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Tension and mistrust, adversarial relations between management and unions

A number of years ago I was a member of a senior executive team that failed to come to consensus on the strategy of the business. This experience was a powerful example of how important it is for people to learn to talk openly and the severe consequences when we don’t.

The company was a manufacturer and distributor of components within the computer industry. For many years the company had an excellent reputation and dominance of their market place. Their largest customers included such companies as Compaq, Sun Microsystems, IBM and AT&T.

As in most industries, competition began eroding the company’s market share. Foreign competitors were manufacturing and selling their products at a much lower price than our company. These low prices more than offset the company’s reputation for quality and ability to customize their products to the needs of their customers. This fact caused a serious crisis that forced the company to reevaluate and renew its business strategy.

After thoughtful analysis, the president concluded that to remain profitable the company would have to expand its product base to include an entirely new product, different from what it had traditionally manufactured. During this time the president met a systems expert who had grown another electronics company to a position of prominence within the industry. Confident in the ability of his staff and organization, the president hired this individual and thus initiated a major shift in the direction of the business. Although they would maintain their expertise within their traditional product lines, they would begin development and manufacturing this new product.

The logic of the move made perfect sense to the president and many others within the organization. However, not all of the key stakeholders agreed. The president persuaded a skeptical board of directors to allow him several months to make the endeavor work. But the senior managers were divided in their support. Those who had been recruited and hired by the company president and were relatively new to the company supported the strategy. However, most of those who had been with the company since its early history, much longer than the president, remained ambivalent at best.

The company eventually designed and even manufactured a number of prototypes. But every success came at a very high price and problems with the design and manufacture of the new product plagued the entire process. It was clear that not everyone was committed to the success of the project.

The response of the president was to lecture his senior managers about the importance of their commitment. He stated on a number of occasions that the strategy could only succeed with “the support of everyone in this room.” But he never got the support of everyone in the room and the project eventually failed. The product never got into full production, several million dollars of cash reserves were depleted, the trust among members of the organization eroded, and the board of directors eventually fired the president and the half of his staff that supported the strategy. They brought in a turn-around consultant who laid-off much of the workforce and eventually sent a lot of the company’s manufacturing overseas.

What went wrong? Was the strategy flawed? Or did a few naysayers derail a bold venture and business opportunity? I’m convinced that the heart of the problem was not the strategy per se but the process by which it was implemented. If this group of senior leaders had been able to engage in open and honest dialogue, the outcome would have been entirely different.

The president of the company, a capable leader, failed to listen to opinions which differed from his own and pushed ahead in spite of objections from the people whose support he so desperately needed. And thus he failed.

Of course, I can’t say for sure what would have happened if he had listened and everyone had an opportunity to express his/her point of view. It is possible that through open and honest dialogue and airing of all the pros and cons and misgivings about the project, the staff would have come to a genuine support for the project. On the other hand, the skeptics may have convinced the president and other members of his staff that the project was not viable. Or, they may have decided the timing of the project was poor and established clearer criteria about when to pursue it. By entering into honest dialogue, it’s far more likely that the members of this executive staff would have arrived at the best decision and one which each of them could support.