Interview With a CEO

A Corporate Renewal Experience

A member of our board, Andy Mayo (AM) led his company through a remarkable performance improvement program a few years ago, the results of which are now well established. I thought his experience might be of interest to our CEO members.

As many of you have remarked during our round table discussions, the single most difficult task in an established company, is its renewal. Sometimes it is called revitalization, sometimes shot-in-the-arm, sometimes turnaround. Many companies, maybe all, need it eventually. Maybe once a decade in good times and in times of high change, like now, more often.

Over the last 30 years, a number of transformation processes have arisen: from Strategic Planning to MBO; from OD to Outward Bound; from TQM to re-engineering. Each one was promising to be the magic answer. In turn, each has waned, when it is realized the success rate is just 30% at best; more likely 20%; and maybe success was caused by something else anyway.

Andy underwent a process that has been used in the Chicago area since at least 1986. It has a success rate measured on the bottom line of nearly 100%. It uses a simple, common sense, process and achieves significant results. I thought an interview with Andy might be interesting. The kind of results he reported were confirmed by three other CEO members who have used it. Names available to CEO members.

RESULTS

Terry Sullivan (TS): Andy, thanks for taking the time for this interview. To cut right to the chase, what were your results?

AM: To summarize the results, in terms of bottom line: on revenues of $6 million we increased our profits by almost $1 million, within one year. Most of the results came in the first eight or nine months.

TS: Where did those profits come from?

AM: Mostly from efficiency improvements. We did not focus on sales growth at that time. Later we did the program again and pushed the revenue side. It looks now as if this year will be a record year for sales.

TS: What other results did you see?

AM: There were a lot really. I think the first thing I noticed was how much more responsive the company was to my management. Then morale was better, almost right away. A lot of the repressiveness that was traditional to our industry had dissolved during the sessions and that was a great help. People who had felt themselves to be powerless now felt empowered.

People began to identify problem areas on their own and fixed them or ask that they be fixed. A lot of internal blocks got dealt with that way.

Communications were much, much better. When communication is really good you don't need so much of it. The initial honest communication happened at the sessions and we kept it up.

The culture was opened up so we could look at ourselves in the eye more easily, ask objective questions and decide what needed to be done.

Some people who were not successful in the old culture were able to flourish in the new.

We really saw the changes in us when we did the questionnaire again a couple of years later. Boy, were we different.

THE PROCESS

TS: How does the program work?

AM: It allows a company to discover and deal with the real issues that are driving its performance. This sounds simple, but in fact it is the most difficult part of any revitalization program. Management sees a problem, even acknowledges it, but then somehow does not deal with it or only partially deals with it. It is too emotionally difficult. This program does not let us avoid the problems. It allows management to see what is going on in the company, why it is behaving that way, and then actually do something about it.

Also, other levels of the company bring up issues that management has not seen as significant and the process establishes their true importance in the cold light of day, and then do something about them. Staff love that. Managers too, after the first shock.

TS: What kinds of things does it bring out?

AM: It is a very comprehensive process. It is designed to bring up whatever needs to be brought up. This is different for every organization. In our case it surfaced operational issues, cultural issues, people issues, strategic issues and tactical issues.

A few examples: I realized we had been living in a fools paradise as to how our clients viewed us; operations that I thought were OK turned out to be in need of major overhaul; Morale! Well I don't want to talk about what that was. We found scores of issues, some major, some minor, and then we did something about them. You see, that is what is really different about this program. You actually do something about your issues, and everybody in the company helps.

Let me give you a people issue example. Our secretaries were a major cause of discontent and operational problems. I had heard grumbling before, but when we saw and appreciated just how serious it was, we did something. Morale must have gone up 20 points on that alone, and the operational improvements that permitted proved to be a big piece of the profit improvement I mentioned earlier.

TS: Can you give me a strategy example?

AM: Yes. This one was a major turning point for us: when we put all our answers together and talked about them, openly, it became clear that the business we were in was deep in change. We were not. We had to make a major shift in strategy, instantly. We did. We had to get out of the custodial business and we had to make our business profitable. That had beneficial, long-term consequences.

