The Economy and Plastics Processors: Cultural Shift Remains Key to Survival
by Laurie Harbour, Harbour Results, Inc.
Industry Fall 2010
It’s been two years since the economy encountered one of the worst crashes in history. Where are plastics processors now? Many more than expected survived the crisis by going into hibernation and changing the way they worked and lived. In hibernation, processors were forced to use fewer resources. Necessities such as people, equipment, material, services and facilities had to be justified as critical to continuing operations. As 2010 came, many manufacturing companies began to see business go up considerably and owners were exhaling from the long hibernation. But is it real or is the economy embarking on a double dip recession? Most economists believe this double dip will occur over the fourth quarter of 2010 and first quarter of 2011. The key message emerging from that prediction is that manufacturing will continue to see an up and down economy for many years to come. The years of a constantly growing economy at 5 to 10 percent a year are gone. Instead, economists expect to see constant fluctuation over the next 10 to 20 years.
Cultural Shift Drives Economics Survival
As the economy heads towards mid-term elections, there are many questions for government. Recently released figures show the manufacturing sector in general is improving in the U.S. However, data also shows continued sluggish job growth. People are in an uproar, saying jobs are not being created to return to a high rate of business and sustain an economic recovery. To the Harbour Results team, these results make total sense because it means companies were functioning in a truly inefficient fashion before the recession and are just not hiring resources back unless they are sure they need them. Companies that are thriving in this economy are indeed doing more with the same. These companies have figured out how to increase the effectiveness of existing resources, and continue to produce products as efficiently as any country in the world.
The key to this shift among U.S. businesses is culture. While weathering the recession, many companies realized that it was time to do things differently and not go back to the old ways of running business. This meant that it was time to address their culture and make the changes necessary to be strong enough to handle this type of economic turmoil in the future. The companies that have come out of hibernation, but have not addressed the need for a culture change or prepared the culture to do more with the same, may see trouble as the economy enters a double dip recession.
Why is it so important to drive change beyond the economic factors? The main reason is that customers will demand the change. Customers will look for leaders driving change as they evaluate companies. Also, competition will force the need for change because the competition will be implementing with vigor, leaving your company in the dust. Lastly, the ownership of your company will or should begin to demand the change because they will continue to see the bottom line erode without this improvement.
How do you manage this culture change within your organization? There are several key steps to evolve your business.
- Cast the Vision for change and set appropriate goals. In order to truly make the change necessary, the leadership of the organization must cast the vision for the company and set the appropriate goals. The main goal should be to create an organization that can successfully adapt to the changes in the marketplace. This is creating an organization that has realized the true sense of FLEXIBILITY. In addition, companies should articulate further what that looks like and what additional goals are, with the main focus on FLEXIBILITY.
- Create a Sense of Urgency. Once everyone understands the goal and vision for the organization, the leader must create a huge sense of urgency. Employees must understand why it is critical to get on board with the vision and what it means to the organization financially, structurally and operationally. This is the time to educate the team on what is going on in the economy, the customer base and competition. They need to know that without change, it is possible that the organization will not exist in the future. Harbour Results conducts hundreds of assessments each year and continues to see organizations with no sense of urgency, with leaders who are very calm about things not being done. The best companies are impatient about change and want to have things happen faster than they are today.
- Leadership to Guide the Team. Once the vision and sense of urgency are set, the leader needs to get the core management team on board and excited about driving change. Too often companies state the vision, get the team excited and fall short in execution. It becomes the program of the month that never gets implemented and the employee base loses motivation to maintain a sense of urgency. Leadership has to follow through on what they say. It is critical that the head of the organization evaluate the core management team. If people are not on board or in the wrong seat, the leader must be willing to move or remove those roadblocks. It only takes one person on a team to destroy the entire momentum for the whole. Once the team is set and excited to move forward, the leader must empower them with the authority to drive the change.
- Constant Communication. It is often said that people need to hear things 30 times or more before the message truly sinks in and becomes part of their daily lives. That is how organizations change a culture. They have to communicate the vision and goals constantly and from all facets of the team. The organization needs to see the vision lived out and have it constantly brought to their attention. Leaders often feel frustration, complaining that the people in the organization are not getting it. The leadership has an employee meeting, telling everyone what they are going to do. But a couple weeks later, its clear that the message was not received. The leaders ask their management team questions like, What wasnt understood from the employee meeting? and We told them this is what we were going to do, so what are they missing? These are very common reactions for leaders as they embark on this journey. Remember that people have to see and hear the desired change many times before they jump on board. It is critical to over-communicate to achieve the desired outcome for the company.
