for change. Imagine that future possibilities are greater than the disappointments of the past and the challenges of the present.

Here are some thoughts on change. I hope they inspire you, too, as you chart a course for 2011 and beyond for your organizations and yourselves.

	“Failure is only an opportunity to more intelligently begin again.” ~ Henry Ford
	“Change is inevitable. Suffering is optional.” ~ Buddhist saying
	“There is nothing more difficult to take in hand, more perilous to conduct, or more uncertain in its success, than to take the lead in the introduction of a new order of things.” ~ Niccolo Machiavelli
	“Groups become great only when everyone in them, leaders and members alike, is free to do his or her absolute best.” ~ Warren Bennis and Patricia Ward Biederman
	“To reach a port we must sail, sometimes with the wind and sometimes against it. But we must not drift or lie at anchor.” ~ Oliver Wendell Holmes Jr.
	“If things seem under control, you’re just not going fast enough.” ~ Mario Andretti
	“We miss 100% of the shots we don’t take.” ~ Wayne Gretzky

Best wishes to all for the holidays. Have a happy, healthy and sustainable new year.

The post A New Year of Change appeared first on Ready About LLC - Technology, Business & Product Strategy & implementation.

Senior executives involved in hundreds of acquisitions report that ignoring a company’s culture is the leading cause of problems in acquisitions. So what IS this culture thing? And what does it mean to “pay attention” to culture – something that’s important not just in connection with M&A, but all the time?

Generally, culture is how things work in an organization. Not the formal org chart view, but how things REALLY work. It’s the company’s management style, history, strategic focus, and how and what it communicates. Are we customer-focused, market-driven, innovative or reliable? Is management directive, collaborative or a bit of both? Does the boss have an open door — and does he or she really want everyone to use it? Which way does communication flow?

I also see culture as the story we tell about ourselves. It’s what we believe in, what we talk about and how we play. It’s mission, vision and our relationships with each other and the broader world. It’s the story of how the company was founded and how we snatched the big deal from a competitor. It’s the all-out company effort to support a food pantry. It’s even that we always dress casually and have muffins on Friday.

Think of a time when your company did something that made you extremely proud. Who was involved? What was your role in the success? What was it about the company or its employees that made it possible? OK, got it? Now go out in the hall, tap someone on the shoulder and say, “You know, I was just thinking about the time when…” and tell him the story. That’s culture. And odds are you’ll hear the story making the rounds.

All those things, and more, go into a company’s culture. They’re also part of what makes a company valuable to an acquirer.

If someone buys your software company, where engineers work flex hours in dim rooms, wear flip-flops and listen to reggae, what will happen if the buyer is all about 9-to-5, business casual dress, brightly lit cubicles and no music? Unless those programmers and their subculture are valued, a huge part of the company’s value is likely to flip-flop out the door.

What if you’re the potential seller of a company? What are your culture concerns?

If you’re just selling off part of the company, one concern is for those who remain behind. They may now have more work to do without those who are going with the sale. That’s frustrating and stressful. Equally important, they’re facing a loss — of the interactions with their suddenly ex-coworkers. A big piece of their culture is gone.

Even if you’re selling the whole company, let’s face it — if you’re any kind of leader, those are YOUR PEOPLE going to the buyer and you care about them.

For both buyer and seller, a key to preserving culture — and value — is communication.

It’s important — on both sides — to go as fast as possible, have a plan and communicate. Be ready with as much transparency as you can offer.

As a seller, you can help your people and help preserve the value of the organization you’ve built. Don’t just talk about the price when you’re negotiating — talk about the team and the way they work.

And once you’re able to talk to employees about the sale, be clear about what it means.

What does the future look like? What do you know about the acquiring company and its culture? Celebrate your company’s culture — especially its successes. Tell that story I asked you to think of a few minutes ago. If you’re going to the new company yourself, be available to your people and reassure them. You’re the most powerful advocate they’ve got. Acknowledge the loss if only part of the company’s going. You and your employees have to go through the stages of grieving. Help people grieve and move on.

As the buyer, obviously you’re hugely invested in the success of this investment.

Make sure the integration is planned and smoothly executed — interacting with HR, the location of the cafeteria, job descriptions, building passes, parking spaces, bathroom keys, employee manuals, etc. Show you’re on top of things and that you care about a smooth transition. Pair incoming employees with mentors who know the ropes and can explain the unwritten rules that govern how things work. Make sure that your integration team — in fact everyone who will deal with the newcomers — is aware of the acquisition’s value.

In addition, be open and clear about what the future looks like. It’s common in acquisitions for some employees to lose their jobs. Be open about that, too. Everyone will be anticipating it; the more upfront you can be, the better for everyone — even those who may lose their jobs.

