180 Days to a 180-Degree Turnaround

Journal of Business Strategy, May/June 1999

A poorly performing company, one in need of a complete turnaround, typically lacks resources for new strategic initiatives. The usual remedies are layoffs, cost cutting, and asset sales. However, these remedies often undermine the company's long-term health. Moreover, they don't address the issues that lie at the heart of the problem: an ineffective corporate culture.

Does culture change work as a turnaround strategy? Can the current managers change the culture? Can they do so quickly enough to save the company? The answer to these questions is "Yes."

First, they have a relationship with the employees and can tap a reservoir of goodwill, if they know how. Second, they know the companies operations, products, and customers. A turnaround specialist would have to learn these things. Third, the current managers can, with effort, understand their role in creating the ineffective culture, and then reverse direction.

In contrast, turnaround specialists hired from outside have little emotional investment in the company and few relationships. Their aggressive efforts to show fast financial gains can undercut or even gut a company. In many cases, it is far preferable for the existing management to lead the company to a new more effective culture.

Before Turning Around
Every organization, every group of any size, has a culture. Any time people regularly live, work, or play together, they create a culture. Culture is simply the sum total of people's thoughts and actions, their beliefs and behavior, in that group.

The beliefs people hold are rooted in their experiences. For example, if employees believe that missing projected timelines is "O.K.," then that belief is the result of witnessing, and likely on more than one occasion, a milestone come and go with no real message form anyone in authority that this is unacceptable. If experiences are the basis of culture, results are its outcome. Every culture produces some outcome, such as order or chaos, peace or war, profits or losses, results or excuses.

Thus our model of culture has four characteristics- experiences, beliefs, actions, and results. The model is illustrated in the results pyramid in Figure1.

In any company (or any group), experiences foster beliefs, beliefs motivate actions, and actions produce results. Managers who accept this model arm themselves with the knowledge necessary to change their company's culture. To do so, they must work at the level of their people's experiences and beliefs.

When results are lacking, too many managers try to effect change by issuing new marching orders that are supposed to drive new actions. However, really effective leaders create experiences that transform people's beliefs in a way that causes them to step up to new actions that drive desired results.

Turning a nosediving company around in six months is an ambitious goal. But it can be done. In the pages that follow, we present a six month timeframe and the key tasks management must accomplish in each 30-day period.

Days 1-30: Align the Turnaround Team Around Beliefs
The senior managers must develop a common understanding and view of what needs to be done in order to change their company's culture. Here, they define what the culture needs to be in relation to the results that need to be achieved. They must clearly articulate the results the company needs to achieve so that everyone in the organization understands them and can relate to them. The next step is to clearly identify how people need to think and act differently- what they need to stop doing, start doing, and keep doing- in order to achieve key company results.

Once this is done, a critical step in accelerating the turnaround is to effectively define beliefs people would need to hold that would drive the actions necessary to achieve the results. This is done by asking, "What do people need to believe in order to act that way?"

The quickest change processes we have seen have involved the development of a beliefs statement. This is not a mission statement to be hung in the cafeteria and never referred to again. Rather, these are beliefs that all managers and employees make a personal commitment to live by on the job every day. A serious turnaround team therefore takes time to define those beliefs.

Here are a few sample beliefs from two successful turnarounds, both of which involved new product development. One company got back on track and hit a critical mid-year launch date that was surely going to be missed. Another amazingly launched a turnaround that catapulted their company from $2500 million to $800 million in annual sales in just five years.

Beliefs from the first company include: "I set, own, support, and achieve company milestones," "I constantly look for what else I can do to achieve results," and "I share timely, relevant information that ensures mutual understanding and alignment." From the multi-million dollar turnaround: "I believe that innovation is a key requirement for our products, processes, and services- it is expected and will be rewarded" and, "My company will win only when my daily work is consistently aligned with the company mission, vision, and objectives." Correctly supported, these beliefs produced the actions that drove the desired results and produced a quick turnaround.

Days 1-30: Start at the Relative Top and Work with Intact Teams
In implementing change, one must start at the relative top. That is, culture change can occur anywhere and within any piece of the organization, as long as you start with the leader of that department, team, division, or subsidiary and then work with their team.

Culture changes one person at a time. The top team, particularly the leader, must model the new culture. Each leader must become a champion of new behavior and a master at creating new experiences around the new cultural beliefs. By working with the leader's intact team, you can create a microcosm of the culture that you want for the rest of the organization. You can also create a supportive environment that enables each member of the team to help the others stay "honest" in living the new beliefs.

Days 31-60: Create New Experiences
Those on the management team ignite the turnaround by creating experiences for the rest of the company. Some managers explicitly announce the new beliefs. Others start by creating experiences that exemplify the beliefs, then announce them soon thereafter.

For example, one new leader found that her company culture was consumed with the belief that you solve the company's problems by working to create consensus in long, drawn-out meetings. She complained that no one felt accountable for the decisions the of the company. It seemed everyone was hiding behind the "team process." She changed this belief by stating a new philosophy that teams don't make decisions, leaders do. Leaders counsel with team members, but at the end of the day, the leader makes the call and, thereby, assumes the accountability. Just talking about this process with her team was a new experience that had a huge impact. Combined with her own example, change was accelerated.

Days 31-60: Create the Right Kind of Experiences
We've identified four types of experience important to culture change. The following two are key:
Type One Experiences are clear and unambiguous- they require no interpretation from management to foster the right belief. Example: To cut costs, management starts flying coach instead of first class.
Type Two Experiences require interpretation form management in order to foster the right belief. Example: Managers start holding shorter meetings and explain that this reflects a belief in effectiveness rather than an effort to cut off discussion.

