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change management

The Destructive Impact of Stress on Employee Performance

impact of stress on employee performance

This article originally appeared on the SimplyHired blog.

The No. 1 enemy of an employee’s success is stress.

Often the source of stress is change, yet change is unavoidable. If leaders were to consider this lever, they could modernize the notion of what an engaged employee looks like and achieve new heights of engagement and productivity in the workplace.

The main reason stress is destructive to organizations is because it creates instability, often at a time when the organization is most in need of consistency. For instance, when the business is under pressure to meet a deadline, optimal performance is required by each individual. However, this stressful situation might cause some employees to crack and some leaders to snap.

Hiring and Engagement Tools Ignore Change

The pressures of business demand that management be on the lookout for new ways to engage employees.

An influx of tools purport to aid management’s ability to recruit the right employees and engage them to maximize the organization’s productivity. The full spectrum of typical HR activities – from pre-and post-hiring tests and assessments, to recruitment campaigns that promote the essence and purpose of the organization – all have the same weakness: they fail to account for the role of change in the equation. Even with a multitude of tools, sustained and consistent engagement and productivity has proved elusive for most organizations.

The three common ways organizations miscalculate the impact of change are:

1. Recruit to the Culture

Employer branding, purpose-driven organizational design and brand ambassadors share a common goal: making an organization attractive to top talent. Each of these approaches recruit individuals to the company as if the organization, its leadership and the business environment are fixed.

These hiring methods that attract candidates to the culture might also lead to havoc by creating a self-perpetuating system that inadvertently reinforces negative attributes. I saw this with the rise and fall of a coworker. Mandy had moved up in the ranks of the small company and in a short amount of time she was put in charge of the meeting planning department. By all accounts she was exceptional at her job, but as natural attrition occurred on her team, she always hired a replacement who was exactly like her. In time her team was comprised entirely of people who possessed nearly identical ideas, habits and experiences. The department continued to serve the organization well until a new senior leader wanted to shift the strategic use of meetings and events. Years of having recruited to the culture left the team too weighted with a particular capability set. It was unable to adapt, and management wiped out the department rather than try to fix it.

2. Fail to Anticipate Stress

Personality tests and work-style assessments that attempt to pinpoint candidates’ strengths, attitudes and motivators determine if prospective employees are a good fit for the team, but they do not predict if the employee will be productive, happy and committed long-term. That’s because these approaches to achieving employee engagement identify the nature of people’s character and values, but what the business needs to know are the drivers that determine how employees will behave, even as pressure rises.

As soon as any aspect of the situation shifts, whether at work or at home, it has the universal effect of diminishing productivity. Stress at work such as a new boss, a merger, competitive pressures or a new strategic direction, as well as tensions from other sources – discord at home, health issues or strained relationships – all impact each employee’s ability to be productive and attentive to their work. 

3. Rely on Engagement Surveys Alone

It’s a perilous combination: offering employees the opportunity to give a thumbs-down to management decisions or the business environment without management having enough understanding or will to act on the information and fix the problem.

An over-reliance on engagement surveys could give management a feel-good activity that has the appearance of being responsive but actually just reveals the sources of employees’ stress. Even more disconcerting, this exercise in simply recognizing the state of engagement has the opposite effect when employees realize that the regular pulse-checks are disconnected from the organization’s health because “engagement” has been defined too broadly and there is no plan to act on the survey results.

The current focus on measuring engagement, particularly in real-time, plays an important role in diagnosing issues, but it does nothing to mediate the unavoidable discrepancies between what employees want and the business needs. Leadership might learn what to fix but not how. 

The Employee Engagement Revolution Starts with Recruiters

Paying attention to the impact of stress on individuals’ motivations, work styles and productivity habits would make it possible for the organization as a whole to weather change without compromising engagement.

This is a revolutionary way of re-imagining what engagement looks like.

Recruiters who acknowledge that business conditions are in constant flux and understand that engagement must remain at an optimal level might want to recruit for their culture, account for stress and constructively use engagement surveys, but there is no simple way to do that, according to Pam Teagarden, an engagement expert and the founder of Authentum.

Organizations are made of up individuals, so it stands to reason that thriving people constitute a thriving organization. Teagarden’s research conducted at the University of Pennsylvania has generated an assessment system that predicts how business goals can be achieved by employees who are under stress. Her research shows that it’s possible for employees to be engaged at work even if disengaged in other aspects of their lives.