As you integrate teams and departments, encourage them to share their real and perceived strengths. Unlike those companies trying to fit a square peg into a round hole by ignoring culture, you can help yours build a new, shared culture out of the best of both.

Note: This post also appears on the Lyons Solutions LLC web site.

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A. We know what we want. We brainstorm in our department and with other business units. Then we write up a plan and schedule a meeting with IT to turn it over to them to build.

B. We make sure to cc: the CIO (or CTO, lead developer, etc.) as we develop our new products. That way we keep him in the loop so we know IT is represented in the process.

If you answered “A” your company works like a lot of others. Projects get done. (You’d be out of business if they didn’t, right?) But many projects take longer than they should and I’m sure you’re frustrated by the process. If it’s any consolation, the folks in IT are just as frustrated.

If your answer was “B” you’re in better shape, but really only marginally.

The best approach (sorry, I know there was no “C” above, that’s the nature of trick questions) is to have someone from IT – in fact, someone from every stakeholder group – involved from the start.

Projects always go more smoothly and have a better chance of success when all voices are heard. There’s lots of research out there supporting this. And people who are engaged in the process bring greater creativity to bear on finding answers. If you start by assuming that everyone wants the company to succeed, then why not open up the brainstorming and planning to more people. In this case, especially IT.

“But IT always just picks holes in our plan. They tell us it won’t work or it’ll take too long to build. And they don’t understand the business the way we do.”

Bridging the IT-Business Divide

This is part of the not-uncommon disconnect between IT and other departments – often Marketing and Sales, who tend to drive product development. It’s something a good CIO can help to overcome – by making it a point to stay on top of what’s being planned, by involvement in developing corporate strategy, and by helping other departments know what IT’s doing. There may be other projects under way that could dovetail with yours – an opportunity to enhance both.

Trust me, IT doesn’t enjoy saying “no” any more than you enjoy hearing it. No one likes to say “no” all the time, to rain on everyone’s parade. But you may have left them no choice. You’ve put together a plan for the next great web site feature. But what if it’s not technically feasible? What can IT do except point that out? It’s all downhill from there. On the other hand, if the tech folks are invited to participate early, they’ll be more likely to point out creative solutions. Again, that should be a broad invitation: Don’t forget Finance, Customer Service – even customers can provide valuable and creative ideas.

The next time you’re sitting down to start whiteboarding, invite IT – and everyone else with something to add.

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While reading one of the many articles about the upheaval in the financial system, I was struck by how Lehman Brothers went bankrupt and Merrill Lynch survived to be acquired, and how a key distinction was the CEOs’ perspectives as a long-time insider (Lehman) vs. a new outsider (Merrill).

Albert Einstein is often quoted as saying, “The significant problems we have cannot be solved at the same level of thinking with which we create them.” There are many issues at play in the financial crisis, however the examples of Lehman Brothers and Merrill Lynch illustrate that the “same level of thinking” also can not only keep you from solving the problem, it can keep you from seeing its significance.

It’s important for leaders to look outside their own experience and their companies’ own experience, by seeking the input and ideas of their stakeholders – employees, customers, shareholders, etc.

Richard Fuld Jr., the CEO of Lehman Brothers, started at the firm as an intern in 1966 and has run it since 1994. The New York Times (Sept. 20) describes him as “a classic Wall Street trader — taking big risks, reaping huge rewards, exuding intensity and demanding loyalty.” Fuld’s “defiance and independence” and view of business as usual, said the Times, led him to misjudge the severity of the crisis and delay seeking a capital infusion.

John Thain took the helm of Merrill Lynch last October after the company’s former CEO was forced out. Thain spent his career at Goldman Sachs and the New York Stock Exchange before he was brought in to help Merrill sort itself out after reporting billions in losses, the first step of which was to raise money. He also made a point of reassuring investors, according to the Times, that “We’ve got fresh eyes on these problems, and we’re not wedded to believing this company has done everything right for years.”

“We are all prisoners of where we have been. The longer you are attached to a place, the harder it is to see it without rose-colored glasses,” says James D. Cox, professor at Duke University School of Law.

So how can we avoid the rose-colored glasses?

Create a culture of communication and accountability.

Start by making sure everyone in the organization has a clear understanding of its strategy, give them a clear vision of success and clear goals, and give them the skills they need. Then set them loose to find ways to get there, and be open to anyone in the company who raises a flag when things change. How? Reshape the organization if necessary and give them incentives based on the company’s performance.

For that matter, be open to those outside the company.  Stakeholders need to have a place at the table, or at least have input. Include customers in planning large initiatives that could affect them.

