Preventing Strategic Failure

Steps for Assessing Change Readiness
Peter O'Donnell
This article provided by the Engstrom Institute

Don Forsythe's face said it all: City Life Urban Ministries* was in trouble. Don had only been treasurer for a year, and couldn't believe what he was hearing from Ray Darling, City Life's long-time executive director. According to Ray, the ministry's ambitious new strategic plan was already way off the mark in terms of its revenue-generation goals. What Ray couldn't explain was how this happened. To Don, this was an even bigger problem than the potential $300,000 shortfall in the first year's revenue projections. He knew City Life's future was dependent on being able to answer that important question.

So, how did this well-respected urban ministry find itself falling so far short of its goals in such a short time? Was the plan itself inherently flawed? No, the plan looked good. Was the organization's effort inadequate? No, not really. Did some totally unforeseen set of circumstances undermine its success? Not totally. Then what was it?

The Anatomy of Strategic Failure

In a nutshell, the answer was simple, and yet, complex. The reason City Life was failing was that its plan failed to address key "readiness for change" issues necessary for its success. Let's take a closer look at what was going wrong.

One of City Life's traditional means of generating revenue to support its various ministries was to sell used clothing and household items. It would collect these items from a number of drop boxes throughout the community, as well as home pickup. Staff members would then sort, repair, if necessary, and display the donated goods in several retail outlets the organization maintained, primarily in poorer neighborhoods.

The cornerstone of City Life's new strategic plan was simple—it planned to dramatically expand its donated goods retail operation. Given the past success in this area, ministry leaders assumed they could at least triple the amount of money they raised through this endeavor, thus filling a growing gap in their steadily increasing budget. This assumption, however, turned out to be wrong.

With the help of a team of consultants, they soon realized why this happened. First, their basic strategy failed to account for the changing reality of the "used goods" retail market itself. Not only did their expansion meet with disapproval from other nonprofit organizations pursuing the same strategy, but they also faced increased competition from a very successful private sector retail initiative.

The latter was a formidable competitor—a company with a lot more retail experience and resources than City Life could ever muster, and it wasn't about to give up market share to anyone, not even a well-intentioned charitable organization. Upon closer examination, the leaders of City Life's retail operation could see that their new strategy required a level of marketing and retail expertise they simply didn't have. Several other "shortfalls" further compounded their problems. For example, their strategy was based on the assumption that certain key partners would go along with their expansion plans. This turned out to be overly optimistic, especially when some of these required partners felt threatened by City Life's ambitious plan.

What was worse, though, was the unanticipated problem of internal resistance. It proved very difficult, for example, to gain the needed level of support from other City Life ministry leaders and staff for the initial redirection of resources required to underwrite the retail expansion. And in the end, they had to admit that the majority of their people—even at the senior management level—were doubtful this strategy could meet the funding targets established for this new undertaking.

Clearly, this initiative was doomed before it started. Sound familiar? Perhaps you've found yourself in a similar situation. You've come up with a new "can't miss" strategy you're excited about. Logic, timing—even specific answers to prayer—all seem to be telling you to move forward. Sometimes you've even seen a similar plan succeed elsewhere. And yet, after weeks or months of real effort, your results fall short. And you're left with the same questions that faced Don and Ray.

Preventing Strategic Failure

Perhaps the most important question is: Could this failure have been prevented? The answer, based on the experiences of organizations like City Life, is clearly yes. As Don, Ray and other key leaders discovered through their "readiness for change" assessment, the seeds of failure were sown early in the strategic planning process. What had seemed to be a guaranteed success strategy was, in fact, just the opposite.

The problem was that no one had taken the time to assess the risk, or to even imagine the possibility of failure. As someone remarked during their sometimes painful discussions, "It was like we set sail on a sunny day, with a brisk wind and a gentle swell, only to find ourselves swept up in a storm that now threatened to sink the boat. Had we checked the weather forecast, we'd have seen the trouble into which we were heading."

