Because of internal complacency, erosion of key capabilities, or external challenges, successful businesses tend to drift toward trouble. In a realignment, your challenge is to revitalize a unit, product, process, or project that has been drifting into danger. The clouds are gathering on the horizon, but the storm has not yet broken—and many people may not even see the clouds. The biggest challenge often is to create a sense of urgency. There may be a lot of denial; the leader needs to open people’s eyes to the fact that a problem actually exists. This was the situation facing Karl in North America. Here, the good news is that the organization likely has at least islands of significant strength (good products, customer relationships, processes, and people).
In a sustaining-success situation, you are shouldering responsibility for preserving the vitality of a successful organization and taking it to the next level. This emphatically does not mean that the organization can rest on its laurels. Rather, it means you need to understand, at a deep level, what has made the business successful and position it to meet the inevitable challenges so that it will continue to grow and prosper. In fact, the key to sustaining success often lies in continuously starting up, accelerating, and realigning parts of the business.
A key implication is that success in transitioning depends, in no small measure, on your ability to transform the prevailing organizational psychology in predictable ways. In start-ups, the prevailing mood is often one of excited confusion, and your job is to channel that energy into productive directions, in part by deciding what not to do. In turnarounds, you may be dealing with a group of people who are close to despair; it is your job to provide them with a concrete plan for moving forward and confidence that it will improve the situation. In accelerated-growth situations, you need to help people understand that the organization needs to be more disciplined and get them to work within defined processes and systems. In realignments, you will likely have to pierce the veil of denial that is preventing people from confronting the need to reinvent the business. Finally, in sustaining-success situations, you must invent the challenge by finding ways to keep people motivated, combat complacency, and find new direction for growth—both organizational and personal.
You cannot figure out where to take a new organization if you do not understand where it has been and how it got where it is. In Karl’s realignment situation, for example, it is essential that he understand what made the organization successful in the past and why it drifted into trouble. To understand your situation, you must put on your historian’s hat.
But if you’re not leading a large business, can you still use the STARS model to understand the challenges you face? Absolutely. You can apply it regardless of your level in the organization. You may be a new CEO taking over an entire company that is in start-up mode. Or you could be a first-line supervisor managing a new production line, a brand manager launching a new product, an R&D team leader responsible for a new product development project, or an information technology manager responsible for implementing a new enterprise software system. All of these situations share the characteristics of a start-up. Similarly, turnaround, accelerated growth, realignment, and sustaining success arise at all levels, in companies large and small.
Diagnosing Your STARS Portfolio
In reality, you’re unlikely to encounter a pure and tidy example of a start-up, turnaround, accelerated-growth, realignment, or sustaining-success situation. At a high level your situation may fit reasonably neatly into one of these categories. But as soon as you drill down, you will almost certainly discover that you’re managing a portfolio—of products, projects, processes, plants, or people—that represents a mix of STARS situations. For instance, you may be taking over an organization that enjoys incremental growth with successful products and in which one group is launching a line of products based on a new technology. Or you may be working to turn around a company that has a couple of high-performing, state-of-the-art plants.
The next step in applying the STARS model is to diagnose your STARS portfolio; you must figure out which parts of your new organization belong in each of the five categories. Take time to assign the pieces of your new responsibilities (such as products, processes, projects, plants, and people) to the five categories using table 3-2. Given this arrangement, how will you manage the various pieces differently? This exercise will help you to think systematically about challenges and opportunities in each piece. It will also supply you a common language with which to talk to your new boss, peers, and direct reports about what you are going to do and why.
Leading Change
There is no one-size-fits-all approach to leading change. This is why it’s important to be clear about the STARS mix. Using the STARS model, Karl was able to recognize the clear differences between the realignment situation he was heading into (where problems were gradually mounting, but there was no crisis to drive action) and the dramatic turnaround he had successfully managed in Europe (where urgent needs demanded rapid, radical surgery), and he identified the associated implications for how he needed to lead change and manage himself. If Karl had treated his new situation as a turnaround and tried to conduct radical surgery, he probably would have incurred both active and passive resistance, undermining his ability to realize needed change, especially because he was an outsider and therefore vulnerable to being isolated and undercut. Recognizing what was required in North American operations, Karl adopted a more measured approach.
