Business Transitioning article - well written

FROM THE JANUARY 2009 ISSUE – HARVARD BUSINESS REVIEW

• Picking the Right Transition Strategy   Michael Watkins

Transitions into new leadership roles are nothing less than corner-office crucibles. They test executives’ mettle from day one, with pressure to diagnose, strategize, delegate, and communicate effectively. Think that’s an overstatement? Consider the results of a recent survey I conducted: 87% of the 143 senior HR professionals who responded either agreed or strongly agreed with the statement “Transitions into significant new roles are the most challenging times in the professional lives of managers.” Fully 70% agreed or strongly agreed that “success or failure during the transition period is a strong predictor of overall success or failure in the job.”

Of course, there isn’t a one-size-fits-all approach to making successful leadership transitions. Research suggests that executives can follow certain fundamental principles to accelerate their immersion in a new role or company—for instance, organize to learn about the business, seek to secure early wins, quickly build the team you need to achieve your top priorities, and garner support across the company. But the way you apply the principles depends very much on the business situation you’re confronting: Are you taking charge of a small start-up or an established multinational? Are you being brought in to grow the company or prepare it for sell-off? Are you being promoted in your current company or joining a new one with very different cultural norms and political currents?

Leaders in transition reflexively rely on the skills and strategies that worked for them in the past; after all, their previous successes are what propelled them to the new opportunity. That’s a mistake. My work over the past decade, observing hundreds of executives navigating their way through a range of management roles in various industries and companies, shows that a different mind-set is in order: Executives in transition must gain a deep understanding of the situation at hand and adapt to that reality. Otherwise, to paraphrase Mark Twain, people with hammers will treat everything like a nail, even when the job at hand may be better accomplished with a drill or a saw. This is why I developed the STARS model—a framework for assessing business situations and helping new leaders figure out how to tailor their strategies (and themselves) accordingly.

Leaders in transition rely on the skills and strategies that worked for them in the past. That’s a mistake.

“STARS” is an acronym for the five common situations leaders may find themselves moving into: start-up, turnaround, accelerated growth, realignment, and sustaining success. The model outlines the characteristics and challenges of, respectively, launching a venture or project; saving a business or initiative that’s in serious trouble; dealing with rapid expansion; reenergizing a once-leading company that’s now facing problems; and following in the footsteps of a highly regarded leader with a strong legacy of success.

By using STARS to assess the situation you’re moving into, you can better understand the organizational changes needed and, correspondingly, the personal adaptation that will be required. Sizing up the organization involves asking yourself what specific things need to happen—for example, a jump in market share, divestment of units, or expansion into different markets—for the business to achieve its goals. Personal adaptation involves tailoring your leadership style to the situation—matching the way you communicate to the culture you’re joining, for instance, or changing the way you collect and process information. Armed with such clarity, you can design your plan to manage the organization and yourself.

In the following pages, we’ll take a closer look at the fundamental principles of leadership transitions and the organizational and personal challenges executives face in applying them. We’ll focus on two business environments in particular: turnarounds and realignments. Although there’s some overlap in how you apply transition principles across situations, turnarounds and realignments present distinct leadership challenges and require certain transition strategies.

Assessing the Business Situation

To see how the situation shapes the transition strategy, consider how Stefan Eisenberg (not his real name) adapted his approach when he moved from one role to another. A hard-driving, German-born executive, Stefan had successfully led the turnaround of the European manufacturing operations of an international consumer products firm based in the United States. As vice president of manufacturing, he had moved decisively to restructure an organization that was broken because of the company’s overemphasis on growth through acquisition and its focus on country-level operations to the exclusion of other opportunities. Within a year, Stefan had centralized the most important manufacturing support functions, closed four of the least efficient plants, and shifted a big chunk of production to Eastern Europe. These changes, painful though they were, began to bear fruit by the end of 18 months, and operational efficiency continued to improve: Three years after the changes were rolled out, the company’s plants were in the top 20% of benchmarked plants in Europe.

But no good deed goes unpunished. Stefan’s success in Europe led to his appointment as the executive vice president of supply chain for the company’s core North American operations, headquartered in New Jersey. The job was much bigger, combining manufacturing with strategic sourcing, outbound logistics, and customer service. With his appointment, the previously separate organizations were united in a single end-to-end supply chain.

