400-003-1 INSEAD Alice in Wonderland? A Different Approach to Organizational Change 21999-4853, This case study was written by Helene Gorter-Van Gorp, Research Associate at INSEAD, and Elizabeth Florent-Treacy, Research AMfiliate at INSEAD, under the supervision of Manfred Kets de Vries, Raoul de Vitry d’Avancourt Professor of Human Resource Management at INSEAD. It is infended to be used as a basis for class discussion rather than to illustrate either effective of ineffective handling of an administrative situation Copyright © 1999 INSEAD, Fontainebleau, France ND. PLEASG NOTE THATDSTAILS OF ORDERING INSEAD CASES ARE FOUND ON THE BACK COVER, COPIES MAY NOTE MADE SUE esc Spon Cts i i % Nore Ameen phone #178) 299, fac 2179123988, e-ml: BOCHEaon@el em © Qe Season vel gore at (ine Ho fx tao) Ta, ema Becta sk =O fires etd Ra USA Yes np ir hcl ey400-003-1 1 4853 “She’s the Boss!” Sjef de Koning, a Luijk & Van Vaest (LVV) package delivery driver, was driving his delivery truck through the streets of Rotterdam. The young woman sitting next to him was very curious, asking him questions about his daily route, his customers, and what he thought of LWV. He enjoyed her company though; it was nice to have a break from the daily routine. ‘Amriving at an office building, she decided to join him while he delivered a parcel, This particular client was based in a beautiful new building, and Sjef only needed to take the parcel to the reception desk. The stylish lady behind the counter accepted the parcel, gave the young ‘woman a quick glimpse, and sneered at the truck driver “Well, Isee you brought your girlie today!” Sjef's reply was short: “Sorry to disappoint you ma'am, but she’s the boss—the new Managing Director of LVV, Emma van Nijmegen.”* Things have changed at LVV since that day in early 1996. Not only are all LVV employees on a first name basis with Emma, clients too have come to know and respect her. From the time of her appointment in December 1995 as Managing Director of Luijk & Van Vaest, a Dutch company in the parcel shipping business, Emma has taken the company through a remarkable tumaround from a loss maker to a very profitable market-focused organisation, She made it very clear from her first days at LVV that priorities would be a change of culture, a change of image and a drive for open communication, concepts which were nearly unheard- of in the trucking industry. The consensus among both employees and clients four years later was that she had succeeded. Luijk & Van Vaest and Neerlandia Luijk & Van Vaest (LVV) was founded in 1796 by Bastiaan Luijk and Marie Louise van Vaest in Antwerp, Belgium. From the start it was engaged in the transportation of goods, parcels, and of people, even before the introduction of public rail-transport, Thirty years later the company opened its first offices in the Netherlands but it didn’t move all its activities to the Netherlands until the years during the First World War. The core business of LVV was the collection and distribution to customers of goods and parcels shipped by rail to central depots. In 1928, LVV was taken over by the Dutch National Railways (De Nederlandse Spoorwegen) and in 1986, it was acquired by Neerlandia ‘Though all information in this case is factual and based on authors" interviews with key management team ‘members, the names of the companies and people mentioned in the case have been changed Comes © 8 NSEAD Fea, ee400-003-1 INSEAD 2) 883, Neerlandia, a shipping company particularly active in maritime container shipping, was created in the 1970s by a large-scale merger in the Dutch shipping industry. From’ 1977 onwards it operated under the name of Royal Neerlandia, and in the following years it rapidly developed into an all-purpose transport company, With an eye on the future borderless Europe (1993), the idea was that a stronghold in land transport combined with a connection with other European countries would yield the opportunity to provide door to door services to clients. ‘The aim at that time was to become a transportation company with a one-stop shop service for its clients, Given its aim to provide door to door land distribution services to its customers, it is no surprise that Neerlandia was interested in LVV, with its know-how in land-based distribution, Neerlandia acquired several other land transportation companies in those years, but due to its limited expertise in that area and its primary focus on sea shipping, it struggled to manage its diverse interests and meke a profit out of them. It took the company 6 years, until 1996, to reach breakeven in the land transportation business. This was also the year in which Neerlandia Lines slid into problems due to over-capacity of sea container shipping. Neerlandia’s losses started to mount up, and the only solution for the shipping business seemed to be a joint venture with NORSUN Container shipping, which was about the size of Neerlandia Lines. With such a merger Neerlandia would save 200 million dollars on an annual basis due to economies of scale leading t0 a worldwide reduction of offices and employees. The merger was implemented on January 1° 1997, Neerlandia formed a new management team for the remaining land business, called Executive Committee European Transport and Distribution (ETD). In 1997 this business had a turnover of 3.5 billion guilders and was about to make its first profits The situation at LVV was also rocky in the early 1990s. When Neerlandia took over LVV in 1986, it appointed a Neerlandia controller, Peter van Dijk, as its new Managing Director. Van Dijk did a very good job professionalising the company and brought LVV back into the black after years of barely breaking even. In 1991, he moved on to become to Managing Director of Transuni, another Neerlandia subsidiary, Neerlandia’s