Executive Times






2005 Book Reviews


You’re In Charge---Now What? By Thomas J. Neff and James M. Citrin


Rating: (Recommended)




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Thomas Neff and James Citrin of Spencer Stuart have collaborated on a new book geared to executives taking on new leadership roles, titled, You’re In Charge---Now What? The authors present an eight point plan for success:

1. Prepare Yourself During the Countdown

2. Align Expectations

3. Shape Your Management Team

4. Craft Your Strategic Agenda

5. Start Transforming Culture

6. Manage Your Board/Boss

7. Communicate

8. Avoid Common Pitfalls


While I usually hate these forced point—plans, there seems to be a lot of sound advice in You’re In Charge, and the authors claim the advice comes from their interviews with 50 successful executives, some of whose stories and anecdotes are presented throughout the book, including recollections of what went wrong for some of them.


Here’s an excerpt, from the middle of Chapter 5, “Culture Is The Game,” pp. 154-161:




The issue of trying to transform a culture, especially a deeply embedded one from many years of the corporate equivalent of geological layering, extends well beyond your first hundred days. Sometimes it takes years. The critical point for the early days in a new role is to be highly sensi­tized to the issue, make an effective cultural assessment, and plant the seeds for the long-term change you are committed to achieving.

Arthur Martinez confronted an intractable legacy culture at Sears when he became chief executive of Sears Merchandise Group in 1992 and once again when he became chairman and CEO of Sears, Roebuck & Co. in 1995; he remained CEO until 2000. “I was de­scribed as the first outside hire since General Robert E. Wood,” he says. (Wood left rival Montgomery Ward, where he had been vice president, in 1924 and soon became president and, eventually, chair­man, a position he held until 1959.)

When Martinez came to Sears from Saks Fifth Avenue, where he had been vice chairman, Sears’s retail business was in a tailspin, the catalog business was hemorrhaging money, and the company as a whole had posted more than five straight years of disappointing financial performance. “There was no question that there was a burning platform,” Martinez recalls. “The fact that there was a burning plat­form by itself should have given permission to invite massive cu1tural change. But we were suffering from a classic insider syndrome, where the only reference point was what we had done five years ago,” Mar­tinez explains. He set out to change that.

How well did he succeed?

“Oh, boy.” Martinez sighs when asked about the results of his efforts to change Sears’s culture. “I thought at the time I was doing better than I actually was. In retrospect I would give myself a C-plus grade on meaningfully impacting the culture of the company. It remains one of the most profound challenges that legacy companies like Sears have to face.

“The positive energy that came of out my early days made some people—and me—think that we had that culture issue fixed. The un­fortunate fact, though, was that there was deep-seated resistance to change—a feeling of ‘This guy will be gone in three years and I’ve had my job for twenty, so why should I change? With three hundred thou­sand employees, the problem is inevitably in the middle. It was rela­tively easy to get the top management in line—if not, I could fire them—but I couldn’t do that far into the organization. I couldn’t per­sonally determine, for example, who in the tax or logistics department was obstructing progress.”

Martinez started with a bang, closing 125 retail stores and laying off 35,000 employees out of a then-payroll of 325,000—and in the process earning the nickname “the Ax from Saks.” But a combination of inertia and resistance hobbled his efforts: “It became harder as we went along, especially as our momentum slowed down, because peo­ple started to revert to old behavior patterns. Rather than the new culture taking hold and accelerating momentum, after four years it started to slow down, and I realized we hadn’t changed all that much. We had calmed the surface, but underneath there was massive reluc­tance to profound organizational change.”


Alan Lacy, Sears’s former CFO who succeeded Martinez in 2000, points out that a hundred-year-old legacy can also have its good points: “We had a culture that wanted to do the right thing and people who wanted to do a good job for their customers. But we inherited a culture that had become comfortable in losing competitive advantage and that tolerated things not working far more than anyone should. Yet ironically, it also didn’t feel as if it had the ability to change.

“Because we had such an illogically designed structure, no one had any accountability or authority As we transition to a new structure, ac­countability is very clear. The metrics are clear. The expectation that people will improve their performance is there. And in fact, the team­work environment is much better, and it’s a much more customer­-driven culture than before.

“I thought I got good traction from the beginning, and it continued to build. We have made wholesale changes to the business; we have one-third fewer salaried management than we did eighteen months ago. We had gotten used to running the business with an average group of people. Coupled with good talent management, that meant we could quickly force-rank our employees and figure out who was in the bottom third, and largely speaking, we got rid of the bottom third pretty quickly.

“When you go through that degree of structural change,” Lacy adds, “in hindsight it turned out to be more of an opportunity for cul­tural change than I thought. We disoriented people so much that we couldn’t go back; things were so different that people lost most of their reference points, so they couldn’t regress to the old ways be­cause there was nothing remaining to regress to. In fact, we could ac­celerate the pace of change and make the change stick better.”





