The Idea in Brief
When a company is teetering on the brink of ruin, most turnaround leaders revamp strategy, shift around staff, and root out inefficiencies. Then they wait patiently for the payoff—only to suffer bitter disappointment as the expected improvements fail to materialize.
How to make change stick? Conduct a four-stage persuasion campaign: 1) Prepare your organization’s cultural “soil” months before setting your turnaround plan in concrete—by convincing employees that your company can survive only through radical change. 2) Present your plan—explaining in detail its purpose and expected impact. 3) After executing the plan, manage employees’ emotions by acknowledging the pain of change—while keeping people focused on the hard work ahead. 4) As the turnaround starts generating results, reinforce desired behavioral changes to prevent backsliding.
Using this four-part process, the CEO of Beth Israel Deaconess Medical Center (BIDMC) brought the failing hospital back from near-certain death. Hemorrhaging $58 million in losses in 2001, BIDMC reported a $37.4 million net gain from operations in 2004. Revenues rose, while costs shrank. Morale soared—as reflected by a drop in nursing turnover from between 15% and 16% in 2002 to just 3% by 2004.
The Idea in Practice
Use these steps to persuade your workforce to embrace and execute needed change:
Set the Stage for Acceptance
Develop a bold message that provides compelling reasons to do things differently. Example:
On his first day as Beth Israel Deaconess Medical Center’s CEO, Paul Levy publicized the possibility that BIDMC would be sold to a for-profit institution. He delivered an all-hands-on-deck e-mail to the staff citing the hospital’s achievements while confirming that the threat of sale was real. The e-mail also signaled actions he would take, including layoffs, and described his open management style (hallway chats, lunches with staff). In addition, Levy circulated a third-party, warts-and-all report on BIDMC’s plight on the hospital’s intranet—so staff could no longer claim ignorance.
Frame the Turnaround Plan
Present your turnaround plan in a way that helps people interpret your ideas correctly. Example:
Levy augmented his several-hundred-page plan with an e-mail that evoked BIDMC’s mission and uncompromising values and reaffirmed the importance of remaining an academic medical center. He provided further details about the plan, emphasizing needed tough measures based on the third-party report. He also explained past plans’ deficiencies, contrasting earlier efforts’ top-down methods with his plan’s collaborative approach. Employees thus felt the plan belonged to them.
Manage the Mood
Strike the right notes of optimism and realism to make employees feel cared for while also keeping them focused on your plan’s execution. Example:
Levy acknowledged the pain of layoffs, then urged employees to look forward to “[setting] an example for what a unique academic medical center like ours means for this region.” He also issued progress updates while reminding people that BIDMC still needed to control costs. As financial performance picked up, he lavishly praised the staff.
Prevent Backsliding
Provide opportunities for employees to practice desired behaviors repeatedly. If necessary, publicly criticize disruptive, divisive behaviors. Example:
Levy had established meeting rules requiring staff to state their objections to decisions and to “disagree without being disagreeable.” When one medical chief e-mailed Levy complaining about a decision made during a meeting—and copied the other chiefs and board chairman—Levy took action. He responded with an e-mail to the same audience, publicly reprimanding the chief for his tone, lack of civility, and failure to follow the rule about speaking up during meetings.
Faced with the need for massive change, most managers respond predictably. They revamp the organization’s strategy, then round up the usual set of suspects—people, pay, and processes—shifting around staff, realigning incentives, and rooting out inefficiencies. They then wait patiently for performance to improve, only to be bitterly disappointed. For some reason, the right things still don’t happen.
