Change Management: heroes and villains

“You know Charlie, in this world everything changes and nothing stands still. In fact change is the logos¹ of the universe”- said Hery.

“ I could not agree more Hery”, “and I would add that organisms either adapt to those changes or evolve or die”- “Cheers”- said Charlie

If we could witness Heraclitus[1] and Charles Darwin[2] talking over a beer in a pub today we would consider their statements as self-explanatory, almost obvious, although in their respective time they meant a disruptive “Weltanschauung” or way of seeing the world.

Are Darwinism and the Logos of the Cosmos theories recognized and accepted all over the world? With the exception of a few rural areas of the U.S. where creationists rule and some other remote areas on other continents, you would think so. Sure? Think again! 

Companies are organisms in a changing world. When conditions change, they need to adapt or evolve, else they will perish. That being said, you may be surprised to observe how in the corporate world such theories are well known and positively ignored at the same time. As for any issue in the business world everything boils down to people.

From what I could see there are 7 types of characters awaking to life when a change management project starts. These people influence (drive, support, endanger and sometime hijack) the process; therefore it is critical for the success of your project that you know whom are you dealing with. You may have the best plan and abundant resources: yet the success of your venture (as the general success of any company) depends exclusively on the quality of people you have on board and on their behavior. In an online Change Management booklet I found a very amusing and interesting description of following main players[3]:

1.     The Visionaries and Missionaries

2.     The Active Believers

3.     The Opportunists

4.     The Waiting Apatheticals

5.     The Underground Fighters

6.     The Open Opponents

7.     The Emigrants

The visionaries and missionaries as well as the active believers are fundamental to the success of the project. Sometime they need alignment and coordination, but in general they are low maintenance. If you are looking for “whynotter” this group of people is where you may find them.

The opportunists will measure the project against their personal interest. In terms of communication they will praise the project with their bosses and criticize it with their colleagues (what else would you expect from opportunists?). Some “yesbutters” are to be seen here.

You will immediately recognize the waiting apatheticals by one sentence sooner or later pronounced: “we have tried several times and everything stays the same”. The more you change the more is the same thing or more charmingly: “plus ça change plus c'est la même chose”. The rest of the “yesbutters” are here.

The most dangerous species though is the underground fighter. The underground fighter will do anything possible and impossible to disturb, damage and possibly stop the project. Without being noticed, of course. If you apply risk management techniques to limit or control the damage, you may consider starting here. -hiding but easy to spot-. Beware particularly of those saying “you have to motivate and convince people”. “Sie müssen die Leute mitnehmen” in German, which translate into whatever you do, someone will be upset.

The open opponents may seem difficult to deal with. However their open critics are often constructive and they may help you identifying weakness and potential in the change management project.

The emigrants are actually a natural thing to have in a change management project. People who understand that they will lose their advantages or position will be looking for a new job elsewhere. As a rule the best go first. A skilled person leaving the company is always a sad story - you lose human capital.

Finally, be cautious about the measures of your success in a Change management: If everybody is happy and pleased, very likely you have done something wrong.

No pain no gain.

In case you need support on Change Management issues in Germany please do contact me.

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[1]Wikipedia: Heraclitus of Ephesus (Ἡράκλειτος, Herakleitos; c. 535 BC – 475 BC) was a Greek philosopher, known for his doctrine of change being central to the universe, and for establishing the term Logos (λόγος) in Western philosophy as meaning both the source and fundamental order of the Cosmos.

[2] Wikipedia: Charles Robert Darwin, FRS FRGS FLS FZS^[2] (/ˈdɑrwɪn/;^[3] 12 February 1809 – 19 April 1882) was an English naturalist and geologist,^[4] best known for his contributions to evolutionary theory.^[I] He established that all species of life have descended over time from common ancestors,^[5]and in a joint publication with Alfred Russel Wallace introduced his scientific theory that this branching pattern of evolution resulted from a process that he called natural selection, in which the struggle for existence has a similar effect to the artificial selection involved in selective breeding.^[6]

[3] http://www.economics.phil.uni-erlangen.de/lehre/bwl-archiv/lehrbuch/kap3/change.htm by Tom Behr, and Tobias Tyll

There is liquidity in the WC

A company which is assets rich and profitable, could yet come into serious troubles if it turns short of liquidity:  if its assets cannot readily be converted into cash it may start delaying payment to suppliers or employees, increase its debt or worse miss essential payments. Starting the negative spiral is never a good idea.

If your company is in liquidity distress, one of the best place to start looking for money is the Working Capita (abbreviated WC). The WC is the operating liquidity available and necessary to a business in order to be able to perform their business.

A WC can be “gross”, when it equals to current assets, or “net” when is calculated as current assets minus current liabilities and is affected by the way a company manages inventories, accounts receivable and payable, and cash.

