Change Management Strategy: Find the Right Leader

By Emerson Vice President of Consulting, Christian Hasenoehrl

Wood blocks with black arrows pointing one way and red arrow pointing opposite way

Did February leave you feeling dizzy? A market correction is defined as a 10% downward movement in stocks from a recent high water-mark. Corrections happen with some regularity but – until last month – there hadn’t been a correction in over two years. The recent sell-off delivered a rude wake-up call to complacent investors. Stocks not only declined by more than 10%, they also fluctuated by 4% or more many times over several trading sessions. The movements were magnified by automated trading strategies betting on a long-term bull market with low volatility. If last month reminded you of the beginning stages of the financial crisis, you’re not alone. Many of the so-called experts offered comparisons to prior stock market disasters. As Warren Buffett famously pointed out during the last crash, the emperor has no clothes, and you can always tell who’s been swimming naked.

So what type of leader would you bet on to lead your company out of a crisis? It depends on the situation and the leader’s style. Leaders can be characterized as Futurists, Disruptors, Administrators and Specialists. Each type has its strengths.

  • Futurists like Jeff Bezos will bet everything today on a payoff tomorrow. This means taking huge risks and loading up on leverage to gain market share. Bezos was a first-mover in cloud computing, amassing massive scale by seeing the future of cloud computing before anyone else. IBM has desperately tried to enter the game, but did so late. AWS (Amazon Web Services) is now the most dominant player amongst cloud computing platforms and extremely profitable. When Amazon does report a profit, nearly all of it is from the AWS division, subsidizing the growth of online retail - the idea being that one day in the future they will dominate online retail and categorically start raising pricing.
  • Disruptors like Elon Musk believe that any strategy is great so long as it is not the current one. They have no interest in maintaining the status quo. They create upheaval and uncertainty for businesses. But Disruptors like Musk can create the momentum to change an industry; he transformed the automotive, space exploration and solar power industries, but holds on to management control with mixed success. Jack Welch disrupted his industry to create an industrial giant that was either number one or two in every segment. Businesses that did not succeed were sold off. However, the empire was built with leverage and massive structural risk, leading to a near-collapse during the financial crisis.
  • Administrators are complacent managers, like every one of the CEOs at Walmart who followed David Glass. Or Jeff Immelt, the Administrator who presided over the dismantling of GE after Jack Welch. Jeff navigated through the financial crisis and secured the survival of the company. Administrators will masterfully preside over a well-oiled cash generating machine. But, like Wells-Fargo’s Administrator CEO, they can fail to recognize the severity of a crisis and ignore it or try to sweep it under the rug. Wells classically mishandled their crisis of confidence by ignoring the obvious and keeping the same leadership in place across much of the company, even after the allegations came to light. Hoping a crisis will go away is not good change management.
  • Specialists are not always well-known names. They are brought in to manage a specific set of circumstances. Specialists might focus on conserving cash during a financial crisis or reviving a company fallen on hard times — like John Flannery, the Specialist brought in to save GE by making tough and unpopular but necessary choices. Flannery has a rough road ahead, as he attempts to turn around a historic company, but he might just be the right man for the job. Ian Cheshire of Kingfisher navigated the financial crisis with distinction, focusing the company on conserving cash and investing heavily in people to keep customers engaged and spending. Kingfisher owns the largest home improvement store chains in UK and France, and eight other countries. Mary Barra of GM, managed not only to make GM profitable, but has positioned them to displace Tesla as the leading manufacturer of electric and autonomous vehicles. She made huge investments in alternative fuel technologies, including battery-powered vehicles and driverless car technology, to position GM as a leader for the future. She also restructured GM to be in a better financial position to invest in the future.

Each of these leadership styles is perfect for a certain situation. So who do you want in a financial markets crisis? You don’t need a Futurist – they follow a vision but might not last to see it through. Don’t rely on a Disrupter – they focus on change and doing things differently, but are not great managers. You definitely don’t want an Administrator — they fail to see disruption and don’t adapt well to changing business climates. What you need is a Specialist, focused on a short to medium-term horizon to stabilize the business and position it for survival. The lesson: pick a leader for the task ahead.

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