Saturday, 5 November 2011

Instilling a sense of crisis – Crisis v Urgency in change management

Despite not officially being part of any change management model, instilling, establishing or creating a sense of crisis can be virtually considered as a primary component of modern change management.
One of the most notable, arguably the most notable, example of successful implementation of this ploy dates back to the mid 1990s when Mr Kun-Hee Lee, chairman and son of the Samsung Group founder, appointed Mr Jong-Yong Yun as the Group president and CEO urging him to “change everything except his spouse and children” (Lewis, 2005).
Mr Yun’s task was indeed particularly tricky and ambitious; notwithstanding, he was able to succeed beyond all expectations. His recipe for success? As claimed by himself (Yun, 2003), driving change encouraging a sense of crisis and instilling in the business management the conviction that the company could be forced into bankruptcy any time soon.

In 1997, by reason of the Asian economic downturn Samsung, as all of the other South-Korean organizations, was deeply under pressure; so bleak was the general economic scenario at the time as to require an IMF bailout. This was indeed a case of real financial crisis when organizations were experiencing severe hardships and were literally struggling to stay afloat.

Mr Yun, who might have initially hardly appeared to be the ideal candidate to spearhead the particularly challenging and tricky process of change entrusted to him by the Samsung chairman, showed very soon and contrary to all expectations not only to be the most suitable person to perform the daunting task, but also to have unrivalled business capabilities. The course of action he implemented to enable the business to leave the danger zone it occupied included the difficult and tough decisions to: dismiss 24,000 employees (a third of the company’s overall workforce), sell $2 billion of non-core businesses that were losing money, drastically reduce overheads, dismantle the company rigid management structure and massively invest in technology, design and human capital recruiting about 300 American MBA graduates and 700 PhD-level engineers.


The economic crisis was actually still there, but Mr Yun managed things so exceptionally well insofar as to attain a spectacular success, not only from the financial point of view but also in terms of the repositioning of the corporation in the electronics market. Previously known as a cheap consumer electronics manufacturer, thanks to Mr Yun Samsung was thus acknowledged and regarded as a global manufacturer of high-end electronics products.


Instilling a sense of crisis has been ever since regarded as a permanent tenet and pillar of Samsung corporate culture, Mr Yun did not want the business management to ever forget the lessons learned during the dreary downturn which severely affected the organization during the mid-1990s; as he used to say (Yun, 2003): “We must not lose the sense of crisis that helped us change.


Differently from many other executives, Mr Yun was well-aware of the circumstance that complacency might have been widespread within the company and of the likely resistance which would have been opposed by managers when pushed beyond their comfort zone. Mr Yun’s credo, nonetheless, was basically underpinned by the certitude that the corporation could have not rested on its laurels, but had rather to remain constantly vigilant: “When everything goes smoothly is the time when things go wrong” (Yun, 2003).

Creating a sense of perpetual crisis may indeed prove to be detrimental for employees’ nerves, but Mr Yun applied this strategy with extreme and careful consistency. His approach was not based on generating and regenerating a sense of crisis whenever the corporation had to undergo a restructuring or change process, but on relentlessly doing whatever it was considered necessary to firmly embed this belief in the organization’s culture, trying thus to develop and establish a culture of perpetual crisis (Fortune, 2005).

Amongst Mr Yun’s statements one in particular appears to be extremely interesting and noteworthy. Whereas many executives were fervently discussing the importance of the role played by business strategy and its implementation for organizational success, Mr Yun was supporting the idea that what actually makes a difference is not business strategy, but rather organizational culture; insofar as claiming that the success of Samsung was not due to its business strategy, but indeed to its corporate culture (Fortune, 2005).


Mr Yun constantly and actively spread a philosophy of imminent disaster within the organization with the ultimate intent of fostering and creating a robust, broad, common cultural ability to deal with crises (Fortune, 2005). He basically seemed to aim at replacing the dictum “change is always with us” with the motto “crisis is always with us.” Implemented in such a way, the sense of crisis rather than causing high levels of stress and anxiety should contribute to make individuals ready and used to crisis and to effectively deal with this. At the same time, it is also particularly important to avert that the circumstance individuals get used to crises might, also inadvertently, prompt these to belittle and weaken the intensity of the efforts required to face these and cause employees to underestimate the importance of the likely remarkable consequences produced by these events. The fact individuals become acquainted with crises should not clearly lead to these considering crises as less challenging, requiring low levels of attention and let alone contributing to generate complacency amongst the organization management.


A company cultural ability to effectually cope and deal with crises may indeed enable this to gain competitive edge vis-a-vis those which are not ready to face unexpected financial disasters and downturn periods.


Whether the sense of crisis should be perceived by individuals as whether these “are constantly living besides a bomb which could explode anytime soon”, it is hardly imaginable that employees may ever perform their duties properly and effectively. In contrast, whether the business culture is underpinned by the idea that “in the event of crisis we are ready and capable to promptly and effectively cope with it and we know how to deal with it”, the attitude and readiness to crisis may unquestionably prove to be an effective contributor to organizational success and help employers to gain competitive edge over their competitors.


Andy Groves, former Intel CEO chairman, definitely represents and additional strong supporter of the “instilling a sense of crisis” tactic as an effectual means to facilitate the introduction of change. To this extent, he indeed regards as particularly significant also a “healthy dose of paranoia” (Kandell, 2005).


