The harsh realities of leading through change

Implementing any kind of change will most likely be met with scepticism and unhappy staff, but these leaders explain why trusting your decisions and doing what’s best for the business is crucial.

In 2011, Waterstones was in serious trouble. “It lost £37m in the year that I joined,” says managing director James Daunt, the founder of the Daunt Books retail chain, who joined in May of that year and had to take drastic action to avoid closure.

“I came with a strong knowledge of the industry,” he says. Turning the company around took some radical – and unpopular – steps that cut costs significantly.

After slashing marketing spend and reducing headcount at the head office, Mr Daunt’s vision was that each store should stock and sell books that appealed to local customers, rather than having uniform stock and marketing campaigns dictated by publishers. Its returns rate (books returned to the store) was about 25pc when he joined the company – a huge hidden cost, which increased the company’s workload, he explains.

Join the community | Future-proof your business

The strategy worked and this year Waterstones returned to profit for the first time since 2009. Its average return rate is now 4pc. The reduction in workload enabled us to halve the number of store managers, and bookseller staff were cut by about a third, explains Mr Daunt. “There’s nothing pleasant about cutting staff to that degree, but it does fairly dramatic things to your cost base.”

Keeping morale up was a challenge, he adds. But he believes that having the background that he had helped: “Being led by someone who was entirely familiar with every job that they do meant that I was able to convince my team that there was a future [in bookselling].”

Take as much time as you can afford

Job losses are an unpleasant reality of a restructure. This was an inevitable outcome for homeware brand, JML, which struggled to grow globally because of the management challenges of overseas operations. This resulted in a restructure that switched from JML using a range of centrally-owned subsidiary companies to carry out operations, to selling them off and using their services as third-party distributors, explains chief executive, Ken Daly, who has been in the role since 2012.

Only the business's successful subsidiaries were sold to other companies to be run as third-party distributors, such as its Singapore operation, where no jobs were lost. Of the less successful ones, some assets were sold on, but these companies' operations were closed down, which resulted in redundancies. It was a difficult and uncertain time for those people, adds Mr Daly.

“You need to make sure that you’ve got plenty of time to spend with your distributors. It’s not something that we did overnight; it took about two years,” he says. “Some companies might not have the luxury of being able to take that time, but fortunately, we were able to do a phased transition.”

More than just talk

Being clear and honest with staff is key during times of uncertainty. However, for Taylor Rhodes, chief executive of Rackspace, a US-based computing software and service company, actions speak louder than words.

Taylor Rhodes, Rackspace

Listed on the New York Stock Exchange since 2008, Rackspace was bought by private equity firm, Apollo Global Management, in November 2016. In the Noughties, following an initial boom of disrupting traditional telecoms systems with its cloud-based platforms, the company started to face stiff competition from Amazon, which had started renting out its own computing platform to corporate clients.

Mr Rhodes decided to stop trying to compete with Amazon and partner with it instead, which was a controversial decision. Rackspace would sell its technical management expertise and security services to clients using Amazon’s – and then later Microsoft’s – cloud platform.

It was a real challenge to talk the company’s shareholders around to what he believed was a better future, despite it being choppy and unpredictable for a period of time, says Mr Rhodes. Ultimately, his team should have appreciated how much time it would take, and have been clearer in articulating the opportunity that the new strategy opened up, he says.

After deciding that Rackspace would be better off as a private company, there was uncertainty among staff, who feared that a private equity buyer wouldn’t have their best interests in mind.

“It was about finding those actions that were very material and putting them in place to show employees that you’re still prioritising their development,” he adds. It’s exactly what they did after announcing the opening of a new data centre in Germany. It was on the table prior to the Apollo buyout closing, but sceptics immediately starting saying that the investment wouldn’t be seen through.

But in 2016, the company launched in Germany, demonstrating their commitment to their employees.

Stick to what's best

For Dave Yarnold, chief executive of software company, ServiceMax – bought by General Electric (GE) in January 2017 – being the boss of an acquired company means being an advocate for its best interests. “Every big company has a process for doing an integration,” he explains. “You, as the acquired company, need to have a strategy for how to deal with that process.”

Mr Yarnold felt that it was crucial that the acquisition had as little impact as possible on ServiceMax’s processes for dealing with its customers. He was happy to adopt GE’s corporate systems for things such as HR or payroll, but didn’t want to change anything that affected its customer-facing functions, he explains.

After discussions with GE’s chief financial officer, both agreed that the growth of ServiceMax should be the number one priority.

“I confirmed that the distraction around customer services systems integration would likely impact our ability to focus entirely on growth,” he explains. “You have to manage expectations with [the integration team], your new management team, and your own team.”