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The result of Kleinfeld's tremendous changes was been a thriving company, but a demoralized workforce. This result highlighted the problem with instituting change and the types of internal resistance innovative managers have been forced to deal with when overhauling failing companies.
In fact, one of the primary concerns that employees have had when there has been any type of major corporate restructuring has been the fear of layoffs. When Spirit Aerosystems spun off from Boeing and was purchased by Onex Corp., its employees feared that layoffs were imminent. While there were some lay-offs, the majority of the employees were retained and were also highly compensated for their role in helping make Spirit's IPO successful. The retention of so much of the workforce reflected a major change in corporate strategy; cooperation between workers and management. This change was exceptionally notable because the motive behind Boeing's decision to spin-off Spirit was largely motivated by Spirit's high operating costs. However, by cooperating with the union to reduce job classification complexity and secure a wage reduction, Onex may have been able to transform a money-losing plant into a money-maker. They did this by sketching "out a scenario where workers could earn some $30,000 in stock and cash over five years as long as the IPO was successful." While Spirit's long-term success has yet to be determined, the IPO was a tremendous success. The IPO raised $1.4 billion, and "each Machinist is about to receive $61,440 in cash and stock." Furthermore, industry analysts have predicted that Spirit can expect to see financial success for the next few years.
In addition, many major corporate changes have occurred in the recent past, which has made it impossible to determine the impact of those changes. Antonio Perez, a former contender for the top position at Hewlett-Packard recently unveiled a plan to change Kodak's approach to computer peripherals. For years, printers have been created to be inexpensive to purchase, with the real profits coming from ink replacements. However, Kodak decided to change its approach in a dramatic fashion. While its new printers will be more expensive than those offered by competitors, the printers are geared towards printing photos, ink will be formulated to last for 100 years, and the replacement cartridges will cost half of other replacement cartridges. Interestingly enough, this change has not only challenged Kodak's existing business plan, but the business plan for the entire printer industry: "Those companies now rely on a razor-and-blade strategy, often discounting machines and making most of their profits on replacement cartridges." While this strategy has been successful, Kodak listened to consumer complaints, which centered on the high cost of ink, and decided to challenge the existing business model. Of course, this challenge was essential for Kodak; with falling film sales, the once-successful company had to do something to shore up falling profits, and it chose to focus on printers. However, to do so, Kodak had to focus on a formula change from ink-based to pigment-based, so that the ink could last longer, showing that internal changes in a company could be driven by external factors.
Even luxury brands, which have traditionally relied upon consistency and dependability for the majority of their sales, have had to move away from brand-name recognition in sales. One example of a luxury brand struggling to remain relevant in the modern world, which has seen a proliferation of upstart luxury brands in the past decade, was Chanel. However, rather than languish like other luxury brand companies, Chanel took an aggressive position; it chose to create a global leadership position to coordinate its worldwide efforts, and hired Maureen Chiquet in that position. Chiquet took an unusual stance; when discussing the launch of a new perfume, Chiquet made it clear that getting a huge share of the market was not her goal; instead she wanted the launch to concentrate on making the perfume appear exclusive and special. She also focused on consumer research, which has traditionally been neglected by luxury brands. What she found was that Chanel's marketing concentration had been missed out on the younger wealthy consumer. To change this, Chiquet has encouraged the sale of Chanel by the independent high-end boutiques that the young and the wealthy frequent. Although Chiquet has placed Chanel's focus on luxury goods, Chiquet has also employed strategies from her time at the Gap, and has encouraged merchants to buy more of the must-have items that they think will sale.
One reason that many companies have cited for avoiding change has been a concern that they will upset their existing management and workforce, compromising any success that has been earned. However, innovative leaders have recognized that some conflict in the workplace is inevitable. In a recent column, when asked by a reader how to pick a successor for his company, Jack and Suzy Welch encouraged the reader not to fear the changes that such a decision would create in the business environment. They pointed out that losing good leaders was a natural result of picking one person as a successor, and that such a result was not to be feared. On the contrary, the Welches asserted that "their departure will actually be a favor- for them and the company...because...keeping failed candidates around is too often disastrous. Each candidate's sense of letdown, compounded by the bad vibes of his or her followers, enervates the organization." The Welch's approach was interesting because it spoke of a reality that has oftentimes been unaddressed when discussing corporate change; even positive change can have negative short-term and long-term consequences, both for a corporation and for the people it employs, but that has not been a sufficient reason to avoid that change.
In addition, the Welches have addressed another reason that many leaders avoid change; the fear of looking stupid. Every employee, from the CEO of a company to its lowest-paid workers has made mistakes. Rather than ruining a person's reputation, the Welches suggested that acknowledging mistakes and making the changes necessary to correct them, may actually increase a person's reputation. They believe that "any company worth its salt will reward managers when they acknowledge they've hired wrong and swiftly repair the damage." While the Welches were speaking specifically of staffing mistakes, any type of mistake that has been costing a company productivity or placing an unfair burden on certain members of the staff has earned the same type of treatment.
The problem with a fear of change has been that companies who refuse to change fall behind their competitors. Even innovative companies can face these challenges. For example, when Dell launched its business model, it was nothing short of revolutionary. Dell's concept, which was "to bypass the middleman and sell custom-built computers directly to the consumer," changed the face of computer sales. Despite its innovative beginnings, or perhaps because of them, Dell fell prey to a problem that has plagued many successful companies: complacency. "While Dell broadened its product line, it never dealt with the vast improvements in the competition or used its lead in direct sales and the cash generated to invest in new business lines, talent, or innovation that could provide another competitive edge." Ultimately, it was Dell's inability to create new growth that made it lose its supremacy in the market place. Recently, Dell's founder, Michael Dell, came back on board as its leader, to help the company regain its former position in the marketplace. However, it has yet to be seen whether Michael Dell has what it takes to bring Dell back into such a position, because he had continued to adhere to Dell's old business model. Dell has continued to embrace a people-intensive growth strategy, focusing on hardware services, which happens to be the slowest-growing segment of the computer industry. Furthermore, Dell has yet to find more profitable growth areas. Although Dell's leaders have not been able to find these areas yet, they do seem to have come to the realization that they are going to have to embrace change if they are to succeed.
As these examples have demonstrated, change is necessary for survival. However, these examples have also demonstrated that even positive change can be met with negative attitudes if that change is not implemented in an appropriate manner. One example of positive change being met with a negative attitude has been the resistance that Kleinfeld encountered when he introduced his changes to Siemens. The workers there were very hostile to his perceived American style, despite the fact that those changes were largely positive for the workforce. In contrast, the changes that Onex made to Spirit's workforce were far more drastic. Onex laid off a significant portion of the workforce and had the rest of the workforce take a reduction in pay. One would imagine that these changes would be met with more resistance than the changes at Siemens, but the workforce at Onex was actually more receptive of the changes. The…[continue]
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