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Strategic Change Management: Corporate Renewal and Turnarounds

"In a time of drastic change it is the learners who inherit the future. The learned usually find themselves equipped to live in a world that no longer exists."      
Eric Hoffer, philosopher and author (1902-1983)

Companies facing financial and operational crises who are forced to recognize that solutions to the impending perils are beyond their experience, generally are advised by their lenders and outside professionals to seek counsel in those learned in the tactics of turnaround management and corporate renewal. These consultants are generally well versed in applying established techniques to accelerate account receivable collection, cut payroll and other costs, sell off assets, close down unprofitable lines, and otherwise pare back operations and improve financial oversight so as to bring the company back within financing formulas and, hopefully, to break even or better. Unfortunately more often than not, the company is generally liquidated or sold off to more vibrant entities to partially repay obligations.
There is, however, another choice.

Strategic Change Management
While turnaround and corporate renewal lawyers often describe themselves as change management counsel, in truth they are advisors only with respect to tactical change. Their process involves application of established axiomatic rules to address and redress parts of an entity that exhibit substandard performance. If such parts turn out to be the root causes of the seminal problem, then of course trouble may be eradicated. But if that part is only a portion or, more likely, reflective, of a greater underlying malaise, then such tactic will only have treated a symptom and will likely have exacerbated the problem. If the symptom was particularly debilitating, then its elimination may allow the company to continue along for a while, particularly if the economic environment is one of a rising tide, before the problem resurfaces.

Mr Wise and his colleagues do not do this. Their approach is strategic rather than tactical; a unique approach designed to achieve unique results. To understand it, however, a bit of explanation is necessary:

Begin With a Focus on People

Why does “change” have to be “managed?” It is because the difficult part of change only relates to people. Information Technology programs can readily and easily be modified or replaced, machines and other tangible assets, equally so. People are tougher to change or replace. They do not like to change, and if they already knew what to do and believed in it, they likely would be doing it already. Thus, hearts and minds must be won, for coercion never works. Recall the old adage: “You can make a man sing, but you can’t make him sing sweet.”

Since, therefore, managing people through the change process is the difficult, non-fungible core issue in addressing a “bet the company” business problem, it follows then that the core factor in any business plan is its people: their culture, values and attendant processes. Thus when Mr Wise was asked many years ago what made him think that he could help turn around a hi-tech waste processing facility when he had had no prior experience in that industry, he was able immediately to answer, “It’s because all business are the same. The core commonality is people and process; the rest is little more than technical knowledge and nomenclature.”

Application of Strategic Principles

While tactics are employed an essential part of every battle, absent an overall strategy, they will be ineffective to carry the day. Thus, strategy must by its very nature encompass a view of the entire theater of operations and a holistic, global view of the entity as a whole. Here, static rules are discarded as antiquated “fixed fortifications” and replaced by dynamic principles of methodological analysis to understand the strengths and vulnerabilities of an entity and to create a new culture and new processes that, in a dynamic and accelerated fashion, reinvents the challenged entity in harmony with its traditional strengths and the opportunities of the future. Such a strategy will, of necessity, contemplate the use as well of certain established and time-tested tactics; but the choice and timing of those traditional tactics must follow from and be in line with the supervening overall strategic plan. It is this strategic approach to change management that distinguishes Mr Wise and his team from traditional turnaround firms.

The poet Samuel Taylor Coleridge observed about two hundred years ago that “the light which experience gives is a lantern on the stern, which shines only on the waves behind us.” Thus to see ahead, we must create a new vision guided by principles that enable us to learn so as to be able to adjust the course, tack, sales and rigging to account for the new conditions and ever present winds of change.

“Boots on the Ground” Approach

In order successfully to apply this approach, turnaround counsel must come intimate senior members—albeit temporary ones—of the senior management team. Leading by example, they catalyze change and infuse high energy into stagnant, decaying situations to build a firm, new functioning organization from the ground up. This is in clear contradistinction to the role of consultants that traditionally take an “outside-in” approach, and who generate reports, analyses and recommendations but who do not and—because they have not forged any team bond or relationship of trust with the executive team—cannot give leadership or guidance on who any such recommendations are to be implemented.
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