15
Morale, Emotions, and Expectations
Leading during a Restructuring
Until now we have focused on the actions and roles of those who initiate and run a Fit for Growth transformation and are most directly responsible for its success. We have described the responsibility they have to strengthen their company's differentiating capabilities, how they can use various levers to cut costs, and how they can manage a programmatic transformation journey.
But the people on the transformation team who are changing the business are not the only ones dealing with challenges during a transformation; the senior, middle, and front-line managers who are running the business bear a heavy burden, too. These managers must guide, coach, and support their employees through months of uncertainty. And when the transformation design is complete, it will fall to these managers to stand up the new organization, convince a reduced workforce to implement and adopt improved processes, and transition to working in a different way, while also managing the business. Their role will include helping employees adapt to the changes and often will also include the agonizing business of managing headcount reductions. In this chapter, we discuss how these managers can surmount the challenges of a transition—and how they can rally their employees to do the same.
To augment our experiences in helping clients accomplish Fit for Growth transformations with additional first-hand perspectives, we interviewed several mid- and upper-level managers who lived through transformations in recent years. All of these managers have either remained in their positions at their companies or moved into positions of greater responsibility, so they bring the perspective of the before, during, and after. Their stories and the lessons they have learned inform the discussion in this chapter.
Uncertainty and Anxiety
For managers and their employees, a transformation is a time of tremendous personal uncertainty. After that first all-staff memo from the C-suite, noting that a reassessment of the business is underway and that it may be accompanied by a major restructuring, there are invariably months in which there is little to no further communication, and everyone—from vice presidents on down to hourly workers—is left in the dark. “Everything went quiet” is what one manager remembers of the period after his own company announced plans for a large-scale restructuring. Although the manager was considered a top performer and has since been promoted, he adds, “I was very worried about what was going to happen to me and whether I was going to have a job. No one was giving me any reassurance. And no one could.”
This is the crux of the issue for those on the receiving end of a transformation: they naturally view everything from their own perspective. This is true in the literal sense that the first thought of receiving managers (everyone outside the transformation is in a sense a “receiver” of it) is for their own job security, the protection of their domain, and what they personally may need to do differently. But it's also true in the figurative sense of taking something personally: as the period of time without any clear communication lengthens, frustration, resentment, anger, and depression set in, at various times and to varying degrees.
Among front-line managers and employees, there is often a perception that corporate management is removed from the rest of the organization. This perception becomes more pronounced during a transformation. The small group of executives who have responsibility for the overall transformation can't say much about it themselves, initially because they are still figuring things out and later because of the implications of misspeaking. What little they do say only reinforces the perception that they are out of touch, especially if they stick to limited talking points about the importance of the transformation to the business. The other managers who are brought in to design pieces of the transformation are likewise asked to treat the plans as confidential and speak in only the most general terms. In the information vacuum that develops, the receiving managers themselves end up having to articulate a message to keep their teams going and prevent morale problems from getting out of hand.
There is only so much a manager can do during a transformation to address employees' anxiety. As information leaks out—or doesn't—employees ride a roller coaster of emotions, veering between hope, anger, fear, frustration, depression, and relief. In the rest of this chapter, we focus on what receiving managers encounter during a transformation: from the rumors early on when senior leaders are still debating the cost-savings number and scope of the restructuring; to the intensifying water-cooler speculation as more managers get drawn into private planning sessions; and last to the tectonic shifts of the last phase, when the plans become public and execution begins. Through it all, receiving managers, far from being passive, have a chance to influence pieces of the transformation and use it to shape their own careers. (See “The Upside of a Transformation for Midlevel Managers.”) Their chances are improved if, throughout the transformation, they remain committed to open communication; express optimism about the changes that are brewing; and resolve to handle the inevitable setbacks to come (including staff departures) in the most thoughtful, productive way possible (see Figure 15.1 ).
Phase 1: Opportunity, but for Whom?
The diagnostic and case for change phase is when the senior management determines the broad outlines of the restructuring. This includes setting an overall vision and target, prioritizing changes, and putting in place a road map to achieve them. While employees may know that a major analysis of the organization and costs is underway—based on the memo from the C-suite—the specifics are unknown.
