As spring turned to summer this year, temperatures soared in the boardrooms of major UK companies. Marks & Spencer, Sainsbury’s and WH Smith all faced unprecedented challenges to their very identities. Beset by competitive threats, falling sales and image crises, all were reaping the whirlwind of years of under-achievement.
The choice, apparently, was simple – change or die. Yet behind that decision lay a crucial supposition – and one that is being increasingly questioned by key figures within the executive community.
The question is this: do change programmes actually work?
The change theory has, until now, caused little argument. Corporate change breathes fresh purpose, creativity and innovation into staff at all levels.
A highly-motivated workforce that has been brought into the bigger picture is driven by collective goals, perpetuating a culture of continuous productivity and dedication to customer service.
Which, as it turns out, just isn’t true. In the real world, change programmes generate cynicism, resistance and polarisation among those at the sharp end – the workforce. Worse still, change has a nasty habit of generating discord among members of the management team.
Pouring fuel on a raging fire, change programmes invariably provide a breeding ground for obscure committees operating in splendid isolation, creating yet another layer of corporate bureaucracy.
Caught in the middle is the HR department. Attempting to bridge the chasm between the executives and their truculent juniors, HR professionals must placate the wrath of either side.
Stephen Offord smiles in painful recognition. Having witnessed the negative effects of organisational change at numerous blue chip organisations, Offord is now group HR director at financial services giant, Axa UK. Responsible for 12,000 employees and four business units, he is no advocate for misguided corporate change programmes.
“Change in big organisations is primarily about vision driven down. If you have the leader, you have the strategy,” he says.
“Jack Welch at General Electric was a classic example. He’d say: ‘This is what we are going to do. I don’t care whether you like it or not, go and get it done’. You need one person at the very top championing the agenda and everything falls from them.
“Leadership is about clarity, direction and purpose. If you want cultural change, and the vision is missing, change the leader.”
Behind Offord’s forthright opinions is a transparent concern for employees whose fortunes may be irreparably damaged by top-level mismanagement. In particular, Offord is scathing about the chief executive merry-go-round – the highly paid, option-driven cartel that moves from one fat cheque to the next.
“In the UK, there are too many executives who build CVs with no commitment to long-term tenure. What they are thinking is: ‘I’m only going to be here for a couple of years, I’m not getting incentivised for the long-term – what looks good before I jump ship?’
“The lifecycle of a CEO is now two to three years,” Offord adds. “The culture is that if you’ve been there longer, there must be something wrong with you. I’m always interested when I read adverts that say: ‘We want a chairman who knows the City’ rather than one who knows the business.
“In continental Europe, things are different. They’ve got longer tenure and far greater loyalty. It’s one of the negative ways we’ve succumbed to American influences – it’s all about half-year results and pleasing the analysts.”
Transitional management and change programmes are inextricably linked. Motivated by the prospect of lucrative options, members of the board are anxious to be seen by shareholders and the City to be generating activity. All too often, the distinction between meaningful change aimed at curing an underlying ill and a strategic planning process, driven by a need to improve the numbers, is swept under the carpet.
To the chagrin of many experienced employees, management consultants are invariably summoned to observe, advise and report on organisations. Importing scant experience of the corporate frontline – at significant expense – Offord wonders how much difference they ultimately make.
“They usually come in, go around the company polling opinions, and then rearticulate what people were already thinking,” he shrugs. “Everyone in the room nods their heads and the board goes ‘tick’. It’s like Arthur Andersen at Enron – the only way to keep the account was by saying what people wanted to hear.
“It’s classic CYA (Cover Your Arse) – no-one gets sacked for using them,” he adds. “Management consultants are paid vast sums because shareholders and plcs want them to rubber stamp on something, to prove it’s not just our ‘good’ idea.”
Not all change programmes are a facade, however. Takeover threats, declining market share, falling profitability – these all provide meaningful motives for corporate realignment. However, those who perceive business as cyclical argue that change programmes are an over-reaction. Instead of calling in the consultants, they argue, reallocating funds to business units would be more productive.
“We invited a professor from the INSEAD business school to talk to us about value creation,” says Offord. “His view was that too many companies focus on the competition instead of thinking: ‘What is it we do to beat them? Where is our niche in the market?’
“He may have a point. How many change programmes does Tesco run? What about Swatch or Starbucks? They don’t need them.
“The only meaningful question is this – what is the change in the market that customers want and how can we deliver it? Dell was the perfect example. It didn’t do anything radical or even provide it at a lower price, but it offered a fresh proposition to its customers.”
Organisational change is only one response to flagging performance. Acquisitions, for instance, boost market share overnight, provide an effective defence against predators (eat before you’re consumed) and offer a rapid alternative to organic growth.
Few industries have absorbed greater change than financial services. Beset by pressures from the Government, hounded on all sides by the regulator and demonised by a voracious media, change has been conducted in the glare of publicity.
“Where do I start?” chuckles Offord. “Apart from all the familiar negatives – overselling, misrepresentation, etc – the industry itself is suffering from over-capacity. You wonder sometimes is it the consumer that comes first, or the regulation?
“Globally, Axa historically had a programme of acquisitions that are now moving forward and will help us reposition the business,” he says. “Little by little, we’re overcoming our problems and coming out the other side as a winning business.
However, what is really astounding, is that we’ve managed to do so without the help of management consultants.”
Cloaked in mystique, shrouded in jargon, smothered by suspicion, change is invariably greeted with fear and loathing. No matter what rationale is provided by HR professionals or how gentle the process itself may be, breaking down the terror of change presents a formidable hurdle.
“Ninety-five per cent of people hate it,” Offord admits. “I’ve taken my HR function through huge change and even we struggle with it. The vast majority of people are very uncomfortable with change. More to the point, they don’t care. Most people want to go on holiday, have a car, enjoy their lives – they really aren’t that bothered.”
Nonetheless, large-scale organisational change remains a necessity. To survive, let alone prosper, 21st-century corporations must be proactive, nimble and highly responsive. Change programmes may be the wrong tool for the job, but staying still is no alternative.
“It’s an intriguing contradiction,” concludes Offord. “Most companies know they need to change, but have little appetite to bring it about. Change is seen as a good thing to do, but only because it placates the analysts. Real change is too uncomfortable, people don’t like it and it’s rarely driven by an eloquent vision.
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“In the end, it goes back to leadership,” he explains. “If you have the leader, you have the strategy. I’m a firm believer that if you have to bring consultants in, you’re at death’s door. And you’re at death’s door because the leadership has put you there.”
“Most people aren’t stupid. They see through the smoke and mirrors and know only too well that change programmes rarely have any long-term benefits. They are intended to drive short-term results and have richly earned the derision heaped upon them.”
