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Forbes - John Kotter's Change Leadership

Kotter International
July 9, 2014

It’s been a tough 2014 for Target. They started the year on the heels of a substantial customer data breach, which significantly damaged their brand reputation and consumer trust and led to declining sales figures and lower than expected 2013 results. Then CEO Gregg Steinhafel was abruptly let go by the board. Target has begun searching for a replacement, someone who can recapture the attitude of Target’s past; an attitude that helped fuel their prior transformation and subsequent meteoric rise.

Getting back to the “fast, fun and friendly” culture that characterized Target for more than two decades under former CEO Robert Ulrich will be no small feat – and may or may not be what’s necessary to drive the business forward. Culture is inevitably a product of great leaders, which Ulrich was widely viewed to be. But there is an inertia to culture – as long as things are done a particular way, and this seems to generate positive results, things will continue to be done that way. And, while there are undoubtedly positive elements of the old Target culture that could stand to be recaptured, the culture under the company’s next CEO will need to be adapted for success in the future as well.


Step 1: Start With Direction

In an organization plagued by general malaise and recent lack of vision, nothing is more important than refocusing the team around a clear picture of the future that will inspire, motivate, and drive employees to make that vision reality. This is especially true when bringing many new team members on board, as Target has been recently. It won’t be enough for senior executives to want to recapture Target’s past attitude. They will also need to 1) paint a compelling picture of the big opportunities coming down the road and 2) describe how recapturing some of the lost characteristics of a nimble, more innovative Target will help the company seize those opportunities.

Step 2: Make Sure the Team is On Board

In Target’s case, the process of getting buy-in for a new vision will depend heavily on the leadership of the yet-to-be-hired CEO. The company is in need of a truly transformational and inspiring leader who can balance the short- and long-term needs of the company. Current senior management and the board will need to consider not only the skillset of the next CEO, but also whether they believe in a similar vision to transform the organization. Target will need a leader with vision and passion to work quickly with existing management to halt the brand’s decline and move to secure the company’s future leading role in an industry that is shifting rapidly all around it.

Step 3: Leadership and Vision, Not Management and Control

Truly transforming Target, however, relies on more than just top management. A vision alone will not be enough to turn the tide for the company. Senior leadership, including the next CEO, will need to lead the way by living up to the vision they lay forth. It must be authentic and touch both the hearts and minds of the organization. Additionally, these leaders will need to give employees permission and space to allow for leadership to surface throughout the organization. Target’s early market buzz was attributed in large part to its selection of innovative, trendy, and quirky products, many brought to store shelves by virtue of the freedom with which individual store managers and merchandisers could operate, without too much corporate bureaucracy. But in recent years that freedom had been curtailed in order to gain global efficiencies and cut costs. Rebuilding some of that independent spirit may be key to infusing the energy and drive Target needs back into the organization.

Step 4: Share the Vision

For a company like Target whose reputation has taken some knocks, they may want to consider sharing the vision more broadly, not only to staff, but also to customers. Many long-time customers are disappointed in the company and want to both hear about the future and see proof of the change in action. In recent years, Target’s product selection was determined more by margins and pricing than by consumer trends and demands, leaving many to feel the creative spark had gone out of the brand. Trust was broken with the data breach and relationship with the brand will take time to repair.

To reconnect with their key audience of affluent-but-price-conscious consumers, Target will need to convince shoppers the company understands where they have slipped and has a clear and ambitious plan in mind to do better. Communicating with integrity a powerful future vision for Target can help re-engage consumers.

Step 5: Embrace Change Instead of Resisting

Over the past few years, Target’s philosophy increasingly looked to be one of tightening control, creating more bureaucracy and a larger hierarchy. After the data breach, false urgency abounded and many people were running scared within the organization. The things that made them a success in the past decade, where employees had more permission to act and operate with a feeling of ownership, seemed to disappear. These latter traits tend to be characteristics of companies that embrace and work within the context of change rather than resisting changing environments, and they are the characteristics Target should strive to embody.

Already, Target looks to be heading in the right direction. The interim management, under acting-CEO Tom Mulligan, isn’t waiting for a new CEO to be selected in order to begin to move ahead. Instead, they reshuffled some management positions immediately following Steinhafel’s departure, creating greater autonomy and allowing new ideas to surface more quickly. For their customers and shareholders, I hope that this trajectory continues.


Kotter International
July 8, 2014

By Ken Perlman

There are certain words we use at work that we simply don’t (or shouldn’t) use at home. I have never said synergy to my children. I have never (ever) referred to a request I’ve made of my wife as a deliverable.

And then there are contronyms – words that mean totally different things in different contexts. Generic examples of this are dust (the noun means dirt, the verb means to clean), fast (which can either mean speedy or to not eat). Some contronyms mean something different at work than they do at home. At work, offline means a 1:1 meeting, in my home it means turn off all the internet-connected devices before coming down to dinner or my wife will go ballistic.

Trust and respect are unfortunately becoming examples of work-based contronyms. At home, trust (verb) is something we demonstrate for our children as we watch and check-in on them to verify and assist. They feel ownership over their actions and we release some control so they can take the lead. We stand at the ready to help them any way we can should they ask for it. At work, trust is coming to mean you’re on your own. Respect (verb) is evolving into a term that distances the utterer from someone else’s decisions, i.e. “I respect your authority… ”

The problem with using trust and respect in these new ways is that it exacerbates the silos already slowing us down in the new, hyper-speed marketplace. As executive teams work to resolve critical issues on the ground, they find themselves struggling to implement improvements, while still demonstrating trust and respect for their peers (across silos) and their management teams (across levels).

