Strategy sans psychology can't work

What is better - strategy with speed? Or, strategy with seed?

These days, corporates are getting caught in a vicious cycle of implementing strategy with a shocking speed, without working on the turnaround psychology of the people, who are expected to put that strategy in place.     

I marvel at the speed at which changes are occurring- be it related to consumer preference, product variants, innovative practices or services, ground-breaking technology, or creating new organizations.

Older companies are being made to work harder for their money and innovate to kick in greater efficiency, stay competitive or change their existing tactics and business models to survive a tough climate.

The reasons for going down this speed spiral could be many - changes in the surrounding market conditions, consumer demands, their consumption patterns, rise in input price, intensifying competition or something else.

One critical parameter that gets caught in this speed cycle however is the morale of the employees. Their trust in the management begins to disseminate amidst increased skepticism. The two categories of stakeholders who get deeply impacted by this half-backed, half-baked change process are the consumers and the employees.

The consumers get robbed of the full value of the premium price they are expected to pay for an ad-hoc change strategy; while the employees don't get to derive the full value of the effort spend on a speed exercise. No one cares to work on the 'psychology of turnaround' which is critical to the change process.

I once brought this subject - Turnaround Psychology - up for discussion with a clutch of CEOs of mid-size companies, who are acknowledged 'Turnaround Managers' of the decade. One of these is from Telecommunications; two from steel industry, three from the IT industry, and one from shared economy.

When I prodded, these experts listed following challenges in their turnaround strategy that I repeat in the same ascending order: Securing the stakeholders' buy-in to the proposed strategic change; execution; arranging funds; creating synergy and identifying and pitchforking talented employees to key positions.

Of all these challenges, they unanimously picked No#1 as the most difficult task. And they all agreed that once employees become optimistic about the turnaround process, implementation of strategy became remarkably simple.

In this context, one consumer durable company makes an interesting case study. Changes in the organization started in 1997, and after an initial bit of struggle that lasted for a full year (2002-2003), it managed to regain its leadership position in a highly competitive consumer durable market.

Gradually, the CEO got so carried away by the brand's strong positioning, he started becoming insensitive to the market. Then due to several reasons, the brand started taking a beating in the market, in terms of share, revenue and profitability. The channel, which kept the brand started de-selling it. There was an exodus of star employees from the organization and the troubling phase lasted for almost two-three years.

Things however began to change only when the then CEO got replaced by a new CEO. The present incumbent understood the matter and decided that his priority would be to manage the 'psychology of turnaround.'

In any corporate caught in the vicious cycle of change, the biggest issue that arises is morale decline. This may results from an accumulation of decisions, actions and commitments - all entangled is self-perpetuating talk, dynamics, secrecy, blame, isolation, risk-avoidance, lack of respect and a feelings of vulnerability, creating an unstable culture that makes an already shaky situation worse.

Once a company is caught in this spiral, it's difficult to change the course.  Employees in a downward spiral exit either in a denial, resistant, withdrawal mode, where they refuse to acknowledge the change or pretend indifference as if nothing is amiss. Any of these states can be counter-productive for the change-managers, and spike their progress with the plan.  

Management guru Sumantra Ghoshal once explained how to handle such a crisis. Denial in resisting employees is evident in rationalization and withdrawal from the change process. The leader caught in this situation must confront the reluctant employees with information, explain the change consequences and illustrate the positive outcomes with concrete examples.

If the resistance is still loud and persistent, the leader to stop and listen, empathize, commit personal involvement and cut losses. If during the course of this interaction, he or she perceives incoherent energy and noisy intrusion into the process, he must attempt to streamline, set priorities, assign tasks and issue short-term goals and deadlines to meet them.

However if the leader is able to secure complete buy-in of his people to the turnaround strategy, he must consider myself lucky, take a step back and make room for the next rung of leadership to lead the change. This is the time to set long-term goals, celebrate success and focus on team-building.

If he does that, he will win respect, collaboration and inspire action. Turnarounds are undoubtedly difficult times, when leadership matters the most.

Able leaders reward successors, create heroes, a culture of candidness, and are able to energize the workforce across the rank and file with their personal magnetism and produce results - time and again. One cut does not fit all. Different situations call for different responses, but if the fundamentals are in place, the execution comes easy.