How to manage change, even in a long-established business

There comes a time in the life of many businesses when the owners realise that they have to change it or close! Significant change may be planned or forced upon you. Maybe you see bigger opportunities that your current structure cannot cope with. You may foresee the market changing radically, or face a long-term crisis that cannot be solved by tweaking here and there.

But what is involved in change? How do you make it happen? What if people in the business don’t like the way things are going?

When faced with the need for change, the important thing is to take a step back from the business and ask three questions:

• Where is the business now?
• Where do I want it to go?
• What is the best route from A to B?

This is the first step in managing change, as opposed to responding to change or letting change manage you. This guide will lead you through the main elements involved in successfully managing change in your business.

What is change?

There are many types of change:

• forced or planned,
• external or internal,
• good or bad.

Change was traditionally seen as a problem with which one simply had to cope. Modern business gurus, however, take a more positive attitude to change, treating it as an opportunity to be embraced. Who is right?

Much depends on the business you are in. For example, a company in creative media or new technology has to be reinventing itself continually in order to keep up to speed with the latest developments. However, this constant state of flux does not suit all industries. Most need a degree of stability so as to be able to plan and develop over time.

You need to decide the balance of stability and change that best suits your particular sector or business’s circumstances. Then you should build the appropriate degree of flexibility into your business plan. In that way, the changes you experience will be planned rather than forced.

Always beware of change for the sake of it – for example, a panic response to a competitor’s price cut, or the tendency of a new management to throw out everything the old management did, just to prove they are in charge.

Change must always be calm and considered, and seen to be so, even when the situation demands quick decisions. Once you have developed your strategy for change, you will have to ‘sell’ it to your team if you have one. If they do not buy into it, it is unlikely to work in the long term and you could be worse off than before.

Levels of change

There are three levels of change.

Procedural

This is the lowest level and simply involves changing the way a particular task is performed, for example through the introduction of a new technology or a more efficient system. However, even this level of change can be very disruptive if everyone has become used to the old way of doing things.

Structural

This involves major changes to your business structure. This usually means transfers, new appointments and/or redundancies. This can also be disruptive.

Cultural

This is the most difficult change of all because it involves changing attitudes throughout the business.

Change frightens people – not only employees, but also customers, suppliers, shareholders and financiers too – so proceed cautiously. The rule with change is ‘as much change as is necessary, as little as you can get away with’. That said, half-hearted or insufficiently radical change is the worst option.

What kind of business are you?

Many types of business are limited to the capacity of the resources available. A restaurant, for example, may be providing a reasonable income within limits such as seating capacity. For such a business, change is likely to be gradual and predictable.

Many other businesses, though, have the opportunity, or indeed are formed for the purpose, of growing as far and as fast as they can. So the restaurant owner may see the opportunity to grow by opening other restaurants or even franchising the brand. This will require several major transitions. Change in these cases is essential and the main challenge for the owner is how to manage it.

So, if your aim is not just to create a job for yourself, but rather to make your fortune, you must begin to plan how to become a butterfly when you are still a caterpillar.

Change and the business plan

As with so many other things, the importance of having a proper business plan to help you deal with change cannot be overstated. A good plan will take account of the need for change. It will control it. It will set targets year by year. It will prepare for those external changes that ought to be foreseeable. So managing change should be simply a matter of following your plan.

However, there are some forces for change that cannot be predicted, even by the best-researched business plan. Even here, the plan should still be helpful, giving guidelines for coping with the unexpected.

The nine steps of change

Most of what follows deals with how to cope with such unforeseeable changes.

1. Recognise the need for change

The need for change is often obvious. It might be external: there may be sudden and major changes in market conditions, suppliers, customers, competitors or technology. Sometimes it’s internal: you may lose a key member of staff, or, more positively, someone may have a good idea. Either way, you need to act swiftly and decisively.