director of human resources succeeded him at LVV. In contrast to Van Dijk, he was rarely seen on the shop floor. He liked to work on his own instead of with his management team. In addition the management team wasn’t a team at all. They set the wrong course; a series of questionable strategic decisions with a focus on volume growth quickly led the company downhill. People were pushed to do work they didn’t believe in, working under high pressure without trust in their managing director and his management team. The revenue increase of the previous years faded in 6 months’ time. In late 1995, Neerlandia removed this managing director, leaving @ leadership vacuum at LVV. During the following three months the management team of LVV, faced with a power struggle among executives, together with the terminal managers, effectively mutinied and decided to stop the volume growth measures and carry on doing their business the way they had in the past. The Board of Neerlandia urgently needed a new managing director for LVV. In a service business, people are all important. The previous managing director, despite being a former director of human resources, had not had the people skills necessary to work with the different groups at LVV, from the truck drivers to his own executive committee. Therefore, the board knew it would be essential to find someone who would not only be very good in process thinking, but would also be a people manager. Over the previous several years one young oerint © BP INSEAD Finn, rene400-003-1 INSEAD 3 4883 Neerlandia manager in particular had made a good impression on different members of the Neerlandia board, someone who had stood out from the crowd more than once during her career. Emma van Nijmegen was a young woman who had shown drive and intelligence from the time she joined Neerlandia, and she had proven herself to be very capable, and willing to take risks and leam. The Board decided to take a closer look at Emma and consider her for the post at the top of LVV. Emma van Nijmegen Emma van Nijmegen came indirectly from a shipping family—one of her ancestors sailed the world on Dutch East Indies ships—but she didn’t become attracted to the world of shipping until after high school. At 18, Emma went to Seattle for an exchange program, but also worked at a shipyard. Emma says “This was significant, because suddenly simple things in life were different, When you're 18 or 19 years old, a year abroad makes a tremendous impact. I looked at my own norms and values with a different perspective.” fier she retumed to the Netherlands Emma signed up for the Maritime Technology studies at the Technical University of Delft. In Delfi, Emma was one of a very few female students. She had her own engineering company at the same time. Halfway through her studies, Emma went to Indonesia for one year to work for the Indonesian government, Living in a garage without air-conditioning, far removed from the luxurious lifestyle of the Dutch expatriate community, she tried to blend in to the Indonesian culture as much as she could. She was already showing, a sense of curiosity and flexibility that would serve her well later in her career: “At one end of society there was me, going to work by bus, At the other end there was the Dutch community; everyone with a driver, three maids and a swimming pool. I enjoyed all these extremes.” After this experience, Emma successfully finished her studies and graduated as a maritime engineer. She first heard about Neerlandia during the company’s Spice Race, in those days a very well known sailing adventure. Emma loved sailing and her interest in the Spice Race triggered a closer look at Neerlandia. Afier graduation, she approached Neerlandia about a management traineeship, but made it clear that she was only interested if she could go abroad. Neerlandia agreed and Emma started as a management trainee in 1986. She rapidly moved up the corporate ladder with positions as Trade Manager Neerlandia Lines in Hong Kong in 1989, Commercial Manager Neerlandia Lines in Singapore in 1990, and General Manager Logistics Planning (Containers) in Rotterdam from 1992 to 1995. Reviewing Emma's history with Neerlandia, the board recognised that Emma had shown an outstanding operational performance in container logistics, one of the most difficult jobs in shipping industry. Here the same principle applies to vessels as to trucks: retuming empty from a destination costs the company money. Emma was very adroit at matching the volume available for transport with loads to be shipped, and minimising cost. So there was no doubt about her proficiency in process thinking, The board then focused on the question of whether she could really manage people well, Emma had shown a particular interest in her people Coit © 1 INSEAD, Fenn, Fe400-003-1 ‘SEAD 4 853 throughout her career. Emma also had a sense of responsibility toward her people that was appreciated. When she was still at Neerlandia, she was known for sharing her year-end bonus with the people in her department, She explained: “Every manager got the same bonus; there was no differentiation, So it wasn’t because you did a good job. It was a generic thing; so [I felt] everyone should share it” Aware of the risk but confident that Emma had both technical knowledge and people-sense, the board agreed to appoint her for the top job at LVV, managing 5000 people who handle 200,000 parcels and pallets a day. Willem Donker, member of the Board explained: “We knew at the time that we were taking a big risk [in picking Emma], Not only because she is a woman, but also because she had never been in the package delivery business before... But Emma dealt with people in her department in a very honest and direct way, combined with a certain toughness, and this was exactly the