Organizational Change Starts and Ends With People

By Steven E. Sacks, CPA, CGMA, ABC

You read about companies everyday: those who separate themselves from the competition by disrupting the norms and those who remain steadfast, much to their detriment. For the former, think about Amazon, Uber, Netflix and other “change agents.” Now, think about the former: JCPenney, K-Mart and Sears.

As the late chairman and CEO of Intel, Andy Grove said, “Success breeds complacency. Complacency breeds failure. Only the paranoid survive.” Companies that have or are disappearing believed by sticking to their history, growth and brand recognition, all achieved in a different time. Their thinking was that they would continue to be successful. They lacked the paranoia. Was it blissful ignorance or was something else at play?

In this era, the winners not only see around the corner, but more important, they are able to manage rapid changes. Their formula is akin to the top stars in any sport: they anticipate change, prepare their companies for it, and then transform it into a competitive advantage.

Systems, structures and processes are necessary to be sure, just like the ability to attract needed capital or create a value proposition that convinces the public it needs what you are selling. But like with anything else, the basic currency that enables change to take place is your people — at all levels.

The question that is always asked: what’s more important, capital or labor? In fact, The New York Times published a recent article Is Capital or Labor Winning at Your Favorite Company? Introducing the Marx Ratio? While this goes into more scientific and mathematical theory than I am interested in, it is nevertheless a relevant question to ask.

I am of the opinion that no matter how quickly business is spinning, a business’s success goes beyond the resources of capital and physical labor and extracts the knowledge and wisdom of its people. You may ask, like what? What about intuition, institutional know how, accumulated judgment, experience, exposure to success and failure and the collective intelligence and sense of all the employees? These elements hold true whether the organization is in the public or private sector. They assist in identifying and pursuing and capturing opportunities that allow them to serve customers and clients.

These resources must be harnessed, managed and leveraged and not on an incidental level. They need to be part of the daily mix of operations; not kept a secret to a select few at a certain level or in select departments but announced to every single individual.

Building the Right Environment

This is no simple task. The first thing to do is create a roadmap. This will contain a set of values common for all and a strategic direction that is thorough and unequivocal. Everyone understands the framework and how to work within it. Company leaders must convey a clear direction, and this in turn will influence behaviors by defining those that are beneficial and those that are counterproductive. As always, the tone is from the top, so leaders must explain what is right and demonstrate this by their actions.

This gets into memorializing the desires of management. Values expressed are one thing, weaving them into everything a company does, whether it’s financing, marketing, human capital management or branding. All elements must tie together through systems, protocols and personal interaction. The least important exercise is trying to articulate a philosophy through numbers, statistics and charts.

What is the spoken or unspoken social “contract” between the organization and its people? Do employees know what is expected of them? Do they know what needs to be done to be considered a solid performer? Is there a relationship between an individual’s goals and those of the company? These need answers in order for the resources of knowledge and experience I referred to earlier to be converted into a sustainable competitive advantage.

The notion of organizational “infrastructure” cannot be overemphasized. A mechanism must be in place that allows the different segments to be in alignment with the overall strategy and values. Because change does not stop, the best approach is to build the infrastructure first and create it with an element of flexibility in order to respond the personal needs of the employees. Their needs may change frequently; your systems and processes should be adaptable as opposed to changing the personalities and desires of your people.

Because the most important element of organizational change is people, make sure that your philosophy and practices encourage continued personal improvement by offering training, tools and systems, allowing your people to get better. The goal is to have employees use critical thinking skills and identify and solve problems. They will then have an intellectual investment in the company’s success.

Organizational change and employee improvement must march in lockstep, otherwise there will either be a loss of competitive advantage or an exodus of talent.

About Steve

Steven Sacks is the CEO of Solutions to Results, LLC, a consultancy that specializes in helping individuals, firms and organizations meet the challenges of communicating with clarity and purpose. Visit his website at www.solutions2results.com.