The outcome of this research is BASIS (Business and Attitude Style Information System), which Teagarden says can model how pressure on people impacts the business. Armed with this information, individuals and the organization can identify a path to success regardless of stress.

In our rapid and endless state of change, organizations must withstand and even thrive during unprecedented pressures. If employees can adapt their productivity levels without sacrificing their engagement levels, the organization will have a stable foundation for achieving its goals. In this environment change may still be stressful, but employees and the organization can be ready for it.

Leading during change requires excellent communications skills. Download this free 47-page eBook Character Trumps Credibility to start building your story bank and increase your effectiveness.

Business Storytelling Training to Lead Change

engaging leader podcast

Podcast: Business Storytelling Training

I returned to Jesse Lahey’s show Engaging Leader, to continue our discussion about strategic storytelling. In our first discussion, we talked about how leaders can harness the power of storytelling to improve their ability to influence, inspire and engage.

In this training, we get more into the nuts and bolts of business storytelling.  During the 25-minute podcast interview, I share with listeners how four storytelling frameworks will improve your ability to lead change. We get into the specifics of the story types and their role in change.

 

Change the Way You Lead Change

The podcast content is designed to provide practical and actionable information. Anyone who needs to be persuasive in the workplace will find tips that they can use right away.

You can listen from the website, download the podcast to your computer, or download it in iTunes. All the options are on the Engaging Leader website.

 

An Rx for Influence: The Two Story Solution for Change Management

two pills

photo by Dean Hochman / BY CC

This article was first published on Anecdote.com.

The problem with a negative story

Being negative is an easy trap to fall into.

When trying to prove a point or change someone’s mind, the natural tendency is to use a story that has a negative point-of-view to warn against an outcome and perhaps shock the listener a little.

The problem with a negative story is that it is only a warning and it is only attention-grabbing. Using a stand-alone cautionary tale tells your audience how not to behave, but fails to fill the void with a better idea.

A powerful anecdote I recently heard could effectively be used in many settings. For instance, if you were coaching a young professional about how to handle questions regarding their level of expertise.

Sometimes the wrong explanation can hamper your ability to move ahead in your career. Anna visited a doctor to discuss an elective procedure. She asked the surgeon the very obvious question, “How many times have you done this operation?” The doctor’s response was, “Five.” With that answer, Anna resolved that she would not be his sixth.

Certainly every doctor – or any type of professional – needs to gain experience and practice, but there has to be a better answer to that question because no one wants to be the guinea pig.

This story is instructive, but only to a point. If the coaching ends here, many questions are left unanswered. Therefore, to truly change a mind, you also need to exemplify the desired behavior.

The perfect complement to a negative story

A second story that demonstrates the positive perspective is the perfect complement to the negative story.

A helpful secondary story could be:

A young surgeon was asked in clinic by a patient “How many times have you done this operation?”

She told the patient who was in need of a major surgery: “Never. I haven’t done this exact procedure before because every patient is different. I approach each surgery knowing that no two patients have the exact same anatomy, pre-existing conditions, or medical history. That being said, I’ve spent years training at some of the best medical institutions with world-renowned teachers and this has prepared me to take on any case, including yours.”

The patient responded favorably and was comfortable signing the consent forms because the answer was honest and it instilled confidence. That’s what you want to achieve when responding to a question about your capabilities so that lack of experience never hinder your career growth.

A prescription for success – the two story solution

For a young person preparing for a job interview, you can see how a revelation might occur after hearing these two stories. That’s because taken together, the negative example followed by a positive one is both a diagnosis of a problem and a prescription for success.

An example that serves as a warning certainly will catch the attention of your audience, but alone it probably isn’t enough to achieve your preferred result. Consider using the negative and positive story technique the next time you are leading change because influence isn’t authoritarian, nor is it restrictive. True influence is education with a dose of inspiration.

 

Business Storytelling Essentials for Leading Change

Engaging Leadership Podcast about Storytelling for Business Leaders Who Lead Change

Jesse Lahey hosted me on his Engaging Leader podcast to discuss why storytelling works in business when change is afoot.

