Chapter 4 Mistaken Perceptions – How to Fail at Change Management

Chapter 4

Mistaken Perceptions

Solving a Perceived Rather Than a Real Problem

“We need to implement situational leadership right away,” said a member of the executive team while plopping down a series of articles from academic journals on the desk of the general manager. “Morale is suffering. Turnover is high. What we have is a failure of leadership and we need to fix it!” Advice from academics and textbooks for how to run a business is endless. Thousands of different theoretical lenses, tools and techniques, and methodologies exist for how to lead and motivate people, how to implement strategy, or how to get things done. In some ways, academic theory for business is like a dinner buffet. There is plenty to eat, but it is the application of individual judgment that leads to the selection of elements that go together well as a meal. The purpose of theories, tools, and practices is to solve problems, but if the identified problem is perceived rather than real, such tools are bound to fail. In the case of morale and turnover, it is easy to jump to the conclusion that the style of leadership employed lies at the heart of the issue. But jumping to that conclusion ignores an infinity of other possible issues such as the strategy of the company, the culture, the workload, to name just a few. The rush to solve a perceived problem leads inevitably to solving the perceived problem rather than the real one, with the consequences of living with sustained ongoing turnover and moral issues (Figure 4.1).

Figure 4.1 Solving a perceived rather than a real problem

Similar cases of solving a perceived problem are observed when a company grows from a national, to multinational, to a company with global reach. On achieving a significant level of global expansion, it is not uncommon to hear comments from executives in the home country make comments such as, “To be a global company—we must have local operations run by local managers.” The perceived problem is that the lack of in-country local managers is somehow preventing the global company from achieving a complete level of global competence. There may be an element of truth in this perception; however, installing local managers without changes in process, decision-making, and culture lead to a company that operates much the same way as it did without local general managers. The perceived problem is “a lack of global mindset due to the lack of local management,” when the actual problem is “a lack of global systems, processes, and culture that in turn lead to a lack of a ‘global mindset’.” Solving the perceived problem leaves the actual problem in place and perhaps makes it worse.

Financial controls can be a touchy area in any company and the opportunity for perceived problems to be solved is widespread. A typical example involves the policy associated with who has the authority to approve an expense. In one case within a multinational company, the general manager suggests that after an annual budget is approved, then the local directors of each function should have sign-off authority for their individual budgets. The rationale is that the overall budget is pre-approved, pushing sign-off authority down to directors rather than the GM correspondingly matches authority with responsibility. The perception of this proposal by corporate executives in the home country was highly negative. To address the perceived problem of the lack of financial control, executives insisted that the general manager sign-off on all expenditures. The solution to the perceived problem of a lack of control led naturally to unintended consequences. Once functional directors realized that they had no authority to approve anything, then they proceeded to send their purchase requisition “wish lists” to the general manager for negotiation and approval by the home office. Steps taken to address the perception of the lack of control led to a lack of control.

A final example of a company doing its best to solve a perceived problem is observed when executives perceive that the company salespeople are “making too much money,” and in an effort to solve the perceived problem, cuts sales commissions or transfers salespeople from commission-based compensation to a salary. In one sense this action does tend to solve the problem of salespeople making too much money, but it also results in the company not making much money either. The result is observed to often not to end well in business-to-business sales contexts, but it has also taken its toll in the retail environment. For example, Circuit City switched from a commission model to hourly pay structure that is cited as one of several factors that led to the collapse of the company a year later. This is not to say that shifting from commission-based compensation to salary-based pay is always a bad idea. In many cases, this is known to be successful when the problem to be solved is the need for more account management and less pure sales and new business development. The key in such change is understanding what the needed change is and ensuring that the problem it seeks to solve is real rather than perceived.

Pointers for how to fail:

  1. Apply a management theory or practice because it is promoted by a notable academic.
  2. Create the appearance of a company a successful global company rather than actually be one.
  3. Take steps to achieve the illusion of control rather than actual control.
  4. Take steps to address an issue that bothers you, and in doing so, reduce the effectiveness of the company.

