Under The Surface - A recent study in the chemical industry performed by Celerant Consulting looks at the reactions, attitudes and handling of corporate changes during this crisis. The panel comprised of 659 executives in the U.S. and Western Europe with 49 executives coming from the chemical industry.

The bad news: Many change programs in the chemicals industry do not really bear fruit. The new report shows that an appalling 20% of overall chemical industry change initiatives carried out over the last five years were a clear success - with "clear success" defined as "more than three-fourths" of all projects being successful. The chemicals industry here lies significantly below the intersectoral average of 32%. Which raises the question: Why do more change-initiatives within the chemical branch fail than in others? Rudolf Jerrentrup, senior adviser at Celerant Consulting and responsible for the study, said, "There are several reasons for this, one being that the chemical industry has been under change for a long time through adaptions, changes and restructurings. Also, the period before the downturn was a very successful one for the industry. All in all, this means that the focus was not so much on efficiency but much rather on guaranteeing growth. We see that this is now being corrected."
Another part of the study concerned itself with the question of how companies have dealt with their change programs during the crisis. In the chemical industry, a striking 18 % of managers have gone as far as suspending their change programs compared to the intersectoral average of 6 %. Having that in mind, the question arises as to what programs are being continued despite the recession.
"Of course the chemical industry has resorted to some drastic measures in order to generate cash," Jerrentrup said. "But we are currently seeing that many programs that had been put on hold are now being reinstalled in order to achieve sustainable results. The message here is that the chemical industry is quick to react, but also very quick in re-installing what they consider to be necessary."
Furthermore, the study asked about change initiatives such as staff reduction, reduction of spending budgets, changes in organisational structure or changes in business processes. It here seems that managers tend to decide on short term rather than long term goals.
Jerrentrup about the short term approach that seemingly seems to prevail in the industry: "The results show us that in times of crisis most companies tend to resort to conventional wisdom and conventional methods on change reactions instead of investing in people and softer skills. Unfortunately the chemical industry does not really make an exception here. But now would be the time to come to decisions that allow the organisation to change itself."

Crisis as an Opportunity for Change

But how are managers using the crisis as an opportunity to drive through change? The predominant answer here was: As the respective companies have a strong argument with decreasing sales and turnover due to the crisis, most employees understand the management's need to cut costs. Therefore, employees rather concede to wage cuts and in many cases seem to be even glad to still be employed.
"Most employees nowadays are very aware of the current economic situation and think that it is better to change their behavior or accede to changes because they might be dismissed otherwise," Jerrentrup said. "It is noteworthy that the chemicals industry has reacted very swiftly to the crisis and was thus able to reap first benefits by the end of 2009. The task now is to make these results sustainable and that means a need for change management to make the new behaviours sustainable."
These results very well fit into the overall picture. Whereas in the intersectoral average 33 % of respondents cited "winning hearts and minds" of employees for the necessary changes as the element they had greatest difficulty with - thus making it number one - this item in the chemical industry is only cited by 12% of respondents. In the chemical industry, the biggest hurdle for change projects is "keeping to time and budget," which is cited by 40%.
A final interesting aspect is that, confronted with the question which element of change initiatives the respective organization has experienced the most difficulty with, 16% of chemicals managers could not come up with any suggestions at all, whereas this aspect in the intersectoral average is only cited by 7%.
It seems that in quite a few instances in the chemicals industry the management does not exactly know what the reason for the failure of the change program was. The first step here would be to ascertain what went wrong and then re-arrange.
"The process needs to make transparent the reasons for failure and success," Jerrentrup said. "This needs a clear process in order to avoid these flaws in the future. Many chemicals companies here have a weak spot that they should work upon."