Not Changing Out Senior Executive Management Quick Enough - How Does This Affect Business Outcomes?

Changes are inevitable in all walks of life and the business is no exception. Changes in leadership are very much a part of doing any kind of business. But, it’s not always accepted with an open mind by managers and employees. It’s quite natural for some employees to be apprehensive about such changes. They may not be sure about the changes the new leadership may incorporate into the present staffing levels. The fear of layoffs and downsizing may also creep into their minds. Workers often find it difficult to come out of the familiarity attached to their comfort zones and also fear that they might not be able to adjust to the changing atmosphere. With this inherent ‘fear of the unknown’, changes in leadership positions can disrupt the workplace atmosphere and bring in issues attached to employee morale, satisfaction, and in turn, the business turnover.

Change is very much a reality for any business these days. It often needs to implement changes at its enterprise levels to reflect upon its people, products, and processes and by doing so, it can evolve with the constantly evolving world of business. Therefore, change management has to be an integral part of the leadership programs of an organization. While it is observed that the short-term effects of changing the senior executive management can be painful at times, such a change, if carried out cautiously, can leave a positive impact on the overall business outcomes in the long term. People inside the company may resist such changes. Hence, organizations must proceed with a systematic approach to manage major change and develop a dynamic workplace culture. This is the only efficient way to navigate through such changes successfully.

What Are the Reasons for Such a Change?

Several reasons can influence changes in senior executive positions in an organization. Business growth, slowdown, new product development, and relocation are just to name a few. At times, a company may be sailing through the process of an acquisition or a merger. In such cases, a larger organization may be taking over the business operations of a smaller organization. Also, a smaller entity can decide to strengthen its industry presence by transforming into a larger company or group. Sometimes, a small business can also obtain investment from private equity firms or venture capital. Such an infusion of capital may involve allocating certain percentages of equity among new executives on board. All these instances may necessitate quite a few changes in senior leadership positions.

Additionally, the retirement of senior leaders may also allow some of the promoted managers to take over the reins of the senior leadership position.

We will now discuss how a well-measured change in senior executive management affects business outcomes.

It Helps the Business to Penetrate New Markets

Growth is perhaps the most important stage in the life cycle of a business. A change in the senior leadership positions may sometimes help the company to broaden its outlook. With new sets of ideas, the changed leadership may help the company to set new goals to penetrate new markets or to expand their operations across countries or state boundaries. Under the influence of a new and rejuvenated leadership, the company can realize its goals to broaden its reach sooner than it anticipated earlier.

Helps to Enhance Productivity and Business Operations

Sometimes, a new leader can bring in new and innovative ideas into the operations of a business. He can help the business to shift gears from its age-old practices and instill a renewed focus on developing improved products /services and thus enhancing the customer experience. This way, the business can outthink its competitors and can attain the position of a market leader sooner than it expected.

Here is an example to show how a well-timed change in senior leadership can do a world of good for the growth of a company.

In 1998, the founders and the CEO of Sybase left, leaving the company struggling for growth. At that time, the company was dealing with an enterprise databases and tools but, was struggling to adapt to the rapidly changing enterprise applications market. The new CEO took over, brought with him a whole new perspective, and a new management team altogether. Over the next few years, he revamped the entire sales and product strategy of Sybase and converted it to a powerhouse dealing in mobile databases. Eventually, in 2010, Sybase was sold off to SAP for a whopping $5.8 billion.

Additionally, changes in senior executive positions can positively impact business operations and allow the business to streamline its functions more efficiently. For example, if a non-profit organization hires a senior business executive from a profit-making business, the organization will experience a major shift in its operations. The new leadership will improve the administrative performance of the non-profit organization with a set of new and more structured procedures.

