A friend of Larry's recently complained that he was having difficulty getting his management team to embrace and implement a much needed strategy to expand and diversify the company's product offerings. Eight months earlier, he had assembled the team and asked them to come up with some ideas and work out a viable plan. Priding himself on being a true believer in participative decision making, he left the meeting feeling a sense of accomplishment. He waited eagerly to see some results, but months passed with no action from the team. In meeting after meeting, they discussed and debated the pros and cons of different strategies but never arrived at a consensus.
Obviously distressed, the friend turned to Larry for help. "Why," he asked, "is nothing getting done?"
Larry had to hold back from saying, "Welcome to the real world," because this is a classic example of how difficult it can be to initiate change. No matter what the situation, it's always a struggle for people to change, even when they have a hand in developing the direction of the change and can see the benefits of it. After all, the unknown is scarier than the known, or as Harles Cone, one of our heroes in the world of consulting, says, "We always prefer the certainty of misery to the misery of uncertainty."
In the early 1990s, employees at IBM suffered through the misery of uncertainty under the powerful leadership of a new and demanding CEO. After floating comfortably for years on an unchanging but losing course, the company struggled through a challenging upheaval to transform itself from a dying behemoth into one of the most vibrant companies in today's marketplace. Most observers attributed the incredible turnaround to Lou Gerstner, who took over as CEO in 1993. His predecessor, John Akers, believed that networked personal computers would be the wave of the future and had set about dismantling the company's mainframe business. By the time Gerstner arrived, Aker's strategy had become conventional wisdom, and even though sales and stock prices were spiraling downward, everyone stayed the course without question.
They had no idea of the sea of change they faced when Gerstner stepped up to the helm. Direct, brusque, and unafraid to confront conventional wisdom, the new CEO questioned everything IBM was doing. He pushed to revitalize mainframes, taking the position that the company must once again serve as the source of business computing solutions and that mainframes should be a part of those solutions. He also demanded accountability for performance, something that had not been emphasized under Akers. According to one longtime IBMer, "Meetings in the pre-Gerstner days were congenial and pleasant whether anything was accomplished or not. ... Meetings with Gerstner are anything but pleasant now. He insists that excuses be replaced with results, and that if something isn't working, it's either fixed or it's scrapped immediately." Ultimately, Gerstner's aggressive, hard-nosed strategy worked. IBM's stock rebounded, profits rose, morale improved, and the company rose up to once again become an industry leader.
Whether it's transforming IBM back into a corporate giant, restructuring a department, or changing to a culture of absolute honesty, most changes, even those with positive goals, are painful and difficult. In observing the process of change in his own life and the businesses he consults for, Larry has identified three aspects of the pain involved in change, which he calls P1, P2, and P3. Understanding these elements can help managers implement change more effectively in their companies.
Have you ever owned an old, reliable, anonymous-looking car that you simply could not get rid of? As long as it ran well, looked half-way decent, and got you where you wanted to go, you were happy to hold onto it. In other words, you experienced very little P1, the pain of continuing with the old way. However, when old faithful started to run poorly, broke down with increasing frequency, and embarrassed you with the pitiful looks it inspired, your P1 started to grow. Slowly, you began to hate the car and dream of buying a new one. Before you knew it, your P1 (the pain of continuing with the status quo) had become too strong to ignore.
As your P1 became almost unbearable, you began to notice all the new cars cruising past you on the way to work, and you lusted after their shiny exteriors and stylish modeling. When a car commercial aired on television, you actually paid attention, picturing yourself behind the wheel of whatever model was being advertised. A new car would stretch your budget, and your old car was still getting you where you needed to go, but as your P2 (the pain of the desire you feel when you see something you want but don't yet have) grew, you felt that you simply must have a more powerful, plusher model that oozed prestige and luxury.
P3 was the price you had to pay for the newer, more expensive car: the dollars it cost, the concessions you made to your spouse, the hassle you endured negotiating at the dealership, the depreciation in the car's value as you drove it off the lot, etc.
Ultimately, when the pain of driving your old car plus the pain of wanting the new one outweighed the pain of buying the new one, you bought the new one. Think of it as an algebraic formula:
When P1 + P2 > P3, change will occur
When the pain of continuing with the "oldway" (P1) plus the pain of the unfulfilled desire for the "new way" (P2) becomes greater than the pain of changing to the "new way" (P3), people will change.
In the case of IBM, employees obviously needed a good dose of P1 to let go of conventional wisdom, and Gerstner, with his tough-as-nails approach, provided that dose. For Larry's friend who wanted to motivate his management team, our advice was to raise the P2 by setting some hard deadlines for implementing changes and promising worthwhile rewards for meeting them. At the same time, he lowered P3 by attending the planning sessions and helping the team work out a viable strategy.
As you work to transform your company's culture to one of honesty, straight talk, and integrity, you can manipulate these variables to help stimulate the change. By increasing the pain of P1 and P2 and lowering the anticipated pain of P3, you increase the odds that change will occur. For example, by insisting that people be outspoken and honest—and being ready to create discomfort for those who refuse to do so—you increase P1 (the pain of continuing with the old way) in the company. Then, by promoting the virtues of honesty, creating a safe environment in which to express it, and practicing it yourself, you help to raise P2 (the pain of desire to do it). Finally, by providing infrastructure, training, and institutionalization for the practice of absolute honesty, you lower P3 (the pain of getting there).
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