I was listening to a very discouraged CEO, George Donnelly Jr. of DonCom Inc. The usually energetic leader, fiftyish and in good health, sagged in his chair. The family business was continuing to grow, and Donnelly, a grandson of the founder, needed help. His plan to bring in a nonfamily chief operations officer to share the load had been thwarted, even though the board supported it. He and the outside directors had concurred that nobody inside (family or not) was anywhere near qualified for the job. Perhaps later, but not now.
When he introduced the idea a few months back, his executive committee had reacted with confusion and alarm. The plan called for members of the committee—including George’s cousin Karl, in charge of purchasing—to report to the new COO. It soon became apparent that there wasn’t much enthusiasm around the table for the idea. After an hour’s discussion, George told the group, politely but firmly, that he and the directors were in full agreement on the decision. It was best for the business, and he wanted their support.
Right after that meeting, his cousin Karl came into his office and announced that for him and for several others on the executive committee the plan was a “no go.” Over the next two weeks, five of the seven committee members, two of them family shareholders, offered reasons why they thought this was a bad idea, likely to make things worse.
Resistance, as every leader knows, is a byproduct of change. Various strategies can be employed to manage it, from trying to change people’s minds by force of reason to using power and leverage and making deals to neutralize the opposition. But first the leader has to understand there are various levels of resistance, each of which must be identified and dealt with in a separate way. George Donnelly’s efforts to deal with resistance shows how various approaches can work—or not.
The business is an old-line wholesaler of consumer goods, which also operates big box direct-to-consumer discount outlets under a different name. George followed his father, George Sr., into the CEO’s chair, and their side of the family owns 40 percent of the shares.
Karl is in charge of purchasing. His father, Alfred, was a partner of George’s dad, his older brother, in the previous generation. A chronic whiner who was always long on expectations and short on performance, “Uncle” Alfred is now retired. But his side of the family owns 25 percent and his presence is still felt. (In 1958, the company merged with a retail firm owned by the Comisky family to form DonCom; the Comiskys own the rest of the stock.)
Preparing the organization for what he knew would be a major change, George Donnelly Jr. (not his actual name) issued an organization bulletin which informed employees in all locations that a search firm had been engaged, and outlined what the new COO’s role would be. This only further inflamed the opposition.
About a month after the meeting with the executive committee, George had to travel unexpectedly to see an important customer. He asked Karl to stand in for him at an employee service-awards dinner. Upon his return he found several voicemail messages reporting on Karl’s comments at the awards ceremony. Karl remarked to quite a few people that his older cousin wasn’t as committed to promotion from within and to family control as had been his predecessors. When he heard this, George was enraged, but said nothing.
During week six, he brought the search consultant in to meet committee members individually. At the executives’ weekly meeting, he asked for their comments. There was a lot of silence. Karl spoke up and said that committee members really didn’t see a need for another top-level executive. With salary, benefits, relocation, and search fees, he could cost a quarter-million dollars. “That’s a lot of bonus money and dividends we won’t get,” Karl argued.
The CEO had had enough. He said he would not tolerate any more opposition. He had listened to everyone. He had reminded them that their experience was almost all in this one company. He and the directors had a more realistic view of the world. Later, he talked by phone with his three outside directors. They urged him to persevere. He told them he’d have to do something about Karl.
The following week his father phoned to say that Uncle Alfred was demanding a conference call with the two of them and the outside directors. During that meeting, Uncle Alfred was searingly critical. Dad and the other directors were fully supportive. Karl proposed that the COO’s job be split. The operations group could report to him, and a new, higher-grade marketing person should be employed. After discussion, the board decided 5 to 2 to stay with the original plan, except that Karl could continue to report to the CEO.
Dad’s comment later: “You’re doing what’s needed. Karl has tried to sabotage you. You had the votes to force him out but you gave in too quickly.” The outside directors all thought the outcome was okay. Karl could be dealt with later, not in a rage but with a careful plan.