Actually, that's a great illustration of the key elements of assessing readiness for change. Before heading out to sea, there are several factors that must be considered in determining the wisdom of such an act: the weather and sea conditions; the seaworthiness of the boat; and the skill and attitude of the crew. Even moderately challenging conditions can prove difficult to manage in a sub-par boat with a crew that isn't working well together. So, if you want to assess your ministry's readiness for change, perhaps you should first look at these key factors before you set sail.

Jesus, in challenging people to consider carefully the cost of important decisions they faced, had this to say:

"Suppose one of you wants to build a tower. Will he not first sit down and estimate the cost to see if he has enough money to complete it? For if he lays the foundation and is not able to finish it, everyone who sees it will ridicule him, saying, 'This fellow began to build and was not able to finish'" (Luke 14: 28-32, NIV).

This passage speaks to more than just our decision to follow Christ. It also provides a framework for considering other significant changes in our lives. It tells us that having a bright idea isn't good enough—we also need the capacity to turn that idea into reality, and to follow through until we succeed. It warns us to be honest about what we have, and don't have, in relation to what it requires to succeed. And it underscores the importance of strategic relationships as the key to dealing with certain challenges.

Assessing Readiness for Change

If you're interested in carrying out an assessment of change readiness, here are some questions to guide your discussions. The quality of the result you achieve will depend on the depth of honesty you bring to the task. There's no sense engaging in such an assessment if you've predetermined the outcome.

Competence: Are we pursuing the right strategy?

To be right, a strategy needs to be built on sound principles and practices. But it must also be congruent with the organization's mission, vision and values, and suited to the conditions under which it will be implemented. In other words, getting the strategy right involves both "doing things right" and "doing the right things."

What City Life's leaders realized, for example, was that they'd become too focused on the need to generate more revenue. They hadn't stopped to consider how their retail expansion strategy might actually undermine their other "mission critical" work in areas such as youth employment and street outreach. They began to see they were sending confusing messages to the community regarding what their focus really was. In terms of the changing conditions in their "marketplace," they now realized they were trying to expand their retail operations at the same time a large national discount clothing chain was rapidly adding new stores throughout their community.

So, in fact, it was getting harder to succeed day by day, and the standard for "doing things right" was steadily being raised. In addition, as they began to measure certain key indicators, they realized their new retail outlets were far less profitable than their established stores. Total sales were up, but sales per store were down, and costs were way up. On the cost side, both fixed costs (higher leases) and setup costs (hiring and training retail staff) were higher than anticipated. None of these had been anticipated, and certain indicators did not bode well for the future.

Capacity: Can we access the required resources?

Developing a great strategy doesn't guarantee success. Every strategy, from the simplest to the most complex, requires certain capacities to be in place to implement it successfully. These capacities include people and other resources—everything from individuals with certain skill sets, to facilities in key locations, to key information. In short, capacity assessment involves identifying all the key resources required for success, and their accessibility.

In assessing capacity, City Life leaders began to understand more clearly why their strategy wasn't working. For the retail expansion plan to work, there were three key capacities required—retail space, donated goods and trained staff. And they had problems in all three areas. Retail lease rates were on the rise generally, but especially in the neighborhoods where City Life was competing with the discount chain for available properties. This forced them into less-than-ideal space, where rents were still higher than usual.

They also found it harder to collect an adequate supply of used goods, and their costs were going up there as well. Finally, they learned that they'd underestimated the time and cost required to recruit and train store staff, particularly store managers, many of whom had to be borrowed from their established stores, causing staffing problems there as well.

Connections: Do we have healthy strategic relationships?

Most strategies require people working together effectively for successful implementation. So, relationships are critical, especially ones that might be called "mission critical" partnerships. Such partnerships can be internal or external, and breakdowns in these relationships can have disastrous consequences.

This is where the lights came on for the City Life board and management team. They began by mapping the key relationships necessary for their strategy to succeed. They soon realized this was an area with a lot of broken connections. For example, they found growing resentment from staff members who were under the gun to increase sales and donated goods, while cutting costs, and facing barriers not under their control.