What Employees Go Through
For everyone outside the executive team, Phase 1 is a time of uncertainty. Questions surround the vaguely described “project.” Unless employees know with absolute certainty that they are “indispensable,” many feel vulnerable about their own future. And even employees handling those seemingly indispensable activities—and who are considered top performers—rarely see their positions as secure. With the company sharing so little, rumor and speculation take the place of information in this phase. Hoping for the best, some employees predict it will end up just like the last time the company announced a reorganization, when it petered out a quarter of the way through and nothing changed. Other employees will express a more pessimistic view: that there will be radical changes, including large layoffs, that will directly affect them and hurt the company. In a matter of weeks, what is or isn't going to happen with jobs and organizational changes becomes the dominant topic of discussion in the office. Few people see the possible upside—that the transformation will fix broken processes and reduce bureaucracy, leaving the company (and many of its employees) better off.
What Managers Are Up Against
Middle and front-line managers who aren't involved in designing the transformation usually bear the brunt of employees' questions in this phase. These managers rarely have an idea of what is being discussed at the executive level and what might come out of the initiative. Often, they don't know what their own futures look like. Yet they have to manage the morale and expectations of their people, who often don't realize or believe that a manager could be as much in the dark as they are. This puts managers in an awkward position: not knowing much about what is going on, but still having to say something to address the rumors, support their people, and maintain productivity.
What Managers Can Do
The best that managers can do in this phase—where they have no real information and nothing has been decided—is to be as truthful and transparent as possible. They need to reinforce the case for change as communicated by the CEO in everyday language that will resonate with their teams. In addition, they need to find a way to keep their teams focused on day-to-day business. One effective way to do this is to take actions that reinforce the company's existing culture and values. For instance, a manager might find a way to get staff to focus on an individual performance metric in which people naturally take pride. In an operation focused on customer service, for example, a manager might launch a customer satisfaction survey and share results with employees. A retail operations manager might remind employees to keep focusing on their customers and delivering the best service they can.
“I encouraged people to control what they could control, to try to stay positive, and to focus on their key objectives,” said an IT director at a company that went through a Fit for Growth transformation in 2015. “My feeling was we could all take one of two roads. We could either sulk, not do the work, or not act in the right way—in which case we would be making the decision to let us all go much easier and our fears would become a self-fulfilling prophecy. Or, we could continue to work on what we were supposed to work on, try to help the company, hope for the best, and go from there.
“At the end of the day I knew I might not have a job, but I didn't feel that it would do me any good to take a pessimistic position.”
Phase 2: Anxiety Surfaces
The detailed design kicks off with the public articulation of a savings target, often quite aggressive. With the target identified, shared with outside stakeholders, and broken down by function and business unit (at least internally), the transformation moves into a more intense phase. If there was skepticism, however faint, in the previous phase that things would just blow over, it diminishes in Phase 2. A select few colleagues and managers get pulled out of their day-to-day jobs to help design the detailed expense-reduction plans. Some early cost-savings initiatives—hiring freezes or restrictions on travel, for instance—get implemented. In whatever department one happens to be in, there is an unmistakable sense that things are speeding up.
What Employees Go Through
With something very sizable in the works but no details on how it will be achieved, people's anxieties come to the surface. In some cases, good people—exactly the people companies want to keep—become frustrated with the uncertainty about their futures, seek other opportunities elsewhere, and leave. The majority of employees don't go anywhere, but as the rumors continue to fly, morale dips and anger and resentment mount toward the company and the executive team, who are often invisible to employees at this point.
“You almost have to see it” to understand how disruptive the experience is, said a manager at a large company who believes that the transformation at his organization was particularly difficult because of how much like a family it had been previously. “There would be days when everybody was in tears, and nothing had even been announced yet.”
What Managers Are Up against
In Phase 2, managers' own worries deepen. On top of being concerned for their own jobs, they also worry about whether long-time colleagues, some of them personal friends, will survive the restructuring; about the fate of their executive sponsors and others who have mentored them; about what it will take to grow and advance in the restructured organization, should they be fortunate enough to be offered a position in it; and about whether the new company will be a good place to build a career.
Part of the problem for managers in Phase 2 is that they don't have a lot of support. By necessity, the change management and communications work is focused on the transformation initiatives, all critical undertakings. In the face of these larger priorities, there is often little time to help middle and front-line managers figure out what they should be saying to people further down the organizational ranks, which increases the unease in that part of the organization.
“There was no talking point we were given that made any real sense; there was only a talking point to the business piece,” said the manager at the family-like large company. “And most employees could care less about the business piece when something like this is going on. ‘Talk to me as a human, as part of your family.’ That's what people wanted.”
