Managing Change

It is well known that over the years, we have closed down or sold a number of the 400 or so Virgin companies we have created – our critics regularly point this out. But what’s wrong with that? Companies are tools, each designed to fulfill a particular purpose. If they are superseded or no longer needed, our group will sell them or shut them down. We try our level best not to lose any people or know-how, but we do not allow ourselves to get nostalgic about the underlying concepts of the companies themselves. When Virgin renews itself, the critics who tut-tut about all the leaves falling to the ground have failed to spot the tree.

If you’re going to lead your company through a restructuring, first you need to take a cold, hard look at the business. Are you really going to be able to empower your staff to do the job that needs to be done? It can be superhumanly difficult to change a company’s existing culture. This is also something you should consider if you’re leading a team that’s contemplating a business acquisition – so many of which end up being disasters because the executives involved fail to understand the real challenges of getting different types of employees to work together and share the same goals.

We found ourselves grappling with a challenging situation in February 2007, when we relaunched the combined company of NTL, Telewest and Virgin Mobile as Virgin Media, creating the largest Virgin company in the world, with 10 million customers and 13,000 employees across the U.K.

Until then I’d always followed a “small is beautiful” business plan. In Virgin’s early days, whenever the head count at one of our companies topped a hundred employees, I would ask to see the deputy managing director, the deputy sales manager and the deputy marketing director. I would say to them: “You are now the managing director, the sales manager and the marketing director of a new company.” Then we would split the company in two. And when the number of employees at either of those companies reached 100, I would ask to see the deputies and split the company again.

Virgin Media was neither small nor beautiful. The NTL part of our business, in particular, was in a very sorry state. We needed to make drastic changes in the area of customer service. For one thing, the people dealing with complaints didn’t seem interested in helping customers. We found out why: It turned out that they were reading from scripts all day.

This brings me to my next bit of advice: executives and managers overseeing any restructuring or merger should find ways to inspire all employees to think like entrepreneurs. Whatever you do, treat them like adults. A person’s own conscience is the hardest taskmaster of all, so the more responsibility you give people, the better they will perform.

So in Virgin Media’s case, the scripts went straight into the garbage. We told our call-center employees to solve problems within one call if possible, and we reallocated resources to the front line to improve operations.

There was skepticism at first among former NTL staff. What would happen if one of our customer-service people overstepped the mark? What if they started offering customers too many perks? My response to that was, “Live and learn.” I didn’t think anyone should be criticized for being overly generous when handling a disgruntled customer. If one or two of our people got themselves into a tangle, it just meant that they’d do better next time. And Virgin Media is now one of the U.K.'s leading providers of cable TV, Internet and phone services.

The lesson I have learned from this and other, even more difficult restructurings is: avoid taking on someone else’s legacy. If the people you’re responsible for no longer have the enthusiasm and determination needed to relaunch the company, you’d be better off finding a new team to launch your business. You may even need to start from scratch.

But what if you can’t move on? What if that’s not an option?

There is an alternative, one of the hardest tricks in the book: restructure your company so that it’s very small, very specialized and very expensive. This is an innovation of the highest caliber. Take a large operation and find ways to scale it down, retarget it and remarket it, all the while adding value that justifies the hike in price. It’s very hard to do, not least because you’re in so much pain as you’re doing it.

Why try this route? If you’re able to pull off the small-and-specialized restructuring, your staff may be in charge of a smaller company, but each contributor will have more clout. They will be able to take pride in their successes, and learn quickly and well from their failures.

What’s more, you’ll be gathering people together in a way that will have them bouncing ideas off each other, befriending and taking care of each other, and eventually they will start coming to you with solutions and great ideas again.

Wouldn’t it be wonderful if the new company you create is full of motivated, caring, creative people? Think of what you could achieve.