08 May 2024

Change management in a company

Kurs zmiana w firmie - zarządzanie zmianą, retencja pracowników, HR

On a black background appears a red letter "N." After a moment, you hear the characteristic sound "ta-dum." This Netflix ritual probably accompanies most of us while watching movies at home. Today, the global streaming powerhouse has annual profits in the tens of billions of dollars, but just 20 years ago, Netflix, then a DVD rental-by-mail service in the USA, was on the brink of collapse. Bold yet challenging and risky decisions saved the company from liquidation. Change management and the willingness to embrace it contributed to the expansion of Netflix's service catalog, ultimately ensuring international success and reaching the farthest corners of the world, including Antarctica. The example of this company shows that change is an inherent part of business. Because business must constantly evolve to keep up with technological and civilizational development.

Business figure museum

I represent the generation whose childhood was in the 90s. It was a time of VHS movies and VCRs, cassette tapes and Walkmans, balloon gums and ice cream cones, sticky notes and Tamagotchis. There was no internet or social media, no streaming platforms or music services, and there were no smartphones or tablets either. If you wanted to watch a movie, you could go to one of the many local video rental stores and choose a title that interested you. If there was an opportunity to take a photo, you first had to look for camera and check if there was film in it. If you wanted to call someone, you had to reach for a landline phone or possibly search your pocket for a phone card and look for a street telephone booth. A mobile phone seemed like a luxury, even though it was only used for calling and texting. Entertainment in the "mobile" sense was provided by listening to monophonic ringtones and playing "Snake".

Three things from that era have already fallen out of common circulation: phones with classic keypads, traditional home cameras, and VHS tapes. Along with them, three companies that were business behemoths recognized almost worldwide in the 90s also disappeared from consumers' sight. Founded in the late 19th century, Kodak dominated the photographic industry for many decades. However, at a crucial moment, the company's leadership underestimated the potential of digital photography. After its former dominance, there was not even a trace left. Finnish Nokia missed the smartphone revolution and placed too much trust in the power of its own operating system, which, however, lost to iOS and Android. Meanwhile, the gigantic network of American video rental stores Blockbuster collapsed with the decline of DVD discs, and the nail in the business coffin turned out to be the rise of streaming.

Interestingly, the last of these companies in the early 21st century turned down a $50 million offer to buy Netflix. Blockbuster's leadership deemed the offer from the competition, which operated under a slightly different business model (movies were not rented in-store but sent by mail), as unattractive and short-sighted. In this case, one can certainly speak of Blockbuster's strategic mistake, but behind the failures of each of the three mentioned companies lies primarily: a lack of business initiative, mental and technological stagnation, and reluctance to transform. Change management at Nokia, Kodak, and Blockbuster didn't work because there was no properly prepared, comprehensively conducted, adequately communicated, and ingrained change there. Implementing new solutions, services, and products should be treated as a process that requires commitment, care, discipline, and consistency from the company and its employees at every stage. It's not easy, as statistics show: about 70% of changes implemented in companies fail to achieve their intended goals.

BANI world

However, the somewhat pessimistic data should not deter businesses from the desire for development. Especially since in today's dynamic world, development is no longer just one of the options to choose from, but has become a necessity dictated by many factors. Modern business is increasingly governed by advanced processes: digitization and automation, the expansion of mobile technologies, artificial intelligence and machine learning, sustainable development, and environmental responsibility. These can be called trends or beneficial practices, but considering the significance and scope of these processes, they should simply be described as requirements for running a profitable and future-oriented business.

Change management, and at an earlier stage, readiness to undertake it, also represents a response to everything related to the human factor. Changes in business are, after all, a reflection of demographic shifts and changes in consumer behavior. For many modern corporations, the priority has become what was once the domain of smaller, family-owned businesses several decades ago: the pursuit of personalized offerings, care for the health and well-being of employees. Among the companies that made it to the list of the largest business entities in the United States (Fortune 500) in 1955, a staggering 90% either failed, merged, or were acquired. This was influenced not only by emerging technologies but also by changes in the way societies think and function.

Why is transformation so crucial from a business standpoint? The answer may lie in the popular concept of BANI, whose name is an acronym for four English words: brittle, anxious, non-linear, incomprehensible.

