Change is all around us, all of the time, but never more so than at present! Sometimes change is forced upon us, and sometimes we are the architects of change, but regardless of the drivers of change, there are certain leadership skills that are essential. These leadership skills are external focus, prioritisation, implementation and flexible thinking.
1. External Focus. The first of these is an external focus. (This is one of the defining features of leaders vs managers!). Leaders of the most successful SMEs typically spend between one and two days a week interacting with customers, suppliers, peer groups, trade bodies and other sources of market intelligence. This external focus helps them to detect early signals of threats and opportunities. During the latest pandemic, it was SMEs who had this external focus who were the quickest to react. Being the quickest to realise that they needed to respond, but also being the best informed on the support and potential partners they may find to help navigate through the stormy times ahead.
However, this external focus is also necessary in less turbulent times. Strategy is not something that is developed once in a while, when you get your management team together for a day of navel-gazing. (Although this can be a useful exercise). The best strategies emerge from a continuous process of external sensing and gathering of information, combined with testing of ideas and options.
2. Prioritisation. The second leadership skill for being a master of change, rather than a servant, is the ability to prioritise. Covid has, for a short period, removed the need to prioritise for most companies. When government instructions and staff welfare have been the essential priorities, virtually all other considerations have been put on hold. However, as SMEs start to emerge from this period, and start considering the gradual process of reopening their businesses, then the need to prioritise has never been more necessary.
SMEs that struggle usually fall into two camps. The first camp consists of companies that are stuck in the ‘comfort zone’. They have a good product, a stable customer base and the business is ticking over. These companies have very little on their change agenda that is proactive. The only change they implement is that which is forced upon them, often by regulators. The problem is that the market never stands still. Wherever there is a profit there will be somebody looking to have some of it, either with a direct competitor product, or some other way to solve the need or problem that your product addresses.
The other camp is made of those companies that are over-ambitious and unfocussed. Typically the MD is a highly energetic ideas man/woman, who returns to the office each week with three new ideas which were dreamed up over the weekend, all of which he/she wants investigating tomorrow!
Successful SMEs live in ‘the goldilocks zone’. They have identified the two or three critical things they need to be doing over the next 1-2 years to be either growing the top line, the bottom line, or ideally both. Research has shown that companies (or operations within larger companies) that focus on between one and three critical goals are highly likely to achieve them Those that try and tackle between four and five might achieve one, those that tackle more than five are highly unlikely to achieve any of them! The best way to tackle a long list of potential changes is to focus on two or three at a time, and this is why prioritisation is a defining skill for success.
3. Implementation. The third skill to be a master of change is the ability to implement. This ability is in fact a combination of two capabilities, the hard and the soft sides of change. The ‘hard’ side of change includes project management, problem-solving, risk management, project planning and scheduling, progress checking, management reporting etc. Depending on the type of change, it may also include specific skills such as contract negotiation, engineering, IT, training or product development. Many SMEs understandably do not possess these specific skills so will buy them in when needed, however even doing this there will be basic project management, contract management and problem-solving skills still required by the SME.
The soft side of change is however much more difficult to buy in! The ability to take people with you on the journey lies firmly at the feet of the MD and their leadership team. Some leaders believe that there is an inbuilt suspicion and resistance to change in most people. However, this self-limiting belief tells you more about the culture of the organisation that you lead than any pre-determined character of your staff.
Some fortunate companies have had many years of positive experience of change, and in these companies it has become such a part of the culture that there is a willingness to experiment and learn by doing. However, if your employees have had several years of having change ‘done to them’ with no opportunity to influence the change, and little benefit to them personally, then it is hardly surprising that resistance is their first response.
The most difficult stage here is to transition from one culture to another. The foundation for your current culture was probably laid 3-4 years ago, as this is how long it can take to change. If you want to have a culture in three years time where change is the norm, well-executed and welcomed by your staff, you had better start now! (See below for some ideas on how to create a culture of change readiness).
4. Flexible Thinking. The final essential leadership skill is flexibility of thinking. This is really where the SMEs should have the edge over the larger companies. Large companies have economies of scale, reserves of resources and specialised staff, however, they are like super tankers to change course. SMEs with fewer staff, quicker lines of communication and fewer stakeholders to manage can change course relatively quickly. But herein lies the paradox; Effective leaders of SMEs must have the tenacity to continue to drive ahead change in the face of adversity AND, at the same time, have the flexibility of thinking to recognise when the situation has changed, and that a new course of action is more appropriate.
The current crisis will see the end of rather too many SMEs, but the ones that will survive will be those that have a strong external focus, have two or three priorities they were working on, are good at implementation and have the ability and judgement to flex their plans, cut their losses and set a new direction.
With a once in a lifetime challenge like Covid the imperative to rethink the future is obvious. In less turbulent times this judgement of when to persevere and when to make a course correction is much more difficult. This brings us full circle to the opening paragraph on external focus as a leadership skill. When you have invested heavily in a plan, it is sometimes only by talking it through with a trusted and impartial peer that you can step back, regain perspective, and validate your course of action. Within the Manufacturers Alliance, this is something that is often cited as one of the most valuable benefits of membership.
Creating a culture of change readiness.
It is not easy to shift the culture of an organisation; however, the following steps can help build an organisational capability for change.
- Communicate until it hurts! Establish solid lines of communication through your management line. Communicate good news, bad news, even communicate when there is no news!
- Share company results frequently Provide staff with monthly updates on how sales and profits are doing. This will establish a background for why changes are necessary or possible.
- Develop your first line leaders If you have more than 20 staff it is likely that more than half the staff report to first-line leaders. You must build the leadership capability of those who manage the staff.
- Establish local performance measures Nearly all employees want to know if they are winning or losing. Have the teams establish measures for each machine or work team based on ‘what a good day looks like’ . Use this to identify opportunities to improve.
- Establish performance-based pay While this can be painful, particularly in a unionised environment, employees will only embrace change if they see something in it for them. Linking this to performance measures they can influence is essential for it to be motivating.
- Find out what good change looks like Talk to peers and networks about what changes they have implemented that went well (and badly). Understand how to implement change, learning from other’s experiences.
This article was written by John Hardwick, Chair of the North Manchester Manufacturers Alliance, Independent Consultant and visiting lecturer at Lancaster University. Prior to joining the Alliance, John has worked for 35 years in the manufacturing division of GlaxoSmithKline.