- Leadership Must Lead. Now the job of the leader becomes one of truly guiding the organization to the vision. They are not the executor, but they are the tour guide through this change. Their role becomes one of removing roadblocks, getting naysayers on board or making the necessary changes to get them off the moving train. The leader sets the tone and the speed in which the organization will operate. We have watched several clients start this journey, with the train moving very quickly, only to run into the brick wall of a team member who refused to change. Some companies have made the choice to eliminate that person quickly and keep the train moving, while others have not. Those that have not acted quickly have watched their whole team lose momentum, excitement and sense of urgency because the ownership would not make the tough call to remove a long-time employee. The change process will cause many people to face a tough fork in the road. They either jump on the moving train and participate in the change process or choose not to get on board. If they become a roadblock, they need to be moved from their leadership role.
- Celebrate the Wins and Gain More Momentum. As the process moves forward in your organization, there will be many small wins. These wins need to be celebrated and brought to the attention of the whole team. The best companies change cultures by adding up all the small wins and celebrating them to drive momentum toward the big wins – success through 1,000 small wins. It is critical for the leadership team to develop some type of performance-based compensation. Companies have built entirely new incentive programs to reward their people financially for being involved in the process and contributing their ideas. These programs are critical to the culture change because it shows that the leadership is willing to share their success financially. Additionally, the most momentum has been seen from those companies that have a small celebration of a win for the whole organization to see. Sometimes recognition from the boss in front of the whole company means more than a $500 bonus, but when a person gets both recognition and financial reward…watch the improvement gain on itself! With the new credibility to the vision based on the small wins, it is critical for leadership to push forward more new projects and plans for the future, gaining more momentum for the process.
- Build the Foundation for the Future. Leadership must continue the constant communication of how the organization is improving due to the change in the culture. Help the employees see the connection between their change in behavior and the success of the organization. This will continue to solidify the need for change, while mapping a clear path for the future direction of the company. Leadership needs to plan for the future by not only updating the goals for the coming months and years, but also by stepping back and thinking about succession planning for each critical role in the company. It is important that hiring practices and training be modified to fit the new culture. New employees need to come to the organization with positive problem-solving mindsets and training needs to be about helping people identify where change is needed and why their behavior is critical to the organization. Leaders need to follow the PDCA (Plan, Do, Check, Act) approach to their business. Every year, leaders must plan for the next. Then the leadership has to do the things it said it was going to do, driving that throughout the team. It is critical to check the progress on a quarterly, monthly and even weekly basis to see how the team is performing to the plan. If necessary, the team must act on any changes that are required to the plan or the process in order to meet the vision for the future.
Once these steps are executed within an organization, people will begin to see, feel and smell a different culture. Many people wonder how you can gauge a successful transformation of the culture because it is so hard to measure, but in our experience the change can be felt. One company that has emerged with a new culture over the last year was wondering how to gauge its success. It was as simple as conducting short interviews with each key person on the team. One year ago during those interviews, there was a tremendous amount of finger pointing and complaining about the company in multiple ways. There was never anything positive. One year later, the first thing each employee said was I feel really good about where we are headed. There was no negative back stabbing or finger pointing. Each key employee could see that the company was not where it wanted to be, but that future success was visible. That is culture change and, combined with the outstanding profit numbers that go with it, this company can truly say it is headed in the right direction.
If culture change is the key to any companys future, then ask yourself a few questions about your company. How does my companys culture smell? I know thats an odd question, but you can smell a culture from a mile away. Do you have a culture by design or by default? How can you create an environment where people wake up everyday and say I get to go to work here today? You want a place of employment where people come in and give not just their mind and body, but give their hearts. So, what are you doing to win their hearts? Some of the best companies in the world today (i.e., Southwest Airlines, Zappos, Netflix and Virgin) have realized consistent profits for many years because they have focused on culture first.
John Kotter, a world-renowned change management expert, wrote in his books that there are four key outcomes the companies that had successfully focused on the DNA of their culture had in common:
- Revenues increased threefold.
- Stock price or company value increased by more than 10 times.
- Net income increased on average 700 percent.
- Job growth increased.
Now which one of you would not want to see these results within your company? Culture is the key. What are you going to do within your organization to experience this change?