"The world around us is unstable and fragile. Failing to implement changes sometimes results in the disappearance of businesses, such as Sears or BlackBerry, and even entire industries. Currently, we are witnessing the decline of the traditional taxi industry, replaced by transportation services offered through mobile applications. Awareness of the collapse of individual companies or entire sectors reduces the sense of security and makes us – as individuals and organisations – anxious. Moreover, many of these phenomena, such as pandemics and lockdowns, cannot be predicted because they occur nonlinearly and unexpectedly. This unpredictability, combined with unease and instability, ultimately leads to incomprehensibility, or a lack of understanding of the dynamics of the modern world," explains Jarosław Chybicki, the instructor of the "Change in the company" course.

How not to succumb to the world of BANI? It's best to apply the appropriate antidote to each of its toxins. In the case of fragility, this will be resilience to market fluctuations and flexibility, which hides the ability to adapt to change. We can address unease with empathy and mindfulness. As for non-linearity, the response is the ability to quickly react to variables. Incomprehension, on the other hand, can be minimized through synthesis (rather than analysis) and intuition, which sometimes plays an equally crucial role in business decision-making as innovation and creativity.

Von Thun’s ears: how the others hear you

Showing initiative and willingness to act is not enough. Besides decisiveness, efficient change management is crucial, with the first step being effective communication about the actions taken. This means providing employees with information about the reasons behind decisions, the current situation, as well as the anticipated consequences or risks. Responsible communication also involves maintaining or restoring the team's trust and engagement in work and relationships. The entire process of informing is complemented by an explanatory instruction outlining methods for navigating through changes.

"It's about consistently communicating what's happening, even when we don't know everything. We don't know how things will unfold. We don't know if the changes will lead to the results we hope to achieve. Nevertheless, providing information, along with the caveat that we don't yet have all the knowledge about the change process, is incredibly important. Similarly, accepting the moods that accompany change and taking into account the emotions of the people we are communicating with. How to do this? It's best done by involving the team in various activities that discuss and familiarise them with the change in some way. Through meetings, workshops, and consultations, we give employees as many opportunities as possible to participate in the change process," adds Jarosław Chybicki.

The good, yet also bad news is that there is no one effective communication strategy. Change management requires an approach to informing tailored to the company's business profile, established hierarchy, internal organizational relationships and habits, and preferred managerial style. At Google, the communication policy is based on clarity and transparency of information. Microsoft employs technology for the same purpose (e.g. the Teams app), which allows for real-time sharing of employee opinions. Meanwhile, Zappos promotes a culture of feedback and openness, aiming to increase team members' sense of ownership of change. On the other hand, the Swedish Ikea focuses on visualisation and simplicity of communication.

Choosing a strategy doesn't guarantee ultimate success if the right communication tools aren't selected. It's simply about the language we use to make our information understandable. Contrary to appearances, this is not an easy task, as illustrated by the Schulz von Thun model. According to this concept, every message can be interpreted by a person in four ways using four "ears." The factual ear focuses on the actual state of affairs. The sensitive ear hears the sender's attitude towards us. The appeal ear calls for action. Meanwhile, the self-revealing (therapeutic) ear hears what the sender says about themselves.

Let's imagine a situation where a married couple, driving to a family dinner, stops at a traffic light. The husband, sitting in the passenger seat, says to his wife, "You have a green light." The woman hears: "The light is green" (factual ear), "He's telling me what to do again! He probably thinks I'm a bad driver" (sensitive ear), "He must be in a hurry. He really cares about this dinner" (therapeutic ear), "I need to accelerate and go" (appeal ear). While in everyday communication, our statements should address all four "ears," in business, the factual ear is the most important. It's important to avoid statements that activate the sensitive ear. This means that when communicating about changes, it's best to use simple, clear, and understandable messages that leave no room for overinterpretation, ambiguity, or speculation.

Find your agent

Ensuring proper communication is a necessary step towards moving to the next stage of change management, which is convincing employees to embrace it. Transformations often come with feelings of fear, uncertainty, disorientation, and doubt. Resistance from the team can also be a natural reaction, especially when the company's position seems stable and not in need of modification. If something is working well, why change it? Key to convincing people to change is awareness of the emotions that may arise in the managed team. The dynamics of moods and attitudes are described by the Kübler-Ross model, which in psychology is primarily used to illustrate the stages... of grieving. Comparing death and change in a company may seem bizarre and absurd, but it's hard not to notice certain similarities.

