# How to manage organizational changes [Change management theories](mgmt-7_changes-theories.md) A great organization will excel over time, but time will crush a mediocre one. - Adequate-enough organizations can survive when times are good, but collapse right after the awful organizations when times are harsh. Stay extremely paranoid about *any* dips in your financial situation. - Even when you're growing, make movements to protect from recession later. - Invest heavily into research & development to improve the product. - Only scale up executive pay directly with the rest of the organization. - Generally, the financial state of a bankrupt organization happens slowly over years, then strikes suddenly in about a month. - If you're aware of it, do *not* try to cut your losses and run, since people will look for someone to blame. - Instead, look for someone else to buy out your organization, which may give an opportunity for you to leave management entirely if you want. Above a specific level (or throughout the growth of a not-for-profit), your role will be subjected to the desires of a board of trustees. - Even if they don't exert their power, this board will have some level of [influence](power-influence.md) over *every* [decision](people-decisions.md) and [change](people-changes.md) within the organization. - If you have control over your board, pick people who match your values, *not* simply [who you're familiar with](people-4_friends.md). - Board selection, and any additions or removals, defines the future of the organization. Avoid hiring in the good times or firing in harsh times too quickly. - Payroll is, by far, the most expensive cost in an organization, and every new hire has an initial lead time before those people can successfully work at full-capacity. - The workers are, by far, the most valuable part of an organization, so losing any qualified and tested worker is a blow to the organization's culture. ## Change management Always expect change. - Nearly every system is imperfect, and even a perfect system has to deal with related systems which are flawed or unreliable. - Occasional problems are natural, but repeated issues are clear indicators that the system itself (or its interactions with other systems) has defects. - Further, organizational [culture](people-culture.md) itself shifts with growth and hardships. - Without change, *all* systems become [bad systems](mgmt-badsystems.md). While you may be able to make changes instantly on an individual level, all change moves slower in larger systems. - Information has to travel across a pipeline to all affected people. - Most system changes require running the old method alongside the new method for a period of time. - People also often tend to resist changes, so offer incentives instead of ultimatums. For *any* change, expect a multi-phase approach: 1. Observe any pain points, weaknesses, shortcomings, or process gaps. 2. Analyze and brainstorm ways to fix them. 3. Make a clear plan on how to fix them. 4. Give everyone clear and reasonable goals about what to do and why it matters. 5. Get consistent status updates on their progress. 6. If you need to change the plan, go back to Step 1 for that specific needs. 7. As you see results, compare actual and projected metrics. Try to foster more open discussion and ideas about change. - Make a requirement that every new idea have a minimum word count. - Cross-pollinate ideas by mixing everyone across different workgroups and departments. - Give members the freedom to explore methods they prefer. Each [change](people-changes.md) management system either tends to prioritize keeping people informed or keeping systems continuously running. ## Growth As an organization grows, its competence scales proportionally but its failures scale exponentially. - As the group gets larger, it eventually becomes a [bad system](mgmt-badsystems.md) unless you completely decentralize management to separate, near-autonomous entities. - The only way you can succeed is through *constant* [delegation](mgmt-5_communication.md) to everyone else. The leadership should grow with the organization. - Frequently, organizations stop growing because the senior management hasn't adapted to the new requirements of their role. - Any direct management should slowly shift to an [influence](power-influence.md)-based approach. The only way to keep a massive group together (i.e., [above 150 people](groups-large.md)) is to break it apart into significantly smaller divisions, and repeat as it continues growing. - By breaking apart the organization into units, each unit becomes its own mini-organization. - Try to prevent each organization ever breaking past 60 people. - By breaking it apart, each entity is able to work for themselves, but also able to pull from the vast resources of the collective entity. Large groups often become [defective](mgmt-badsystems.md) because the senior leadership can't lead leaders. - Training a leader needs constant and dedicated input, feedback, encouragement, and guidance. - Even for menial tasks, training leader-like personalities is dramatically harder because it's [the art of influencing](power-influence.md) the most self-determined (and therefore stubborn) class of individuals. Good ideas come through *outside* the organization, so connect as much of the organization to the outside world. - Get direct customer feedback instead of simply hearing members' disagreements. - Get personally involved in altruistic activities and causes you care about, and advertise them to the team. - Pay the members for time serving in altruistic capacities. When [hiring](mgmt-3_teams.md) new [managers](mgmt-middle.md), be *very* picky over who you appoint. - It's tempting to pick someone you know (e.g., a [family member](people-family.md)), but they will have an easier time stealing from you or breaking rules if they know they can [influence](power-influence.md) you out of any legitimate consequences. - Unless you favor everyone who *isn't* a personal connection, any personal connections *will* imply nepotism for everyone else. - Hire for [character and moral integrity](morality.md) (which you *can't* train) more than competence (which can be trained). ## Modular systems If your product is relatively the same everywhere it's provided, find ways to create a modular framework. - If you give the customers a homogeneous experience, the brand recognition will guarantee they'll know what to expect (e.g., McDonald's restaurants). - However, this *only* works for something you can turn into a commodity. Otherwise, it's better to more clearly differentiate different parts of the organization as separate autonomous groups. - Generally, a *very* large organization works better with different subsidiary entities that [specialize](jobs-specialization.md) in different domains. ## Reassigning workers Sometimes roles are no longer necessary. - Change is almost guaranteed in most industries, meaning the workers will have to adapt to it or leave the organization. If it's at all possible, reassign workers to what they *want* to do, not simply on how skilled they are. - If they've been at the organization for at least a few years, offer a few months' pay for them to leave if they want. - Generally, the older they are, the more they'll want a reputable role. ## Mergers and acquisitions As organizations get larger, several things will happen to your role: 1. You will need to delegate *most* of your tasks to others, meaning you'll eventually be doing nothing *but* [make decisions](people-decisions.md) all day. 2. Everyone who was part of your team as a worker will likely grow with you (and become managers as well) or depart the organization. 3. To most people, you will become a symbol more than a human being, meaning the rules of [celebrity management](image.md) apply. To that end, your role (if you choose to stay with the organization) will adapt to endless [meetings and communications](mgmt-5_communication.md) with a wide variety of short interactions. - This is typically *not* a [good life](goodlife.md) for most people, so be prepared to leave your role if it doesn't sound appealing. Don't expect the group's loyalty to transfer in a merger/acquisition. - They were closely connected with the [culture](people-culture.md) and workplace they had before. - Unless the new organization respects that culture, some will adapt to it, some will embrace it more than the old culture, and others will leave. ## Downsizing Generally, if you have a choice, prioritize your terminations according to the organization's needs: - For non-social roles, get rid of the least productive workers. - For social roles, get rid of the least pleasant people. - For technical roles, get rid of the least-skilled people. If you have to lay off people, only do it once, and as deep as you'll ever need. - Every layoff drops morale, and multiple layoffs make people feel it's a [trend](trends.md). - If the budget isn't balanced, you really can't help it. - After the second layoff, workers will start looking for work elsewhere. Don't procrastinate layoff decisions if you know it's inevitable. - Openly communicate the likely risks of a layoff and offer severance pay for any volunteers. - To avoid further anxiety, take decisive action within a week of the announcement. Be absolutely direct with the layoff message. - Speak personally about the fact that you don't want to do it, but you had to. - If you made *any* mistake whatsoever, clarify precisely what happened, how you misjudged, and that you were wrong. - Wrap up the notice by clarifying precisely what *will* happen, what departments will be affected, and by how much.