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Gastspreker 2 mei 2005

Patrick De GrooteVoormalig CEO en Gedelegeerd Bestuurder

Zenitel N.V.

“Top management: gevoelens en emoties bij herstruktureringen”

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Praktische afspraken

• We beginnen met het exposé hier. Het laatste deel van de uiteenzetting is expliciet opgebouwd als interactief debat waar van u als deelnemer een actieve input wordt verwacht.

• 18u30 aperitief in de hall, waarna we voor het diner beneden in de zaal worden verwacht.

• We trachten het officiële deel stipt af te ronden om 21u30

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Introduction

– Capital markets between 2000 and 2004 are characterized by uncertainty and crisis of trust due to sputtering economy and downwards spiral in certain sectors.

– Ambition of CEO’s was often in unbalance with economic reality and lacked modesty. Unfulfilled expectations in shortening reporting cycles give raise to the “Battle of the Quarters” by management.

– Recent international scandals around highly estimated CEO’s result broadly in questioning leadership and entrepreneurship.

– Boards become nervous and tend to interfere in operational matters. Values of business and social responsibility start to embody changing contents due to mutating interests from reference shareholders.

– Against this prevailing back-ground, a turn-around becomes a very complex phenomenon in a turbulent environment.

– Related emotions from top managers cannot be neglected and influence decision taking.

Finding the right balance

Finding the right balance

Emotions

Skills

Methods

From Management literature…..

The sound track

- Bringing companies on speed: the Algerian experience (‘72-’77)

- Power, steel, non-ferro

- Difficult business environment in the seventies: new technologies, poor skills

- Nation wide strategy

- Increase output and reduce cost through performant maintenance of production equipment (’78-’96):

- Involved in several hundreds of restructurings in industry, power, transportation

- World-wide

- Development of professional methodologies

- Maintenance engineering at ABB Service Worldwide (’96-’99):

- The breakthrough of Full Service

- Acquisitions

- Taking over maintenance departments and re-structure

- The Zenitel adventure (’99-04):

- The call for the impossible

- External and internal turbulent and complex environment

- How to get a terminal patient out of the hospital and give him a new future

Position for

growth

Strengthen the base

– Business plan– Acquisition strategy

– New organization– Focus on core-business – strategic

alliances– Business processes– HRM– Communication plan– Cash position– IT and reporting– Grip on the costs

Zenitel’s Change Programme 1999 - 2004

First phase 1999-2002 based on two axes:

Next phase 2003-2006: profitable growth

CSSWireless

Solutions

From SAIT – RadioHolland and STENTO to Zenitel – Milestones

BU

MobileRadio

Marine(On-board)

CSS

Divested

SRH Marine

EuroMarine

Airtime Services SPACE

Wireless Solutions

Rhein-metall

50%

50%Acquisitions 100%:

RamacomRNS

HalberthallATCOM

RadioteknikTelpro plus

INES

Acquisitions 100%:Servoteknik

Colsys

Divest non-core:Debitel BE +NL

ATSEuroMarineServoteknik

SiriusProduction

Others

Divested

Managing crisis and change processes (1)

- Why do you take that challenge ?

- Not without danger

- The kick ?

- The call for the impossible ?

- Natural unrest?

- The re-structuring path – a matter of falling and getting up again and again:

- Doubt

- Believe in yourself

- About doing the right things and the things right

- The big choices:

- Strategic plan

- Mergers and acquisitions

- Divestments

- Dealing with the stock market and all shareholders

- Up-dating the business plan

Managing crisis and change processes (2)

- The important moments:

- Watching the cash: a continuous battle

- Capital increase: oxygen

- About reference shareholders and listed companies

- New corporate identity – new HQ

- MBO

- The difficult things:

- Lay-offs

- Setting up a new team

- Internal policies – the hidden agendas

- Post – M&A integration

- Lay-offs of management team members

- Managing all stakeholders: personnel, banks, suppliers, customers, media….

- Why and when do you stop:

- Your own choice, at the right moment

- The motivation curb

- Invitation to new challenges

Challenges (1)

- External (over the past years):

- Global economy

- Telecom sector

- Internet bubble

- Own markets under pressure

- Scandals and declining trust

- General entrepreneurial climate

- Uncertainty: banks- investors-customers-suppliers- ….