Levels of resistance
The resistance can be at three levels. Level I resistance is often caused simply by lack of information or a narrow perspective. The tendency toward secretiveness in family firms fosters some of this. Faced with unwanted resistance, we often fall back on manipulation, use of power, or unnecessary concessions in order to remove the obstacle. We want to get rid of the tension, to get this resolved fast, preferably with the outcome we had in mind. That was George’s initial response—and error.
A better response would have been to try to relax and listen carefully. Sure, emotions will be present, but they need not be distracting. Instead of using his power, George could have “embraced the resistance”—accepted it as a signal that something else was needed. Treating those who resist with respect, rather than with the only partly veiled contempt George showed, would have helped, too.
The CEO and I reviewed his situation and his options. George decided he had not spent enough time building support for the changes. During individual visits and talks at the next three weekly meetings of the executive committee, George provided lots more information on why this decision had been reached. The first week he talked about the duties of the CEO and COO, how they overlapped, how they differed, and the benefits and costs of adding this job. The second week he reported on his visits with others in the industry who had successfully adopted this organizational structure. The third week he went into detail on how George planned to spend the time he would gain from having a COO and how that would benefit them all.
The nonfamily CFO, however, remained strongly opposed. He claimed that when he was hired a year earlier, he had been given a long-term commitment under which he would report only to the CEO. The new plan, he said, violated this verbal contract.
The CFO’s opposition was an example of Level II resistance, which is encountered when a key stakeholder’s needs are not met. Defusing this type of resistance calls for an investment of time and care. In this case, a side deal was cut that permitted the CFO to continue reporting to the CEO, at least for the time being. Longer-term, perhaps he could be persuaded to accept a different reporting arrangement. That might of course require other concessions—more money, a larger department, wider responsibilities, and a new title.
Karl’s resistance was Level III—deeply embedded, emotional, and not easy to change. Logic could accomplish only so much in dealing with him, and hate was not far away. Karl knew that support on the board wasn’t running in his direction. The directors had voted 5 to 2 against his alternative plan. Nevertheless, George gave in to Karl, at least temporarily allowing his cousin to continue reporting directly to him. That, too, was an error, as George’s father told him.
George believed he had to settle things with Karl on a boss-subordinate relationship. But Karl was not just an employee. His deeply embedded resistance, combined with his independent power base (ownership and a seat on the board), required countervailing force. George should have used one of the third-party options available to CEOs. For instance, he could have requested an opinion and recommendation from the outside directors, his closest advisers, or an independent consultant. As Peter Drucker warns, “If you only get to do this once, it had better be done right.”
George’s concession neutralized the resistance for a time. He was ready to move on hiring a new COO. Upper management was by this time so dispirited, however, that it took nearly a year to rebuild morale and create a receptive atmosphere for the person hired. George was wise to accept the delay in order to buy time to build support, even though he was frustrated by it.
So how did it all turn out? The COO is in place and doing well. Two members of the executive committee are gone—one voluntarily. The CFO still reports to the CEO. Karl has been replaced on the board by an outside director. Moreover, he is no longer head of purchasing but, instead, has become director of public relations for the firm. In short, he’s been redirected, with clipped wings. Though still sullen, he’s no longer mutinous.
The CEO used two strategies to accomplish this. First, he recommended that no inside executives besides the CEO be allowed to sit on the board, except during a time of succession. That passed 5-2 and Karl was out. Second, when the position of public relations director became vacant, he restructured the purchasing department so that a top-level executive was no longer needed to direct it. That enabled him to transfer Karl to public relations, where as director, he now reports to the COO. Total elapsed time to implement the plan was almost two years instead of the expected six months.
James E. Barrett heads the family business practice of Cresheim Consultants in Philadelphia. For a more detailed discussion of resistances to change and how they can be managed, the author recommends “Beyond the Wall of Resistance” (Bard Books, 1996) by Rick Maurer. Through examples of organizations attempting to change, Maurer, a consultant, analyzes what works and what doesn’t and offers common-sense tactics for overcoming obstacles.