An operational example was the realization that our billing process was much less than it should be. This was uncomfortable news for some of us, but we faced it anyway. That led to another big piece of the profit improvement. There was a lot of facing the truth in the program.

TS: What can you tell me about the process?

AM: In one way it's very simple. We answered a questionnaire, anonymously. The management team then analyzed their own and their subordinates answers. Then, while we were doing that, the team committed to a detailed blueprint of where they wanted the business to be, and how it was to behave, in a couple of years. Each person committed to specific, verifiable actions that are designed to correct the problems and to fulfill every element of the business blueprint. Those action steps were monitored and followed up.

Of course all that is just the surface. The commitment, drive and energy raised during the process is what causes real changes to happen and become permanent. That's hard to describe.

TS: Talk some more about the questionnaire.

AM: It is usually given only to managers and supervisors. But, because of the highly complex nature of our work with our clients, we gave it to all our staff. It was quite large, but it took only about an hour to fill out. It asked some very unexpected questions about things I would not have thought were important, but they were. Also it asked what seemed to be dull questions about the competition, corporate style, management behaviors and such, but when we saw our answers, then they were very interesting. I think it measured about a hundred factors. Only six or seven proved to be of major importance to us, but a bunch more had to be dealt with too.

TS: How was the questionnaire processed?

AM: The consultants did not digest the answers for us. They computerized the responses, but they made us analyze them ourselves. Where it was right for us to get upset about our answers, they made us do that, too. They would not let us hide from our answers. They referred to it as "holding the mirror", until we had really seen ourselves for what we were, warts and all, and finally admitted it. It is an extraordinary process. Most of it happens in the belly rather than the head.

TS: Can you remember any of the answers now?

AM: No. At the time I thought I would never forget. What was important was they were the truth, and we had to admit it because we had said it, not some outsider. Some of it was painful. Maybe that's why I don't remember, but I do remember that the next time we did the questionnaire, the answers were better and so was our bottom line. Those answers turned out to be the Leading Performance Indicators for our business.

TS: After you answered the questionnaire, what did you do?

MB: The management team went to a conference center for the initial sessions. When I went in the first morning, I thought we were in the wrong room. There were no tables, just a line of chairs facing overhead projector screens with computers attached.

We dealt with each issue as it arose. We defined action steps to fix them. We created new goals and then specified action steps to achieve the goals. Then we took action after action until the goals were achieved one inch at a time.

Of course I know that that does not tell you anything of the changes in the culture and behavior of the management teams and in the way people worked together. The results really came from all of that.

After the senior team did their work, we led the next levels of the organization through it. Eventually, everyone took responsibility for implementing the future. They defined and accepted action steps to achieve things and were measured on their accomplishment.

OTHER RENEWAL PROGRAMS

TS: You mentioned that you created action plans as part of the process. How is what you did different from planning?

AM: The purpose of planning is to create a plan. What we did was transform our bottom-line and competitiveness. The plan was just something we used to capture the commitments made and to follow up with, but technically you could call it planning. One of my senior managers evaluated what we did against strategic planning guidelines put out by one of the big six accounting firms and found it met all those criteria, and then some.

Over the years we have done a lot of strategic planning, but I never experienced any significant profit increases because of it. In fact, I read recently that strategic planning has never been associated with significant profit increases, but the results of the program we undertook were entirely different from any planning I had ever done before. Also, the style and pace of it were about as different as you would get. But the term "planning" has a soothing ring to it and I think we referred to it as planning when we first introduced it to the staff.

RE-ENGINEERING

TS: How does it compare to Business Process Re-Engineering?

AM: As a result of the program we did very significant re-engineering of our organization: structure, process, systems, everything. The program really re-engineered our soul and it gave us the commitment at every level to do a complete reengineering job. The low success rate of traditional reengineering programs is due to the lack of this commitment. You could say that the program was the front-end of our reengineering.

DURATION

TS: How long did the program take?

