Tip of the Spear Ventures

A Family Office that behaves like Venture Capital | Private Equity | Business Consulting

leading change

How to Effectively Communicate Your Business Transformation Initiative – Five Tips!

By

The Point: In business transformation initiatives, everyone scrutinize every detail – Stakeholders, Investors, etc. So how can you effectively communicate so as to manage the discussion? At Tip of the Spear Ventures’ Business Transformation Consultancy — The Zeroing Agency — We’ve seen business transformations achieve less than full-potential results because of communication. So, in this post we’ll explore how to effectively communicate your business transformation initiative along with five tips… Enjoy!

Attend Webinars & Workshops – View our upcoming Webinars & Workshops

Business Transformation Communication

As a leader, you know that there are always a few challenges present in your business. Communicating with stakeholders (Your superiors, subordinates, and peers) during a business transformation initiative is perhaps the most difficult aspect. Leaders must be prepared for increased scrutiny of disclosures and reporting. Leaders are subject to rigorous performance discussions about their managerial-abilities. Leaders in business transformation situations must convey humility and confidence about any mistakes made, as well as a belief that they can correct them.

Leaders, Team Members, etc. will scrutinize every financial statement, report and public appearance for signs of weakness or strength, regardless of whether the business transformation is a formal restructuring or strategic redirection. Competitors will use any hesitation or ambiguity to win customers, suppliers and key employees. All these challenges are present simultaneously, when core business management is most challenging.

Communication during business transformation is not an easy task. Our research suggests that there are some guidelines for communicating with stakeholders. Leaders can improve their focus and support their teams by focusing on the team’s perspective, monitoring changes in support base, identifying future milestones and building trust/credibility.

Looking to Transform Your Business?

Download Your 37 page | 128 question Business Transformation Self-Assessment Workbook!

DOWNLOAD NOW

Five Tips to Effectively Communicate Your Business Transformation Initiative

Tip #5 – Communicate from the Team’s Point of View

To achieve a successful business transformation, there must be input from many stakeholders such as investors, board members, owners, employees, customers, suppliers, government agencies, communities, and unions. It is important to communicate early and often in order to establish a consistent narrative for stakeholders and convince them that the business transformation is a win-win proposition.

Investors hold the purse strings. Employees may be motivated to work harder if they acknowledge a company’s achievements and reward it by increasing their share price. If investors remain negative about a company for too long, it can lead to low morale and defections that ultimately affect the viability of any business transformation. A decline in share prices can lead to activists launching attacks or to a takeover bid for a company with a lower intrinsic value. In such a situation, news that is not good news is often considered to be bad news. This process can be accelerated and accompanied by increased risks from a lack of communication.

Communication with investors and team members is important to set the tone for all discussions. It is tempting to adapt messaging for different stakeholders. We have found that this can lead to confusion, conflicting narratives and increased risks. Some cases ended badly because the company misrepresented what it said to whom. We have also seen messages from internal management leak to investors and other stakeholders (such unions) or messages meant for employees confuse employees about company priorities.

Tip #4 – Watch for Shifts among Core Supporters

Even in times of great fortune, smart leaders invest their energy understanding the views and values of their most important supporters. These “intrinsic supporters” base their decisions on a thorough understanding of the company’s strategy, performance and potential for long-term value. They are more likely than short-term supporters to support leadership during a business transformation and to help the company’s stock prices move as it develops. However, we have found that supporters can shift more in times of business transformation than in times of crisis. This can indicate the difficulty of the transformation ahead.

Leaders can benefit from a thorough analysis of these supporters to help them assess the potential impact of any improvements. External agents such as public-relations or communications firms can help to identify pain points. Leadership must address these issues head-on and not hide behind pleasant statements and platitudes. For example, one company’s supporters praised management’s efforts in addressing hot-button issues raised during meetings between top supporters and the board of directors.

Tip #3 – Share a Specific Vision for the Future

A company going through a business transformation should have a clear and compelling strategic vision about its plans to fix the root causes of underperformance or distress. This meant that one client had to recognize its shortcomings in capital discipline and commit to improving return on investment and short-term results. It meant that another client had to integrate ten previous acquisitions that had tripled its size, reduce fragmentation and build a more efficient central support system.

A vision should include financial goals and an outline of how they will achieve them. The organization should be open about the tradeoffs it is making between saving money to improve the bottom line and investing in the business to sustain its performance after the business transformation efforts are complete. We have found that investors are open to reinvestment as a key part of long-term value generation. They are willing to support if they know what investments are being made and when they expect returns.

Although being too precise about timing can lead to problems, investors often value and sometimes demand a guidepost. One client company, for example, set a midterm goal to grow earnings margin by 18 percent to 20 percent. It regularly reported on progress towards that goal during earnings calls and in reports. A company that was part of a cyclical industrial industry business had been earning lower returns for five years. It set bold goals to return capital invested at or above cost. This goal included estimates of margin and cost improvements from its largest divisions.