The methods used to instil a sense of crisis are basically the same as those which can be used to create or establish a sense of urgency; the different result essentially depends upon the extent, the degree and the gravity these entail. Having recourse to the one or the other should sorely depend on the evaluation of the expected effects which these are likely to produce on individuals.


A few examples of the reasons which may be used by an employer to underpin the sense of crisis are:

- The possibility that markets for cash cows may collapse overnight,

- Competitors might bounce back,

- Chinese companies will inevitably and aggressively take away the market (a strategy which Samsung knows very well from its history),

- Product innovation is the only remedy,

- Cutting cost and complexity is needed to lead the innovation pace,

- It is necessary to be the first in the market and to market (adapted from Fortune, 2005).


A few examples

3M Brazil
In 2007, 3M Brazil decided to introduce a lean manufacturing approach in its factories. The change process was mainly driven “by participative middle management support”; notwithstanding, the desired objective was actually attained when the business CEO motivated change creating a genuine sense of urgency.


The organization had already planned to double inventory turns, but the need to attain that result had emerged as even more important after the business CEO participation at the Brazilian Lean Summit organized by the Lean Institute Brazil, during which several companies revealed to record much better inventory turns performances thanks to the introduction of the lean manufacturing or production methodology (Calia and Barbeiro, 2007).


Enterprise Denmark
Enterprise has been for a long time the only technical contractor of the Danish State Railway (DSB) and the only operator of the national rail network (Bane Danmark). When the railway industry was liberalised in Europe, the organization had to decide whether to expand its activity abroad or continue to maintain its operations within the Danish boundaries. The ambitious top management appointed in February 2007 decided to expand the company activities throughout the European territory; the headquarters planned hence to become the main technical contractor in Scandinavia by 2010 and in Europe later in 2015.


To implement the change process necessary to pursue its strategy within the identified timescale, the organization business leaders decided to adopt the Kotter’s 8-stage model, with the exception of the first stage, to wit: create urgency. The entire workforce was actually aware that change was required and to some extent employees were also prepared to change, but the dominating feeling was that change should have occurred earlier and that it might possibly be too late to introduce it. Establishing a sense of urgency was hence considered by the Enterprise top executives as a pointless stage and arguably likely to produce counterproductive effects. More in particular, managers were afraid that urgency could have brought frustration, rather than motivation to change. The organization management instead of establishing a sense of urgency decided thus to inspire trust in the future, that is, we need change, we need it here and now, and we are still in time.


The project is still underway and, as usually happens in these cases, it has not been immune from difficulties. From the Kotter’s point of view the project failed, albeit deliberately, to establish a sense of urgency to which trust was preferred. This choice, notwithstanding, seems to be in line with the employees’ shared reservations, that is, “is this the right moment?”, rather than “is that really necessary”?

Reportedly, the change process has not derailed yet, thanks to the careful attention which the organization management has paid to its most important asset, that is to say its human capital (Petersen, Ballegaard and Pedersen, 2008).


Pilkington Australasia
In the early 1990s, Pilkington Australasia, by reason of a harsh recession which had seen many of its clients collapsing, had to implement a long process of change entailing a series of important restructurings and mergers.

Real crisis notwithstanding, the top management did not resort either to create a sense of urgency or to establish a sense of crisis. This very soon proved to be a massive blunder causing serious hardships during the merging procedures.
The sense of urgency was, in contrast, later established by the new General Manager, HR, appointed in 1992. By means of a massive and open communication programme, this was able to motivate change creating a vision and setting the new direction; clearly, after having established the required and genuine sense of urgency the circumstance actually required (Graetz, 2000).
Whereas the effectiveness and usefulness of establishing or generating a sense of urgency in change management can be taken as axiomatic, it still remains to determine whether increasing the dose of the remedy “urgency” to the “crisis” level might actually produce side effects or even lethal effects.

The cases of successful implementation of change by generating a sense of urgency are indeed copious and can be found also in the distant past. Nonetheless, a considerable number of change processes have also been successfully implemented thanks to the method of instilling a sense of crisis. The Samsung and Intel cases respectively discussed and mentioned above are definitely emblematic of the effectiveness of this approach. In practice, the two terms “crisis” and “urgency” are interchangeably used as a matter of course, which makes it harder to find out what is the real meaning that executives and business leaders attach to these terms and consequently difficult to determine whether urgency has to be considered preferable to crisis or otherwise.


In many instances the sense of crisis diffused within the organization was actually supported by the existence of a real crisis affecting not just the organization, but the whole national economy, as for example in the cases of Samsung and Pilkington Australasia. In these cases, where the genuine existence of a crisis is glaring and palpable, the lack of the business senior executives’ initiative to instil a sense of crisis might be even perceived as highly suspicious by employees. Individuals are able to realize what is going on and under some circumstances they could even call for change in order to secure their organization survival and thus their job stability. In the case of Enterprise Denmark, for instance, employee awareness of the need for change was so evident as to suggest the organization’s management to inspire trust, rather than urgency.

The real problem as usually happens is not concerned with the wording, albeit formally there is indeed a considerable difference between the two terms, but with the mode the need for urgency or crisis is communicated to the workforce and, most importantly, with how it is perceived by individuals. Embedding in an organization corporate culture the need for urgency or crisis and deprecating complacency can definitely enable employers to effectually manage change whenever this is promptly required, but can also considerably help these to support the regular, proper unfolding of the business operations under any circumstances.

Longo, R., (2011), Instilling a sense of crisis – Crisis v Urgency in change management, HR Professionals, Milan [online].