Recent economic conditions across the globe have challenged the competitiveness and sustainability of companies to a great extent. They just can’t rest peacefully on their past laurels and must lookout for new opportunities to stay in the market. They must challenge the status quo and fight for survival all the time. Therefore, they can’t avoid change and change is inevitable for them. Many successful companies have acknowledged this and have initiated a transformational change in their processes. One major step in this direction is the change in senior leadership and creating a new vision altogether. But, bringing about these changes in senior leadership is not at all easy. As shown in the figure below, there is a definite interdependence between resistance to change, leadership styles and organizational outcome. Resistance to change is an obvious roadblock in these early stages of such transformations, which must be overcome to oversee a successful chan

As transformational change is strategic, a top management team comprising of the CEOs and vice presidents are given the responsibility to initiate it. Senior-Level employees who are closer to the top management in the hierarchy are likely to understand the strategic goals behind such changes. However, lower-level employees taking less part in decision making are often not aware of these strategic goals and hence, can be cynical and pessimistic about these changes. The middle-level management can be entrusted with the duty of bridging this gap in strategic understanding as it can link the top management with the frontline resources. This linkage is an effective strategy for the formulation and implementation of a transformational leadership change.

It Brings New Opportunities to a Business

Very often, a change in leadership brings in new avenues and learning possibilities for the employees. If the employees apply themselves enthusiastically to these possibilities, they can create new opportunities for themselves, as well as for the business. Also, by assuming the leadership role, the new leader can express his capability to accept additional responsibilities. He can guide and train his subordinates on how to make the most out of the new opportunities.

Changes in senior leadership positions can affect the business goals of a company directly or indirectly. Such changes can affect the expansion and growth plans, operations, workforce management, and administrative support system in a big way. Having a measured approach to change and not resorting to frequent chopping and changing can impact the business positively. Such an approach to changing can help the company to attain its business goals and to sustain a motivated and engaged workforce.

How Can a Startup Adapt to the Changing Leadership Strategy?

Leaders in a startup should be open to base their leadership approach on the will of their investors and boards. Research has established that venture capitalists replace up to 40% of the startup founders with more professional and experienced people at certain critical junctures [1].

The investors have a rapid assessment of the top leadership at every key business achievement (or shortfall) related to product introduction, revenue, new markets, and so on. They assess if the startup has the right people, doing the right job, with the right skill sets required to propel it to the next higher level. They also look into whether the roles of the present leadership are aligned to the most important business opportunities and whether the startup is adopting the right working approach for the next higher stage of business. If at any stage, the investors think that the startup is not quite able to perform to its true potential, they may decide to bring in a CEO (or any senior-level professionals for that matter) from any other avenue of the industry to look after the startup operations, while relegating the erstwhile founders to a mere “strategic planning” role. It’s perfectly all right for the investors to do so and it’s for all stakeholders to understand that the action is for the growth of the startup. This action is of critical importance for its existence and any unnecessary delay to act can result in the startup losing momentum and a fair bit of ground to its competitors.

But, here is one word of caution as well! While reshaping the leadership, a startup should note that the reshaping is done while keeping in mind the strength of the leaders. Otherwise, a time will come when the founders will have no option but to resort to a frequent reshuffling of the leadership team, moving ‘unfit’ people out of their roles and creating new roles. Eventually, the founders will discover that their roles have shifted as well. All these mean that the leadership has not evolved in a straight line as expected before.

Here, we will discuss some principles that should be kept in mind while changing the leadership approach:

Leadership Jobs Change Faster Than the Leadership Titles

Irrespective of how the job of a leader is defined today, his real responsibilities are due to change along with the growth of the company. His salary or profile may not necessarily get a boost due to this change. For example, let us suppose a leader is now running a small team that services just a handful of customers. When the company grows tomorrow to have a customer base of a few thousand, the responsibilities of the leader will increase by manifold. But his title or profile may not change in the same manner. For some leaders, it may be hard to come out of their comfort zones and work differently. If a leader is not willing to work in this changed scenario, he may decide to switch over to a new role or may even decide to leave the company altogether.

It’s Hard for a Leader to Develop New Skills

In a start-up atmosphere, everyone is highly involved financially and emotionally to make the start-up a success. Most of them may find it difficult to even think about the fact that their skills may no longer fit the needs of the company one fine day. Therefore, a leadership team would do well to either work together or to get outside help to acquire the necessary skill sets. As a team, the leaders should assess the portfolios of one another and refocus them as required. They may do this by working with selected executives, or a coach and by assessing the senior leadership roles after conducting 360 assessments regularly for the leadership team. Another way is to set up internal reviews at regular intervals where every leader can talk freely about what is going all right and what is not.