Here are a couple phrases you should be alert to. If you hear them in your organization, an alarm should go off telling you that the organization’s radar is malfunctioning: 

• “We’ve always done it this way.”
• “We know better than anyone else.”
• “We don’t need anybody’s help.”

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If you’ve ever tried to change an organization, you’ve undoubtedly struggled with resistance. What you may not know is that resistance has a physical underpinning. Our brains are hard-wired against change.

Neuroscience can explain a lot about why we react the way we do to change as well as how we respond in the face of stress – and there’s no doubt that change can be stressful.

The first thing we do when exposed to a new idea is to compare it with what we already know. This comparison process takes place in the pre-frontal cortex, an energy-intensive part of the brain. On the other hand, we use the basal ganglia to deal with things we’ve already learned to do. This part of the brain sits amid established pathways of long-standing habit and takes much less energy to activate.

In addition, the brain uses a lot of energy to cope with surprises – perceived differences between what we expect and what actually happens. If we’re expecting something to taste sweet and it tastes salty or bitter instead, the orbital front cortex generates strong error signals. The orbital front cortex is closely connected to the amygdala, which houses the brain’s fear circuitry (more on this in a second).

So what do we need to do to overcome these predispositions?

First of all, it takes energy to process all the new information flooding into the brain, so help it out by reducing the number of inputs. The more people focus on what they’re learning – and change is all about learning – the better able they are to handle it. Get them away from day-to-day stress and distraction and introduce the new information in off-sites or other meetings where they can focus.

And make it an engaging, pleasurable experience.

Telling people “you’re all screwing up and heads will roll if we don’t fix this” engages the amygdala’s stress-fueled fight-or-flight reflex. Stressful situations create tunnel vision. Fear or anger. All we see is the enemy or the way out. Don’t we really want people to be at their most engaged and creative when they’re trying to discover how to make our organization’s more effective and successful? We get that by focusing on more positive things – goals, strengths, collaboration.

Looking forward toward a desired outcome instead of at the things you want to stop doing has another positive effect. If we assume it takes a similar amount of energy to worry about problems as it does to focus on goals, which do you think is a better investment of that energy?

Second, moments of insight help people to internalize new information and new ways of doing things far better than simply being told. One way to provide that insight is to engage people in designing the changes that need to be made. Give them access to data and goals and let them collaborate on creating the new approach, the new solution. If they own the solution people are more inclined to adopt it.

Finally, let them practice and generate the pathways in the basal ganglia where deep knowledge lives. That means don’t just dictate a change in procedure, give people a chance to work with it before it really counts. Give them training. The same holds true for creating change itself. The more people engage collaboratively and creatively, the better they’ll become at it and the more successful the organization will be at learning how to keep ahead of the curve.

 ***

For more on this subject, see “The Neuroscience of Leadership” by consultant David Rock and Dr. Jeffrey Schwartz in strategy+business, Booz & Co.’s publication, and work by Daniel Goleman and others on Emotional Intelligence.

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Culture is a story we tell about ourselves that we believe is the story. But it’s a story that can change. New chapters are written all the time.

An acquisition starts a new story of the merged organization, but it’s also a new chapter in the ongoing stories of both acquired and acquirer. Keeping those stories alive and adding to them is as important as creating the new one. And for the new one to resonate it needs to be shared and created by all those involved.

Even troubled companies have Camelot stories – about the time they received an award, won the big account, launched a new web site, stole a march on a competitor by developing a new product. They also have cautionary tales – the champion in Accounting, the troll in IT, why it’s dangerous to go visiting HR.

It’s understandable, but unfortunate, that there’s so much secrecy in the early stages of an acquisition. Due diligence is limited to a handful of senior executives who communicate mainly about “hard facts” and only cursorily about the integration process – the story that will be unfolding in the months to come. There’s lots to be learned from both the Camelot and the cautionary tales if only the stories told around the water cooler were part of due diligence.

How an acquirer values the culture – the stories – of the acquired can mean the difference between being a hero, embraced by all, and a villain, resisted at all costs. The acquirer’s story shouldn’t be forgotten either. It shapes how the new employees see themselves fitting into the merged culture. In one acquisition I was involved in, we were seen as the barbarians at the gate. The acquired company was the flower of civilization and the CEO who sold his company and stayed as a consultant became the noble prince, resisting the evil acquirer and defending the downtrodden. You can imagine how bumpy that one was.

The theory of social constructionism suggests that organizations, relationships and even our self-image as individuals are a function of the stories we tell about our interactions and choices. We’re all spinning stories all the time, and social constructionism says that words create worlds.

Since it’s unlikely to happen during due diligence, it’s critical early in the planning and during the integration to bring the stories into the open to understand strengths, weaknesses, hopes, aspirations and fears. And to begin crafting the new chapters and the new story.