The effective management of these items infers a close cooperation between finance and sales functions.

Here some examples:

Account receivables: They are good if your clients pay in due time and according to the contractual provisions. Your Day sales operation (DSO), a performance indicator that show how fast or slow your customer pay you is a good management tool to steer the sales. It can vary from industry to industry and from region to region but the principle is: the sooner the client pay, the better. By assessing the reasons why your client are paying you late you learn a lot more about the market, your own company and the quality of your products and services than hours spent in the board room. Sales will hate you for speaking to the client (which is something you should do with their consent) but it shed a lot of light on gray areas. By talking to few customers, I realized that our R&D department was spending money and resources on products nobody wanted. The sales representative should control a dunning list, however if the client is in delay beyond certain limits, finance will need to take over.

Inventory: one of my preferred blocks. If you start analyze inventory (god forbid it) you may find a lot of skeletons, poison bottles and little or horrendous secrets. Your Inventory days ration will tell you for how many days you hold an item in stock. Examples of what you can find: Overstocked items. You may discover that your local guy can order from you or other supply without really any authorisation. Is your signature guideline in place? Is that amount of stock really necessary to run the business or the guy loading the warehouse would like to have a comfortable life, which is independent form lead times? The frequency with which items move will tell you finally how much trash you have which is out of market, returned from your client (often hidden by the sales guys in a dusty corner of the warehouse).

Here my piece of advise: if your company is short in cash, before going to the bank and ask for more debt, you should make sure that you squeeze all the liquidity you can from where it is available. There is liquidity in the WC!

Do not be shy in asking what, where, when, who and why on a regular basis. You may find many surprises but you can be pretty much sure that the money will stop flushing down the drain. 

In case you need support in Working Capital matters or any other finance/Change management issues in Germany please do contact me. 

Pearls out of the stupidarium

People are not stupid. But sometimes they manage to say or do extremely stupid things. For my own amusement I collect those pearls of stupidity for my amusement and future memories.

While doing my job I collected one of my treasured pearls; after so long time this pearl still stands definitely out.

Few years ago I joined a company that for a while did not have a CFO . A director, whose focus was not to create transparency and give input to the rest of the management, but rather to embellish numbers and hide negative trends, was in charge of the process and task of budgeting and controlling.

When I started regaining control of the process and was providing the management with a more realistic view of the situation, as you can imagine, the outcry was very loud. I offered to manage the processes together and to accompany him to visit the subsidiaries, but the guy declined, saying that I would have disturbed a smooth budgeting process.

More amused than annoyed, I asked why should I not join the process and support it.

The answer was striking: “because the sales and marketing functions are the enemy of finance, it has always been like that”.

This statement stands definitely out as one of the marvelous pearls of my stupidarium and makes top of my list.

I like to think of companies as human bodies. Each organ in the body represents a function:

·       Sales are the feet and legs of the companies

·       Operations digests

·       The CEO is the brain

·       Marketing is the complexion and the general look

·       Finance is the eyes and nervous system

·       The blood is the liquidity

·       Audit is the liver

·       Compliance is the kidneys

Thinking that one organ is an enemy of the other organ or that an organ rules over the others  makes top of the stupidarium list. There is a famous joke, which for obvious reason I cannot directly report but you can find by yourself by clicking the link below:

http://www.channels.nl/knowledge/33188.html

Companies where a single function prevails are monsters. The bestiarium is very rich.

Monster companies with a very small head and large feet. They are pale (liquidity is tight), incapable to respond to the challenges of the market and of the competition. In these companies the sales function prevails.

Monster companies with big head. They know exactly where to go but they cannot go there. They are ruddy (plenty of liquidity), their pulse is high as it is the blood pressure. In these companies the finance function prevails.

Monster companies with big breasts and B side. They do not know where to go and cannot go there. But they look good. In these companies the marketing function clearly prevails.

No matter how absurd it may sound, the attitude to let one function prevail is quite common in the corporate world; I can name a few CEOs with a sales background which take as mission of their job the one of keeping finance down, hiding the messages of the numbers, to the great disadvantage of the company and its shareholder. They are like drivers who want to run a car by listening to the directions of people seating in the back seats. They refuse to look through the windshield and sooner or later they will crash.

In an ideal company no function prevails over the others. All give their inputs, the head decides and most importantly takes responsibility, for the present, the future decisions, and most importantly for the past. Yes, because every CEO should own also the past:  the fact that someone else created an issue, does not diminish the responsibility of taking care of problems.

If you want to assess how good or bad a company is (about to be) run, ask about his or her background and the importance he or she assign to finance or to any other functions for that matter.

If you are lucky your stupidarium and bestiarium collection will not get any further addition.