Change is the only constant in life. I was fascinated to learn that in the 1920s if you became a Standard & Poor's company, you stayed on the S&P 500 for 67 years.
If you are one of the ``500'' now, your tenure is questionable because there are so many factors of change that endanger a company's term.
This column will explore the importance of a tire dealership adapting to changes to meet new demands and remain a viable entity.
I'll investigate theories that can assist your organization to successfully implement changes.
There are both internal and external drivers of change. Samples of the external variety are:
* Information technology/technological advances; and
* The removal of a competitor in your local market.
Samples of internal change drivers may be the death or retirement of the founder of your dealership; the voluntary sale of the dealership; or the hiring of a dynamic salesperson who helps your dealership grow exponentially.
To demonstrate the importance of aligning resources to the factors driving change, let's explore a case study of a fictitious dealership we'll call Tom's Tires, a family-held operation that had been in business for 50 years.
Tom Sr. had started it out of the back of his pickup truck when he graduated high school. The dealership grew into a respected business with three locations in town, doing business in all three channels of trade-retail, commercial and wholesale-and also operated a retread plant.
The dealership had been profitable for years, but increased competition led to stagnation in sales growth and less than desirable future profitability projections. With Tom Sr. retiring, Tom Jr. became the company's new president. He had worked around his dad's business since he was old enough to walk, truly loved the tire business and recognized it had provided him with the funds to send him to college and set up a nice life for him and his family.
However, Tom Jr. knew that he needed to make some changes to meet his customers' needs better and continue to grow his business.
So he and the management team held an off-site meeting and concluded that their decline in sales growth was because their competition had implemented a means for their customers to place tire orders online.
Tom Sr. had made choices not to pursue the integration of new computer systems for the business, feeling that ``for the last 50 years this business was built on people relationships not on computer integration!''
Meanwhile, the competition took steps to provide their wholesale customers access to view inventory levels and place orders online on a ``24/7'' basis.
Driven by the lack of sales growth, Tom Jr., the new CEO and visionary, was making forays into providing tire solutions for the dealership's customers by exploring increased sales growth through computer network solutions for his customers.
He recognized that advances in the information technology industry had created a potential industry niche for tire companies that could turn these advances into business solutions for their customers. Much to his father's initial dismay, Tom Jr. decided to capitalize on this niche.
In order for Tom Jr. and his dealership to meet his new goal of increased sales growth from online orders, three internal drivers of change within this organization were needed: managerial decisions to support the new business objective; re-aligning employees' needs with the new organizational goal; and structural reorganization.
After completing the initial research and implementation, the new online ordering department met Tom's start-up business initiative of becoming 20 percent of the company's total revenues. The managerial decision to support their customers and expand the business by providing computer network solutions was gaining momentum with every new order.
Although Tom Jr. and his management team were very excited about the new growth in the business and his father's initial skepticism had turned into overwhelming support, there were still some wrinkles that needed to be worked out. Tom Sr. was hearing from his golfing buddies that the new ordering system was great but that they were experiencing some delays in delivery, follow-up phone calls and ``occasional system delays.''
Also, the founding generations said, ``Just because I'm ordering online doesn't mean I never want to see a salesman again.''
This change in company strategy created a gap in employee skills precipitating the drive to change employees' roles and upgrade their abilities to meet customers' demands for networking solutions. The new department set up to handle online requests required employees to be trained on the new platform in the computer system.
These demands also necessitated reorganizing from a department to a team-based structure so that decisions could be ``pushed down'' within the organization. That would give employees-rather than just management-input in the operation.
Also, the online business incentive pay was adjusted to include all the members of the team in order to stress the importance of prompt customer service, as well as follow up by salepersons and immediate resolution of slow downs in the system.
To implement a change strategy within an organization, a leader must assess a number of factors:
* The readiness of the organization for change;
* The potential obstacles or restraints to change;
* The likelihood of obtaining middle management's support; and
* The leader's ability to convince employees that the ``benefits of a change will overshadow the personal costs.''
These points should be explored every time an organization is considering a change.
Change readiness: Tom's Tires knew it had to change because its sales had stagnated. Of course, the willingness and readiness to make a change was greatly improved when the company's initial introduction into online ordering provided it with 20-percent growth.
Obstacles: Impediments the dealership encountered included human resource problems such as improving the employees' skills and making managerial decisions like team vs. department organization and establishing performance benchmarks and incentives.