In a business context, according to the model developed by the American physician, the first stage of acclimating to change is shock, expressed through denial. In the next phase - disturbance - there is an expansion of anger and rage. As negative emotions begin to subside, exploration of the change occurs. Employees spend more time contemplating new solutions and slowly accepting them. The fourth and final stage of this process is rebuilding, during which the team regains engagement and is ready to implement changes. Of course, nothing happens spontaneously.

“At the initial stage, maximizing communication is crucial. We should then ensure the delivery of as much information as possible and respond to emerging questions. Anger and resentment can be minimized by allowing the expression of emotions and shifting them to a rational level, meaning considering the raised concerns. During the exploration stage, it's worth giving employees time to find their place in the change process, to test new solutions, even at the expense of lower productivity. In the final phase, focused on rebuilding and engagement, it's important to remember to celebrate successes. To showcase every positive consequence of the implemented changes” advises Jarosław Chybicki.

Of course, change management isn't akin to a battlefield where a general must single-handedly persuade a rebellious army to charge. It may rely on allies. According to Simon Sinek, and many other researchers, among employees, three groups can be distinguished, each with a different approach to transformation processes. Innovators enthusiastically embrace the challenge of change and can quickly adapt to new realities. Early adopters approach new solutions with some reservation but are willing to engage in planned actions. The vast majority - as the name suggests - are employees who need proper motivation and leadership. If, according to Sinek, the change process successfully engages 15 to 18 percent of innovators and early adopters, then the rest will follow suit. Therefore, from the perspective of company management, the greatest efforts and attention should be focused on these first two groups. These employees will become "agents of change" - our officers who will persuade the army to follow the general.

The team needs to be “charged up”

At every stage of managing transformation – including the final stage, which is consolidating change – a company's focus on effectively engaging employees is crucial. Without sustaining this engagement, the team will feel fatigued by the change, may not fully understand its goals, and will be less inclined to implement and sustain new practices. It's estimated that up to 30 percent of failed changes were due to insufficient engagement of staff. Therefore, the role of middle management, efficient communication, and sensible prioritization within the company are so important. In other words, change doesn't end with communicating and convincing about it, followed by implementing new solutions and methods. The team needs to be kept "charged up" at all times and re-energized with fresh communication and activities in the form of training sessions and workshops.

Preparation, communication, persuasion, and consolidation. These four stages allow for skillful planning of the transformation process and facilitate change management. They thus form the framework that needs to be filled with appropriate business strategies ensuring success and opportunities for growth. How to achieve this? There is no one-size-fits-all method, as evidenced by the differing approaches to change among global giants. Apple has employed different solutions over the years, and Microsoft has done the same. Today, leaders in the global technology sector, referred to as FAANG (Facebook, Apple, Amazon, Netflix, and Google) or GAFAM (if Microsoft replaces Netflix), are reaping the juicy fruits of changes initiated several years ago. Of course, we are talking about huge financial investments and the technologies behind these changes, but these factors are not necessarily decisive.

"Most of the problems modern business has to deal with aren't technical problems, meaning they don't require the right methodology or brainstorming. In most cases, the problems we face are adaptive problems. You can't solve them. We have to change ourselves – whether at an individual level or an organizational level – to adapt to the new reality," emphasizes Jarosław Chybicki.

So, what matters is the ability to adapt to the modern world, supported by creativity, initiative, and effective change management. Otherwise, our company may end up like a Nokia 3310 hidden at the bottom of a drawer or an old film camera kept in the attic. 

About the author

Tomasz Zacharczuk

Tomasz Zacharczuk

Content Creation Specialist at ICAS Poland. A graduate in journalism and social communication from the University of Warmia and Mazury in Olsztyn. With over 10 years of experience as a radio and online journalist, I leverage this expertise to engage with experts and present the concepts and benefits of the ICAS EAP program. Condensed knowledge, engaging presentation and clear communication are foundation of the interaction between companies and customers. Efficient interaction allows for a better understanding of the needs and requirements of both sides. Only a partnership based on trust and transparency enables the establishment of lasting and positive relationships, not only in business but, above all, in life.