Since managers use experiences to change beliefs, they must understand what type of experiences they are creating. (Type Three Experiences have no effect on beliefs. Type Fours will always be misinterpreted, no matter what management says. Same lay-offs fall into this category.) In any cultural transition, and especially in a turnaround, managers must plan experiences for their people and gauge the likely belief that will result.

One or two large, public, Type One Experiences early in a turnaround can be very useful. For instance, people in a falling company usually have poor morale. They've lost faith in management. However, if senior managers first take responsibility for the situation and willingly listen to people's frustration, they create a powerful experience. People want management to acknowledge their situation. When management does this- and then clarifies a path forward-they regain goodwill and pave the way for the new beliefs.

Days 61-90: Seeking Feedback Constantly
A turnaround calls for leadership, which means managers must create experiences that foster in people the right beliefs. For instance, certain experiences will be needed for people to believe that deadlines count, quality is king, cost-control is essential, and open discussion of problems is valued.

How can managers insure they are creating those experiences and that their experiences are being interpreted correctly? By seeking feedback constantly. Managers must ask their peers and subordinates for feedback. Before a decision, after a meeting, anytime the opportunity presents itself, managers must ask, "What feedback do you have for me?" Managers should encourage both critical and supportive feedback. When they hear criticism-and they will- they must respond positively.

When a peer or subordinate points out that a manger is not demonstrating the new cultural beliefs, that manager is instilling the wrong belief and must change. Moreover, he or she should engage the observer in the change process. In a turnaround, it is virtually impossible for managers to get too much feedback on the experiences they are creating.

Days 61-90: Use an Integrated Process
To speed the change effort and accelerate the turnaround, management must work on three fronts simultaneously. Not only do they need work to provide new experiences, but they also need to start dialog about the change with the rest of the organization through formal training and discussions. Moreover, they need to ensure that the formal and informal systems of the organization work to reinforce the new cultural beliefs.

Where there is no emotion, there is no investment. Managers must get people engaged in the process of talking about the process of change that is needed and the role they will play in that change. This is an important step to creating buy-in, ownership, and accountability in people regarding how they need to think and act differently.

Days 91-120: Get Everyone Enrolled in the Process of Change
It is essential that leaders and managers create critical mass and positive momentum by getting people at all levels enrolled in creating the change. Attributing the reason for change to a new leader or the fear of loosing one's job can work. But it is far more lasting, more positive, and more useful to help people understand the results the company needs to achieve and their role in helping the company achieve those results.

This kind of understanding led an accounting clerk to spend 290 hours of his own time (his department was understaffed because resources were being plowed into new product development) to fight a tax assessment that ultimately won the company another $1500,000, which they plowed back into R&D.

Days 91-120 days: Create Accountability for the Change
Establishing an environment of positive accountability, where people feel accountable to demonstrate the new culture and achieve company results, is critical to accelerating the culture and achieve company results, is critical to accelerating the cultural transition at this stage of the turnaround. Holding people accountable in a positive, constructive manner through coaching and feedback will move more of the organization more quickly toward the desired state.

Days 121-160: Troubleshoot the Turnaround
This is a good time for appraisal and adjustment. Senior managers have had four months, and everyone else has had three, to assimilate the new beliefs and behaviors. Given this rapid pace, there will certainly be problems.

Two common problems at this stage are a declining cycle of morale and the tendency of some people to view themselves exempt from the turnaround effort. Luckily, both problems can be solved.

Morale is usually low during a turnaround because of poor performance. Breaking the cycle of a decline in morale calls for concerted effort on the part of leaders to expect improvement, coach the change, and celebrate success along the way. As the team at the top engages in these three activities, people will get behind the "cause," "catch the vision," and rally to make the effort work.

When some employees see themselves as exempt form the change, holding people accountable-at all levels- to demonstrate the change is absolutely essential. Creating a powerful cultural momentum where peers hold peers accountable to "get on board" accelerates change more quickly than any other technique management might use.

Instilling accountability man not be the entire answer, however. Managers must also judge whether a reluctant employee is a "hold out" or one of the "walking wounded" who can recover. The walking wounded often respond well to a good listener. Telling someone with justifiably low morale to snap out of it isn't enough. They need to feel they've been heard before they can change. Hold-outs who won't move m ay need to be counseled out of the organization.

Days 161-180: Ensure Formal Systems Alignment
By now a critical mass of people reflects the new culture in their day-to-day activities. The sooner the company's formal systems reinforce that culture, the better. The new culture becomes fully institutionalized when the systems aligned with the beliefs.

Formal systems such as compensation, promotions, and communication systems send a strong cultural message to everyone in the company. Altering these organizational systems so that they reinforce desired behavior and actions will speed the assimilation of the new culture. Some of these system alignments can serve as Type One experiences that reinforce "the way we do things around here."

A successful turnaround effort can't stop at home. It may also be necessary to get the international affiliates or overseas entities on board with the change. If so, involving people from these organizations right at the start of the process will accelerate their entry into the new cultural environment that is being laid out for the whole company.

Realistically, a total, permanent cultural transition takes more than 180 days. With this model, however, a committed, energetic management team can turn a company around completely-180 degrees-and get it moving in the right direction in 180 days.

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Roger Connors and Tom Smith are principals of Temecula, Calif-based Partners in Leadership. They are authors of Journey to the Emerald City: Achieve a Competitive Edge by Creating a Culture of Accountability (Prentice-Hall, 1999) and The Oz Principle: Getting Results Through Individual and Organizational Accountability (Prentice-Hall, 1994).