Winning (12 page)

We’ve actually already dealt with that question in the chapters preceding this one—in those discussing candor, differentiation, and good people management practices. In particular, the answer lies in using a rigorous evaluation system, with its regular formal and informal reviews. Very simply, a good performance evaluation process informs and prepares people in the fairest, most open way I know.

If people know where they stand, in fact, a firing actually never happens. Instead, when things are not working out, eventually there is a mutual understanding that it’s time to part ways.

In this kind of environment, where the employee is doing OK but not quite what you want, it can take a couple of years for the endgame to be clear to everyone. Over that time period, there will be many candid conversations about performance and career goals. The possibility of parting ways will have been raised and discussed openly.

In the ideal situation, the last conversation will go like this:

B
OSS
: Well, I think you know what this meeting is about.

E
MPLOYEE
: Yes, I guess I do. So, what are your thoughts on timing and what’s the deal?

Moreover, as a result of this process, sometimes you get lucky, and the employee will come to you first:

E
MPLOYEE
: I’ve got a great job offer, and I think I’m going to go for it. What do you think?

B
OSS
: What a great career move for you. I think you should take it.

These kinds of partings are rarely acrimonious, and surprise is the last thing anyone feels.

Cases like Richard, Gail, and Steve can never be eliminated entirely, but with candid and consistent evaluation processes in place, they can become less and less common every year.

SECOND, MINIMIZE HUMILIATION

To take the stinging embarrassment out of a firing, you first have to understand the emotional timeline of the experience.

For the boss, the timeline begins long before the actual event. In preparing for it, you feel nervous, frustrated, and anguished. Unless you are a complete jerk, you dread the whole thing, especially the conversation itself. For weeks, you lose sleep, rehearsing how it will go. You talk to your spouse or best friend about the situation to help get your nerve up.

Meanwhile, your employee is scared, but from my experience, usually optimistic until the end. Denial is the operative emotion. Most people walk into termination meetings hoping against hope this isn’t the day, a feeling usually mixed with gut-wrenching fear.

So, the day finally comes, and you sit down.

You deliver the bad news, and suddenly you feel relieved; the anxiety flows out of you. It’s over, you think. I did it kindly, I said nice things. The package is fair. Phew. At last I can get on to other work, including hiring someone great to fill the soon-to-be-vacant spot. You go home feeling that a terrible weight is finally off your shoulders. Dinner that night tastes better than it has in a while.
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Your employee is in another emotional time zone, to put it mildly.

Even if he has been well prepared by candid evaluations, he is crushed—his self-esteem is in the tank. If you’ve done everything right, he won’t be surprised, but he could still be feeling terribly sad and hurt.

The next day at work is when you must start to act against your instincts. Yes, the employee has done a poor job, and yes, he has taken up a disproportionate amount of your time and energy already. But until he departs, your job is to make sure he doesn’t feel as if he is in a leper colony.

Build up his self-confidence. Coach him. Let him know there is a good job for him out there, where his skills are a better match. You may even help him find that job. Your goal for the fired employee is a soft landing wherever he goes.

A firing may take an hour, but someone’s departure can take six months. You’ll save a lot of pain—and preserve a lot of pride—if you don’t rush it.

The unfortunate reality is, firings are a part of business. But that doesn’t mean they have to end up as the bitter messes they often do. If you handle them right, they’ll never be enjoyable, but they can be tolerable for all involved.

The legacy of a firing lasts a long time—for you, your company, and, most of all, the person who has been fired.

Obviously, if your company is collapsing, you can’t handle layoffs with kid gloves. And if someone has an integrity violation, you need to kick that person out the door, and fast.

But for everyone else, leaving for reasons more in the gray area, remember that every time there is a parting of ways, you own the process.

When it’s time to let someone go, do it right. No surprises. No humiliation.

I
’
M SURE YOU
’
VE NOTICED
the hand-wringing and hyperventilating about change out there. For more than a decade, there has been a whole industry devoted to the topic, all of it selling pretty much the same line: change or die.

Well…it’s true.

Change is an absolutely critical part of business. You do need to change, preferably before you have to.

What you’ve heard about resistance to change is also true. People hate it when their bosses announce a “transformation initiative.” They run back to their cubicles and frantically start e-mailing one another with reasons it’s going to ruin everything.

Frankly, most people hate it when they find out their favorite coffee shop is closing. The
Times
of London changed to a tabloid format, and the editor told me he received a letter asking him how it felt to be the person responsible for ending Western civilization.

People love familiarity and patterns. They cling to them. The phenomenon is so entrenched it can only be chalked up to human nature.

But attributing a behavior to human nature doesn’t mean you have to be controlled by it. Yes, managing change can sometimes feel like moving a mountain. But managing change can also be incredibly exciting and rewarding, particularly when you start seeing results.