Tip #2 – Build Trust & Credibility

Leaders of companies that are underperforming will not be able to regain trust and credibility with stakeholders until they have a discounted version of the improvements they claim. To regain trust, leaders must be transparent and open about their work and inspire confidence in their ability to do the right thing.

Tip #2A | Get Rid of All the Bad News. Leaders should be as honest as possible right from the beginning. This is a well-known principle in politics, but it also applies to businesses going through a business transformation. The opportunity for a new leadership team to admit all past failures and begin fresh is a wonderful one. One example: A company’s stock rose after it announced a write off of over $1 billion. Investors and stakeholders saw this as a sign that the new leadership team would take responsibility for past mistakes and make tough decisions about exiting investments that were still taking capital and management’s time. The task of a current leadership team is more difficult. Strong leadership is required to critique one’s actions and sometimes risk being replaced. Investors and stakeholders might be more patient when a business transformation is in progress, but they will wait for evidence to prove that it is working. If bad news keeps coming in, even the most dedicated stakeholder or intrinsic investor’s patience will be worn thin.

Tip #2B | Establish a Track Record of Delivering. Only communicate the goals that you are confident you can reach–using metrics and milestones that you review regularly. Then prove that you can accomplish them. Credibility is important in a turnaround. Nothing can undermine it more than making promises and then failing to deliver. Metrics don’t have to be strictly financial. One company, which had repeatedly missed its output and financial targets, focused its business transformation goals on operational metrics to show tangible improvement in performance. For instance, it tracked progress towards overall equipment effectiveness. Although these operational metrics weren’t directly related to top-line performance they provided stakeholders and investors with a way for them to monitor their leaders and hold them accountable for making improvements.

Tip #2C | Offer Incentives to Targets. Talk is cheap and sophisticated stakeholders and investors tend to gravitate towards leadership teams that are willing to put their money where it is needed. Structured compensation packages that directly tie them to business transformation targets and having board members and executives buy significant amounts of stock in a company are signs of confidence and commitment to keep their promises. One company presented a new incentive plan for business transformation that aligned incentives between leadership and frontline employees based on similar performance metrics. Stakeholders and investors responded positively to this plan, citing it as an example of the company’s focus and commitment towards turning a new chapter and a reason to keep their current position.

Tip #2D | Increase Transparency. Honesty can be helpful not only in the financial guidelines, but also for specific projects. Two made a habit of describing — during earnings calls or investor gatherings — 10-20 projects that would improve operational efficiency, cash generation, and worker behavior. The stakeholders and investors noted that they were more impressed by the clear picture of the transformations that these companies underwent and that they believed that the margin improvement was more sustainable than shortsighted cost reduction.

Tip #2E | Be Confident. Leaders need to project confidence in their ability to weather difficult times and compete with other companies, as well as a positive outlook on the company’s future. They must also show humility when faced with distress, regardless of whether it is due to past underperformances or external factors. Stakeholders and investors will be looking at word choice and tone to identify signs of arrogance or overconfidence that can result from denial of past mistakes.

Tip #1 – Brand the Business Transformation

Although branding a business transformation might seem like marketing to many executives, it can be a powerful way to create a focal point for the outside world and amplify the story to make the rebuilding effort more credible inside the business. For example, a client company gave a succinct name to its transformation efforts and included it in all of its external communications. Stakeholders, investors and media began to mention the project name in their communications. This was a shortcut for the company’s impressive transformation. It made internal and external communication more cohesive and gave employees some external recognition.

Brands can convey a feeling of new beginnings. A campaign name can be attached to write-offs, exits of failed ventures, or even boring PowerPoint templates for earnings call slides. This will reinforce a consistent, compelling story about change and help build critical momentum.

SUMMARY

in this post, we explored how to effectively communicate your business transformation initiative along with five tips. In business transformation initiatives, everyone scrutinize every detail – Stakeholders, Investors, etc. So how can you effectively communicate so as to manage the discussion? At Tip of the Spear Ventures’ Business Transformation Consultancy — The Zeroing Agency — We’ve seen business transformations achieve less than full-potential results because of communication. Why?

Communication is not an alternative to performance. A stock price can only be driven by beating expectations and punishing short-sellers quarter after quarter. Leaders can build momentum by communicating with investors and other stakeholders in a thoughtful way to help them raise a company that is struggling to create new value through business transformation.

Sam Palazzolo

By

I recently participated in a roundtable discussion on the topic of change leadership, and subsequently was interviewed about the Javelin Institute’s new program, “The BEST Leader in 30 Days!” (This program brings you 30 daily activities that’s recognized through research validation to equip you to be the BEST Leader possible… Not a Good Leader, or even a Better Leader… the BEST Leader!) If you’re interested in the program, you can email me at info@javelininstitute.org for more information. Here’s Part I of the interview, slightly edited for clarity and brevity:

INTERVIEWER: Sam, you’ve not only led change as a leader yourself, but also helped other leaders with change. Tell us a little bit about how in general you think about change leadership, and how you apply that in the businesses you work in/with?