TABLE 3-2
Diagnosing your STARS portfolio
Use the table to identify the mix of STARS situations you face. First, identify which elements (projects, processes, products, perhaps even complete businesses) in your new responsibilities fall into the various STARS situations in the first column; list those elements in the second column. You need not have something in every category. Everything may be in turnaround, or it may be a mix of two or three types. Then use the third column to estimate the percentage of your effort that should be allocated to each category in the next 90 days, making sure it adds up to 100%. Finally, think about which of these situations you most prefer to do. If you also assigned that situation the highest priority, be sure that your preferences are not overly influencing your priorities.
Armed with insight into your STARS portfolio and the key challenges and opportunities, you will adopt the right strategies for leading change. Doing so means, however, adopting the approaches laid out in this book for creating momentum in your next 90 days. Specifically, you must establish priorities, define strategic intent, identify where you can secure early wins, build the right leadership team, and create supporting alliances. Let’s look at what Karl did differently in the turnaround and realignment situations he faced.
The starting point, of course, was focused learning. In the turnaround situation in Europe, Karl 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 in North America, Karl’s learning challenge was markedly different. Technical comprehension was still important, obviously, but cultural and political learning mattered more. That’s because internal social 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 Karl was, a deep understanding of the culture and politics is a prerequisite for leadership success—and even survival.
Likewise, as Karl worked to establish priorities, he had to weigh the demands of the situation. The European 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 Karl closed plants, shifted production, and cut the workforce dramatically. He also rapidly centralized important manufacturing functions in order to reduce fragmentation and cut costs. The North American realignment, in contrast, didn’t call for an immediate transformation o
f 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 Karl to focus on those areas.
Situational factors also played a large role in how Karl built his leadership teams in the two situations. To expeditiously turn around the European business, Karl 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 Karl’s best efforts, didn’t grasp the need for change; in fact, the manager’s inaction threatened to undermine Karl’s leadership. That person’s departure sent a crucial message to the rest of the organization. Meanwhile, Karl promoted from within to fill that role and others, and that helped rally the organization behind his plans. People came to see that he wasn’t only focusing on the weaknesses of the business but was also appreciative of its strengths.
Finally, Karl had the good judgment to secure early wins differently in the two situations. In turnarounds, leaders must move people out of a state of despair. Karl 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, in contrast, Karl’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, and 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. These actions enabled him to pierce the unfounded optimism and send an important message to the rest of the organization.
Key differences between leading change in turnaround and realignment situations are summarized in table 3-3.
TABLE 3-3
Leading change in turnarounds versus realignments
Managing Yourself
The STARS state of your organization also has implications for the adjustments you’ll need to make to manage yourself. This is particularly true when it comes to determining leadership styles and figuring out whether you are reflexively a “hero” or a “steward.”
In turnarounds, leaders are often dealing with people who are hungry for hope, vision, and direction, and that necessitates a heroic style of leadership—charging against the enemy, sword in hand. People line up behind the hero in times of trouble and follow commands. The premium is on rapid diagnosis of the business situation (markets, technologies, products, strategies) and then aggressive moves to cut back the organization to a defensible core. You need to act quickly and decisively, often on the basis of incomplete information.
Clearly, this was the case for Karl in Europe. He immediately took charge, diagnosed the situation, set direction, and made painful calls. Because the outlook was bleak, people were willing to act on his directives without offering much resistance.
Realignments, in contrast, demand from leaders something more akin to stewardship or servant leadership—a more diplomatic and less ego-driven approach that entails building consensus for the need for change. More subtle influence skills come into play; skilled stewards have deep understandings of the culture and politics of their organizations. Stewards are more patient and systematic than heroes in deciding which people, processes, and other resources to preserve and which to discard. They also painstakingly cultivate awareness of the need for change by promoting shared diagnosis, influencing opinion leaders, and encouraging benchmarking.
In his North America appointment, Karl needed to learn to temper some of his heroic tendencies; he had to make careful assessments, move deliberately toward change, and lay a foundation for sustainable success. Whether any leader in transition can adapt her personal leadership strategy successfully depends greatly on the ability to embrace the following pillars of self-management: enhancing self-awareness, exercising personal discipline, and building complementary teams.
