Magazine article Management Review

Making Change

Magazine article Management Review

Making Change

Article excerpt

When a new CEO comes on board, people expect to see changes with far-reaching consequences for the company. But how much change, and how fast should it come?

More and more troubled companies are turning to outsiders to shake them up and set them on a new road.

Some of America's biggest corporations have seen strangers take the helm. The litany is well-known: IBM recruited Louis Gerstner Jr., a marketer with experience at McKinsey & Co. and RJR; Eastman Kodak Co. lured George M.C. Fisher from Motorola; Westinghouse Electric Corp. hired Michael H. Jordan, another McKinsey alumnus and a Pepsico executive. Polaroid Corp. recently brought in the first outsider in its history to be CEO--Gary DiCamillo from Black & Decker Corp. Even turnaround specialists have gotten into the act--Albert Dunlap at Scott Paper Co. and Jay Alix at National Car Rental System Inc.

Virtually all new outside chief executives are hired by boards that give them broad powers to change the organization. But just how fast should these newcomers make those changes?

"Instantly," asserts the crusty Dunlap, who, in the first 12 months after his arrival in April 1994, drastically reshaped moribund Scott Paper and laid off a third of its workforce. In July 1995, Scott was up for sale to Kimberly-Clark Corp. "Without qualification, if [CEOs] can't set the whole framework within their first year, they will never get it done," Dunlap says. "If they haven't dealt with all the issues, they will not succeed."

Some maintain that Dunlap was hired by the Scott board to prepare the company for sale. Whether this is true or not, Dunlap contends that a CEO must sell whatever assets don't fit the core business within the first year, not merely contemplate a sale: "If the sale can't come through within a year, then it's not going to get done."

Dunlap, known as one of the speedier change managers in recent corporate history, isn't far off the mark. Experts say emphatically that if a new CEO does not make at least one or two serious and discernable changes in the first six months, he or she has lost critical momentum and might not regain it.

This notion is in tandem with the conventional wisdom--espoused by many of these same experts--that it takes five to seven years for an organization to make deep and abiding changes to its culture.

For Donald C. Hambrick, the new CEO's "umbrella call" to an organization means that in the first six months he or she must make "at least one demonstrable, visible change" in each of these areas: structure, information and decision process, rewards and people.

"I call them the levers of executive change," says Hambrick, the Samuel Bronfman Professor of Democratic Business Enterprise at Columbia University Business School. "Unless you're backing up your changes on all fronts, they will be taken as hollow and as mere rhetoric."

Six months to initiate major change? A nanosecond in organizational time. Why, then, does a new outside CEO have such a short window of opportunity?

The First Hundred Days

The naming of a new outside CEO is a moment unique in an organization's history, a time when the company is holding its breath. The new chief executive is an unknown entity. Lines of succession and the old ways of doing things are probably in jeopardy. Fear and anxiety fill the ranks.

There is never a better time for change. And, the new CEO had better let the organization know immediately that change is afoot. Six months later, whether the change is small or large, some degree had better be visible.

"People are watching you from the very first day you arrive," says Todd P. Jick, a managing partner at the Center for Executive Development and co-author of The Boundaryless Organization (Jossey-Bass, 1995). "In terms of the questions you ask and the issues you examine, where you put the spotlight in the first 90 days [signals] the areas ripe for change. …

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