What Managers Can Do
For managers, three things are particularly important in Phase 2. First, they must continue to communicate with their employees. Much of a manager's success during this phase comes down to people skills: the quality of relationships the manager has, and his or her ability to convey empathy and communicate a realistic optimism. As in other situations in life where one has a leadership role, it's sometimes useful to project the opposite of what others are feeling: optimistic when others are gloomy, confident when others are insecure. These positive attitudes send an important signal to other members of a team.
Second, managers should communicate employee concerns and suggestions up to the executives and the transformation team. Midlevel managers should use their access to senior leaders to inform them of what's happening in the trenches and the overall morale of the front-line workforce. Senior leaders are often so consumed with shaping the future that they lose track of the feelings within the organization at large. Friendly prompts about what's happening in the trenches help remind them to address the communication vacuum and support the day-to-day business.
Last, managers should support the transformation. This means providing information accurately and promptly when someone on the transformation team requests it. It may also mean volunteering for the workshops and solution-development sessions that the company is likely using to shape the future.
Phase 3: Turmoil, but also Glimmers of Something Better
In the execution phase, the uncertainty that has pervaded the organization starts to recede. Decisions about new operating models and the required headcount changes are finalized and announced. Implementation teams are formed to act on the decisions that have been made. Employees at every level see what the new organization will look like and how individual roles will change. Communication that was once minimal moves into overdrive in the form of memos, town hall meetings, staff meetings, training, and team-building sessions.
What Employees Go Through
The transformation is now in high gear. Employees are told how reporting lines and organizations will change. They may learn of plans to consolidate functions across business lines or geographies, to implement new processes or IT systems, to outsource work, to move some work to a new city, or to shut down entire offices. In some instances, early retirement and enhanced severance programs will be announced, giving employees even more to think about.
Not everybody will like what they hear. As in previous phases, there will be a lot of bias in how employees interpret information—what's in it for me? Some employees will think the changes take the company down the wrong path. Others will believe that the essentials that made the company great are being abandoned. A few will be disappointed that the changes don't go far enough.
At the beginning of Phase 3, the question that looms largest for every employee still has not definitively been answered: do I still have a job? This is because the decisions about organization changes, process redesigns, and upcoming cost cuts (all of which are now being discussed openly, at least in broad terms) must still be translated into names of who stays and who goes. So the bulk of the emotional bumps still await the employees, and the uncertainty about the personal situation remains.
In addition to the psychological and emotional toll of daily worry, there are practical adjustments to make. Every department is starting to hear about new systems or processes they will be implementing. There is talk about changes in the metrics that employees will be held to, and about the new measures that will be used to judge their job performance. Everyone will need to work in a new way and demonstrate new behaviors. This will lead some people to ask, “Can we really pull this off? Can we work this way in the future?”
What Managers Are Up Against
For all the turmoil, the beginning of Phase 3 can also be a time of relief and renewed optimism, certainly for managers. The stage has been set for a recovery of the department's morale, and there is a vision of the stronger company that will emerge as a result of the transformation. But there is a lot of work to be done before reaching the promised land, and there is one especially difficult obligation to fulfill: managing headcount reductions, if the plan calls for them.
In a large-scale change, many managers will face the difficult obligation of having to let some of their employees go. In some transitions, existing performance data may be used; the data is applicable to the future and is of high enough quality. In other transitions, where the data is not applicable or not trusted, managers need to conduct special assessments to evaluate their employees. Once the assessment is done, the manager, with help from HR and Legal, will select who in the team stays and who goes. During this time, until the selection is complete and the official communications and severance packages are ready, the manager cannot tell the employees anything.
“You get the pressures of people calling you who are your friends, saying, ‘Come on now, what's going on? You've got to tell me something. Am I safe?’” recalled a manager of the period when he was huddled in meetings related to employee selection. “To have to turn them down”—that is, not be able to answer them—“is a tough thing,” this manager added.
On the flip side, managers should expect that some of their high performers will leave in Phase 3, generally for jobs at other companies. Some employees will put out feelers that turn into offers, and some others, especially in the middle to senior management positions, will be approached by recruiters. Unwanted attrition is part of the fallout of a transformation. Despite the risk of losing their top performers, managers should resist the temptation to make promises to employees about their jobs during a restructuring, but instead discuss the benefits of the transformation to the company and to the employee.
Last, a manager must be prepared for the emotional fallout that the retained team will experience once their friends and colleagues are let go. For the remaining employees, the relief of knowing they have a job is often quickly followed with something akin to survivors' guilt. “I felt like I had been hit by a truck when [my closest colleague and peer] told me that his role had been eliminated and that there were no additional roles available for qualified talent like himself in the company going forward,” said a regional vice president of a retail bank. People decisions will be scrutinized and conspiracy theories about favoritism may arise. This dampens team morale and adds to the concerns over what new expectations will mean for the remaining employees personally, how they can perform the work with fewer staff, and whether those new expectations are realistic.