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A group of people were talking about the ways that attitude can affect outcomes. The leader of the team held up a glass with water in it and asked each member, “Is this half full or half empty?” The group was split, of course. Finally, the leader picked up a smaller glass, poured the water into that, and said, “It’s a full glass!”

It struck me that all too often we unquestioningly accept the basic premise, that it’s much easier to do something “the way we always have” than to take a fresh look.

Sure, it may be correct. But maybe not.

When someone says to me, “I don’t think this group has good team spirit and it’s hurting our productivity. Can you do a team-building exercise?” I could take that at face value. But that may well ignore an underlying conflict or communication gap (including unclear goals), and that the apparent lack of team spirit is a symptom, not a cause.

Think of the times when plans have been scrapped – or maybe even worse, when plans have gone ahead and ultimately failed – based on an assumption.

The best way to check those assumptions is to challenge them: Are we asking the right questions? Are we solving the right problem? Why do we need to solve it? Why is it even a problem? Why do we do things this way? What would happen if we did the exact opposite of what’s being suggested? Is there another way to look at it?

In other words, pour the water into a different glass.

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I compared notes with a couple dozen friends recently about success and failure factors in change initiatives. We each interviewed three people, asking them to tell us about one successful and one unsuccessful project, and to talk about what factors contributed.

It’s an interesting exercise, and one I recommend. Talk to friends, colleagues, bosses, and employees. Just ask them to tell you the story of a change initiative they’d say was a success and have them identify the things that made success possible.

Be sure you agree on what success means. I’d say a change project is successful if it produces tangible, sustainable results that support business goals. But you can choose your own definition – as long as it’s not just finishing on time and within the budget. If you’re installing software or printing a brochure or something like that, those are great outcomes. But for real change – a CRM system that changes the way you do business, or reorganizing a department, or launching a new service – you can do both and still fail: The operation was a success, but the patient died.

To get you started, here are the top 10 responses from our unscientific study, in no particular order.

• Urgency: Create a sense of urgency. This isn’t “the sky is falling” urgency or “heads will roll.” It’s giving people a compelling picture of the importance of the change. In an example from Kotter and Cohen’s “The Heart of Change,” a manager collected samples of 424 different kinds of gloves bought through existing disparate, wasteful, purchasing systems to demonstrate why the company needed to change to a consolidated approach.
• Management Support: The change has to have support from top management. Even better is to have a top manager champion the change. It’s a further demonstration of urgency and indicates that resources should be available. Don’t confuse this with a manager ordering change to happen; that generally won’t stick.
• Stakeholder Voice: All stakeholders need to have a place at the table, or at least have input. Several of the examples we found involved change designed and implemented by one group in a company that stalled because it didn’t fit for everyone affected by it. If everyone’s heard, the solutions will be more aligned with the business as opposed to off-the-shelf programs, which often fail.
• Define Success: What’s the desired outcome? A 10% increase in sales? A 10% reduction in errors? Installing a CRM system or an ERP system, or just changing reporting structures, aren’t clear pictures of success – describe what the landscape look like when the change is completed.
• Tie to Strategy: Assume that your teams want what’s good for the business. If you communicate a clear vision and a strategy, people have something to shoot for in a broad sense. They also will know when a big change initiative doesn’t align with strategy and vision, and may be less motivated to make it happen. If it is aligned, the odds of long-term success go up dramatically.
• Support Skill-Building: Change will stick much better if people have the training they need to implement it and to work within the changed system afterward. If it’s a new software system, training your tech team on how it works and how to implement it is important and so is training the folks who will use it and support it later on. If it’s an organization redesign that has people doing different tasks, make sure they have a chance to learn how to do those tasks.
• Collaboration: Lone Rangers don’t generate lasting change. They just annoy people. When people collaborate on a change effort, they all have skin in the game and commitment to long-term success.
• Accountability: Don’t confuse activity with results. Teams that are having lots of meetings may not actually be making progress toward a goal. But milestones have to be realistic and achievable. Don’t try to boil the ocean.
• Flexibility: That said, remember that change is going on around you too. So if the environment changes, be willing to bend the plan or even change the goals. And if you do, go back to all the other points about communication and clarity.
• Empowerment and Trust: Give the teams a clear vision of success and clear goals, give them the skills they need, and set them loose to find ways to get there. In most cases, they’re closer to the customers than managers are, so they know best what needs to happen tactically to achieve a goal. And they respond to being trusted much better than to micromanagement.

We looked at some of the factors that contributed to the failure of change, but they mostly tended to be the reverse of the points above. Plus, you don’t really want to learn about failure and if you want to learn about success, study success.

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