If investors aren’t satisfied with a company’s growth rate, they might try to replace the CEO. The incoming replacement typically has about eight weeks to figure out what’s wrong at the venture and how to fix it.
A quick turn onto a new path is desirable so that the company can grow faster and investors see the new executive as part of the solution. But that’s not always easy because the new chief inherits the people who were responsible for the old strategy. Those staffers may feel threatened by a new strategy and try to undermine it.
The new leader could replace them but at the risk of losing valuable talent. Instead, a CEO might be better off managing a process to help employees see the company’s future as he or she does. Then all the company’s oars are rowing in the same direction.
John M. Collard, chairman of Annapolis, Md.-based Strategic Management Partners, conceived of turning around a company company as a five-step process. His white paper that named each of steps in the title: ‘Management Change, Situation Analysis, Emergency Action, Business Restructuring, and Return to Normality‘.
Shane Buckley put his own spin on enacting dramatic change, by using seven steps, after becoming the CEO of Xirrus in the summer of 2012. As he explained in an interview last week, he saw that Xirrus, a commercial Wi-Fi firm, had a presence in schools and universities but needed to expand its markets and selectively outsource activities previously done in-house to lower costs.
“I changed our business and a key part of that was outsourcing many of the activities that Xirrus had done internally, such as manufacturing,” he said. “I knew that implementing this … would require a big cultural change.”
Buckley could have fired the employees, replacing them all with people who saw things his way. But he decided to bring in an outside management consultant, Judy Issokson of Issokson & Associates, to help him lead the process of changing Xirrus’s culture.
The following seven steps that Buckley took to change Xirrus’ strategy without replacing all its people could be of help to other firms.
1. Meeting with all employees
Buckley started off as CEO by meeting with people both inside and outside the company. “During the first six to eight weeks, I had a chance to figure out what was working and what needed to be fixed,” he says. “I met with all customers and partners. I also spent about 30 to 45 minutes with groups of six to eight employees to ask them what is happening.”
Listen to customers, employees, suppliers and industry experts to figure out the markets to target and capabilities the company needs to win.
2. Creating a safe zone to talk about the truth
People are naturally afraid when a new CEO arrives. Buckley hired Issokson to help dispel that fear. She created ground rules to help employees feel confident that they would be safe if they told her their true feelings about Xirrus.
Explained Buckley: “I was working with Judy to help us identify the barriers to getting Xirrus where we wanted to be. I realized that since [the company was] going to outsource activities like engineering that Xirrus had always done internally that the engineering staff might have different skill sets than what would be needed. But I wanted people to feel free to express their concerns” in a safe environment.
When a CEO’s vision depends on radical change in the company’s strategy, it’s a judgment call whether to keep most of the employees. If the decision is to work with current employees, the leader needs a way for them to replace their fear of change with enthusiastic buy-in to the CEO’s vision. A CEO who’s great at managing change can accomplish that. Otherwise, hire an experienced consultant (after checking references) who has done this for similar companies.
3. Getting ideas for future goals
Buckley wanted people in the company to articulate what they believed needed to be done. He met with his executive staff and the whole company, he said. Over four to six weeks people were asked, What do we need to do? What are our key objectives? He was not given the answers directly, though.
Hiring a consultant who’s good at managing a process leads staff to feel like they came up with the same goals for the company as you did. The key thing to remember is that if your people believe that the company is implementing their ideas, they will embrace those ideas much more enthusiastically than if the ideas are forced upon them.
4. Asking questions about key objectives
Issokson analysed the responses and presented her analysis of the top five priorities.
CEOs should react carefully to ideas proposed by their staff. If people feel that the CEO is taking pot shots at their ideas, they’ll turn into resentful sheep rather than enthusiastic problem solvers. So ask questions about the ideas proposed in a way that’s respectful and seeking greater understanding.
5. Allocating resources to the priorities
And after listening to the responses, Buckley decided which resources would be assigned to meet the key objectives and in which sequence. One priority was to make Xirrus a company that was easier for customers to do business with. “We decided how we would change the way we would bring in customers and how we would respond to their questions,” Buckley says.
Determine the urgent priorities and be sure they get the capital, people, technology and other resources needed to make them happen first. If the most important priorities are realised, the company will survive long enough to get additional resources for less mission-critical ones.
6. Sustaining momentum
When priorities are set and resources allocated accordingly, people wonder whether the company will follow through. To that end, leaders must model the behavior they want to elicit from employees. Said Buckley: “You have to be authentic. Leaders have to do more. People want to see that you are working harder than they are. And they ought to feel free to give the leader feedback and keep the momentum going.”
Remember, people are always watching the CEO. The ones who want to get ahead will do the things accordingly. If the CEO is working harder than they are, they will try to keep up or even exceed his or her efforts.
7. Linking measurement systems to priorities
Lastly, the way people are measured must be consistent with those priorities. Buckley decided that if customer requests were to be truly valued, “we can’t keep measuring them just on whether they met their sales target. ” He added,
“We need to start tracking how satisfied customers are as well.”
Communicate clearly how the new strategy will affect staff recognition. Then change the measurement systems to line up. That will go a long way to getting staffers to make the company’s top priorities happen.
And Xirrus is planning an initial public offering next year, according to a March story in the Pacific Coast Business Times. Buckley claimed last week that Xirrus is thriving, growing 40 percent year over year, it added 70 people and seeking new markets with a new footprint.
“On a human capital level,” he says: “People are more engaged, they work together across functions, and the company is moving faster because trust has replaced fear.”
“Xirrus has executed a masterful expansion of the business since Shane Buckley joined,” wrote Steve Krausz, general partner for US Venture Partners, whose firm invested in Xirrus. “In my 29 years of venture investing, I have seen few companies go through such a successful transformation as Xirrus,” he says.
“Xirrus now has a complete product offering that has anticipated the explosive growth of mobility, video and cloud management of Wi-Fi services. The customers have responded with great enthusiasm as enhanced video and mobile services are being demanded by both consumers and enterprises at an ever accelerating pace.”
Editor’s Note: This story was updated to include Steve Krausz’s comments. His title was later corrected to reflect his role solely as a venture capitalist whose firm invested in Xirrus. Also, Xirrus CEO Shane Buckley’s comments have been updated to indicate that only one area was outsourced: manufacturing.
This article was originally posted here on Entrepreneur.com.