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Picking the Right Transition Strategy by Michael D. Watkins

Included with this full-text Harvard Business Review article: 1 Article Summary The Idea in Brief—the core idea The Idea in Practice—putting the idea to work 2 Picking the Right Transition Strategy 9 Further Reading A list of related materials, with annotations to guide further exploration of the article’s ideas and applications

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Picking the Right Transition Strategy

The Idea in Brief

The Idea in Practice

Are you moving into a new leadership position? If you don’t correctly diagnose the situation you’ll be facing in that role, you risk overrelying on strategies that worked for you in the past. That’ll backfire if your new situation requires fresh approaches.

DIAGNOSING YOUR SITUATION

To succeed in your new role, Watkins recommends these steps:

First determine what kind of transition your organization faces. Watkins focuses on two transition types—turnarounds and realignments— to illustrate his recommended process. In a turnaround, you must save a business recognized as in crisis. Challenges include: • Reinspiring demoralized stakeholders

• Diagnose the situation. Are you leading a startup? A turnaround? Realigning a faltering company? Managing a rapidly expanding business?

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• Select the right organizational strategies. For instance, turnarounds require faster, riskier changes than realignments and call for technical learning (strategies, markets, technologies). Realignments demand mastery of cultural and political nuances. • Adopt the right leadership style. For example, in turnarounds, people are hungry for hope, vision, and direction. You’ll need a heroic style—charging against the enemy, sword flashing. Realignments require stewardship: diplomatic building of consensus around the need for change.

• Making effective decisions under pressure • Going deep enough with painful cuts In a realignment, you must reenergize a previously successful organization. Challenges include: • Convincing stakeholders that change is needed • Restructuring the top team and refocusing the organization SELECTING THE RIGHT TRANSITION STRATEGY The table illustrates how Stefan, an executive

for a U.S.-based consumer-products firm, adapted his transition strategy to two different situations. Stefan first led a turnaround of the company’s European manufacturing operations. Then he was asked to realign the company’s North American operations. ADOPTING THE RIGHT LEADERSHIP STYLE Turnarounds call for heroic leadership. You need to give people a sense of hope, a compelling vision, and clear direction. In Europe, Stefan immediately took charge and made some very painful calls. Because the outlook was bleak, people acted on his directives without resistance. Realignments require stewardship. You must set aside your ego and patiently build consensus around the need for change. In North America, Stefan resisted the urge to step in and issue directives. Instead, he provided data and let people form their own conclusions. They took ownership of problems and of the change initiatives required to solve them.

Strategy Elements

In a turnaround...

In Europe, Stefan...

In a realignment...

In North America, Stefan...

Learning

Focus on technical learning (e.g., about competition or technology changes)

Rapidly assessed the organization’s strategy, competitors, products, markets, and technologies.

Focus on cultural and political learning.

Thought through how he, as an outsider, could help people see the need for change.

Establishing Make fast, risky priorities moves focusing on strategy and structure.

Slashed headcount; centralized manufacturing functions to cut costs.

Make more deliberate moves focusing on systems, skills, and culture.

Fostered a culture of ownership (e.g., by promoting managers from within).

Building leadership teams

Clean house at the top; recruit external talent.

Drastically reduced top ranks and hired most new senior talent from outside.

Make just a few important changes, promoting from within when possible.

Recruited several leaders with strong technical skills to support systems changes he planned for manufacturing.

Securing early wins

Replace despair with hope.

Closed ailing plants; refocused people’s attention on the company’s core strengths.

Replace denial with awareness.

Revamped performance metrics in manufacturing and customer service to highlight crucial weaknesses. page 1