 

 

During this 30-minute exchange we cover business storytelling essentials for leading change, including:

  • the impact of change fatigue on change initiatives
  • the art and science of business storytelling
  • how to convince skeptical business leaders that storytelling is effective
  • how facts change minds versus how stories change minds
  • the role of facts in business storytelling
  • how to construct a business story
  • the power of story to transfer idea ownership
  • the role of empathy in changing minds

 

The episode is available for free and immediate download here and on iTunes.

 

The Dotted Line: Calling All Change Agents

The October 2014 issue of The Dotted Line features news + resources for leading change. Subscribe to receive future issues of The Dotted Line delivered to your inbox.

 

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Be the Change By Telling the Story

The last Storytelling for Leaders public workshop of 2014 will be held on Monday, November 17 in Washington, D.C. at the Le Méridien Arlington. Get details and register or take your chances trying to win a seat at the training by heading over to Facebook.

If you can’t make it to D.C., bring Storytelling for Leaders to your team, company, or corporate training academy. 2015 dates are already being booked. Find out more.

 

Resources for Change Agents (Like You)

How to Make Yourself Memorable
from Business Insider

Whenever you meet someone new, you can be sure that they want to know two things about you. No, it’s not where you’re from and what you do for a living. Those superficial questions are actually trying to ascertain what you’re about and what you want.

Your employees also seek the same information from their leaders, especially during times of change. Until you provide answers, they are going to resist change because they doubt your sincerity, ability, and motive. Find a way to connect with everyone you meet by using these four steps for creating your own connection story that will improve your effectiveness as a leader.

The Cure for Micromanaging
from Simply Hired

Leading change is a stress-filled endeavor, so don’t make it worse by breathing down the necks of everyone on your team. Micromanaging won’t make you a better leader (unless being annoying is your goal). This cure for micromanaging results in the need for less direct oversight and fewer rules, while encouraging more engagement. It’s sort of like a magic pill, but it’s not bitter at all.

No One’s Favorite: Flavor of the Month Leadership
from LinkedIn

Humans are hardwired to seek consistency. That’s the reason we hate hypocrites and are justified in demanding some degree of certainty at work. Leaders violate that trust when they roll out a new initative or switch the strategy too often. As a result, employees revolt by refusing to participate, their reason being that “it’s just the next flavor of the month”. Put an end to this complaint by taking a hard look at your organization and identifying which of the five root causes apply to you.

 

 Executive Coaching
*  One Opening  *

One-on-one coaching works for busy executives who want to learn communications and influence skills that will enhance their effectiveness in the boardroom, behind the podium, or across the desk. You’ll be led through a proven program that’s customize to your specific needs and current workplace challenges.

Just last week a client in Atlanta used these skills to deliver a presentation to a skeptical executive team and he was elated to report that he ultimately won their support for his initiative.

I have opened only one new spot for an executive who is ready to improve his or her communications and leadership skills. Inquire today.

 

Upcoming Events


Storytelling for Leaders public workshop
in Washington, D.C.on Monday, November, 17.
Reserve your spot.

Make Your Strategy Stick: Storytelling Roles of Management and Communications in Cincinnati, Ohio, on Thursday, November 20. Sponsored by the International Association of Business Communicators. Sign up.

Little Stories that Pave the Way for Big Change podcast interview with Jesse Lahey of Engaging Leader to air in early 2015. Learn more.

……
Request a speaker on the topics of change communications,
corporate culture, employee engagement, or business strategy.

 

Connected Strategy Group was founded by Amanda Marko, president and chief connection officer, to help leaders increase their influence through deeper connections that enhance the effectiveness of business strategy, change management, employee engagement, and corporate culture initiatives. Amanda recently became one of only a handful of people globally – and the first in the U.S. – to partner with Australia-based Anecdote to deliver their Storytelling for Leaders program. Storytelling complements her consulting work to help leaders better influence, engage, and inspire others.

 

No One’s Favorite: Flavor of the Month Leadership

photo by keane dasalla / BY CC


Understand the Source of Resistance

Good leaders aren’t hired to maintain the status quo. They are brought on to improve, expand, and advance their organization.

In reality, those are all different ways to say: lead change.

With change comes resistance. Leaders in-tune with their stakeholders will invariably be familiar with the objection that whatever new program, strategy, or plan you are rolling out is “just the next flavor the month.” The leaders might acknowledge that this sentiment will surface, but too often they proceed with the roll out and hope the employees will come around.

Don’t discount this criticism; try understanding it.

