The Seven Million Dollar Turnaround
A US division of a large global electrical power and product supply company was in financial difficulties. When this division was merged with the parent company in 2002, it was losing about $8 million a year. A new general manager was bought in to turn the division around and make it profitable quickly. The general manager attended a senior management development program and learned about the SOQ. He decided that this measure and approach might be helpful to him and his team when doing a short-term turnaround.
In August 2002, the first general climate assessment was conducted with all the employees of the division. The management team worked to integrate the results on the SOQ with their current understanding of what was needed to make the turnaround work. The team reviewed the results and identified that they were strongest on the debate dimension, but were very close to the stagnated norms when it came to challenge and involvement, playfulness and humor, and conflict. They indicated that the quantitative and qualitative assessment results were consistent with their own impressions that the division could be characterized as conflict driven, uncommitted to producing results, and that people were generally despondent.
The leadership decided that they should target challenge and involvement, trust and openness, playfulness and humor, and conflict in order to help them implement the needed turnaround. It was clear to them that they needed to soften the climate and drive a warmer, more embracing, communicative and exuberant climate.
They developed and then implemented a plan for short-term climate change.
They committed to increase communication by holding monthly all-employee meetings, sharing quarterly reviews on performance, and using cross-functional strategy review sessions. They implemented mandatory “skip level” meetings to allow more direct interaction between senior managers and all levels of employees. The general manager held 15-minute meetings will all employees at least once a year. All employee suggestions and recommendations were invited and feedback and recognition was required to be immediate. A new monthly recognition and rewards program was launched across the division for both managers and employees that was based on peer nomination.
At a time when making the division profitable was the highest priority, the management team re-established training and development and encouraged employees to engage in both personal and business-related skills development. They also provided mandatory safety training for all employees.
Another category of initiatives included providing a clear and compelling mission, strategy and values for the division. The management team formed employee review teams to challenge and craft the statements in the hopes of encouraging more ownership and involvement in the overall strategic direction of the business.
In general, they focused on relaxing the climate. They used the suggestions provided by the narrative parts of the survey to identify actions that needed to be taken. They modified rules regarding the dress code, adapted more flexible working hours, and allowed plants and flowers in the workplace. They scheduled parties and social events, and fostered open debate and feedback without repercussions. Managers who could not follow the new behavioral norms were coached and some were removed from their positions. It was critical to encourage everyone to understand how their specific role and responsibilities fit into the overall flow of the business so they did extensive work on detailing the definition of roles and process ownership. Their stated aim was to create an unstoppable “bubble of excellence” in North America and to challenge the “tyranny of the average.”
In September 2003, the leadership team wanted feedback on how they were doing in their efforts to change the climate, so they requested a second administration of the SOQ. The four dimensions they targeted improved significantly. In addition, two additional dimensions showed significant improvement, even though they were not specifically targeted. The conflict dimension showed the largest change in the more positive direction. We also noticed a significant improvement on the trust and openness dimension. This could have been the result of the level of intensity with which the management drove the climate change.
The division showed a $7 million turnaround in 18 months and has now begun to deliver profit much closer to projections. In 2003, the division won a worldwide innovation award. They are building specific innovation metrics into their balanced scorecard and continue to identify areas of improvement, despite a promotion of the General Manager to a national position.
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