Job training staff also resented having to spend more and more time meeting the staffing and orientation needs of the retail operation, which took time away from their primary focus on youth employment programming. And the recent round of layoffs in areas other than retail had further damaged relationships between ministry departments, and between management and staff.

Externally, what was happening wasn't pretty. They'd unwittingly set up an "accidental adversarial" situation in relation to some of their long-standing agency partners, particularly those suffering from City Life's aggressive competition in the "used goods" marketplace. The result was a noticeable decrease in collaboration on other key ministry initiatives.

Commitment: Are our key people committed to the undertaking?

Of course, this begs the question: Who are the key people? The answer is simple—a key person is anyone whose commitment to the success of the undertaking is critical to its achievement. With this in mind, it's important to understand the unique roles and contributions of every person at every level of the organization. It's also important to understand the difference between commitment and compliance, and to put the emphasis on the former.

As you can imagine from the analysis in the previous section, City Life had major problems in the area of commitment. What was more disappointing, though, was that this had never been a problem before. As Don, Ray and others talked with more people, they realized the changes they'd initiated had begun to have a marked negative impact on City Life's culture. As targets were missed, there was more blaming, less ownership of the problems, and less commitment to finding solutions. More people talked about just doing the job and staying out of trouble—fewer spoke with pride and fulfillment about their work.

One discovery concerned them the most, however. In conversation with several management team members, it became clear that even those in leadership roles were having trouble maintaining their commitment to the new strategy. Ray had been so focused on cheerleading the implementation effort that he'd made others uneasy about voicing concerns. They felt they had to make a choice—go along with the plan and keep quiet about their misgivings, or risk being labeled as disloyal and not team players. With this concern, the management team's capacity to learn was seriously compromised.

Confidence: Do our key people believe we'll succeed?

To return to the sailing illustration, the size of the waves coming at you is a function of both their actual size and your perception. If you see them as being manageable, there's more likelihood you'll respond in a way that makes them so. The opposite is also true. Confidence is a key measure of the likelihood that a person—or a whole organization, for that matter—will successfully meet the challenges it's facing.

When confidence is high, bolder action is possible. When confidence is low, it becomes important to start slowly, build momentum, and create confidence through a series of early wins.

At City Life, the confidence level was at a low point. Six months into the strategic change that was supposed to solve its financial problems, the situation was worse than ever. One management team member, when asked how confident she was in ultimate success, summed it up this way: "I don't know whether we'll pull this off. Sometimes I feel like we're being asked to close our eyes, hold hands, and jump off a cliff together. I can only hope there's something soft to land on." Not very confident, and that's at the leadership level. Imagine what the leaders found as they worked their way through the organization to the front-line staff.

Where Do We Go From Here?

It's been three years since City Life Urban Ministries woke up to the failure of its strategic change initiative, and much has changed for the better. To be sure, there've been some rough patches along the way. The negative impact of the failed expansion didn't go away overnight simply because the leaders recognized the problems. But the valuable lessons they learned have helped them bring about a number of successful changes along the way.

In place of their abandoned expansion strategy, they've shifted their focus to creating neighborhood "service centers," where well-staffed, well-stocked smaller stores also provide space for various neighborhood ministries. Not only do these ministries share the rent and utility costs, but the co-location of services has increased the range of services provided and helped City Life build key partnerships in the community.

Perhaps even more important has been the recovery of City Life's culture as a supportive, inclusive workplace—where people are honored, the truth is befriended, and learning happens naturally. Many of the performance improvements achieved over the past three years have come from the front lines, with management's enthusiastic support.

Even more important, though, is the way City Life is approaching its future. Now, with any new venture, it carries out a rigorous readiness assessment at the outset, as part of the planning process. This has resulted in some bright ideas being shelved or discarded, but now, when significant change is initiated, it's done with a commitment and confidence that it will be successful.

*The names are fictional, but the situation is all too real.

Peter O'Donnell, founder and president of the Healthy Futures Group, Toronto, Canada, is a consultant specializing in organizational change and leadership development. You may contact him at peter.odonnell@healthyfutures.ca.