Ignoring the flavor-of-the-month complaints will delay your ability to successfully implement your plans and realize their benefits. When employees complain about flavor of the month leadership or initiatives, what they’re really crying out for is consistency and certainty.

Ice Cream: Delicious

When I go to my favorite ice cream shop, Graeter’s, I know they’re scooping up the best French Pot frozen treats in the world. If one day they were serving hamburgers and the next day they were selling screw drivers, I would not only leave with an aching sweet tooth, I would also be very unsettled because all I know that is true and just about the world would be shattered. (Yes, that’s an extreme reaction, but this is really good ice cream.)

With consistency comes a level of certainty that provides a framework for our worldview. Just like an ice cream parlor that puts screw drivers on the menu, inconsistent priorities, messages, and signals in the workplace make it disorganized, confusing, and frustrating for workers and management alike.

It shouldn’t be surprising that consistency has been identified by renowned psychologists as a primary driving force of human behavior.

In a series of experiments, individuals were observed going to great lengths to avoid inconsistencies in their words and actions, even being compelled to do something extraordinary and outside their own best interest just to appear and feel consistent. In these experiments, strangers who witnessed a theft on a public beach were unlikely to confront the thief; however, upon agreeing to watch someone’s belongings for a few minutes, the strangers became vigilantes who chased the perpetrator down the beach.

The need for consistency is a strong motivator indeed.

Flavor of the Month: Disgusting

Our desire for consistency motivates our workplace behaviors as well. Discrepancies between a leader’s words and deeds will cause significant confusion. Make no mistake: the actions will be held in higher regard and the misaligned messages will be ignored.

The real peril comes from the increased disdain for the leader who disrupts our overwhelming desire for reliability. Leaders “whose beliefs, words, and deeds don’t match may be seen as indecisive, confused, two-faced, or even mentally ill. On the other side, a high degree of consistency is normally associated with personal and intellectual strength,” explained Robert Cialdini in Influence: The Power of Persuasion .

That’s why we prefer the Bill Clintons to the Tiger Woods; better to be the same in public and private than to profess one standard and live by another.

Root Causes of the Criticism

To understand the flavor-of-the-month complaint, leaders need to take a hard look at their organization and determine the source of the discord. They will likely find one of five situations:

1. Misaligned actions
Calling someone a hypocrite is an extremely harsh judgment, but sometimes it’s warranted. The executive who asks employees to make sacrifices and accept a pay freeze to save a struggling company, yet doesn’t show restraint when it comes to black car service and private planes is an extreme example. More often, misaligned leadership actions come in the form of failing to follow through on promises.

Announcing a change initiative is akin to making a promise. The bargaining chip for the discomfort of the transition is that in the end, something will be better. Failure to properly and thoroughly execute the new program will undermine your promises and disengage your employees.

2. Misaligned culture
When the culture itself is counter to the initiative being undertaken, your people will cry foul, so fix the culture first. I worked with a global company that was aware of its tendency to make simple things complex. The company was full of engineers; therefore, they commonly created over-engineered solutions. Trying to introduce simplified tools to the employees and customers would have failed if the leadership hadn’t first addressed the complexity issue. As the culture transitioned, the entire organization became more nimble and receptive to change.

3. Misaligned communications
When leading change, everyone must be in lockstep in word and action.The key to aligning the change communications is to put in place a framework in the form of a Clarity Story.

It looks like this:
In past….
Then something happened….
That’s why we’re going to….
So all these good things can happen….

Once the organization’s communications framework for change is determined, leaders should personalize the message by inserting their own moments, examples, and facts to strengthen the case for change. Delivering the same message in different ways is not just acceptable, it’s preferred because then it’s authentic.

4. Failure to link change initiatives to the strategy
Strategy should provide the backbone for all change communications. In fact, it’s built into the Clarity Story framework described above. “That’s why we’re going to” is the place to reiterate your strategy.

During the most recent recession and ensuing recovery I worked for a multinational company where we consciously linked every announcement – whether it was a force reduction, an acquisition, or a policy change – to the strategy. This had the universal effect of reassuring employees and other stakeholders that those in charge had a plan and they are deliberately executing it. A sense of optimism, focus, and resolve was reinforced by this communications strategy and as a result, the words of the leaders motivated the actions of the employees, who were responsible for the company’s turnaround.

