New leaders at the helm of a business often see the need to make changes. Sometimes, pressure to change comes from outsiders, such as activist investors. Sometimes, the new leader may choose to make his or her mark by doing many things differently in a company that had been slow to change. However, new leaders need to be careful when making changes because doing it wrong can lead to disaster.
There is a right way to go about changing a business. Generally, this entails being selective about which changes to make, and taking a more gradual, evolutionary approach.
Yet, it is not unusual to see new leaders ignore these principles of how to change. And when they do, the results are disastrous, yet could have been prevented if they had paid more attention to how to do change right.
A recent example of this appears in the June 3, 2024 Crain’s Chicago Business article “How Oberweis Dairy wound up in bankruptcy court“ by Ally Marotti. The article’s subtitle is “The company made bad bets, then ran out of money to fix the mistakes.” According to the article, “the company stretched itself too thin. It made too many bets on low margin ventures—like a delivery fleet that trucked milk to far flung locales, opening pizza and burger joints and a dead end attempt to enter Asian markets.”
The article reports that this pursuit of new ventures occurred after a younger family member took the helm of this family business. The article explains, “Such is the peril of running a longstanding family business. When a company is passed down multiple generations, it can start to stray from its core.” The article points out that bankruptcy experts often see this happen with family businesses.
Based on my research into business success and failure patterns, the problem of excess straying from the core under new leadership is not limited to family businesses. It often occurs when new leaders are brought in, regardless of whether the company is family run or professionally managed. It is especially common when new leaders are brought in to revitalize a company that was previously slow to change.
In fact, disastrous excess new, much like the Crain’s article describes at Oberweis, is what I call a new products/new ventures phase. This is when companies are pursuing many new lines of business that generally end up leading to financial disaster.
So, in conclusion, when new leaders are brought into a company, they must be careful with the kinds of changes they make. There is a right way to make changes in a business. New leaders need to avoid the common mistake of straying too far from the core. Instead they should make evolutionary changes that more effectively build on the company’s strengths.
