In the past, change was contiguous. But now, a multitude of changes are happening simultaneously. If you think youre playing it safe by taking on only as much change as your comfort level permits, remember what Will Rogers once said: "Even if youre on the right track, youll get run over if you just sit there."
In his book, "Managing at the Speed of Change: How Resilient Managers Succeed and Prosper Where Others Fail" (Villard Books, 1993), Daryl R. Conner, president and CEO of ODR Inc., Atlanta, illustrates the current state of change using a childs riddle. "On day one," he writes, "a large lake contains only a single small lily pad. Each day the number of lily pads doubles, until on the 30th day the lake is totally choked with vegetation. On what day was the lake half full? The answer, of course, is the 29th day. It took 29 days for the first half of the lake to fill with lily pads, but only 24 additional hours for the lake to become overwhelmed."
Welcome to day 29. Anyone whos been in finance for any amount of time is already too familiar with the constant change that threatens to choke out creativity and cut off innovation and productivity. Its not just that business is changing, but rather that the nature of change itself is changing. How can we possibly lead our organizations when we feel like were drowning; when were all desperately trying to hold on to the lily pads we already know? Is there any hope?
The answer is "yes ... but." Finance professionals can learn to manage and embrace change, but it takes effort. It starts by thoroughly understanding the nature of change, why change is so difficult, and how change should be managed. In fact, every successful corporate executive in the near future will be both a student and master of change dynamics.
Not long ago, the denizens of corporate America were able to manage the changes they faced quite nicely. It wasnt easy, but given enough time and reassurance, people were able to adapt to desktop computers, joint ventures, telecommuting, teamwork and new product launches. Sure, the changes took getting used to, but people were able to manage because they had time to get used to them. The difference today is that theres simply no time for people to catch their breath because the changes are happening concurrently.
While installing enterprise systems, companies are also negotiating overseas partnerships, spinning off unprofitable divisions, restructuring the corporate office, redesigning workflow, paying more attention to the customer, negotiating new contracts with employees, complying with government regulations and continually establishing new products and markets. As Conner explains, "Weve moved from an era of contiguous change where changes were lined up one behind another in a somewhat linear fashion into an era of perpetual unrest."
What makes this so difficult is that despite the speed and prevalence of external changes, our internal human needs actually change very slowly, if at all. Human beings are basically control freaks. We have established expectations, and when those expectations change and we feel we cant control the changes, we go a little crazy. While people can cope with a little less control for small amounts of time, give us too much change over too long a period and our coping abilities are overwhelmed. Like sponges, we can only absorb so much.
In fact, the inability of employees to assimilate change probably kills more corporate initiatives than anything else. The last reengineering effort you tried may not have failed because it was a bad idea, but because employees just couldnt take any more. Just as our immune system is depleted after the flu, so is our ability to cope diminished after too much change.
Does this mean finance managers should not pursue any more changes until after things calm down? Should you wait to automate performance reporting? Should you hold off on e-business plans? Of course not. Youd be eaten alive by your competitors.
As a leader, you have to give the human side of change as much attention and forethought as you do the process side of change. And that begins with a thorough understanding of how individuals, leaders and companies embrace change.
Managing the Pace of Change
In the last few years, many consultants, academics and executives have written books about managing change. While each of the authors has a slightly different take on the subject, there are some similarities in their approach. A review of their collective wisdom resulted in 10 steps that finance managers who want to become finance leaders should take to help themselves and their organizations become more comfortable with turbulence.
Become a scholar of the change process. Conner has studied change and change leaders for more than 25 years and understands what allows one executive to ride the waves of change while another drowns. He has found that the most change-resilient leaders are those who have developed a sense of mastery about change dynamics. "Most senior officers are ignorant about how change unfolds and what the patterns are," he explains. "Just as youre unlikely to build a profitable company if you dont understand the economic environment, you wont succeed in the turbulent environment unless you understand why people resist change and how to build commitment in a changing environment." For this reason, finance executives should study the process and effects of change. Change is too potentially damaging to rely on intuition alone.
Cultivate personal resilience. Resilience is the not just the ability to survive change, but to bounce back afterward. Its not that resilient people dont experience the anxiety associated with change. They do. But when faced with unfamiliar situations, they are able to maintain a high level of quality and productivity, remain physically and emotionally healthy, and rebound from the difficulties of change stronger than ever before. As a leader you can cultivate your own personal resilience by keeping a positive attitude, focusing on objectives, and remaining flexible, organized and proactive during periods of great change. (See How to Enhance Your Speed of Change, below.) But you should also work to increase the level of resilience in your organization by recognizing, promoting and rewarding employees who embrace change.