In contrast to the situation in Europe, North American operations were not in immediate crisis—which was the essence of the problem. The organization’s long-term success had only recently shown signs of slipping. The previous year, industry benchmarks had placed the company’s manufacturing performance slightly below average in terms of overall efficiency and in the lower third in the crucial area of customer satisfaction with on-time delivery. Mediocre scores, to be sure, but nothing that screamed “turnaround.”

Meanwhile, Stefan’s own assessment of the organization indicated that serious problems were brewing. The business was addicted to firefighting; managers reveled in their ability to react well in crises rather than tearing out problems at the root. Stefan believed it was only a matter of time before major failures occurred. Furthermore, executives relied too much on “gut feel” to make critical decisions, and information systems provided too little of the right kind of objective data. These shortcomings contributed, in Stefan’s view, to widespread, unfounded optimism about the organization’s future.

Using the STARS model, Stefan was able to recognize the clear differences between the realignment situation he was heading into (where clouds were gathering but the storm hadn’t hit yet) and the dramatic turnaround he so successfully managed in Europe (where urgent needs demanded urgent actions). In a turnaround, there is a burning platform; the problem teaches the people, if you will. In a realignment, there is a lot of denial; the leader needs to open people’s eyes to the fact that a problem even exists. If Stefan had treated his new situation as a turnaround and tried to conduct radical surgery, he would probably have incurred both active and passive resistance, undermining his ability to realize needed change, especially because he was an outsider coming in and therefore vulnerable to being isolated and undercut. Recognizing what was required in North American operations, Stefan adopted a more measured approach.

Organizational Change

The right strategies for creating organizational change flow directly from the STARS situation you’ve inherited. Once you’ve clearly outlined your new challenges, you, like Stefan, can more effectively apply a set of fundamental principles that will ease your transition and increase your odds of long-term leadership success. Specifically, you must organize to learn about the business, establish A-item priorities, define strategic intent, get the leadership team in place fast, identify where you can secure early wins, and create supporting alliances.

Let’s look at how Stefan applied four of these principles. Take organizing to learn—that is, figuring out what to learn, from whom to learn it, and how best to accelerate the learning process. In the turnaround situation, Stefan needed to rapidly assess the organization’s technical dimensions—strategy, competitors, products, markets, and technologies, much as a consultant would. In his new leadership role, Stefan’s learning challenge was markedly different. Technical comprehension was still important, obviously, but cultural and political learning mattered more: That’s because internal dynamics often cause successful organizations to drift into trouble—and because getting people to acknowledge the need for change is much more a political challenge than a technical one. Particularly for a newcomer to the organization, as Stefan was, a deep understanding of the culture and politics is a prerequisite for leadership success—and even survival.

Likewise, as Stefan worked to establish A-item priorities, he had to weigh the demands of the situation. The turnaround required radical surgery. The strategy and organizational structure of the business were preventing it from achieving its goals and had to be changed quickly. So Stefan closed plants, shifted production, and cut the workforce dramatically (a strategy shift). He also rapidly centralized important manufacturing functions in order to reduce fragmentation and cut costs (a structural shift). The realignment, by contrast, didn’t call for an immediate transformation of strategy or structure. There weren’t any major capacity or productivity problems, so plant closures weren’t necessary. The manufacturing functions were already centralized and strong. The real problems lay in systems, skills, and culture. It therefore made sense for Stefan to focus on those areas.

Situational factors also played a large role in how Stefan built his leadership teams. To expeditiously turn around the European business, Stefan cleaned house at the top of the organization and recruited most of the new senior talent from the outside. In North America, however, the leadership team he inherited was already quite strong. Still, he realized he needed to make a few high-payoff changes in the roster: A couple of central manufacturing roles required leaders with stronger technical skills to support the systems changes he planned to make. And there was an influential manager who, despite Stefan’s best efforts, didn’t grasp the need for change; in fact, the manager’s inaction threatened to undermine Stefan’s leadership. That person’s departure sent a very important message to the rest of the organization. Meanwhile, Stefan promoted from within to fill that role and others, which helped rally the organization behind his plans. People came to see that he wasn’t just focusing on the weaknesses of the business; he was also appreciative of its strengths.