During my years at GE, we were in a pretty constant state of change. Most companies today are. You have to be if you want to stay in the game, let alone win.

That said, I realize that change is not a layup. Over the past couple of years, I have been struck by the number of people at Q & A sessions who have asked me, “My organization needs to change. How can I get them to do it when everyone wants things to stay the same?” The question is usually delivered with a level of despair.

My first answer always is a question back. “Are you really the
only
person who sees a need for change?” I ask. “If you are, and you don’t have some authority, make your case, and if you don’t get anywhere, learn to live with the situation or get out.”

But if the situation is not that extreme—that is, you have the power to get things done and a few supporters as well—then you can make something happen.

It comes down to embracing four practices:

 

1. 1. Attach every change initiative to a clear purpose or goal. Change for change’s sake is stupid and enervating.
   
 

2. 2. Hire and promote only true believers and get-on-with-it types.
   
 

3. 3. Ferret out and get rid of resisters, even if their performance is satisfactory.
   
 

4. 4. Look at car wrecks.
   
 

 

If a company’s leaders implement these practices with passion and reward everyone else who buys in, eventually all the noise around change will stop sounding like noise. Change will become business as usual—the norm—and when it does, mountains do move.

I’ve seen it happen, and it’s not as earth-shattering as it’s made out to be.

Now for the practices in more detail.

It is a disaster when companies take all the hype about change literally and grab every new management fad that comes down the pike. It’s change overload! Some big companies adopt ten different change initiatives at once and run in eight different directions. Nothing meaningful ever happens in these flavor-of-the-month kinds of situations except that, for most employees, work feels very frantic and disorganized.

Actually, change should be a relatively orderly process.

But for that to occur, people have to understand—in their heads and in their hearts—why change is necessary and where the change is taking them.

This is easier, of course, when the problems are obvious—as in, the house is burning down. Earnings are collapsing, a competitor has dropped prices 20 percent, or a new product appears that totally threatens your market position. Change is made even easier when the media is writing stories about your imminent demise—perhaps the one time you welcome bad press! Many of the most notable large company turnarounds in the past decade had this going for them: GM, IBM, and Xerox, to name three.

When the whole world knows about your problem, the wind is at your back.

But sometimes the need for change isn’t scrawled across the skies.

Competitive threats only seem to be emerging. They may not even be real…or they may be your company’s death knell. You don’t know—and still, you have to respond.

In those cases, lots of data and relentless communication about the business rationale for change are the best ammunition you’ve got.

Take the case of GE’s appliances business in the late 1970s. In those days, Appliances and Lighting were the mainstays of the company—the previous two chairmen and several vice-chairmen had come from their ranks. As far as everyone in the business was concerned, GE was the leader in major appliances and it would be that way forever.

In 1978, when I was appointed head of the Consumer Products Group, I found myself staring at an appliances business whose market share had been slipping for a few years and whose margins were sliding even faster. To an outsider like me, the situation looked frighteningly similar to the television receiver and automotive businesses, where the Japanese were making tremendous inroads with higher-quality, lower-cost products while fat American companies sat by doing little.

I made my case to Appliances’ business managers at their headquarters, in Louisville, Kentucky. The place was loaded with “good old boys,” not to mention tons of overhead and layers of bureaucracy. I showed them chart after chart illustrating Appliances’s eroding position. And yet, early buy-in was minimal, to put it mildly. At the outset, I basically forced the cost-reduction program.
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Almost immediately, I got back the two refrains common to every cost-reduction program ever launched:

“We’ve already cut the fat. You’re asking us to cut the bone.”

And: “The competitors are crazy. They’re giving away product. Just watch—they can’t keep it up.”

Fortunately, the head of the business—a “good old boy” named Dick Donegan, whom I had been prepared to write off—saw the logic of the case, came to my aid, and started to champion change at Appliances. His leadership was vital to fixing things. He had been with Appliances his entire career, so he knew the players well. He built a team of supporters around him and cleaned out detractors—literally hundreds of them—over a two-year period.

In the end, the appliances business went through drastic changes because it had to. That fact wasn’t blindingly obvious in 1978, when the change was launched, nor was it overwhelmingly clear for a few years after. Infact, the Japanese never really sold large appliances in the U.S. Only recently have the Chinese and Koreans made inroads.

The domestic competition was tough enough to make change necessary. Just look at the price of a refrigerator today. That’s why the appliances business continues to cut costs and still hasn’t hit bone. It is now a business characterized by continual productivity improvements, modest innovation, and a team that understands that change is a way of life.

One lesson from the Appliances story is that you don’t always have, at the outset of a change initiative, every bit of information you’d like to make your case. Regardless, you need to get out there and start talking about what you do know and what you fear.

