In my last post, Best Practices Accelerate Value Delivery, we saw how the CIO of a relatively new government agency used a comprehensive best practise based framework to quickly deliver a decision support mechanism that would support the leadership team in their decision-making activities related to IT application and services investments.
In this post, we’ll look at the repercussions a retailer experienced when it decided to move its administrative staff from the downtown headquarters to a suburban setting to provide more retail space and reduce costs. Unfortunately, management failed to include three of the four change pillars in the cost/benefit analysis. They reaped the consequences.
Thanks to L.P. for the details on this case
This mid-west retailer housed most of its administrative functions in its historic headquarters in the downtown core. With the tepid recovery from the 2008 financial meltdown, the company’s management were focused on two key challenges: increasing revenue and reducing costs. The COO proposed that the company move administrative staff to a suburban location that offered much less expensive floor space and leverage the vacated space in their headquarters to support a range of high end products and services. Increase revenue and reduce costs in one move! It was viewed as a no-brainer. The proposal was approved.
Within six months:
- Complete the move of 400 administrative staff to a new location offering a 50% reduction in the cost of floor space
- Refurbish the vacated space and have the retail space fully operational
The COO charged his real estate organization with locating new facilities to house the administrative staff and assigned his Human Resources VP with planning the actual move including the layout of the new facilities, a seating plan and communication to the affected staff. The real estate group acquired suitable space for almost 60% less than the cost of the headquarters space. Even with the required capital improvements, the savings realized would be greater than the 50% reduction target.
The Human Resources VP had his staff focus initially on the floor plan and facilities for the new space, figuring that would require the most lead time. With about three months remaining until the move, he started work on the transition and communication plan. The core elements of the emerging plan included one major big bang move:
- Staff would receive notification about the move 30 days before the actual event. Part of that communication would include the new floor layouts and the workspace locations for each staff member.
- Work from home would be expanded to reduce the commute stress.
- On the Friday before the move, staff would pack up their work spaces for delivery over the weekend.
- On Saturday, private movers would transport the personal packing plus personal computers to the designated locations in the new facility.
- On Sunday, tech support would hook up and test the transported PC’s and their connectivity to other technical and network services.
- Also on Sunday, store staff would start reconfiguring the former administrative space to house the retail operation.
- On Monday, shuttle buses would leave the downtown store at 7:00 am for the new administrative complex. Shuttle buses would depart from the administrative complex at 5:00 pm for the downtown store. The trip was expected to take about 45 minutes each way, subject to traffic. Of course, staff could choose to use their own means of transportation as well.
The plan was reviewed and approved by the organization’s senior management. It looked like a nice clean move. Unfortunately, word about the move started to leak out shortly after the new facilities were arranged. The grape vine was alive with rumours and conjecture. Middle management was not in the know and so could not handle questions passed on to them. As the queries percolated up to senior management and on to the Human Resources VP’s desk, the standard response from HR was “all your questions will be answered shortly”.
Because of the growing unease among the staff and middle managers, the formal announcement about the move was released by the HR VP six weeks before the move date rather than the planned 30 days. Not only did the communication not address the questions and concerns, it raised a whole new set of issues, including:
- Lack of public transportation to the new site
- Significant extension to the work day because of the planned shuttle bus schedule
- No consultation on floor layout and facilities and the location of departments and staff
- Minimal neighbourhood services in the new complex for babysitting, shopping, dining, etc.
The office environment in the weeks before the move was a cauldron of criticism, accusation and spite. HR’s only comeback was “just wait, you’ll like it once you move”. That didn’t placate anyone.
When the new facilities were finally opened for business, 17% of the administrative staff had already handed in their resignations. At the end of the first month, the figure had climbed to 23% including a number of key managers. A couple of departments experienced staff losses of over 40%. Most of the remaining staff were frustrated and disgruntled. The lack of accessible public transit was the number one complaint. Even with revised shuttle schedules, the days were still considerably longer for most employees with no commensurate increase in pay. Those employees that tried to drive to the new location usually experienced morning and evening rush hour gridlock.
