Layoffs the Crisis at Delarks

¶ … Layoffs

The crisis at Delarks began when Denton was named CEO. He immediately set about redesigning the company and in doing so had never taken the time to get to know it. This may not have changed his tactics, but it would have allowed Denton to better predict the crisis, and possibly to have prevented it. The crisis was essentially created because Denton's change program consisted entirely of offense tactics. He made numerous moves quickly, closing stores and removing key people from their positions. However, in doing so, he failed to undertake any of the key defensive tactics that would have allowed the change to progress without such a crisis. He never explained what the objective of the change was, nor did he provide any sort of explanation as to why the change needed to occur. Denton had failed to explain his vision for Delarks and in doing so had failed to convince the employees to buy into his vision.

There was no chain of accountability during the change process. Denton made all of the moves himself, and never answered to any of the employees. He became entirely disassociated from the company. Madison was the last straw for many employees because it was an entirely unaccountable move. Wazinsky did not even know about it, and neither did the store manager. As a result, the employees of the company saw an entirely offensive action, with no justification, and no accountability from Denton to anybody. At that point, the situation was so toxic that even people Denton had brought with him wanted out -- even they no longer bought into his vision.

The action plan that was developed has a good chance of succeeding, but the situation is so bad that Denton might not be trusted enough to implement it effectively. The first step is critical -- ensure that the majority of the damage has been done, and no more senior people leave. The change co-sponsor is another good recommendation. There are two reasons for this. The first is that the change needs to be viewed as something that benefits the company as a whole, not just Denton. Denton is an outsider, and is understood by the employees to be beholden to Wall Street rather than the company or its customers. Nobody trusts him so he needs a co-sponsor. In addition, Denton is a lousy communicator, and as a result the co-sponsor he chooses will ultimately take the lead on communicating the vision for the company.

Clarifying the change message and improving communication are two critical elements. Some of the problems that have occurred have probably occurred because of a lack of communication. The surviving employees have little sense of where they fit in the company and as a result they probably feel as though they are next to be fired. Nobody has bought into the restructuring, not even the other members of the senior management team. So the message not only needs to be refined, but it has to include the survivors and it has to be communicated effectively so that the rest of the organization buys into it. The workers have no reason to care about improved stock prices, for example, so if that is all Denton has to sell them, his message simply will not resonate.

Fear and mistrust need to be eliminated. Some humility on the part of Denton might be required, but some honestly will also be needed. Sneak attacks like the one in Madison will not easily be forgotten. The spirit of change does not exist at Delarks, so that part of the action plan should probably read "instill a spirit of change" rather than "keep the spirit of change alive." Denton needs to find ways to make the survivors care about the change -- they never have so they only saw the downside.

The survivors need to be involved in the change process, and not just at the senior management level. They need to feel proud of their company, but unless they feel as though they have some input, they will not feel proud.

There has been little security at Delarks. Nobody feels safe. What was needed from Denton was a clear understanding of what his vision for the company was. From there, security can be defined. It can be explained to the employees what the company was looking for in employees, so that employees can either envision themselves as part of the new Delarks or choose to leave on their own. Even Wazinsky did not feel secure, and by the time of the case neither did Denton, faced with a succession of senior management defections. Denton had not defined what a secure employee might look like. He had not allowed the employees the opportunity to see their own future in the company because he had not provided any security to them. They had traditionally enjoyed absolute job security, for example, and when he shattered that he did not provide the employees with any idea of what they could do to earn their job security in the new Delarks.

There are a number of steps that I would undertake to resolve this crisis. The first would be to apologize for not including the employees earlier. Atoning for past mistakes and demonstrating humility is the first step to regaining trust. The second step is to have a clear vision, one that includes employees. At this company, the employees are accustomed to giving their careers to the company, and the employees still want to have that mindset. Denton either needs to allow this, or explain to them what mindset they should have. This involves creating a vision for each employee of his or her own future.

The crisis can be resolved over time, but it will take a while to build back the trust that has been lost. Attrition will remain high, so Denton must commit to hiring in order to bring in staff that fit his vision. The survivors need to know that they are still around because they have been hired fresh, meaning that the company believes in them and wants to support their long-term goals. Then Denton needs to back this up, with money or training or other incentive. This means investing in the survivors.