approach we felt we needed for LVV.” Welcome to the Snakepit The land transportation business was completely new to Emma. She had no idea how the business was run, who was in charge of what and who the players were. So she thought shed wait and see, thinking it would become clear over time. Then people started to warn her that it ‘was one great snakepit “i's a highly political organisation; there's no co-operation.” “You're too young and you're a woman,” “You don’t know the business, so how can you tum it around?” The announcement of her promotion was very positive and supportive, but because of all those remarks she was starting to get a little nervous. LVV employees were mostly drivers who had been working together for years. This was, like shipping, a typical male-dominated industry. LVV was described to Emma as being very fossilised and hierarchical in the way it was run, It was not flexible regarding change and there was a huge communications gap between the head-office and the regional offices. Not only that, but since the previous managing director’s departure, LVV employees and regional managers alike had become used to running things their way, with little direction, One of Emma’s main objectives was to gather the right people around her and to establish a cohesive team. To accomplish this she knew she had to strive for open communication and a change in the culture. She would have to transform LVV from its present state as an unprofitable organization with a barely functioning management team and a workforce of steady but traditional drivers, parcel sorting, and administrative personnel, The strategy she had in mind for LVV was one that needed creativity and improvisation to implement. Her management team would have to figure out which way to go, what products to use, in which markets 10 compete, and which clients to serve, Equally important, they would have to400-003-1 ‘SEAD 3 4883, convince the people of LVV that a corporate culture of innovation and openness was in their ‘own best interest. Emma thought she knew what LVV needed. First of all, LVV had to change fundamentally. They didn’t have a clear vision where to stand in the market. Though solid and dependable, LVV had a low-tech image that lacked luster. Emma’s only vision at that stage was that there needed to be a vision. Together with her management team and the regional managers of LYV she would develop this vision. They asked each different department - Marketing & Sales, Human Resources etc.- to come up with business plans conceming marketing, strategy and the future, and present them to the management team and regional managers. LVV wanted to be the number one company in the Benelux for parcels and pallets delivery. She wanted both the LVV old guard and their customers to think of the organization not just as a package moving business, but as the most reliable and innovative service company in the Benelux. Secondly, she saw that the organization was hindering or lacking communication and trust. So LVV needed to be more focused on the people. This concemed the building of trust and teamwork within the management team and the regional management. Corporate transformation of this magnitude is always risky and difficult, Though Emma was undeniably qualified and well respected in Neerlandia, she would have to leamn the package delivery business from the ground up. This was also the first time Emma would manage a corporate change process, Last but not least, the fact that she was a young woman entering a male-dominated industry was an extra handicap, Could Emma turn LVV around? Emma van Nijmegen at LVV Emma woke up feeling very excited. Her first day at LVV would start with her presentation for the works council and it felt as if she was going through a school exam, In her presentation she wanted to show how she looked upon the organisation and to stress her focus on people. “People are not assets. People are people, and they are especially important in a business like ours. They are the most important part of the business.” Soon after the first introduction Emma announced that she wanted to start a program to build trust and bring the people of LVV together. It was clear to her that in order to achieve this she ‘would have to talk to people endlessly. She would have to be open to suggestions as well as criticism, knowing this to be the best way to encourage employees to trust her. Walking the Talk The people of LVV had mixed feelings about the appointment of Emma as new managing director of LVV. The general attitude was one of “Let's wait and we'll see what happens”. She had the benefit of the doubt, but she would have to get results fairly quickly. Emma’s plan however was simple. From day one, she started to meet with as many people of LVV as. possible. She listened and talked to them, travelled around the country to all the local sub-400-003-1 INSEAD 6 oss regions and sat down with the management teams. She didn’t have any history within LVV, which made it much easier. She made it clear that people could tell her everything: what went vwrong in the past, how they saw the future, and what should be changed Emma needed to know what was going on in the company at all different levels. Therefore she decided to ride along with parcel delivery drivers for a day in different sectors, and to work with the parcel sorting personnel in the hubs and terminals. This was a great opportunity to eam what was important for them, how they looked at LVV, what they thought about the company, and how they saw their own lives interacting with the working environment. Emma enjoyed those days enormously and learned a lot at the same time, Although she never made any promises about any of the subjects or questions raised by the people during her visits, she really listened