5. No strategy
A strategy grounds your change efforts, so it makes sense that an organization without a strategy is adrift and its leaders appear to be making it up as they go. In this case, the flavor-of-the-month criticism is wholly justified and leadership must first determine their strategy before attempting to introduce a new initiative.

Put Change on the Menu

Ending flavor-of-the-month leadership doesn’t mean freezing your change initiatives; it means acknowledging that a baseline of consistency and certainty will boost morale and comfort your stakeholders that there is a method to your madness.

When have you found yourself referring to an initiative at work as the latest “flavor of the month”?

……….

Storytelling is an effective change management tool that can be taught to leaders. Fall workshops are being held in New York and DC; in-house training for teams or one-on-one executive coaching in leadership communications techniques are also available.

For more storytelling resources, download the free 30-minute audio training, Making the Business Case for Storytelling.

When Managing Change, Don’t Just Defer to Data

photo by MissyH / CC BY

Surprise With a Story
Long-serving employees of the European division of a global tech company were getting restless. They felt career opportunities were lacking and that outside hires were taking the best open positions. The career discontentment was leading to disengagement. Management wanted to reverse the trend.

The first response of the head of human resources was to inundate employees with facts. Lena directed her team to collect factoids like the percentage of openings that were filled with current employees versus outside hires, as well as a list of industry awards that recognized the employer as a top workplace.

Establishing that management was in the right was a smart step, but it wasn’t enough to change employees’ opinions.

The fuel for overhauling the perception came from the stories we collected. There was Carlos who was able to stay with the company when his wife’s promotion required the family to relocate from Spain to Portugal; Gabby, who made a lateral move into a different division to take on a new challenge; and Ella who stepped into a management role after her third promotion in two years. Sharing stories like these of co-workers and colleagues highlighted the opportunities available to all employees and shifted opinions.

The reason the campaign worked is that facts don’t change minds as well as stories.

Stories serve to open minds to new ideas. When people hear facts, they dig in their heels. Their resolve becomes stronger and their grip on their version of the situation grows firmer. This is the famous confirmation bias. It’s also the reason no one has over “won” an argument on Facebook or the comments section of a website.

To loosen a person’s grip on their current worldview, you have to catch them off guard. You have to surprise them.

Stories Soften the Heart
An unexpected fact – perhaps a shockingly high figure like the number of times plastic water bottles used last year would wrap around the earth – might get the audiences’ attention, but will it change their beliefs and behaviors? I defer to science, which says: no.

In Thinking, Fast and Slow, Daniel Kahneman explains a set of experiments that showed how psychology students learned new concepts. When students were told a surprising statistical fact, they might find it remarkable and memorable enough to share the fact with a friend, but this wasn’t the same as changing the way they looked at the world.

The test of true learning is whether your understanding of the world and the way you interact with it has been altered, not whether you can repeat a factoid. Kahneman summarizes the study results stating that even overwhelmingly compelling data points are incapable of changing long-held personal beliefs. “On the other hand, surprising individual cases have a powerful impact and are a more effective tool for teaching [new ideas] because the incongruity must be resolved and embedded in a causal story.”

People hold stories in their hearts. The reason they clasp too long to the old way of processing orders or replenishing inventory is because they have developed an emotional attachment to those methods that is explained by a story they tell themselves.

If you are going to take away someone’s old story, you have to give them a new one. Reason, even when it’s backed by infallible facts, doesn’t hold a place in the heart.

The Role of Facts
Logical, data-driven decision makers aren’t going to be comfortable with this idea. However, the serious-minded can rest assured that facts play an important role, even when a story is the vehicle for your communication.

Your story must be grounded in fact to be effective. In the early years of eBay, many people heard the anecdote that the founder, Pierre Omidyar, had started the site to help his fiancé add to her Pez dispenser collection. It was later revealed that this account was fabricated by the public relations department to generate buzz for the new company.

Storytelling is not permission to abandon facts. Instead, it’s a better method for delivering facts.

Richard Maxwell and Robert Dickman, authors of The Elements of Persuasion state, “Stories are facts wrapped in context and delivered with emotion.”

Facts alone don’t possess emotion. Facts just are facts. The emotion from facts comes from whatever feeling we assign to them – perhaps outrage or disgust.

However, as the experiments described in Thinking, Fast and Slow prove, those emotions that arise from facts are fleeting and therefore are not powerful enough to shift anyone’s worldview, nor are they capable of inspiring action.