- Power of the media

- Financial annalists

- Stock exchange

Challenges (2)

- Internal :

- Nobody likes change

- New organization incl. change of top mngt and board

- Strategic plan and focused offering

- Consequences: lay-offs, divestments, acquisitions

- Focus on core-business: external partners for supporting processes with related acceptance/integration problems

- Several simultaneous processes: training, motivation, communication, corporate image building, re-engineering internal processes

- Figures: results and their development vs expectations

- Board and its pressure

- Shareholders: change from reference shareholders

- And above all: the troops at home

Emotions (1)

- Certainties:

- Quick decision taking

- Once decided: do it

- Believe in the company; believe in yr team; believe in yourself

- Decisions in team : weak or safe?

- Have the courage to stop long lasting decision processes

- Doubts:

- Major choices: Am I right? (repositioning of offering - divestments – acquisitions…)

- Difficult decisions are taken alone: the general on the hill

- Finding the right people

Emotions (2)

- Emotional moments:

- Lay-off of people, especially of management team members

- Cutting deep, but how deep? Afraid of loosing capacities?

- The battle against continued stress: unexpected events and poor understanding

- Keep the pace at the home-front

- Lonely at the top

- Process of falling and getting up, again and again: never ever give up

- A feeling of satisfaction:

- Appreciation especially by your people

- Sounding board of objective professionals

- Tranquility of mind: ethics above all

- The feeling of having moved forward

Emotions (3)- Destabilizing factors:

- Diversity of reference shareholders interest and corporate governance

- External influences become an increased bourdon

- Figures: improvement process takes always too long

- The islanders: incompetent people generate monopolies

- Dealing with contradictory interests

- Post acquisition integration: cultural shock and clash – personal policies - hidden agendas.

- The pressure of the stock exchange: volatility, liquidity, price

- It would be easy to hit the target every time if it would just stop moving (N. Hamson)

- You need to have a “thick skin”:

- Some managers go through all of them at different points in time: anger, abnormal fears, guilt, resentment, relational problems with team and private, grief, anxiety, despair, fatigue, tension, loneliness, withdrawal, worry, compulsive behavior, sometimes panic or obsessive and negative thinking, depression

- The solution:

- The thick skin. Don’t let doubt eat your self-confidence.

- The real art is to find a rest point in the turbulence

- Living in compartments

- There are no miracles: good results are the consequence of gradual successes

What helps to balance the emotions

• Strategic plan: as a reef facing the breakers

• Importance of active assistance of reference shareholder

• Speed and accelerated transition: quickly search for stability in turbulent times

• Call for top people: line managers, consultants, allies..

• “Educate” your consultants

• Make choices, take decisions and execute the plan: severity, discipline, rigorous

• Cost awareness management: if needed, you never cut deep enough

• Communication: often but no overshooting , repeat messages, transparent, bad news very early, successes

• Work on company image

• Inform on regular basis suppliers and bankers

• Controlling internal processes. Performant reporting. Clear accountability• Keep performance high - pinpoint value creating incentives

• No position jockeying: everyone has to merit his job

• Be fair for all integrating groups after M&A but no compromise management

• Realism in self-confidence – ban self-satisfaction

• Make sure your troops are with you

and 4 major sources of emotions…..

• Success – Is a word of yesterday (Bob Delbecque): you have to earn it every day.– Is never the result of one person, but always from a team.

• Failure– Is watching at each corner. – Is also never the result of one person, but always from a team.

• Team– A leader is as strong as his/her weakest first line report.– Thus….invest in your team.

• Reputation– Comes by walking and– Runs away on a horse (Peter Anthonissen).

Some statements (1)

- Organisaties op scherp. Herman van den Broeck en Steven Mestdagh:

- Apart of human capital, change is considered as the most important factor of success (CEO poll)

- An important part of human information treatment is based on discovering related and recurrent patterns with the goal to tune our behavior

- Managers feel well if they can plan, monitor, coordinate, predict and drive. Quid if something happens that doesn’t fit this picture?