Sometimes, however, the need for change is insidious. A company may drift for year after year, content to make a reasonable profit, oblivious of the fact that its business environment is changing and its own organisation is getting sloppy. One day, it wakes up to find it is completely uncompetitive – and radical change is a matter of survival.

So, even when things are good, and there is no immediate pressure for change, it is a good idea to take time out to review the situation. There is always room for improvement. At least once a year, sit down with your key colleagues and ask:

• What is happening in our business?
• What is happening in the outside world?
• What is likely to change in the foreseeable future?
• Can the business be more efficient?

This is not contradicting what was said about avoiding unnecessary change: a little timely change in procedures might prevent the need for a major structural overhaul later on.

2. Assess whether you need help

If you think that change is or might be necessary, consider seeking outside help.

Your accountants and bankers are usually able to give a reasonably objective second opinion, but if major changes are in the wind, consider hiring a specialist consultant. There are several advantages to this:

• The consultant will help you take that crucial step back from the day-to-day running of the business so you can take a long-term and objective view.
• The consultant will be able to give a second opinion about whether you are right about change being necessary, or the degree of change required.
• The consultant will be aware of more potential problems and opportunities, and should give you some ideas you might never have considered otherwise.
• The consultant will be able to talk to everyone in the business (and possibly outside) with more freedom than you, the boss.

Against this, there are several difficulties with consultants:

• Finding the right one can be tough – anyone can call themselves a consultant. Question them closely about their experience of change management and ask if they have expertise in your industry.
• Consultants are also just about the only people in the world who actually like change, so they will almost always tell you that change is essential and often recommend more than is necessary. So you must be careful to make sure they work to your agenda. Set out what you want from them clearly and hold regular review meetings to check they are doing what you agreed.
• Finally, it is pointless to employ someone who drops a report full of imaginative suggestions on your desk and then walks away. Involve the consultant with the implementation – that way the consultant will be careful to make all the suggestions practical!

Of course, consultants cost money. The good ones cost a lot – and so do many of the bad ones. Against that, managing change will take you and your senior people away from their normal jobs. Getting a consultant to do some of the legwork may save you money.

You might be able to persuade the consultant to agree to an element of payment by results – taking a percentage of the increased profits, say.

In the end, you may find that your consultant simply confirms your first instinct. This confirmation is itself no bad thing, given the price of getting it wrong. More importantly, the consultant will set those instincts out in a systematic and comprehensive report that can form the basis of an action plan.

Remember, though, that the final decision and responsibility rest with you.

3. Analyse your business

Whether or not you employ a consultant, you still need a clear idea of where your business is before you can decide where you want it to go.

A SWOT analysis is as good a method as any. Simply list the (internal) Strengths and Weaknesses of your business, and the (external) Opportunities and Threats it faces. Do this on a single sheet of paper. Once you have the analysis in front of you, you will often find that both the problems and the solutions suggest themselves.

Be ruthless and unemotional about everything, from your own capabilities to the real viability of perceived opportunities. Again, an external consultant or mentor can help here.

4. Consult with relevant groups

Consultation is the key to effective management of change. It is essential to:

• confirm whether change is necessary and collect information about the precise changes that will be required,
• combat the innate fear of change in any business,
• generate a sense of shared ownership of the vision.

Everybody needs to be consulted because everybody needs to take the new vision on board. Employees will obviously be consulted first because change will have the most direct impact on their lives. However, other groups will also be concerned. These include customers, suppliers, shareholders and financial investors. Everyone must be kept informed.

Consultation must be a two-way process. You tell them what you are doing, but you must also listen, and be seen to listen to them. You may hear something that is useful. Either way, this will help make other people feel that the vision belongs to them as much as to you.

Consultation inevitably involves a lot of meetings. Questionnaires and the like have their place, but there is no substitute for talking face to face.

All this can seem time-consuming and even irritating. On the other hand, it has to be done, and is a useful exercise in its own right. People do not talk to each other enough in most businesses. When they are forced to talk in this way, it is often amazing how much useful information and how many simple but practical suggestions come out.