AM: Well the senior team went through it in four days: Two days the first week and two days the next. I think 90% of all the hard work and corporate decision-making were done then. Subordinate groups took just two days each. The time it takes is a function of the size and complexity of the organization and how many people undertake it. Often, I believe, it is just the officers, managers and supervisors. We had everyone go through. For us that was right.

TS: When did you first see results?

As I look back, I think I began to see shifts in behavior and cooperation almost from the first day, right in the sessions. This resulted in systemic improvements across the board and we saw bottom line shifts within sixty days. Most of the results happened for us within eight or nine months.

CORPORATE MOTIVATIONS

TS: You described the process as one that engaged the emotions of the people. Can you describe how you felt during the process?

AM: A bit nervous at first, but there was never a feeling that things were out of control. Within a few hours we were relieved that the issues were out in the open and then jubilation that they were behind us. Morale was up. Especially mine!

I went away more empowered, more in charge of the company than when I went in. Interestingly all the managers felt they were more empowered, more supported.

TS: Did you have to change yourself much?

AM: To be honest, no, but I had to show I was willing to change. That was the most difficult bit in anticipation, but not in practice. What my people wanted me to do, by and large, was what I wanted to do for them. I'm told this realization is almost universal.

SELECTION OF CONSULTANT

TS: Why did you select the consultants?

AM: They were "strongly suggested" to us by our chairman. He knew of work they had done with a much larger company that had resulted in serious improvements and he hoped for the same with us. I wanted that too.

TS: How would you characterize the consultants.

AM: Well, they call themselves catalysts rather than facilitators. I agree with that. The program is much too energetic for mere facilitation. They say they are in the business of early decline or preemptive turnaround and they act as intervenors. But mostly I think of them as fiercely partisan on the side of the company. They are the advocates of the company's potential, and they will brave anyone, the CEO, managers, the workers, to represent that. The results we got were in great part because of this advocacy.

They were also very experienced. The lead catalyst at the time had consulted with more than 100 organizations in almost every conceivable area. The catalyst on second chair was equally experienced. He had run the financial services consulting practice for one of the Big 8 CPA firms in the Midwest for some years They knew when people were waffling. They also knew what actions should be taken to bring the greatest results, and they would not accept promises or actions that did not have the real visceral commitment and emotional investment of managers. They were tough.

FOLLOW UP

TS: What kind of follow up did you do after the program was over?

AM: A major focus of the process is the creation of a detailed, step-by-step, action plan to achieve the goals we set. This is done by us during the sessions. It is put on our LAN so that we can follow up. This was particularly important in the months immediately after the process when we might have "forgotten" some of the harder things.

DOWNSIDE

TS: To everything there is a downside. What was the downside to the program?

AM: For me it was not being able to avoid dealing with the results of some decisions I had made. An example: I had appointed a very competent professional to a management role where he was not doing well. I was a bit defensive about that and my instincts were to avoid the issue, but I had to deal with it. Now I have another manager in that slot, a much more productive staff, and a successful and satisfied professional contributing to the company's future.

LIMITATION OF THE PROCESS

TS: What are the limitations of the process?

AM: The consultants did not tell us what to do. We had to make the hard decisions ourselves. We had to generate the commitment to actually implement them as well, though they acted as guides and sounding boards in the process, but in retrospect I think that probably was a strength, although I know that some organizations prefer an outside authority to come in and tell them what to be and what to do.

This program is based on the premise that the best place to find insight, direction, commitment and implementation is within the company itself. If you get those, then your people learn and the benefits are permanent. That has been our experience.

WHEN THE PROCESS IS MOST USEFUL

TS: At what stage in a business would this be most useful?

AM: Well the catalysts say that only about one-third of their clients are what might be described as "experiencing difficulties". We might have been in that category the first time we used them, though our profits were stable. Two-thirds of their clients range from average to high performers. I like to think of us as in the latter category the last couple of time we did the program, but the critical factor in the whole process is the readiness of the CEO. The consultants say that all that is needed is a managing officer with self-confidence and the desire to succeed. The process does the rest.