Stories, on the other hand, are the total package of fact and emotion rolled into one. Stories are also memorable. They won’t be retold just once like a surprising fact; they will be shared and take on a life of their own.

How to Surprise with a Story
Instead of deferring to data when you need to change a mind, try surprising with a story. An anecdote or colorful example opens minds to your facts and helps to ease the way for the change you’re suggesting.

Five methods for using stories to introduce surprise into your change management initiatives are:

  • Tackle the anti-story
    For whatever change you’re trying to make, there will be counter arguments and competing stories. Identify and acknowledge them; don’t hide from them.If the prevailing story you’re trying to rebut is that your organization is bureaucratic, then recognize the slow responses and convoluted processes of the past. Ignoring the negative and only focusing on the positive will sink your initiative. However, startling the skeptics by making their argument before they have a chance will give you a substantial advantage.
  • Hit them with the one-two combo
    Demonstrating the the negative impact of failing to act is an obvious choice for communicating the need for change. When advising an executive who was reluctant to use storytelling in his communications, telling him about a time that one of his non-story communications wasn’t effective might get his attention, but it was not enough to change his mind. When I followed the failure story with a success story, the combination of the negative and positive examples was surprising enough to work – he started using stories.
  • Tell a story with a twist
    The story itself can contain a surprise. Tell a story that ends in an unexpected way and it will be memorable and emotional enough to stick with the audience and carry your point.
  • Make a connection
    We’re naturally skeptical of the messenger. Overcome this barrier by letting your audience know through a story that you are like them.The young new COO who arrived at a company in desperate need of a turnaround had an intimidating reputation of working for top-performing companies. The employees assumed his successes had been easy, but when he shared that in fact the companies he had worked for started off worse than theirs, the employees suddenly felt reassured that he understood what it took to transform an under-performing company. No longer were they working with an unapproachable superstar; now they had someone on their team who been where they were and could help them improve.
  • Trigger a story
    Doing something remarkable gets other people talking. Use this phenomenon to your advantage by signaling change without saying a word. A leader who wants to overhaul a lax corporate culture where meetings never start on time will trigger stories – and a change in behaviors – if she strictly abides by start times and bars late arrivals from entering the conference room.

Pull, Don’t Push
Stories are a pull strategy – they pull at the heart strings. Meanwhile, facts just push against the established belief system and don’t make a dent.

Anyone leading change needs an awareness of the best and worst of human nature. Because storytelling is deeply rooted in our DNA, embrace this truth rather than deny it. Incorporate story techniques into your change projects and your new ideas and processes will spread faster.

What stories have helped you pull change initiatives to completion?

………….

Storytelling is an effective change management tool that can be taught to leaders. Fall workshops are being held in New York, Boston and DC; in-house training for teams or one-on-one executive coaching in leadership communications techniques are also available.

For more storytelling resources, download the free 30-minute audio training, Making the Business Case for Storytelling.

Workshop details: www.connectedstrategygroup.com/storytelling-for-leaders

What Once Was Free: A Guide to Implementing Fees on Freebies

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Photo by Caden Crawford / BY CC

Don’t Be a Qwikster
Price increases are hard. They’re even harder when you need to start charging for something that was previously free or bundled.

Remember what happened at Netflix a few years ago?

In the spring of 2011, [Reed] Hastings, Netflix’s widely admired chief executive, held a meeting with his management team and outlined his blueprint to jettison Netflix’s DVD operations. Netflix managers would tell subscribers on July 12 that they planned to do away with a popular subscription that offered access to DVD rentals as well as unlimited on-demand streaming video for $10 per month. DVDs and streaming would be separated and each would cost subscribers $7.99 a month, or $15.98 for both, about a 60 percent hike. The changes would take place in September.

Jonathan Friedland, the new vice president of global corporate communications who had joined Netflix just a few months earlier, asked whether customers on tight incomes might object to the price hike, according to people at Hastings’ meeting. Hastings argued that Netflix was a great bargain. He said he knew that some customers would complain but that the number would be small and the anger would quickly fade.

Hastings was wrong. The price hike and the later, aborted attempt to spin off the company’s DVD operations enraged Netflix customers. The company lost 800,000 subscribers, its stock price dropped 77 percent in four months, and management’s reputation was battered. Hastings went from Fortune magazine’s Businessperson of the Year to the target of Saturday Night Live satire. Continue reading CNET’s detailed description of this dramatic chapter in Netflix’s history.