Middle management support: Tom's Tires' middle management bought into the CEO's new vision because the business expanded. However, ongoing communication with upper management is needed to implement change successfully.
Employee benefit recognition: Although initially resistant, employees became committed because the company made a concerted effort to communicate the changes to them, address their concerns and offer training and reward systems.
As Tom's Tire embarked on a course of change, there were many examples of resistance Tom Jr. encountered. Initially, he'd have to sell his father and the management team on the concept. Also, the increase in direct costs of the changes would be constantly pointed out by a prudent CFO.
Perhaps the biggest obstacle to overcome would be the divergence of opinion about ``how much money needs to be spent in order to make money.''
Everyone seems to know how expensive it is to open up a new location. If your dealership has expanded, then the cost of brick and mortar, advertising the new location, relocating employees, buying or moving office furniture, etc. is quantifiable.
However, the costs associated with implementing a new computer system or platform within an existing system is often difficult to nail down to within a 5-percent error margin. Why? Because you may need to hire or train employees in a new skill, and their aptitude in acquiring that skill may be varied.
Another example of what Tom had to overcome while pushing his changes was the idea of potentially losing face in the marketplace if the company was unable to get the new ordering system up and running smoothly.
Two of the greatest issues we often experience when instituting change are ``fear of the unknown'' and ``breaking routines.'' A break with routine creates anxiety, turnover and low morale. Tom Jr. fought that resistance by communicating with employees and rewarding them-through incentives-for new positive behaviors.
Leadership styles influence an organization's acceptance of change. Because Tom Jr. was forced by business into being an agent of change, you can call him a ``transformational leader.''
That's someone who develops a vision and obtains the commitment of his middle management and his employees through communication and alteration of the company's structure to support the vision. He created an environment where performance in support of the vision was rewarded-in this case with incentives.
What if Tom Jr. had taken a more authoritative or directive leadership approach?
With that approach he would have been the only person processing the new information; then he'd have to issue orders for his people. A participative, achievement-oriented style was preferred since the company had complicated tasks that not only required the participation of skilled employees but also the input of their customers, as well.
Theories on change
Not to get too technical, but in my research for this column I found that there are a few globally recognized change management approaches. They are Lewin's Force Field Analysis Model; the appreciative inquiry; and the whole-scale change models.
Lewin's model involves the diagnosis of forces that drive and restrain organization change. The driving forces toward organizational change may be external influences like competition or internal forces like a new leader. The restraining forces may include the costs of the change or breaking employees' routines.
Change is accomplished when a company's agents of change unfreeze the organization's current thinking or actions and refreeze them in the new desired thinking or acting mode. Lewin's model is important because it gives a ``step-by-step framework for diagnosing, implementing and evaluating a change process.''
``Appreciative inquiry,'' as a method to change, attempts to generate an image of a new and better future by exploring the accomplishments prior to the change. This transformational tool focuses on learning from past success by collecting data from interviews, obtaining common themes and exploring propositions, developing and implementing action items and then evaluating the implementation.
I would choose this change method for Tom Jr. because the dealership already had success to build upon. By following a process of asking employees for their input, retraining and involving the customers and middle management, Tom Jr. has achieved the organization's commitment to build on its existing strengths and make the new business a new asset.
When an organization needs to be altered culturally, structurally, procedurally and on a system-wide basis, whole-scale change is the appropriate model. This model's core belief is that system-wide problems cannot be resolved by departmental- or problem-oriented solutions.
This approach is suggested if a business-which is in a state of complete financial disarray-is acquired.
Wrapping it up
Change can be a lot of things, but no matter how the benefits are spelled out, it's often a scary proposition. Author John Steinbeck observed, ``It is the nature of a man as he grows older...to protest against change, particularly change for the better.''
A business cannot simply rely on past successes to withstand the internal and external forces that may threaten its profitability. So in order to retain a company's viability, its leadership must maintain a forward-thinking vision, be vigilant in recognizing the need for change and have the skill and leadership style to guide the organization through the process of change.
A tire executive I once worked with had a rock in his office that said something like, ``Change is the only constant.'' I have often thought about the truth of that statement over my last 20 years of working.
Interestingly, that executive has been in the tire industry for 40 years. He has been through countless re-organizations, two acquisitions, and is fit, hard working and competitive.
However, I would say that his greatest skill is that he understands the message of the rock.