5. Create the vision

The ability to produce a clear vision of where you want to go is the defining characteristic of a leader.

So, while it is essential to listen to advice, and to consult as widely as possible, in the end it comes down to one person making a decision: you saying, ‘This is what we will do – and why.’

The vision must be clear. That usually means it is short, simple, and easily communicated to everyone involved. It is vital that everyone shares it.

6. Set objectives

Change is an ongoing process. It is simply not enough to issue a few memos, and then sit back. You need an action plan that sets out precisely:

• what will be done,
• who will do it,
• whether people need training,
• when it will be done by.

7. Handle resistance

People are naturally conservative. They do not like change. This is particularly true in most employment situations. If you are lucky, they will say so frankly during the consultation process. This is a good thing. It enables them to discuss their fears and you to allay them.

Never discourage a free expression of views. It is the only way all sides can confront and solve problems. Always remember that some of these concerns may be justified. What’s more, people will probably raise issues you may have overlooked. Do not be afraid to admit as much. It enhances your credibility to admit you are fallible: it does no good to pretend otherwise because everyone knows you are anyway.

If you are not so lucky, you will receive no negative comments. This does not mean that everyone is happy. Their unhappiness may surface later in a far more dangerous form: they will simply not implement the new procedures, or will revert to the old ones when under pressure or if given the opportunity.

You may think you can force people to follow the new procedures, but that means standing over them like a slave driver – a total failure of management. The only way to overcome resistance is to get everyone on your side, and fill them with enthusiasm so that they can be trusted to carry the process forward on their own. This means getting any potential problems out in the open from the start.

8. Review progress

Objectives on their own are meaningless. As part of the process of change, a system of regular reviews should be established. This might mean more meetings. However, these meetings have a particular agenda:

• To check if objectives have been met.
• If they have not, to assess whether the failure lies with a) anyone in particular, b) circumstances beyond anyone’s control, or c) the objective itself.
• To suggest remedial action and set new objectives, if necessary.

This is not to say anyone should be trying to blame anyone, but there must be constant pressure to ensure everyone knows that change will not go away. This must come from the top and impact on everyone associated with the business. This applies not only to employees. For example, you may need to meet customers to discuss their perceptions of the new system too.

It’s a good idea regularly to take time to step outside the business and take an objective view of how you are doing, as you did at the start of the process. You may find it is necessary to revise the changes. Do not be afraid to admit as much. Change is very much trial and error.

9. Plan for the future

Change never stops. There is no point where you can sit back and say, ‘That’s change finished with’ – even for a little while. Even as you are reviewing one set of changes, another set may become necessary. The paradox is that the most stable business is the one that understands this, that accepts change, and that builds it into its normal processes.

So keep reviewing the changes you have made, and also possible changes you may need to make in the future. That way, when change comes, not only you, but everyone associated with your business, will be ready for it.

The key is to keep your long-term objective in mind, with each change directed at getting a step closer to it. That said, one by-product of successful change is that it often creates a stronger platform and a wider vision. This in turn allows you to extend your objectives with confidence, so creating a widening circle of success. Above all, do not be afraid of change. If you embrace change, you will be able to teach your people not to fear it either.

Key points

• Consultation is the key to managing change. Listening is vital: consultation is a two-way process.
• Talk to customers, suppliers, shareholders and financial investors, as well as your people.
• Never discourage frank expression of concerns.
• Change as much as necessary and as little as you can get away with – avoid change for the sake of it.
• Take time out to review the business objectively.
• Change must be calm and considered, even in a crisis.
• Take advice, but remember the final decision lies with you.
• Communicate your vision. It should be simple, clear, and easy to communicate. Everyone must share it.
• Build change into your business plan.
• Balance change and stability. Stability comes from accepting that change is inevitable.
• Set and review objectives. Revise the changes if necessary.
• Change does not end. Do not be afraid of it: if you manage it, it will not control you.