Have cake and eat it, too!

Many companies are unwilling to accept the consequences of long-term improvement programs

Usually a company will embark on a massive change initiative when it has reached a state of crisis, like several quarters of poor earnings, and embarks on a program in the hopes of turnaround. (What the leadership doesn't admit is that they are hoping for a quick turnaround.) The way it normally proceeds is that the management team bring in some consultants, and, with great fanfare, they announce the rollout of the new corporate initiative.  The halls of the company are plastered with the initiative’s mantra – zero percent defects, #1 in Customer Satisfaction, or Lean and Mean Organization, etc. – and the entire organization is mobilized to reach the stated goal. During this time, employees attend training to learn new tools and methods to address the problem and also attend focus groups to get their perspectives on the issues. Each department sets up its own team to implement the program and to monitor their progress. After many employees are trained and all the teams are functioning, the consultants will turn the program over to the corporate designated team leaders. At this point, the entire organization is mobilized to achieve the specific objective, and energy and morale begin to build.

Three months after the initial rollout, there is no discernible impact on the quarterly earnings. “It’s too soon to tell,” everyone says, and they continue their capability efforts. After the second quarter, the earnings report shows a sharp drop in profits! The leadership team now hires back the consultants to find out how this could be. After a quick analysis and a hefty fee, the consultants report that, because everyone is working hard on the improvement initiative, no one is working hard on his actual job, hence the slip in performance. With meeting the quarterly earning targets as the number one priority in most companies, the leadership decides that the organization has gone way off track. Although they understand the need to build the capability, it can’t be at the expense of quarterly earnings, especially if they are already suffering, so the employees are asked to concentrate on their jobs and give the initiative their second priority. As a result, the focus groups, ideation sessions, and implementation teams are radically scaled back before having implemented their changes. They do have some great documentation, though.

The new mantra is now “Regain parity,” and the organization focuses on trying to match their pre-initiative (poor) performance. Some hardy souls try to continue the improvement initiative, and they end up working 60-80 hour weeks and quickly burn out and become disillusioned. After about two quarters, the company has regained its former performance, and the capability initiative is re-introduced as a priority. It takes much longer to re-mobilize the organization, and it doesn’t quite meet the initial levels of enthusiasm and energy. Here’s where one of two possible paths occur:

• One, leadership is certain to ensure that the job priorities come first, and so the initiative never really takes off and/or the employees become overworked and don’t perform either their job duties or their initiative tasks very well. The company never realizes any improvements and just hobbles along much the same as before.
  
• Two, after a much longer start, the initiative takes root and employees are working diligently on building capability. At first, there are no effects on earnings, but soon after, earnings drop because employees are not focusing on their job responsibilities! Once again, the CEO steps in and restarts the “regain parity” initiative.

I call this effect the “want cake and eat it, too” syndrome because many corporate management teams refuse to acknowledge that you really can't do two first-priority jobs at the same time. If you are concentrating on an initiative or a merger, sale, or acquisition, you need to expect that the normal business activities will suffer.  This is a lot like halting an exercise program because your muscles hurt. It's going to hurt until you build the capability.  In my experience, very few organizations are willing to take the short-term hit in order to grow long-term and end up becoming dependent on acquisitions for growth.

Setting the expectation upfront on how much time, money, and resources should be devoted to the program versus running the business and determining what is an acceptable level and duration of loss during the program will go a long to ensuring that the improvements will actually get implemented.  Unfortunately, not everyone may be able to participate, but that brings me to another scenario that spells failure for an initiative. I call it The Best Thing Since Sliced Bread.

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