Why has Lacy been able to make progress while Martinez found it more difficult to get traction? Gary Kusin made a comment referring to his predecessor at the top of Kinko’s that could just as easily apply to the situation at Sears or any other company with a strong cultural legacy and the exalted memory of a founder. “There are situations where you have such a strong founder and culture that the first out­side leader kills himself trying to break all the molds,” Kusin says. “He may do all the right things and still lose. I believe you can make a re­ally good argument that in our case the first guy in here was doomed, no matter who it was. And there are those situations where you never want to be the first guy in; you would rather be the second guy in.”

Still, whether first in or second, being a change leader is a per­ilous proposition. “New change agents don’t make it through the en­tire process most of the time,” says Robert Tiliman, former CEO of retail giant Lowe’s. “They normally get assassinated because they build up so much ill will among other people within the corporation that they subsequently are ostracized.”

The bottom line is that in order to minimize your risk, you need to really familiarize yourself with the subtleties and idiosyncrasies of the culture, understand the power bases, recognize that a mandate from above may not automatically ensure a mandate from below, and not try to change the world in your first hundred days. Patience is often an es­sential virtue when it comes to cultural transformation at a large scale.


At Schneider National the culture change was done at a deliber­ate pace, carefully orchestrated by a management team that sought to change itself as a way to change the organization. CEO Chris Lofgren explains, “From the company’s roots and even into the early nineties, we were a very strong operational company. Our predominant prod­uct was the truckload product. Over time we have broadened our service offering. Part of our challenge was that there was an almost exclusive practice of promotion from within. As a result, we didn’t have all the leaders or the diversity of perspective we would need five years from now. To accomplish the growth trajectory we put forth, we couldn’t develop the necessary human capital quickly enough; so we would need to attract them from the outside and retain them. It’s crit­ical to the health of any high-growth organization to do this in a bal­anced way. Balance is paramount when bringing talent from the outside, because there are a lot of capable people in the organization. So it’s more of a rounding out than a wholesale change.”

Lofgren himself epitomizes that rounding out of the company’s culture. He came to Schneider as an outsider in 1994; today he is its CEO.




As Lou Gerstner says, “Changing the attitude and behavior of hun­dreds of thousands of people is very, very hard to accomplish. You can’t simply give a couple of speeches or write a new credo for the company and declare that the new culture has taken hold. You can’t mandate it, can’t engineer it.

“What you can do is create the conditions for transformation. You can provide incentives. You can define the marketplace realities and goals. But at some point you have to trust. In fact, in the end, management doesn’t change culture. Management invites the work-force itself to change the culture.”

There are many ways to word that invitation to make it even more compelling.


Adopt New Measures of Success.

One of the most effective ways to get people to change their behavior is to change their measures of success. This step can be done in the relatively early days of a new leadership position. To instill a perfor­mance culture at Gillette, for example, Jim Kilts instituted a review system that was linked directly to the P&L and market share and backed it up with a robust incentive program. These are not general objectives. Instead, managers are told, “Here’s your budget target, and here’s your market share target. They’re metrics that can be measured. So if you’re hitting your numbers, you win, and if you win, you’ll get paid more in bonus than in the past. And if you don’t win, you’re going to get significantly less,” Kilts explains.

Choosing the measures, defining the relevant market, and estab­lishing performance metrics is more easily done in some businesses than others. In consumer products, such as Gillette’s razors and Du­racell batteries, the markets are well defined and carefully measured by firms such as A. C. Nielsen and IRI. In other businesses, however, the lines are not as clear.

At Gap Inc., for example, Paul Pressler realized in his early days that the management team needed a common set of metrics to create more shared accountability for overall corporate performance and shareholder value. Existing metrics focused on performance within each brand, without creating a strong link to corporate financial goals. This approach reflected the company’s historically decentralized ap­proach to managing the business. As a result, the management team was accustomed to maximizing performance within its respective divi­sions, but was less focused on ensuring that what was good for a par­ticular brand was also good for the company as a whole. While this decentralized approach had worked well for the company throughout most of its history, it had unintentionally created too much internal competition and ineffective use of corporate resources and capital It also contributed to the Gap, Banana Republic, and Old Navy brands converging their designs and going after the same customer segments. To change behavior, Pressler implemented a new compensation struc­ture for his executive leadership team that incorporated incentives for corporate performance as well as divisional results. “I got a lot of re­sistance initially,” Pressler recalls. “People asked, ‘How am I to be held accountable for something I don’t control?’” Pressler’s response: “You do. We’re a team, sharing responsibility and accountability for what’s best for our brands and for our company. We will set our agenda and determine our priorities together.” The result: “We still had to learn how to work effectively as a team, but this helped us begin to change our thinking and our actions.”



