Like a Virgin

CHANGE IS GOOD

Restructuring is a difficult process, right? Even if you’ve done everything right, sometimes you have to take your company in a new direction because circumstances and opportunities have changed. Companies aren’t future-proof-no company lasts for ever.

Over the years at Virgin we have closed down or sold quite a few of the six hundred or so companies we have created-something our critics regularly point out. But what’s wrong with that? Our strategy has often been to build a business up and once it’s successful, sell a stake to release funds to start a number of new ones. Companies are tools, each designed to fulfil a particular purpose. If they are superseded or no longer needed, we will sell them or shut them down. We try our level best not to lose any people or know-how, but we don’t allow ourselves to get nostalgic about the company itself. When Virgin renews itself, the critics who tut-tut about all the leaves falling to the ground have usually taken their eyes off the tree itself.

If you plan 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 many challenges of getting different types of employees to work together and share the same goals.

We found ourselves grappling with a challenging situation in 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 ten million customers and 13,000 UK employees.

Until then I’d always followed a ‘small is beautiful’ business plan. Keeping the businesses small and intimate was easy to do in the record business where we would regularly spin off (pun intended) new labels whenever one of the existing rosters was getting too big. But this time around 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 where the people dealing with (too numerous) complaints appeared totally unmotivated and uninterested. We soon found out why: they were reading from scripts all day!

This brings me to my next bit of advice: management 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 usually the hardest taskmaster of all, so the more responsibility you give people, the better they will perform.

So, in Virgin Media’s case, the offending scripts went straight into the rubbish bin. We told our call-centre employees to solve problems within one call if possible, and we reallocated resources to the front line to fix the problems at source.

There was scepticism 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? Our response to that was ‘live and learn’. I didn’t think anyone should be criticised 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 went on to become the UK’s leading provider 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 no longer have the enthusiasm and determination needed to relaunch the company, you are better off finding a new team or you may be better off starting from scratch.

But what if moving on is not a viable option? There is an alternative, one of the hardest tricks in the book: restructure your company so that it’s very small, very specialised and very expensive. Turn it into a ‘boutique’ operation. This is an innovation of the highest calibre. 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 tough to do, not least because you’re in so much pain as you’re doing it.

Why go down this route? If you’re able to pull off the small-and-specialised restructuring, your staff may be in charge of a smaller company, but each contributor will have more clout and be much more focused. 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’ll start coming to you with solutions and great ideas again.

Wouldn’t it be wonderful if the company you recreate were full of motivated, caring, creative people? Think of what you could achieve, then take a very deep breath.