The loss of key staff caused a number of vital projects to be cancelled. Others projects were delayed. Consultants and agency staff were brought in to keep functions operating, increasing costs. A hiring campaign was launched to replace the lost staff but it was an arduous, costly process that just added additional stress on the shoulders of the managers and senior staff. The promised work from home expansion was killed because of all the other challenges.
On the retail front, sales in the new retail space created from the staff moves were 80% below target. Sales throughout the rest of the store were down more than 30%. It seems that those 400 employees that were moved to the burbs accounted for a considerable portion of the sales activity. On top of that, local neighbourhood organizations and their employees were feeling the pinch from the lost 400. Sales were down in local restaurants and other retail stores. They took it out on the guilty retailer by shopping elsewhere.
Finally, in an effort to place the blame, the CEO fired the Human Resources VP.
How a Great Leader Could Have Achieved Success
Do you want your change to be successful? Then you had best pay attention to the four pillars of change management: shareowners, customers, people who do work for you (including employees, partners and suppliers) and communities. Each had a vested interest in this change and each needed to be engaged effectively to ensure a successful outcome. In this case, three of the four pillars were ignored until they rose in protest, after the fact. Everyone lost. Yes, it can be messy and contentious engaging those with vested interests up front. But that pales in comparison to what can happen if you ignore a pillar or three.
Here’s what a great leader could have done differently:
- Get your facts straight. The retailer didn’t know who its customers were. It didn’t understand how much business its own employees provided. It didn’t understand how much the local economy depended on the 400. It had no idea what kind of challenge the move would pose to its staff.
- Engage your stakeholders up front. The retailer needed to involve the other three pillars in its planning and execution from the start, to make the solution a collaborative effort with broad understanding and support. If they’re not part of the solution they’ll undoubtedly be part of the problem.
- Always consider alternatives. Senior management was fixated on moving the administrative staff somewhere cheap to free up the expensive floor space for more retail revenue. They didn’t look at any other alternatives yet there were many other viable options.
- Establish key metrics and report performance widely. There were no metrics established to track the performance of the change and no public reporting of progress. When resistance started to surface, senior management was not even remotely prepared to address the concerns. A tracking and reporting process would have helped position the organization to acknowledge the issues and respond appropriately.
- Stage the rollout. One big bang implementation exposes the organization to substantial risk and gives no one the ability to gauge success and adjust tactics accordingly. In this case, a staged implementation, by department for example, would have been a meaningful approach to assess readiness and the effectiveness of the plan.
- Do a post mortem and incorporate the lessons learned into your corporate change behaviour. In this case, the lesson learned was “if you screw up, you’ll get fired”. That’s not a terribly meaningful message if you’re trying to improve corporate change performance.
Thomas Kochan recently published a very relevant article, In Market Basket Protests, Three Lessons For Corporate America. Kochan is the George Maverick Bunker Professor of Management and co-director of the Institute for Work & Employment Research at MIT’s Sloan School of Management. In the article, he reports on the employee protests at the Market Basket supermarket chain. The employees banded together to protest the firing of their CEO and to register their outrage at a shift in corporate strategy that would benefit owners at the expense of a loyal workforce and the company they helped build.
Kochan concludes “Market Basket workers are sending a message to business schools across America that it is time to teach the next generation of managers how to lead companies in ways that better balance and integrate the interests of all stakeholders — owners and executives, middle managers who might someday lead the organization, front line employees who are the face of the company to customers, and customers and communities that support the business.”
So, if you find yourself in a similar situation, identify and engage those four pillars right up front. Work with the key stakeholders to shape the change to address stakeholder needs and deliver the required outcomes. Finally, put these points on your checklist of things to do in future endeavours so you too can be a Great Leader. And remember to use Project Pre-Check’s three building blocks right up front so you don’t overlook those key success factors.
In the interim, if you have a project experience, either good or bad, past or present, that you’d like to have examined through the Project Pre-Check lens and published in this blog, send me the details and we’ll present it for others to learn from and comment on.
Don’t forget to leave your comments below.