Institute New Operating Processes.

You can also encourage and reinforce the new behaviors by making changes in the operating process, such as instituting regular staff meetings with clear-cut agendas. As described in Chapter 3, Ed Breen set up what he calls the “Jack Welch calendar” at Tyco: consis­tent operating meetings with all the lines of business, a leadership de­velopment process, and a strategy process. “You spend eight to ten hours with a team, pounding questions at them, and you learn really quickly who knows what and who’s behind,” he says.

This is in addition to the hour-long staff meeting every Monday morning with all the direct reports to discuss what’s going on, spot­light items of major importance, and follow up on the previous week’s to-do list. “The team has come to really value it,” says Breen. “They feel more involved and get to know what everyone else is doing. And it’s a great way to spread best practices.”


Choose a New ManagementTeam.

Making changes in your management team is another way to begin changing the culture. This requires a delicate touch. Many leaders coming from the outside bring a trusted confidant who can leverage and amplify the change strategy. Jim Kilts, for example, routinely rides with a three-person posse composed of longtime associates Peter Klein, who became senior vice president of strategy and business development; John Manfredi, senior vice president of corporate af­fairs; and Joe Schena, vice president of planning. Gary Kusin refused to take on the top job at Kinko’s unless he could bring along Dan Con­nors as strategy chief.

It is, however, all too easy to create resentment if you bring in a personal SWAT team. When Jim McNerney left GE to become CEO of 3M, fears that 3M would become “3E” were somewhat alleviated because he did not arrive with an army of GE executives in tow.


Set New Expectations.

You can also invite the management team itself to make the necessary changes. When Bill Schleyer became CEO of Adelphia Communica­tions, the troubled cable company had to change its culture. It was in bankruptcy, and criminal charges had been filed against the former CEO. Almost exactly on the date that would mark his first hundred days on the job, Schleyer threw a metaphorical bucket of cold water on the senior management at Adelphia to get them to take notice of the new order. “We had our first meeting of forty members of senior management in April 2000, to roll out our strategy. Under the previ­ous CEO, Adelphia made all decisions at the top. In fact, managers were given incentives not to make decisions and were reprimanded when they did. I said, ‘From now on you will be held accountable for results against the aggressive targets we’ve set. If you can’t operate in that environment, you need to get out of the room right now.’ That’s a strong statement: This is the behavior we need, and if you can’t han­dle it, you need to leave. But we can’t be as patient as we normally would like to be. Urgency is one of our core values now. We have to achieve industry-level performance in short order. If we emerge from bankruptcy and aren’t operating at industry level in terms of performance and profit margins, we’ll be vulnerable.”


Identify Change Leaders.

You can search out the people who want to change and make them ~ your microphone to broadcast the new philosophy. When Gary Bridge arrived at Cisco Systems to lead the company’s highly regarded Globa Internet Business Solutions Group, he found “a couple of raging wars going on. People wouldn’t share resources and were spending as much time knocking each other down as they were building up their own case. The team had taken control of the part of their lives they could control, and they’d gone back into their silos.” So he assessed which of the top leaders shared his vision and would have the credibility of the broader organization to become leaders by example and spokespeople for the new approach. This worked, according to Bridge, because “if you went below the top management level, there was this really skilled group of people that hungered for something new. I also spent a tremendous amount of time on getting the team out of their proverbial caves into common spaces, establishing a common vocabulary so they could learn to listen to each other. I made sure that I didn’t arbitrarily join sides but that all of my decisions were very fact-based, and I al­ways explained why I did what I did.” And these messages were simi­larly expressed by the other leaders of the division. “Team building was number one and getting people in proper assignments with the proper metrics. Number two, I was consistently told that Cisco is a place that lives on stories of your customer successes. It’s a customer-obsessed company. And this is one of its hallmark strengths.”


Lead by Example.

Critical to all aspects of leadership and to cultural change in partic­ular is modeling the behavior you want others to emulate. “If em­ployees don’t see the key changes in what you say and do and in your behaviors and mannerisms, it’s hard to change the culture,” says Tyco’s Ed Breen. “The culture reverts to what it was. If you’re com­ing into a situation where you need to change culture or reinvigorate it or, in my case, create one, you’d better be demonstrating it real quickly.”


Readers looking for sparkling new insights aren’t likely to find them in You’re In Charge. What’s to be found and used is a structure and a thoughtful approach to taking on new responsibilities. There’s timeless wisdom in You’re In Charge than can be distilled down to: listen, learn, underpromise, overdeliver. Now, get to it.


Steve Hopkins, March 23, 2005



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The recommendation rating for this book appeared

 in the April 2005 issue of Executive Times


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