How do I fix a dysfunctional business?

This essay looks at the process of managing change and peoples’ reaction to change. Compulsory reading if you are about to try a radical new direction in your business or if you buy an established business that's in need of attention.

We get called on to manage the process of change in many hospitality businesses. I wouldn’t say it was my favourite activity because we are often seen as the ‘bad guys’ by the staff concerned, but it is definitely interesting work and it gives us some of our biggest challenges.

There are two kinds of change

I’ve come to understand that necessary change comes in two varieties; we call them incremental change and radical change. They suit different situations.

Incremental change is the gentler of the two. This is where change is introduced in small, bite sized chunks, over a period of time — by sort of coaxing staff to alter the way they do things little by little. We use this method when there is no urgency and the required change is not too far from what is currently being done.

Incremental change can often severely bog you down

 You can get bogged down trying to change a group of peoples’ behaviour incrementally. One of our clients took over the lease on a large hospitality business from the government. Being basically caring in nature and never having struck entrenched behaviour before, they thought it would be a good idea to take on the existing staff with the business in spite of the fact that it was losing a substantial amount of money. Not only did they inherit a big pile of debt but inadvertently they inherited one of the most intractable groups of staff I’ve encountered.

The fact that the business was haemorrhaging a family’s money seemed to be of little interest to these staff. They’d been working the same system for over fifty years and in spite of full financial disclosure, they strongly resisted even the most benign attempts to bring the place in line with the twentieth century. They summoned the Union, the Department of Labour and Industry and anyone else who would listen, and threw every conceivable barrier in the way of business reform. In the background the rumour and innuendo from a few ringleaders became quite toxic and the owners were accused of all kinds of malevolent intentions.

It has taken five years to get this business stable and it has give us all grey hairs in the process. There have been times when it has felt like wading in molasses, fighting for every little change to the system. Once the opportunity to radically restructure the staffing at the point of takeover had been lost, we faced no real alternative but to pursue the required changes in an incremental fashion. In theory we could have retrenched all the staff and started again, but in reality we couldn’t do that — we couldn’t make them redundant because we were going to replace them straight away, and it is somewhat difficult to sack seventy five staff all at once for poor performance.

A critical mass is necessary to move forward

It all boils down to what is called ‘critical mass’. A group of people will tend to behave the way the majority (the critical mass) do. While you have a majority of staff rejecting change it becomes nearly impossible to reform them incrementally. You end-up continually taking two steps forward and two steps back and you waste a lot of time and money. Once the critical mass of opinion swings the other way reform can take place quite rapidly.

People have a tendency to become bogged in a rut if you let them settle into a routine for too long. This is one of the main arguments for constantly evolving any business — the more used to change a group of staff are the more flexible they will be in times of economic downturn or assault by competition. 

Over a long period of time I’ve come to the conclusion that incremental change is not a suitable method for dealing with entrenched staff. The most efficient method is by radical change. 

Constant evolution means progress

By this I mean by taking the pain all in one hit and getting all the unpleasant stuff out of the way as quickly as possible, then settling things down and getting on with it.

I first pondered this about thirty five years ago when I was employed in the fast food industry. I spent a period of time ‘on ice’ waiting for a promotion beyond store manager. They sent me from one problem fast food store to another for nearly a year and a half with the brief to sort them out quickly then move on.

Ruthless or expedient?

I tried to fix the first one gently and got bogged and the process took me nearly seven months. After a little thought I decided to try a different method. In the next one I was sent to, I lined all the staff up and told them about the changes I required. I offered training to anyone who needed it, then I got them all to commit to the new way of doing things and sacked the first couple who broke their commitments. Everyone else realised that I was serious and the second store only took three months to get to the required standard. The third only took two months.

You may call this ruthless — I call it expedient. The point is, what is the best way to proceed for all parties concerned? What can be done with the least amount of human trauma, the fastest and for the least amount of money? Ultimately if you don’t quickly reform businesses that have lost their way everybody is going to end up out of work and the owner will end up owing a lot of money or bankrupt.

Anyway, the point of all this is that if you inherit an new team that is dysfunctional, think very carefully before you decide on a method of attack. The gentle way may prove a quagmire.

To learn more about the topics discussed in this article please consider the following courses,

For documentation to support the management systems discussed in this article, please visit our resources website.

If you are not sure where to start, contact us now to speak with a consultant.

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