Communication about change does get a lot more challenging as a company gets larger. It’s one thing if you are the owner of a two-hundred-person machine tool company to walk into work one day, call a meeting, and say, “OK, everyone, I just got back from a sales trip, and guess what, we’ve got brutal competition from a really innovative new company in Hungary. Things are going to have to change around here.” It’s another thing entirely to make the case for change to a company with a hundred thousand people in multiple business units in multiple countries.

In big companies, calls for change are often greeted with a nice head fake. People nod at your presentations and pleasantly agree that given all the data, it sure looks like change is necessary. Then they go back to doing everything they always did. If the company has been through enough change programs, employees consider you like gas pains. You’ll go away if they just wait long enough.

This pervasive skepticism is all the more reason that anyone leading a change process must stay far away from empty slogans and instead stick to a solid, persuasive business case.

Over time, logic will win out.

Everyone in business claims they like change; to say otherwise nowadays would be career suicide. In fact, it’s quite common to see someone describe himself as a “change agent” right on his résumé.
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That’s ridiculous.

By my estimate, real change agents comprise less than 10 percent of all businesspeople. These are the true believers who champion change, know how to make it happen, and love every second of the process.

A significant majority—about 70 to 80 percent more—may not lead the charge, but once they are convinced change is necessary, they say, “OK already, get on with it.”

The rest are resisters.

To make change happen, companies must actively hire and promote only true believers and get-on-with-its. But with everyone claiming to like change, how can you tell who is for real?

Luckily, change agents usually make themselves known. They’re typically brash, high-energy, and more than a little bit paranoid about the future. Very often, they invent change initiatives on their own or ask to lead them. Invariably, they are curious and forward-looking. They ask a lot of questions that start with the phrase “Why don’t we…?”

These people have courage—a certain fearlessness about the unknown. Something in them makes it OK to operate without a safety net. If they fail, they know they can pick themselves up, dust themselves off, and move on. They’re thick-skinned about risk, which allows them to make bold decisions without a lot of data.

This description makes me think immediately about Denis Nayden, a managing partner with Oak Hill Capital Management, whom I’ve known for more than twenty years. Denis joined GE Capital in 1977, right out of the University of Connecticut, and by 1989 was second in charge, helping Gary Wendt expand the business from a few hundred million dollars in net income to more than $5 billion in 2000. The best way to describe Denis is intense, but extremely smart and fanatical about growth also work well. He never saw a deal he couldn’t make better; he never saw a routine or a process that couldn’t be unpicked, shaken up, and improved. In fact, Denis always saw the status quo as something to be upended. And in doing so, he brought hundreds of GE Capital’s deals to unparalleled heights of performance. He always gave people a view beyond what they were—to what they could be.

Now, Denis—like most change agents—is not always easy to work for. He constantly asks questions, pushes people hard, and just never settles. In the process, some people can feel threatened or scared. But Denis is not a whatever-works, smooth-things-over kind of person. Successful change agents rarely are.

The point here is that to make change, you need true believers at the top, and get-on-with-it types everywhere else. Take the case of Bob Nardelli at The Home Depot.

The Home Depot, like GE’s appliances business, was a company where the idea of change seemed ludicrous to most people in the organization. When Bob arrived in December 2000, the company looked perfect from the outside, and everyone inside was thrilled with the level of earnings and growth. The founders of the company had done a remarkable job of building the company from nothing, along the way sharing stock options with thousands of employees, who loved the ride as the profits soared through the 1990s.

But two things were happening that no one wanted to face. The business had gotten big with few internal processes in place—careful inventory tracking, stocking policies, and buying guidelines, to name three—and was having trouble maintaining its competitiveness. Lowe’s, its principal competitor, was chipping away at Home Depot’s lead with better service and more modern stores.

Bob was running the company for about a month when he started boldly talking about these problems, using tons of data. But few people at any level were buying his story of Home Depot as a fixer-upper. Many employees from the good old days openly pined for the times when the founders ran the company and everyone was getting richer by the hour. Who could blame them for the nostalgia?

But things had to change, and Bob knew that he couldn’t do that with the team he had inherited. He quickly brought in his own people—true believers—and promoted several longtime employees whom he had identified as get-on-with-its. Together, they put the missing processes into Home Depot and got growth back into the company. Bob had no wind at his back, but he did have the right people by his side.

When it comes to making change, this is the hardest practice to implement. In the last chapter, I talked about how hard it is to let anyone go, but it is particularly difficult to fire people who are not actually screwing up and may in fact be doing quite well.

But in any organization, as the Appliances and Home Depot stories show, there is a core of people who absolutely will not accept change, no matter how good your case. Either their personalities just can’t take it, or they are so entrenched—emotionally, intellectually, or politically—in the way things are, they cannot see a way to make them better.
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