to them, and people got the idea that they could tell her honestly about what, worried them. In addition, every time Emma had a regional office meeting, she would go to the regional terminal half an hour early to walk around and talk with the people on the shop floor. Those visits always tumed out to be very educational and practical. By the time the meeting started she usually had a pretty good idea of what was going on in the region. “Feelings are Facts” Another of Emma’s early moves was to reshape her management team, Emma and the whole team needed to trust each other completely; otherwise her plans for LVV wouldn't work. OF her management team of seven people, some were newly recruited and others already had a few years’ experience with LVV. Four persons remained from the previous management team. She picked people with the same vision and eventually, it became clear there would be 1no room for someone who couldn’t support the team’s vision. That was the main reason why people of the old management team were replaced. Before working on implementing her new strategy for LVV, Emma emphasised the importance of her new management group's functioning as a real team. During one of the first management team sessions, Emma started out by handing out a backpack to every single one of the directors while telling them the following story: “We are on a joumey to climb a mountain, We have a few base camps on our way up but the aim is to reach the top. Each of us has a full backpack with a load of stones from the past. Obviously it would be better to empty the backpack before we start climbing the mountain, You have two choices. Either you throw the stones in the pond and never talk about them again or you throw the stones at someone’s head, discussing them here and now within the team.” ‘These sessions tumed out to be emotional, painful, and intense but they soon paid off. For Emma the main thing was for management to lear to trust and respect each other. Her message was: everyone is different; respect the way people do their work. For example, she explained: “We had a very structured guy and a very creative guy. The creative guy organised everything in his head, nothing on paper. He got results but drove the Capra © INSEAD, Fett, re400-003-1 INSEAD 7 469 structured guy crazy. They were fighting all the time, which didn’t help. I said to both of them: ‘He does it his way, so don’t try to change the guy, Respect the ways people do their job.” In the management team sessions she didn’t hesitate to express her own feelings on how she thought they should work together. As the HR manager, Hans Bruijn and Richard de Groot, Controller of LVV explained: “in one of the regional managers meetings, with some 25 people attending, we had a very intense discussion about behaviour and what we expected from each other. In the heat of the moment someone questioned Emma’s integrity. She didn’t try to hide the fact that this attack affected her deeply. It was unbelievable what that did to the people, It was a shock that a manager of her position showed that kind of vulnerability, but everyone admired it as strength. Here was someone with real emotions, inviting everyone else to show theirs. This opened another level of communication that brought the team much closer.” Richard de Groot, Emma’s controller, once had a problem with his branch controllers who ‘weren’t co-operating well. He met with Emma to discuss the problem and ask her what she thought he should do. How could he make them into a team? She said “Don’t make it too complicated. Put your feelings on the table, because feelings are facts of course. You feel that way, so discuss it. Ask: ‘Where does the feeling come from, is it something I do wrong or something you do wrong?” Don’t be afraid to talk about emotions.” Emma also invested a lot of time in training on self-assessment for her management team The first and most important was a seminar Neerlandia organised: the “Renesse” seminar on behavioural issues and inner theatre themes. It was especially tailored for Neerlandia, and enabled all managers in the organisation to start a self-awareness process that was, by their own account, very beneficial for them and the organisation. During this process, Emma discovered that it was helpful to have a mentor from outside the company as a kind of personal coach, When she started the change process at LVV she decided to again use an outside consultant who could facilitate the difficult meetings lying ahead. This was a professional decision and it enabled her to concentrate on the content side of those meetings. She has also long had a mentor within Neerlandia who has stayed in the background, quietly but surely supporting her: Bemard Engelen, CEO of Neerlandia. As one of her colleagues mentioned: “He gave her full support and the confidence that she could do this job. He might have protected her if necessary. Emma needs to work for someone she can trust completely and she believed in Berard Engelen.” “A pleasure to do Business With” Once the management team began to function efficiently, they were able to turn their attention to LVV’s bottom line, LVV was in a low-margin industry, with income dependent mainly on operational efficiency. Prices had not changed in quite a long time, which put enormous400-003-1 INSEAD g 4853 pressure on the management of operational costs, The price level and the quality of the service were not evolving, Together with the director of sales and marketing, the management team decided to change this drastically. First they set out the new strategy, followed by a marketing plan, They also recognized a need for additional training, All of this was discussed with the regional managers and implemented afterwards, One of the first actions was to ban rate adaptations