Because of their differing imperatives, it is easy for heroes to stumble in realignment and sustaining-success situations and for stewards to struggle in start-ups and turnarounds. The experienced turnaround person facing a realignment is at risk of moving too fast, needlessly causing resistance. The experienced realignment person in a turnaround situation is at risk of moving too slowly and expending energy on cultivating consensus when it is unnecessary to do so, thus squandering precious time.
This is not to say that people who are natural heroes cannot get in touch with their inner stewards and vice versa. Good leaders can succeed in all five of the STARS situations, although no one is equally good at all of them. It is essential to make a hardheaded assessment of which of your skills and inclinations will serve you well in your particular situation and which are likely to get you into trouble. Don’t arrive ready for war if what you need is to build alliances.
You also need to remember that leadership is a team sport. Your STARS portfolio has implications for the precise mix of heroes and stewards (every organization needs both) on your leadership team. Karl 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 threefold. First, he needed to stock his team with some 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 necessary outreach. 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 to fight them and didn’t jeopardize the larger goal of realigning the business, this was an appropriate way to achieve a balance. Third, Karl needed to take into consideration STARS preferences and abilities as he hired, promoted, and assigned people to key projects.
Rewarding Success
The STARS framework has implications for how you should evaluate the people who work for you, and for the culture you want to create. Data from the Harvard Business Review Transition Survey helps illustrate this essential point. Participants were asked which of the STARS situations they thought were most challenging and in which they would most prefer to be. The results, summarized in table 3-4, are illuminating. The most challenging situation was assessed to be realignment, followed by sustaining success and turnaround. Start-up and accelerated growth were assessed as being significantly easier. However, when it came to preferences, the pattern reversed, with start-up being (by far) the most popular, followed by turnaround and accelerated growth.
This is not a surprising finding, and the underlying reasons are revealing. It is not the case that people are drawn to the easy situations. Rather, they are drawn to situations that are (1) more fun and (2) get more recognition.
A successful start-up is a visible and easily measurable individual accomplishment, as is a successful turnaround. In a realignment, in contrast, success consists of avoiding disaster. It is hard to measure results in a realignment when success means that nothing much happens; it’s the dog that doesn’t bark. Also, success in realignment requires painstakingly building awareness of the need for change, and that often means giving credit to the group rather than taking it yourself. As for rewarding sustaining success, people seldom call their local power company to say, “Thanks for keeping the lights on today.” But if the power goes off, the screaming is immediate and loud.
TABLE 3-4
STARS challenges and preferences
Survey respondents were asked t
o identify which STARS situation they thought was the most challenging and which they most preferred (i.e., would choose if they could). The differences in their assessments are striking, particularly when the sums of the numbers for more action-oriented, authority-driven STARS situations (start-up, turnaround, and accelerated growth) are compared to those that call for more focus on learning, reflection, and influence (realignment and sustaining success).
STARS situation Most challenging Most preferred
Start-up 13.5% 47.1%
Turnaround 21.9% 16.7%
Accelerated growth 11.6% 16.1%
Realignment 30.3% 12.7%
Sustaining success 22.6% 7.4%
Total 100% 100%
Start-up, turnaround, or accelerated growth 47.1% 79.9%
Realignment or sustaining success 52.9% 20.1%
There is a paradox inherent in rewarding people lavishly for successfully turning around failing businesses (or starting exciting new ventures). Few high-potential leaders show much interest in realignments, preferring the action and recognition associated with turnarounds (and start-ups). So who exactly is responsible for preventing businesses from becoming turnarounds? And does the fact that companies reward turnarounds (and do not know how to reward realignments) make it more likely that businesses will end in crisis? Skilled managers can seemingly count on less-accomplished people to mess up businesses so that they can come charging to the rescue.
The more general point, of course, is that performance must be evaluated and rewarded differently in the different STARS situations. The performance of people put in charge of start-ups and turnarounds is easiest to evaluate, because you can focus on measurable outcomes relative to a clear prior baseline.
The First 90 Days, Updated and Expanded_Proven Strategies for Getting Up to Speed Faster and Smarter Page 7