- Finding a state of mind between search for change and consolidation

- Managers judge too often on the basis of non-related facts and not on the basis of their inter-relations – reductionism: one focuses on things, not on relations

- Change-fatigue: feeling fed up to spend energy in changing processes knowing that it won’t bring anything or that it will be changed again in the future

- Stress: danger of predicting or anticipating specific results, in pre-calculating exactly what change-programs will cost (lots of managers take for granted their wishes) – 80% of change

programs fail because of an exaggerated initial optimism, loosing all sense of reality by placing the parameters around the change program in a wrong perspective

Some statements (2)

- Leiden in woelige tijden Daniel Vlerberghs en Hans Begeer:

- you don’t need to wait until change happens: you can initiate it yourself and monitor it therefore you need to love change i.e. one should learn to break resistance against change, starting with oneself

- Robert Stouthuysen: today’s managers need to :

- Be alert for developments, also external to the company: be visionary

- Be continuously up to date in the profession: be professional

- Take time to think and afterwards to execute/drive: be manager

- Extract of your people what they have: be leader

- Be agents of change: be able to mobilize

- Change management based on a relation between structure, culture, strategy and management

- The loss of certainties in organization create stress:

- Predictability

- Feasibility of the organizational structure

- Stability

- Clearliness: loss of hierarchical structures , definition of responsibilities

- The environment is changing so quickly so that adaptations to the external world only are not sufficient anymore

Some statements (3)

- Turnaround management in de praktijk. Peter Faulhaber & Norbert Landwehr. :

- Valkuilen en struikelblokken van de turn-around :

- Vluchtgedrag

- Selectieve waarneming

- Vergoelijken, zelfbedrog, bedrog

- Verkeerde opzet van de onderneming

- Gebrek aan consequentie en radicaliteit, verkeerde consideratie

- Opzetten van valschermen: de valkuil van de afscherming

- Reparatiegedrag

- Verkeerde of ontbrekende communicatie

- Gebrek aan vertrouwen bij stakeholders

- Foutieve beoordeling door stakeholders

- Verlammingsverschijnselen

- Turn-around management is een creatieve daad, waarbij een bedrijf onttakeld, gestut en opnieuw wordt ingekleed

Some statements (4)

- The service profit chain. J.L.Heskett, W.E.Sasser, L.A.Schlesinger:

- Hiring for attitudes first, skills second

- The tyranny of “either/or” vs the policy of “and/also”

- After Atlantis. Ned Hamson:

- Chaos and opportunity are the twin choices for individuals and organizations as one era ends and the shape of the one to come is as yet unknown

- How much longer will successful companies survive if they don’t figure out how to respond to the challenge of change

- Currents, rip tides and whirlpools to overcome: I want it now, new, beautiful/elegant, high quality, low cost, earth and users friendly, and made just for me

- Managers and workers saying: I want more input/control over my job, it should have meaning for me, I need variety/newness, I want predictability too, I want my job to have less hassle in it/ user friendliness/low cost to me, I want it to fit me and I’m going to watch your feet, not your lips

Some statements (5)

- Dagboek van een vijftiger, Herman van Rompuy:

- De herhaling geeft stabiliteit.

- Gecompartimenteerd leven: daarvoor moet je een vijftiger zijn

- Waarheid komt 2 à 3 jaar later

- De waarheid kan kwetsen maar de onwaarheid nog veel meer.

- Het moeilijkste is niet vernieuwen maar trouw blijven

- Steeds meer doe ik dingen uit plichtsgevoel. Daar komen geen initiatieven uit voort maar wel goede raad en goed beheer

- Wie zich te evenwichtig voelt mist de gedrevenheid

- Wie vaak ontgoocheld is, is eigenlijk zeer pretentieus en wie het niet meer is heeft geen verwachtingen meer

Some statements (6)

- Five frogs on a log, Feldman, Spratt:

- Change is expensive but delay can be catastrophic

- If I had to do over again, I would have done it faster

- Getting good players is easy. The hard part is getting them to play together

- A merger between equals gives the managers of the combined organization a license to engage in an interminable debate over who has the best practices

- One calendar year in transition is equivalent to 7 years of normal growth, and so you have to move at an unbelievable pace (John Chambers – Cisco)

- Management caught spinning its wheels is almost invariably management that is pursuing too many business initiatives simultaneously

- The kind of reengineering that must be done in the middle of a major transition is like operating a MASH unit. It’s not pretty, It’s not perfect. But it saves lives.

Contact

Patrick DE GROOTENelemeersstraat 99830 Sint-Martens-Latem

Tel. +32 9 282 86 90Fax +32 9 281 23 10GSM +32 495 77 77 76Patrick.De.Groote2@telenet.bewww.zenitel.biz