Abdicate and Hope
Often, leaders in hierarchical organizations are choosing the non-confrontational but also non-supportive way to solve problems. More often than not, the executives respect their subordinates and peers by not getting in their space. They show respect by saying they trust them, then hoping their counterparts make good choices. This supposed trust and respect is, in reality, “abdicate and hope” – all delivered when cooperation and collaboration is what’s really required.

The Solution: Interoperability
A more powerful and effective way to show trust is to enable interoperability (noun). It takes more trust to invite others in, knocking down silos and helping teams across the lines. The more problems we face that are cross-functional, the more solutions will require the involvement of multiple teams. Executives cannot remain polite by staying out of each other’s space, choosing to deal with problems only up to the edge of their domain. The ability for executives to work directly with teams that report to other executives – and have that be okay with their counterparts – that’s a demonstration of true trust.

We know we have a problem when leadership teams don’t step in each other’s space or when they decline to talk to team members multiple layers below them. If it’s a crisis situation and the leadership team is still being really polite to one another and not stepping on anyone’s toes, that is a sure sign of a bigger problem.

How to Get It
Like almost all things in organizations, it is not that complicated to start creating true trust and respect. We make it more complex than it really has to be. Here is a decent recipe for encouraging interoperability:

  1. Set some guidelines. Describe the behavior you want to see. Have the leadership team outline ideal ways of working together.
  2. Get clear on priorities. Establish what matters most to the business. Again, this is a short list (e.g. service wins, customer first, etc.)
  3. Ask for support. Ask your colleagues to actively help one another. Have them go to each others’ staff meetings to discuss how the multiple groups can help each other move faster, make things easier, remove obstacles, and identify the forces and factors that cause cross-silo turbulence.
  4. Model the behavior. Constantly check-in with your colleagues and teams. Work across silos and across levels when things are going well, so when a crisis occurs, this is now muscle memory and not a learning opportunity.

Words like trust and respect don’t belong in the contronym category. How do your teams and colleagues use these terms? Is interoperability already in place or are you crouching behind the silo walls waiting for the crash on the other side?

Ken Perlman is an engagement leader at Kotter International, a firm that helps leaders accelerate strategy implementation in their organizations. 

Kotter International
June 26, 2014

By Randy Ottinger

How much does your company spend on outsourced services and staff augmentation every year? Seriously, do you know how big that number is? Would that money be better spent on building expertise within your own ranks? Could you actually save costs by insourcing? These questions are being asked more and more in the executive ranks.

There is no question that outsourcing has its advantages. In certain circumstances outsourcing can reduce costs, provide access to best-in-class thinking and resources, as well as improve resource flexibility and scalability. There has been an undeniable trend towards outsourcing and staff augmentation over the last 12 years. The global outsourcing services market has grown to $99 billion in 2012, up from $45 billion in 2000 according to a study by Information Services Group/TPI. With that said, a 2012 Deloitte Study

indicates that outsourcing and staff augmentation have failed to deliver on their promised value proposition. Of the companies Deloitte surveyed, 48% terminated outsourcing deals for cause or convenience.

What is the alternative? What holds the promise of saving costs, providing new innovative solutions, and improving the overall operations of your company? Good old-fashioned insourcing. The same 2012 Deloitte study indicated that 34% of companies that terminated outsourcing contracts decided to insource as a future strategy instead. Here’s why.

Top 3 Reasons for Insourcing

1. Improve customer service or customer experience. We’ve all sat on the phone for way too long with a call center, only to talk to someone who is not able to adequately address our issues, then ask for a supervisor and hyperventilate. This happens with both external and internal customers – especially when shared services like IT or finance are outsourced. To support this point, a 2005 Deloitte Study found that, “Outsourcing often reduces organizations’ responsiveness to market changes and poses internal political, organizational, and cultural challenges.”

2. Improve controls. Often it seems there is a significant increase in management expertise required to successfully manage an outsourced relationship. Organizations worry about intellectual property and confidentiality risks, lack of transparency, changes in the size and scope of projects, loss of institutional knowledge, loss of control over key processes, and other issues that are difficult to control when functions are outsourced.

3. Reduce operating costs. This is a HUGE issue because one of the primary reasons companies outsource is to reduce costs. The 2012 Deloitte study referenced above indicates that, “Overall, actual cost reductions through the most recent outsourcing experience are lower than expected with 53% of respondents anticipating significant savings (greater than 10% cost reduction), while only 42% experienced significant cost reductions.”

How Insourcing Can Save Costs and Capitalize on Employee Capacity

When cheap labor exists externally and internal resources seem overburdened, how can insourcing save costs or even be a viable option? Well, as the Deloitte studies show, factors such as tailored solutions, bundling of services, and project scope creep all raise the cost of outsourcing.

In addition, there is a hidden opportunity for insourcing: the ability to tap into existing employee capacity to take on more projects. Most organizations are unable to access this available resource because they operate through a single – and overworked – management system. If companies create a dual operating system, adding an employee-led innovation network that works alongside the traditional management system, employee capacity is instantly increased. The employee-led innovation network provides the opportunity for employees to lead in a significant way that is not available to them in the existing management system.

To increase your insourcing opportunities, it’s probably time to significantly change the way you operate. For more information on the dual operating system, refer to Dr. John Kotter’s latest book, Accelerate (XLR8).

At Kotter InternationalRandy Ottinger helps leaders accelerate strategy implementation in their organizations.