SAM PALAZZOLO: Change leadership can be a complicated component of business success. Do it right, and the change leadership landscape will have plenty claiming stake in the successful outcome. Do change leadership wrong, and you’ll be looked at as sole proprietor responsible for the failure. I see many leaders who enter into situations of change without really having the skills or coaching to know exactly how to successfully change. The biggest component of change leadership to me is rooted in the leader. Specifically, does the leader have the perspective required to gather themselves from an emotional intelligence perspective. It’s very much an EQ moment versus an IQ one!

In my 2018 book, titled “Leading at the Tip of the Spear: The Leader” I examined how you can better lead others by leading yourself. As a matter of fact, my research concludes that if you can’t lead yourself, the likelihood of you successfully leading others ranges from slim to none. One of the insights that allows for successful change leadership is to have insight into where you want to go (Vision) and what change will be required in order to arrive at that destination. It’s easy for leaders to become impatient when leading change because while they can not only see where they want to go, but how they want to get there, they forget to share and lead others at a pace at which they can understand and withstand. In other words, those you’re leading need to not only understand/comprehend where they are going, but perhaps more importantly, what their role will be in getting there across a possible specific time interval.

INTERVIEWER: So, with change leadership in mind, how do you coach people?

SAM PALAZZOLO: At its simplest levels, to have success in change leadership, it’s important for leaders to know where they are, where they are going, and how it is that they are going to get there. Knowing these three aspects allows leaders to architect a plan for change. This architectural blue print will allow leaders to create a plan for change. This blue print is important because it provides stakeholders with a clear understanding of what is being built (Where they are going and how they will get there).

Having specialized in change leadership for the past two-decades, I know that change involves a series of phases that both leader and stakeholders go through. There will be successes, equanimity, and failures along the way. As a student of the J-Curve methodology, I learned that initial failure is typical and with proper corrections success can/will be achieved. Allowing leaders to see this realistic change leadership landscape prior to experiencing change provides the proper perspective. The proper corrections typically, but not always, come from communication gathered from direct-frontline associates affected by the change. Listening to their feedback provides leaders with context from which they can assess situations clearly for proper corrections. With this in mind, and it’s part of the “BEST Leader in 30 Days!” methodology, is conducting a daily reflection of your change leadership efforts/energies. Specifically, there are three questions that you’d want to ask yourself:

  1. What did I do today to further the (change leadership) initiative?
  2. What did I not do today to further the (change leadership) initiative?
  3. What will I do tomorrow to further the (change leadership) initiative?

INTERVIEWER: What are some of the mistakes you see leadership making in their attempts to lead? Specifically, what are the most common mistakes when leading change?

SAM PALAZZOLO: I’ve seen just about every type of mistake be made when it comes to change leadership. Typically, the mistakes cluster around the basic business building blocks of people, processes, technology, and/or financials. All too often leaders will fail to get involved those they expect to go through the change (so that they have input into what will happen on the way towards where the leader desires to go).

I’ve also seen leaders fail in change leadership when they put a “spin” on change. One leader, who’ll remain nameless, used to replace the word change with innovation. His reasoning for doing so was because he had read a study that showed people dislike change. While the study might be correct, changing the namesake doesn’t increase the odds of success. Remember, a duck is still a duck!

At a gym I worked-out in they had a huge sign on the wall that read:

“Until the pain associated with staying the same is greater than the pain associated with change, you will not do anything different.”

Think about that for a moment… If we associate pain with change and pleasure with staying the same, then you’ve got to be in a bad spot to want to change! Afterall, staying the same should be painless. But once staying the same is more painful, you’ll desire relief/change.

INTERVIEWER: You’ve had an impressive career to date (I don’t think you’re done yet by a longshot either!) You’ve worked with a Fortune 1 organization and now you’re working as a venture capitalist, consultant and philanthropist. Are there any differences between leading change at large vs. small organizations and for profit vs. nonprofit ones?

SAM PALAZZOLO: Thank you for the complement… I hope my career continues to grow/change in directions I can’t visualize at the current time. With that said, and to answer your question – Yes, there are differences. While the problem types are very similar (Think people, processes, technology, and/or financials), the scale is simply larger in big companies. This is the same regardless of entity formation (profit vs. nonprofit).

However, there is one key difference that I see play itself out time and again. That difference is that in smaller organizations the leader can make the difference. Whereas in larger organizations, there is less of a leadership impact, but the need to have good leadership in place across the organization exists. Think about it, if the organization is small and the leader is great, successful change leadership is relatively straightforward. In larger organizations, there are many more leaders to coordinate similar future change leadership vision with, and as such each needs to be able to share that vision precisely/similarly with their teams. Same vision and different share lead to unsuccessful change leadership typically (a disaster!)

https://tipofthespearventures.com/2306-2/