Finally, Stefan had the good judgment to secure early wins differently in the two situations. In turnarounds, leaders must move people from being in a state of despair to seeing a light at the end of the tunnel. Stefan did that in Europe by closing ailing plants and shifting production, actions that refocused the organization on its core strengths and helped cut unnecessary projects and initiatives. In the realignment, by contrast, Stefan’s most important early win was to raise people’s awareness of the need for change. He accomplished that by putting more emphasis on facts and figures: He revamped the company’s performance metrics in manufacturing and customer service to focus employees’ attention on critical weaknesses in those areas. He also introduced external benchmarks and hard-nosed assessments by respected consultants—drawing on impartial voices from outside the company to help make his case. All this enabled him to pierce through the unfounded optimism and denial that pervaded the organization.

More recently, Stefan has convened his group’s top 200 managers in a series of sessions where they can collectively examine core systems, skills, and culture; uncover potential causes of the creeping malaise; and find ways to build on the organization’s strengths. This project is ongoing, but the company has already reported improvements in manufacturing and customer service performance.

One Leadership Style Does Not Fit All

Realignments, by contrast, demand from leaders something more akin to stewardship—a more diplomatic and less ego-driven approach that entails building consensus around the need for change. Stewards are more patient and systematic than heroes in deciding which people, processes, and other resources to preserve and which to discard. In his North America appointment, Stefan needed to learn to temper some of his heroic tendencies; he had to make careful assessments, move more deliberately toward change, and lay a foundation for sustainable success.

Turnarounds call for a heroic style of leading. Realignments require something more akin to stewardship.

Whether any leader in transition can adapt his or her personal leadership strategy successfully depends greatly upon the ability to embrace the following pillars of self-management: enhancing self-awareness, exercising personal discipline, and building complementary teams.

Enhancing self-awareness.

It’s critical for leaders to understand their reflexive responses to management challenges: How do you prefer to learn in new situations? Is your personal bent more about heroism, as it was for Stefan, or stewardship? Psychometric testing can help you get a baseline reading of your leadership style, as can 360-degree and other observational feedback. If you are 100% “hero,” then it may be best for you to stick to turnaround opportunities, eschewing other leadership assignments. For most leaders, though, reflexive responses can be adapted when necessary—so long as people clearly understand their tendencies and are willing to make changes.

Exercising personal discipline.

Wise leaders in transition ask themselves, “What am I good at—or what do I like doing—that I need to do less of?” They also ask, “What am I mediocre at—or what do I dislike doing—that I need to do more of? And then they consciously, deliberately fight to make those things happen every day. In his position in Europe, Stefan could go with what came to him naturally—a heroic leadership style. In his new position, though, he knew he would have to be more of a steward—even when it really hurt. Given the pace of change, Stefan often found himself grinding his teeth, wanting to step in and issue directives, but he understood that by holding back he allowed his people to come to their own conclusions and take deeper ownership of the business’s problems. The jaw aches were worth it, Stefan realized, when he saw people start to understand that the organization was headed for a major fall.

Building complementary teams.

You simply can’t do it all, regardless of the business context, and you can’t completely turn into something or someone you’re not—which makes the precise mix of heroes and stewards (every organization needs both) on your leadership team all the more critical. Stefan willed himself toward stewardship in North America, but he knew he more naturally and effectively played the hero role. The implications of this bit of self-awareness were twofold: First, he needed to stock his team with natural stewards to whom he could turn for wise counsel (lest he go off half-cocked) and to whom he could delegate some of the outreach necessary under this leadership approach. And second, he had to identify where it actually made sense to focus some of his heroic energies. After all, every organization, even the most successful, has parts that are in serious trouble. As long as he didn’t start setting fires just so he could fight them and didn’t jeopardize the larger goal of realigning the business, this was an appropriate way to achieve a balance. ? ? ?

As Stefan’s transition suggests, the STARS framework is helpful for individuals moving into new business situations and seeking to develop organizational and personal strategies that are effective in context. It can also play a central role, no matter what the business situation, in a new leader’s attempts to get bosses, peers, and direct reports to agree on the core challenges all are facing. Indeed, the leader can fall into dangerous traps if everyone’s perceptions don’t line up: How can you negotiate achievable expectations if your boss thinks the organization’s problems are significantly more or less severe than you believe them to be? How can you get the necessary support to dramatically turn around your organization if your peers think you are there simply to realign operations, or vice versa? Executives can make change easier on their companies as well as themselves by using the STARS model to develop a common language that will accelerate everyone’s transition into new roles and opportunities.

A version of this article appeared in the January 2009 issue of Harvard Business Review.