Don’t Hesitate to Make Tough Decisions

Making tough decisions regarding senior leadership may be difficult at times. For example, a CEO may hesitate to replace his R&D Head, who has been a pivotal figure while establishing the start-up, but, of late, has failed to work in collaboration with external experts and also in supporting other colleagues. Even though the CEO knows that he should have replaced the R&D Head earlier, he may be hesitant to make the move. But, he should understand that making such a tough decision to replace the non-performing leader with another experienced leader would spare his team a lot of agonies. Making such strong decisions regularly would only ensure further growth of the business in the future and will bring a lot of opportunities for the team members to develop themselves.

Case Studies to Demonstrate the Good Effects of Organizational Change

Here, we will show stand-out examples where a timely organizational change turned the fortunes of the company for the better.

A) Reorganization of Microsoft by its CEO, Satya Nadella

After the huge success of Windows OS and Office Suites, Microsoft went into a stagnant state for a while, due to internal competition among major business units. As a result, innovation took a back seat and Microsoft was struggling to cope up with increased competition from Apple and Google.

After becoming the CEO in February 2014, Satya Nadella restructured the company intending to thwart internal competition. Products and platforms ceased to exist as different groups. In 2016, he merged the Research Group and Information Platform Group to form a new Microsoft AI & Research Group to facilitate innovation across the product lines.

During the reorganization, Nadella instilled a new mission among the employees to challenge themselves and achieve more. This gave the employees a positive mindset and a sense of purpose, which was lacking earlier. This reorganization has made the future of Microsoft a lot brighter indeed

B) Wholesale Organizational Restructuring of the British Airways

After its initial success, British Airways was plagued by the oil crisis in the ‘70s and went into a financial loss. It soon developed a bad name for its failing standards of customer service.

In 1981, Lord King was brought in as the CEO who immediately opted for a wholesale reorganization of the entire organization to reduce the waste of valuable resources. He reduced the workforce by 20,000, eliminated unprofitable routes and modernized the fleet. The airline soon repaired its image and reported the highest ever profit in the Industry inside 10 years.

Before the layoffs, King prepared all the stakeholders for the change by explaining his reasons to restructure. Due to his honest communications and transparency in the processes, the company could avoid negative press and employee backlash and managed the change efficiently.

C) Splitting of Google 

Google went on to enjoy a resounding success by the turn of the 21st century with their life-changing products and an R&D team capable of developing supposedly impossible things. But, as the company grew diverse, it soon became an incredibly tough unit to manage, with interweaving teams, managers, funds, and goals. Mindful of the troubles ahead, Larry Page decided to deconstruct Google by converting each part into separate entities, owned by an umbrella corporation named Alphabet. Each of these entities now has its own goals and a CEO focused to achieve them. By doing so, Page wanted every business to prosper through independence and strong leaders.

Though it was uncomfortable at the beginning, Page explained that the reorganization would make the employees free to concentrate on their mission more productively, without worrying too much about Google. As each company became accountable for its income and expenditure, the employees developed a new-found sense of pride and this made innovation more meaningful for them.

Inspirational Quotes for Business on Change Management

1) "We can't afford to be afraid of change. You may feel very secure in the pond you are in, but, you will never know that there is such a thing as an ocean or a sea if you never venture out of it. Holding onto something good for you now, maybe the very reason why you don't have something better later on."

 - C. JoyBell C.

2) "Change is not only likely, but it’s also inevitable."

- Barbara Sher

3) "Both the Growth and Change are painful. But, nothing is as painful as staying stuck where you do not belong."

 - N. R. Narayana Murthy

4) "Your success in life is not based on your ability to simply change. It is based on your ability to change faster than your competition, customers, and business."

 - Mark Sanborn

5) "Change can either challenge or threaten us. Our beliefs pave your way to success or block you."

- Marsha Sinetar

6) "People don't resist change. They resist being changed!"

- Peter Senge

Reference:

https://hbr.org/2018/02/research-what-happens-to-a-startup-when-venture-capitalists-replace-the-founder