The Wrong Solution for the Right Problem

There is the old saying, “stepping over a dollar to get to a nickel.” This is exactly what happens within companies that spend millions on wasted effort while at the same time, initiating vigorous internal cost-cutting measures. One such program by a multinational company was the internal “Cost Busters” program. The program sought to reduce costs on every front with emphasis on the small things such as office supplies. This effort did not seem meaningful to many given that the company had recently canceled a multimillion-dollar project that never reached the market, signed equally large contracts with external vendors without incorporating clear deliverables, and wasting significant money by ongoing delays in decision-making. Complaints to management led to responses such as “collect enough dust and it eventually becomes a mountain.” Perhaps true, but with mountains of cash going out the door while the dust of cost savings was secured, the company seemed to be focused on the wrong solution for a legitimate problem. Perhaps a new saying should be coined, such as “collect enough mountains and it eventually becomes a continent.” “Mountains” in the case of many dust-collecting companies involve a lack of process discipline and inefficient product development processes. Examples of this are often cited by organizations such as the Product Development Management Association. Companies lacking a structured product development and innovation and portfolio management decision-making systems are known to spend significant money on development efforts that never reach the marketplace. Counting paper clips, that is, “dust”, is clearly the wrong solution for a legitimate cost problem (Figure 4.2).

Figure 4.2 The wrong solution for the right problem

Applying the wrong solution to a clear problem may also appear in companies who acquire other companies to obtain expertise, but then proceed to “manage out” the acquired expertise by employing policies that limit the ability of the acquired company to succeed. For example, consider “Company A” with an expertise in software, networking, and switch technologies acquiring “Company B” with radio frequency technology expertise in order to compete in the market with a complete wireless system solution. The acquisition of Company B solves the problem of the lack of radio frequency design expertise in the parent company. On the other hand, Company B is also known to be limited in output capacity and is slow to introduce new products to market. Company A purchases Company B and determines that it needs to make improvements to Company B in the course of integrating the company into the new organization. What problems did Company B bring to the acquisition? Primarily a lack of efficiency, capacity, and concerns over the time to market of new products. What solution does Company A bring to the table to solve this? Company A steps in and forces Company B to incorporate its pet internal technology into its new radio frequency products. The technology does nothing to address the perceived problems of the company and is resisted by experienced engineers who are informed by public research that the favored Company A technology does not work as promised. After years of struggle against the enforcement of poor technology choices by the parent company, most of the expertise in Company B leaves and eventually the company fails and goes out of business. The lesson for change by acquisition in order to acquire expertise is to seek to solve the problems for which expertise exists, and let the acquired expertise do the job for which it was purchased. The acquired company did include some obvious shortcomings. The right solution would be to address the shortcomings rather than to insist on wrong solutions.

A final example of applying the wrong solution to the right problem is addressing client requirements in the product development process. A classic example of applying the wrong solution is a company that cancels an in-progress product development because a client, after being shown a prototype, insists that the product is not needed. Instead, the client points to an existing product from a competitor and states, “Now this is what we need!” Six months after the product development is cancelled, a major competitor launches a product similar to the one that was recently cancelled. The market shifts to the new type of product and the company restarts the cancelled product development effort. The product is eventually launched but is late to market. The problem in this case was a failure to understand product requirements, and attempting to solve it by doing exactly what the client requests and cancelling a development already underway. The supreme difficulty associated with requirements elicitation is the vetting of what a client could articulate. There is a difference between what the client says and what the client needs. In this case, the client must have needed the planned new product since shortly after the competitor launched the product, the competitor shifted to the new technology. It is easy to do exactly what the customer says, which is the wrong solution to the right problem—in this case, requirements elicitation. It is far more difficult to understand what the client needs and to understand what underlying drivers that will lead the client to ultimately select one type of product versus another. The wrong solution to the right problem is often an “easy” solution that lacks thoughtful analysis of the problem.

Pointers for how to fail:

  1. Solve small problems when you are not able to solve large ones.
  2. Actively snuff out the expertise of a company that was acquired for its expertise.
  3. Always do exactly what clients tell you to do.