Change may be one of business life’s constants, but most change programs - three out of four if you believe the statistics - fail.
Rather of wading through yet another exhaustive checklist of tricks and traps of organisational change, let’s take US President Harry S. Truman’s “show me” approach and instead look at, and learn from, three organisations and their leaders who succeeded spectacularly at organisational change.
Santander: Revolution, not evolution
When Spain’s largest retail bank Santander, also known as Banco Santander Central Hispano (BSCH), wanted to expand into the UK a decade ago, it adopted an acquisition strategy designed to catapult it into Europe’s number two position by market capitalisation.
Nothing new there.
BSCH targeted several UK financial institutions, each famed for their longevity of nearly 160 years and impeccable heritage, knowing the acquisitions could help fast-track BSCH in terms of brand strength and market presence.
BSCH also knew, however, that those same street creds of well-established institutions could be a curse as well as a blessing. Traditions die hard, particularly in the ultra-conservative world of British banking, and a long history of operations doesn’t come without legacy issues such as deeply engrained processes and attitudes that nearly always make change difficult.
To turn three heritage-centric banks into a single, agile and modern retail institution, BSCH had to rapidly introduce new best practices and systems to streamline operations and improve efficiencies - and jettison methods and attitudes mired in “the-way-we’ve-always-done-things” mindset.
Santander’s UK CEO, António Horta-Osório, knew that without success in both areas, the acquisitions would be unable to evolve, so his focus had to be to convince their many shareholders that change was good, out with the old ways, and in with the new.
Horta-Osório soon discovered, however, that the three banks had less in common than he thought. Each had developed over long decades as regional building societies more intent on lending capital for the purchase or improvement of houses, not retail banks equally intent on savings and transactional accounts, mortgages, personal loans, debit cards and credit cards. This meant their product portfolios, brand positions and customer bases were unique, making the integration of systems, processes and people problematic.
Within three years of Santander UK’s 2010 launch into a banking environment still reeling from the GFC, it had grown to become one the UK’s leading retail banks. So how did Horta-Osório pull it off? The answer is communication and more communication - before, during and after the entire change process. And not only communication to those who were to be affected by the new changes, but to everyone.
He began by ensuring that potential reactions from employees and customers alike were considered from every angle, as were the many risks, issues and, importantly, advantages and opportunities.
From all this came clear, easy-to-remember and recite messages that every employee understood, and because of their veracity, believed.
The rest as they say is history, but perhaps the best testament of the bank’s change success is what happened next to Horta-Osório. One year after pulling off the financial change of the century with Santander UK, he became CEO of the prestigious, and much bigger, Lloyds Banking Group where at last report his pay was 11.5 million pounds, or $AU19.5 million, a year.
Google: Time to break up
Since its founding in 1998 by university students Larry Page and Sergey Brin, Google grew quickly to become the driving force in the internet search market - so quickly and completely that the first use of the name "Google" as a verb in pop culture occurred on the “Buffy the Vampire Slayer” television show a mere four years later, in 2002.
It also enjoyed phenomenal success with other products such as Google Maps (a product born in Australia, by the way), Gmail, YouTube, Google Earth, Google Analytics and its online advertising platform AdWords.
But with great power comes great temptation. Google’s R&D teams, with seemingly carte blanche to search for more and more next big things, veered off after driverless vehicles, artificial intelligence, wearable tech, renewable energy, glucose-sensing contact lens, virtual reality headsets, mobile phone solutions, a news service, and much more - some of them successful, some not so much.
Managing an entity so diverse and with an organisation chart resembling a bowl of spaghetti with intertwining teams, managers, budgets and objectives became an impossible feat. In 2015 Google co-founder Page announced plans to deconstruct the business by reorganising its varied interests as Alphabet, a collection of companies and with Google continuing as the umbrella organisation for its internet business. As Page wrote on Google’s employee blog, “We believe this allows us more management scale, as we can run things independently that aren’t very related.”
He added that in the technology industry, “where revolutionary ideas drive the next big growth areas, you need to be a bit uncomfortable to stay relevant.”
Managing this massive change at one of the world’s largest organisations was not without risk, but Page and his management team understood very well the areas of potential conflict. More importantly, they understood the need to meet the needs of every one of their 57,100 employees in more than 40 countries, ensuring they knew what was going on - and why. “The whole point,” Page told employees on the company’s blog, “is that Alphabet companies should have independence and develop their own brands.”
Change should be the foundation of competitive advantage, but few organisations manage change well. Google is a solid-gold exception, with Alphabet now the world’s second-largest company and rapidly becoming only the third S&P 500 stock to surpass the heady $1,000 mark.
Lanxess: No employee left behind
Lanxess is a specialty chemicals company based in Germany and founded in 2004 as a spin-off from chemical, pharmaceutical and life sciences giant Bayer AG. Today, Lanxess is a global business with 70,000 employees in plants and offices in 50 countries.
But getting this point wasn’t easy.
One of the largest challenges facing its new CEO, Matthias Zachert, was transitioning a highly professional accounting team ingrained with Bayer’s 150-year-old corporate culture and strict procedures, and that was unprepared for a brave new business world. Following the shift from Bayer, morale among Lanxess team members was worryingly poor. If left to fester it would almost certainly spell disaster for the new organisation.
Zachert had joined Lanxess, however, with a large portfolio of change management experience to his credit with big pharmas Aventis, Hoechst and Kamps. He knew the key to improving the team’s morale was increased, direct interaction with himself and his management team. He organised workshops to give employees a forum to speak openly with Zachert about their concerns, and then to find ways together to improve processes, procedures, collaboration and cooperation.
Far more than a talkfest, those workshops resulted in key initiatives ranging from flexible working arrangements and regular and interactive employee/manager meetings, to replacing the outdated Bayer accounting system with a new platform that soon increased efficiencies, reduced costs and, to be sure, improved the mood of accountants.
Lanxess is a great example that while sooner is always better, it’s never too late to establish clear lines of communication and engage employees in frank and open discussions about the impacts of change. Full disclosure of the change objectives of individuals, teams, departments and the organisation removes the fear of the unknown, gets everyone on the same page, and empowers employees at a sub-atomic level to embrace change.
Another point to be made is that in all major change programs, there’s a real danger that change management gets delegated. Leaders distance themselves from the challenges of priorities they once championed, and initiatives fail. So if there’s another lesson to learn from Santander, Google and Lanxess it’s this: leaders abdicate responsibility for communication and staff engagement at their peril.
- Santander’s António Horta-Osório understood the power of messaging when starting anew, and made certain everyone in his organisation could “talk the talk”.
- Larry Page of Google/Alphabet saw the vast potential of thousands of employees thinking small and focusing on big opportunities inside the organisation.
- Matthias Zachert ensured his employees were fully on board Lanxess’ journey and actively participating in fulfilling its destiny.
All three leaders believed one thing above all others - that an organisation’s ability to change is the result of the combined efforts of everyone knowing what’s expected of them.