 

Smooth the Move in Six Steps
I’m working with two clients whose viability is dependent on their capacity to demonstrate their value and persuade their customers to pay for services that today are no charge. Neither of them are excited about this change, but their economic circumstances, in fact their very survival, depend on making this transition.

Managing the change means getting a real handle on the way customers and employees perceive you, while also adding up the true costs of “free”. There’s plenty of room for error in this process (ahem, Netflix), so be sure to:

1. Understand What Customers Value
It’s a given that you’ll need thick skin to absorb the inevitable negative feedback, but you can head-off the skeptics by aligning your value proposition with the pricing strategy. The intent of the freebie was likely to endear you to new clients, reward existing customers, or distinguish yourself in the marketplace. Over time, the effect has eroded, and so your new pricing strategy must highlight what the customer actually wants. Otherwise, you risk cannibalizing your value proposition by sending mixed messages.

2. Understand What Your Employees Value
Anticipate that the us-versus-them mentality might come from an expected source: inside your organization. If your sales force and customers become allies in revolt, your pricing initiative is doomed from the start.  However, when your sales force is comfortable with the new pricing, customers will happily pay what your products and services are worth. Uncover the benefits employees received from the freebie and find a suitable replacement. If the give-away made it easier for the sales force to call on new clients, then your marketing approaches and sales training need to be re-engineered.

3. Track the Value
Our priorities are revealed by what we measure. To change your outward-facing pricing, first examine your internal procedures. Start by instituting a method for tracking what was previously taken for granted. Whether it’s a physical asset, a service, or time, unbundle it and account for it. This process alone can be eye-opening in an organization. Don’t be surprised if you hear, “I didn’t realize how much of my effort was actually going this.” Handled correctly, the experience can accelerate acceptance of the change by employees.

4. Separate the Value
By unbundling your offering, you’ll open  the door for customers to select options, while also giving them the power to remove those they don’t need. It’s a win-win. Customers are relieved of unnecessary costs and unrealized benefits, while you have a chance to add revenue streams in the form of service or product enhancements. Be forewarned that this works best with the extras and not your fundamental promise to customers. As long as they are not core to your value proposition, then institute charges for speed or personalization, or perhaps reward loyalty with a tiered system that charges new customers higher prices.

5. Demonstrate the Value
What’s “free” doesn’t get counted by customers either. To set the stage for the price increase, communicate all the value you deliver – both what is currently free and what is charged. For instance, one client is going to monetize the free services they have provided over the last year and send it to customers in the form of an account statement along with an explanation of the changes afoot. As a result, customers will see that they are receiving so much for so little. And when the fee is enacted, customers will have a basis of deeper appreciation for the value they have derive in the past and a better understanding of what they will receive in the future.

6. Redefine the Value
Price adjustments are an opportunity to fundamentally change the way you and your customers define your value. Setting prices is the same as defining value, so don’t miss the chance to direct customers’ attention to what makes your products and services different – and better – than the competition.

 

Cleveland Roadshow

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Photo by Rebecca Olarte / BY CC

There’s lots more to consider when changing prices, so later this month I’ll be joining a couple of smart strategists with expertise in business strategy, pricing, solution selling, and talent management to dig into this topic as part of the Strategic Leaders Wake-Up Call.

If you’re in Cleveland, RSVP and join us.  If you can’t attend, but want more insights and resources on change management and employee engagement, connect with us.

 

 

 

 

 

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Strategic Leaders Wake-Up Call: Pricing Workshop in Cleveland

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Make the Case for Storytelling

tumblr_n0hq0nxdQd1st5lhmo1_1280 You don’t need to tell a communicator: storytelling works. The best communicators know that true emotional connection can only be made through stories.

But try persuading a stubborn executive, a reluctant leader, a timid manager, an overwhelmed salesperson, or an analytical accountant, and you will have a hard time making them budge.

In this free 30-minute audio training, learn to make the business case for storytelling to even the most skeptical audiences.

When communications becomes a responsibility shared by the communications department and executives alike, you’ll find that change is smoother, employees are more engaged, strategy is understood, and the pace is quickened.

This audio training will help you create an organization full of story-vangelists.

 

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