Professor of business administration at Harvard Business School

Restoring the fortunes of a company that has fallen on hard times often calls for bold moves, says Rosabeth Moss Kanter, the Ernest L. Arbuckle Professor of Business Administration at Harvard Business School and author of Confidence: How Winning & Losing Streaks Begin and End (Crown Business, 2004). But brilliant strategies will have little effect if you don’t first rebuild employees’ confidence by giving them concrete reasons to believe in a brighter day.

1. What are the psychological dynamics at work in companies that are underperforming or failing?

In organizations in decline, a kind of learned helplessness sets in. Secrecy, blame, isolation, avoidance, passivity and feelings of helplessness combine to perpetuate the poor performance.

This “death spiral” typically starts when a company begins to neglect the fundamentals—for example, letting communication deteriorate, starting to pull decision making back into the hands of smaller and smaller groups that make decisions behind closed doors. This undermines the organization’s problem-solving capability.

As communication and the willingness to face problems openly deteriorate, infighting and finger-pointing increase. Employees in different units lose respect for one another and for themselves. Groups start withholding information and support from one another. They look to maximize their own results but not to contribute to the performance of the organization as a whole. And as performance erodes, the support of such external constituencies as investors and consumers weakens. That cycles back into the organization to intensify the negativity.                 

2. How can teams or companies break out of a downward spiral?

It starts with confidence—but confidence by itself doesn’t produce success. It produces the effort, the persistence. But the belief that your company can overcome its problems has to be supported by structures and disciplines that make it possible for people to count on one another, exchange resources and pull together to meet a new challenge. 

3. What are the necessary structures and disciplines?

Accountability is the first cornerstone of confidence. It’s a function of open dialogue and mutual respect. When those elements are in place, people are willing to face up to what’s going on and to make good on the promises they’ve made to help fix the situation.

Gillette had experienced several years of declining operating margins and market share when Jim Kilts became chief executive officer in 2001. Kilts quickly moved to eliminate secrecy and denial. Besides creating multiple communication channels, he generated quarterly report cards for his top team and posted the results. He also built a climate of respect by emphasizing he had no preconceptions about people and no plans to make sweeping changes in the management ranks. This helped executives look at the facts without becoming defensive.               

4. What else is necessary to rebuild employees’ confidence that brighter days lie ahead? Collaboration and initiative are also crucial to rebuilding confidence. Four years ago, London-based industrial and energy services firm Invensys was close to defaulting on its financial obligations. Rick Haythornthwaite helped restore momentum when he became CEO by making cross-group collaboration the order of the day. He created nine strategy teams—each focusing on one of nine customer segments—that comprised people from across the company.

Moreover, showing initiative became an expectation. “The days of autocracy are over,” Haythornthwaite told employees. “You have to do it yourself.” Before long, the company’s program to launch and give a boost to improvement projects throughout the organization was flourishing. 

5. What leadership traits are essential in leading a turnaround?

Flashy personalities and bold visions are overrated. A pep talk without evidence is empty. To turn a culture of decline into one of success, you have to restore employees’ confidence in the system. The mechanisms that the leader puts in place are most important.

Place your bets on the future you want

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Five Questions

Restoring the fortunes of a company that has fallen on hard times often calls for bold moves, says Rosabeth Moss Kanter, the Ernest L. Arbuckle Professor of Business Administration at Harvard Business School and author of Confidence: How Winning & Losing Streaks Begin and End (Crown Business, 2004).

Winning: Boardroom benchwarmers

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A: So, two seat-warmers on your board were just reelected unanimously, you say? Doesn’t that mean you voted for them, too? If so, don’t worry. You’re definitely not the only board member in history to endure an ineffective or otherwise dysfunctional fellow director.

Cyber Ed, Thai Style

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If you’re not at the table, you’re on the menu

When the companies of the United States Climate Action Partnership (USCAP)—businesses including GE, Alcoa, DuPont and PG&E—announced their call for federal standards on greenhouse gas emissions in January 2007, The Wall Street Journal castigated these “jolly green giants” for acting in their own self-interest in promoting a regulatory program “designed to financially reward companies that reduce CO2 emissions, and punish those that don’t.”

ValueIT

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A: You could fill a book—in fact, you could probably fill dozens—with all the ways to get off to a good start as a leader.

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Making gender issue history

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Selling beauty

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Winning: Competence trumps corporate bias

Q: I am seeking a rewarding career, having recently completed my bachelor’s degree in management. What obstacles will I likely need to overcome in the corporate world being an older, five-foot tall, African-American woman? Name Withheld, Houston 

A: When we first received your letter, we put it into a file labeled, “How To Succeed In Business While Looking Different.”

Looking backward

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It’s Greek to me

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Best teachers, worst practitioners

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Are you delegating so it sticks?

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How to teach pride in ‘dirty work’

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