As you take your company to the next stage, change management becomes a major challenge. Here's how to help your employees keep up (or move on).
As a second-stage CEO, one of your responsibilities is to orchestrate change. This includes everything from reacting to economic, technological, and regulatory shifts in your industry to establishing new policies and procedures within your organization.
Whatever change you're implementing, big or small, you need to consider how employees will react. Change looks a lot different when you’re sitting in the orchestra rather than standing behind the podium.
When it comes to change, people typically respond in four ways:
Eager beavers These folks embrace change easily. They usually have the skills to make the change, and, perhaps even more important, they have the right mindset. Their response is one of enthusiasm and excitement: "It's about time. Let's go! I'm right there with you." We love these people! They’re critical to successful change management and second-stage CEOs should be on the outlook for them when hiring.
Tentatives These employees are cautious or even downright nervous about making a change, usually because they know they'll need some new skills. They may not have kept up with training and are embarrassed that they've fallen behind. For these folks, provide training and professional development and see what happens.
Psychologically challenged For these individuals, the idea of change activates some deep fear, and it's going to lock them up. Rather than professional training and development they may need professional counseling if they’re going to be able make the change. Encourage them to leverage your employee assistance program, but be prepared: You may need to help them find a position that's less demanding.
Recalcitrants These people are the most damaging to your change initiatives. They will sabotage your initiatives and smile at you while they're doing it. They may have the skills to make the change, but not the right attitude. The change makes them feel threatened, and they resent you for it. You're moving their cheese. If you recognize these individuals, fire them as quickly as you can. Even better, send them to your competition.
This personality framework doesn’t just apply to frontline employees. It includes your management team, your suppliers, and other stakeholders. Recognizing how people respond to change is important for a second-stage CEO to know because change is not the exception in second stage, it's the norm.
Incremental versus radical change
How people embrace change also depends on severity and urgency, i.e., how much change is required and how quickly it needs to be implemented.
Incremental change is easier to initiate because it's gradual and usually proactive. It keeps people on their toes and helps the organization learn. Even so, not everyone is going to be happy.
Case in point: Bridget Lorenz Lemberg launched Forensic Fluids Laboratories in 2005 and has quickly expanded the Kalamazoo, Mich.-based drug-testing lab from a one-woman show to more than 60 employees and $12 million in revenue. To continue scaling, she has begun to introduce structure, including formal job descriptions and performance metrics. "We've gone from a free-for-all to holding people accountable," she says.
"Most employees have welcomed the structure," she adds. "The people who are doing a good job and care about the company absolutely love it. They realize that structure will weed out the people who don’t want to be here. The only resistance has come from employees who are falling behind."
Radical change, especially when it happens in a compressed timeframe, is more stressful for employees and is much more likely to trigger resistance.
Take Nancy Fisher, CEO of Data Distributing LLC, a reseller of IT medical imaging and storage solutions in Santa Cruz, Calif. When Fisher joined the family business in 1996, Data Distributing was selling optical disks and making less than $1 million in sales. Since then Fisher has not only accelerated revenue to about $10 million, but has also prevented the company from becoming a victim of industry commoditization by shifting its business model from optical disks to sophisticated hardware, software solutions, and installation services.
This shift required salespeople to dramatically change their approach. "And that didn’t go over well -; especially at first," Fisher says. "They were used to making quick sales over the phone. Selling complex solutions instead of widgets was not only a longer sales cycle but required different skills. Instead of doing inside phone sales, salespeople now had to go into hospitals and medical centers for face-to-face meetings."
When she outlined the necessary changes, "the backlash was tremendous," Fisher recalls. "Some felt they weren’t valued. Others resented being asked to do new things, so they rebelled and left. Things had been so good for so long, there was a sense of loss with some and entitlement with others. They felt like I was dictating to them: 'You will change or else!'"
Go overboard on information
Be aware that whenever you start talking about change, people will look at it from a position of loss. For some, it may be about loss of status or loss of control. In other cases you may be breaking psychological contracts that have been formed with employees, such as being able to operate in an environment without metrics (Lorenz Lemberg’s situation) or selling a particular product in a particular way (Fisher’s predicament). Even though altering these contracts can produce positive results, leaders should expect to encounter faulty assumptions, blame, anger, and frustration along the way.
When talking to your employees about change, especially radical, reactive change, be open and honest. Explain why you need to make the change and what you think the outcome will be. Tell them that it's normal to be apprehensive, but that you need their help to keep the business alive. Often when there is a major threat, business owners take the burden upon themselves and don't want to tell anyone about the big bad bear. If you have a bear at your door, tell your employees. If they decide to leave that’s their choice, but they need to know.
Remember, leading organizational change is not a popularity contest and you often have to make tough calls. Your challenge is to maintain your team’s productivity, and morale, during such periods. The more you understand how employees might react, the better you can mitigate resistance and motivate positive action.
An expert on second-stage entrepreneurs, DINO SIGNORE is manager of entrepreneurial education at the Edward Lowe Foundation. Signore leads all foundation learning events for second-stage business owners and executives. A national, nonprofit organization based in Cassopolis, Michigan, the Edward Lowe Foundation supports entrepreneurship through research, recognition, and educational programs. @LoweFoundation