What Managers Can Do
The manager has two roles during Phase 3: to ensure that his or her employees transition into the new world as quickly as possible; and to manage the selection and departure of the employees being laid off.
In the first role, the manager is the field leader who will take his or her employees from the old to the new, helping them learn new processes and systems, adapt to a new organization structure and hierarchy, and change behaviors to move to a new way of working. Most if not all managers will face some challenges with their teams; some employees will need help and coaching to learn the new ways; others will miss the old and resent having to learn the new.
To minimize the time and pain associated with the transition, the manager must demonstrate absolute leadership to the team, starting with internalizing very quickly the “why” and the “what” of the transformation and accepting that he or she will be part of the future. Employees will recognize immediately if the manager is not 100 percent committed, and use it as an excuse (perhaps subconsciously) not to make the transition. The manager's role, then, is to show the employees, in words and actions, that he understands the changes, is convinced that they make sense, and will adapt as quickly as possible. To do all this, the manager must be immersed in all the organization, process, and systems changes in order to explain them to his team without hesitating or wavering.
The manager must also be an empathetic coach to his team; even when employees want to make the transition, the change is not necessarily easy. The manager must patiently coach the “willing” so they become “able” as quickly as possible. This may also require requesting additional help from the transformation team and HR for more training or better communications and training packages.
And while the manager is patiently supporting the “willing,” he must also identify the “unwilling” in his team and either bring them along or move them along. Despite best attempts, there are often a few employees who will not be able to break with the past and who will continue to be “derailers” of the transformation. The manager must spot these naysayers early and engage to bring them along. Tactics could range from extended conversations to explain the changes, to blunt direction to shape up or else. And if the behavior does not change, the derailers may need to be let go so they don't poison the well and set a bad example for the rest of the employees.
In the manager's second Phase 3 role, he or she must navigate the set of tasks involved in headcount reductions. Everything connected with reductions—the selection of the people who will end up without jobs, the communication of the unwanted news to those people, and the process of “managing them out”—is a difficult experience. This is a part of a transformation where process is especially important. With any luck, the company has taken a rigorous approach to performance reviews before the transformation, and the existing data can be used to select who is let go. If not, the company likely needs to deploy a special assessment to objectively evaluate employees, and separate top, average, and poor performers. However it is accomplished, the selection process as layoffs begin must be as objective as possible, and the company must avoid any hint of favoritism or bias. The human resources and legal departments will help line managers get through this tricky time.
It's impossible to completely avoid pain during headcount reductions, but many companies seek to minimize the pain to the extent they can. Voluntary severance or early retirement programs might be options in certain cases to reduce involuntary reductions. (See “Managing Voluntary and Involuntary Separations.”) For those let go, outplacement services can likewise be useful, both in lifting morale and in encouraging cooperation.
Around the same time that they are handling the departures of laid-off employees, managers should also begin the more intrinsically rewarding task of managing and motivating the remaining organization. The staff and managers who are still at the company need to know that their former colleagues were treated with dignity and respect, but more importantly—now that the focus is turning to the future—they need to understand their role in making the new organization a success. This is a big turning point in the transformation, both practically and emotionally. “As soon as people knew their options, they were able to say: ‘Okay, it affects me,’ ‘It doesn't affect me,’ or ‘I've got to think about this,’” said one manager. “At that point, we were good. I mean really, we were good.”
The forward-looking communication that is necessary once a transformation has reached this stage is not something that can be accomplished in one or two executive-run town hall meetings, important as those are. There also need to be targeted team discussions led by the immediate managers that the employees trust the most. This is the time to start implementing the new organizational structure, and to codify the decision-making process and how information will be shared and how incentives and motivators will be used to influence behavior. In other words, this is when everybody starts to execute the changes that were being talked about and worked on a few months earlier behind closed doors.
With most transformations, the changes that begin at this point, with new processes, new ways of doing business, and often a refined strategy, need to be jump-started in order to take hold. Corporate culture is an essential tool in making the changes of a transformation stick, with mechanisms like peer interactions and informal leaders reinforcing the most important new behaviors. How to do all of this is the subject of the next chapter, in which we discuss culture-led transformation, an approach that can add immensely to the success of a Fit for Growth transformation.