBono to the organisation!!!!!!!

Developed a company uniform that staff were proud to wear

Ingredient 6 ‐ Creating Short-Term Wins

Initially, a bonus system was introduced based on performance of individual branches/divisions but this had to be modified to stop the border war between branches. Thus, half of each manager's bonus was paid on the organisational performance

Used simple TQM tools and techniques to review the handling of creditors. Initially, there was resistance from the new financial controller and his staff. The new financial controller complained to the MD that the GM was interfering in an area in which he had no expertise and for which he was not responsible. Furthermore, staff handling the creditors reinforced the view that the number of steps could not be reduced, ie all the 56 steps were there for good reasons. After training the staff in the TQM tools and techniques, such as recording a list of all the steps (with time required to perform each step), and asking questions (such as what would happen if the cheques were sent out now?), efforts were focussed on reducing the steps that took most of the time, eg if 50% is reduced from a step that takes 90 minutes, then 45 minutes is saved; on the other hand, if the step takes 90 seconds, then only 45 seconds is saved. After several months, they had reduced the steps to 19!!!!! Several months after finishing the assignment, I phoned the organisation and happened to speak with one of the staff who was on the review. He advised me that they had further reduced the number of steps to 11 steps.

(NB the staff themselves, not management, had reduced the number of steps by using simple tools and techniques. Management had provided the tools/techniques and created the environment, ie encouraged the team to find ways to reduce the number of steps)

Fast-tracking promotions (see Ingredient 7)

Allocating supplier-sponsored trips (including overseas) to staff who supported the change process. Previously, these trips were taken by senior management. One guy needed help getting a passport!!!!!!

Regular celebrations, such as dinner with partners after locating the missing inventory ($1 million), when certain milestones were achieved. The staff themselves chose the most appropriate reward/recognition (not management)

Court case with supplier resolved out of court

Ingredient 7 ‐ Consolidating Performance Improvements

Improved cash flow by improved handling, such as tighter credit selection criteria, and closer supervision of debtors, such as the $1 million debtor. Furthermore, the long-term debt was reduced by around 30% over the 3 years

Allowing 2 career paths, ie sales staff did not have to become managers to progress up the organisational ladder. Too often good salespeople become branch managers and dislike the administrative functions of being a manager. In this situation, the promoted sales person often becomes frustrated (with the likelihood of the company losing valuable staff members) and consequently sales suffer. Thus sales staff progress up a separate career path from those in management. As a result, a truck driver became a branch manager of the most profitable branch and had many tertiary graduates reporting to him. Furthermore, a wholesale manager in a retail store was promoted to being a regional manager in charge of 4 branches

Organisation was successfully floated with 10 similar organisations that had total sales in excess of $1 billion. The MD became MD of the enlarged organisation. Later on, organisation was taken over by a large conglomerate who subsequently has sold it to a global organisation

Continued reviews on a quarterly and annual basis

Introduced an induction course for new staff compared with the previous practice of just being shown to a work area and left to fend for themselves

Introduced an IT system with maximum staff involvement so that it was user-friendly to operational staff as well as senior management and accounts/administration. For example, a truck driver showed me how the system worked!!!!!! Too often the operational needs are neglected with too much focus on senior management/accounts/administration requirements when selecting and introducing a new IT system

Redesigned offices at different branches to reflect new way of doing business

Staff turnover was reduced to under 10%

Hostile suppliers became friendly again, ie GM was invited to Melbourne Cup by supplier who had initiated the court action

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