in the future. The quality level was going to be the main selling point to customers. LVV's slogan would appear on all its ‘rucks—illustrated by a friendly driver with a linen towel draped over his arm, presenting a package on a silver tray—LVV; A pleasure to do business with.” The director of marketing, Dirk de Vries, was convinced that the only way forward was to break with tradition and raise the prices across the board. The radical plan was put into action: though taking the calculated risk of losing major customers due to the price increases, LVV would change its focus to guarantee an excellent quality of service with well-trained people at a fair, though not inexpensive, rate. This strategy would allow LVV to add enormous value on the pick up and delivery side. LVV would provide additional services for clients, such as a 24-hour delivery of parcels and pallets in the Benelux. Dirk and his team put a high priority on the training and reeducating of the sales and marketing people, The success of the new strategy would depend largely on these people, who ‘would have to convince clients that LVV’s services were worth the greater cost. The second. step necessary to reach this goal was to focus on the industry segments that wanted these additional services. The management team was convinced that you can’t do everything for everybody all the time, And as it happened, by offering the additional services to all customers and by raising prices across the board, a certain amount of self selection did take place, But overall, the results were positive. Oil on Troubled Waters Meanwhile, top management at Neerlandia was struggling to adapt to a changing situation. The merger of Neerlandia Lines and NORSUN Containers in the beginning of 1997 caused an upheaval in the management, strategy, and thinking of Royal Neerlandia (Figure 1). The new Executive Committee ETD (Excom) would have to generate its own cash flow, its own profits, The Excom formed a matrix management structure, which meant that different managers were responsible for both countries, products, and competencies (Figure 2). Now that line responsibilities were divided into different product divisions, managers could no longer take decisions alone, but had to discuss them with the colleagues responsible for a specific country, product or competence. It was a process in which people had to get used to each other and to the way others managed their business. As Willem Donker explained: “So much had to change in such a short time that people kept fighting for their own patches, without showing mutual respect. All these strong characters in this committee weren’t a team at all!” In January 1997, Emma became a member of the Excom, In the matrix structure, she was responsible specifically for the parcel business and overall for the Benelux countries. Emma Caprio 19 SAD, ete, Pe400-003-1 INSEAD 9 4853 handled her combined positions (committee member and Managing Director of LVV) very well, without paying lip service to one or the other. If something she was involved in was in Neerlandia’s interest she stated this very clearly to LVV and vice versa. Her open approach was highly respected by both sides. Emma's appointment to the Excom was remarkable in the sense that she was the first woman ever to have been appointed to the top management team of Neerlandia, Her colleagues on the Excom agreed that she definitely looked at things from a different angle. Her highly intuitive approach allowed her to comprehend and analyze organisational issues quickly, Her understanding of “sof,” human issues was complemented by a strong technical background and well-developed operational skills. As a colleague on the Excom mentioned “Emma reacts strongly from her emotions; she is very intuitive. If she can trust you as a human being than she is fine on a business level as well,” And her controller stated: “She is a people and numbers person: stirring on a high level, but aware of the details.” ‘The Excom came under the supervision of Willem Donker in the middle of 1998, Donker put, a lot of energy into making this committee work like a team, His influence facilitated the process enormously. Emma felt relieved that someone was picking up the pieces. At the end of 1998, Neerlandia’s European Transport and Distribution division succeeded in attaining the projected profits, mainly because of the success of LVV. Finding a Balance In December 1998, Emma looked back. For the two previous years the company had been going straight up the charts, the losses of the early 1990s were all but forgotten, and customers were satisfied with the new price/quality ratio. Twice a year the management team ‘went on a retreat for two days to think about strategy, priority setting and their own behaviour and “inner theatre” themes, to think about what motivates people in general as well as themselves in particular. However while discussing the plans for the year 2005, a strong message was sent to her by the team: “Hey, Emma you are going too fast, you need to slow down, You need to give yourself and your people time to adjust to the change’, It was time to get more peace and calm into the organization, As a company they needed to set priorities and so they decided to ‘skip’ some projects. Furthermore they needed to make sure that all the primary goals, like focusing on industry segments, would get all the attention that they needed Emma realized she had hardly given herself the time to set her own priorities in terms of decision making. “Last year I was running around all the time, and too much was happening at ‘once. I was not setting my own priorities in terms of deciding what not to do. 1 decided that this was not the way I wanted to go forward, so I fundamentally changed a number of things.” ‘opel 19 SAD, ate Fa