Focus top managements energy on a key set of change initiatives. Despite all the talk about working cross-functionally, too many corporate leaders still operate from a silo mentality. The head of human resources pursues one change, while the head of finance pursues another, while the information-technology director pursues yet another change. Unfortunately, all these concurrent changes strip the capability of employees to adapt to any one of them. Because of this, corporate leaders should make a concerted effort to focus on business imperatives and not get caught up in changes that simply seem like a good idea. "Executives must have the ability to treat their organizations adaptation capacity as a shared resource," Conner explains. "Change capacity is a sponge they all share."
Know your purpose and vision. George Land, chairman and CEO of Leadership 2000 Inc., a change-management consultancy based in Phoenix, Ariz., suggests that to survive change, leaders must have a clear picture of where they are heading and what they want to achieve. Without one, its too easy to get waylaid. "A clear purpose and vision pulls us toward the future," he says. "Without a compelling purpose, we live life as a fairly haphazard experience, being easily swayed by the latest fad, temporary pressure or the most recent advice on what others think we ought to be doing."
Involve employees in the change process. "People dont resist change," Land says, "they resist being changed." For this reason, finance leaders must involve employees in the process of change. That means allowing them to come up with ideas of what needs changing, how it should change, and what the change process should involve. When employees are part owners of the change experience, resistance will diminish.
Establish performance measures. One of the principles of managing change is to focus on performance results as the primary objective of change, instead of focusing on the change itself. By looking at what new technology will do for the company, for example, it is easier for people to understand why the technology is needed. Unfortunately, a lot of managers focus on activities as opposed to focusing on concrete outcome measures. For instance, they will point to the creation of a new strategy or the formation of a new alliance as proof that a change succeeded. "These are activities, not outcomes," says Douglas K. Smith, author of "Make Success Measurable! A Mindbook-Workbook for Managing Performance" (John Wiley & Sons Inc., 1999). For change to be successful, "people have to have goals and metrics that make sense of the activities," he says. In establishing measures, the challenge for finance executives is to translate outcomes into nonfinancial terms. Not every change will impact stock price, return on investment or market share. To get employees to rally around change, you need to think about how to measure intangibles such as customer satisfaction, speed and new product innovation.
Let the external market guide decisions. It can be very difficult for executives to change their mind-sets about how decisions should be made in such areas as pricing, delivery and customer service. If a certain pricing strategy worked in the past, why should the company employ a different strategy now? To speed up decision-making around key business initiatives and make the changes easier to accept Stan Davis, co-author of "Blur: The Speed of Change in the Connected Economy" (Perseus Books, 1998), suggests that executives allow the market to make decisions for them. "Give the market information and let it decide the change that is needed," he says. Take a vending machine, for example. By installing a microchip inside the machine, you could program it to set fluctuating prices based on certain conditions, such as demand or outside temperature. If it is 50 degrees outside, the price for a can of soda might drop to 50 cents, whereas if it were 100 degrees, the price would increase to $1. Instead of changing prices based on some internal decision-making process, the changes are easier and quicker when companies use market forces to make them.
Allow mistakes. In our ever-changing environment, it is impossible to predict outcomes. For this reason, it is also impossible for employees to avoid making mistakes. Thats OK. "Mistakes are a way to gather information about the environment," Land says. "They should be invested in because they produce intellectual capital for the organization." This may be hard for financial professionals who have traditionally spent a lot of time and energy covering up their companys mistakes. But when you spot mistakes and highlight them for others, youre allowing people to learn more about what is required in the changing environment.
Manage paradigm life cycles. Every executive has his or her own paradigms. It may be a paradigm for hiring, a paradigm for going to market or a paradigm for reorganization. But these patterns and ways of operating eventually become obsolete. Each has a natural life cycle that depends on the business environment. To succeed in a world of rapid change, financial professionals must hone their ability to objectively evaluate a given paradigm. You shouldnt hold on to an old way of operating longer than is necessary, nor should you discard a process too quickly for the next flavor of the month. "The ability to manage paradigm life cycles," Conner says, "will be a key management discipline in the new millennium."
Pursue continuous learning. One of the biggest inhibitors of change is the reluctance of individuals to reinvent themselves. In fact, the more successful people are, the less likely they are to pursue a new course of action. After all, their successful activities have gotten them this far why should they change? The problem with this kind of thinking is that it does not acknowledge the fact that old ways of operating do not work in an ever-changing environment. "The biggest barrier for most people is what I call the failure of success," Land says. "When we find a pattern and it works, we tend to believe it as the truth. This makes us arrogant about what is right and wrong."
If you have any hope of adapting to the changes swirling about, you must pursue learning as a way to continually reinvent yourself. Take the extraordinary analytical ability that has gotten you this far, combine it with a healthy dose of curiosity and imagination, and let the business world unfold around you. Change may be constant and stressful, but it can also be energizing, entertaining and a great source of productivity and innovation. Your ability to succeed in the new century will boil down to your ability to embrace change. Are you ready?
Next month: How the need for constant learning will drive organizations and shape jobs in finance.