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Richard Branson on Managing Change

Virgin Group's founder shares advice on leading a team through a restructuring or merger.
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Restructuring can be a difficult process. Even if you've done everything right, sometimes the company needs a new direction because circumstances and opportunities have changed. It is well known that over the years we have closed down or sold a number of the 400 or so Virgin companies we have created. Companies are tools designed to fulfill a particular purpose. If they are superseded or no longer needed, our group will sell or shut them down. We try our best not to lose people or know-how, but we do not allow ourselves to get nostalgic about the concepts of the companies. When Virgin renews itself, the critics who tut-tut about all the leaves falling to the ground have failed to spot the tree.

To lead your company through a restructuring, you need to take a cold, hard look at the business. Will you be able to empower your staff to do what 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 fail to understand the real challenges of getting different types of employees to work together and share the same goals.

We found ourselves grappling with a challenging situation in February 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 10 million customers and 13,000 employees across the U.K. Until then I'd always followed a "small is beautiful" business plan. In Virgin's early days, whenever one of our companies topped 100 employees, I would ask to see the deputy managing director, the deputy sales manager and the deputy marketing director. I would say to them: "You are now the managing director, the sales manager and the marketing director of a new company." Then we would split the company in two.

But Virgin Media was neither small nor beautiful. The NTL part of our business, in particular, was in a sorry state. We needed drastic changes in customer service. For one thing, the people dealing with complaints didn't seem interested in helping customers. It turned out they were reading from scripts all day.

This brings me to my next bit of advice: executives and managers overseeing any restructuring or merger should find ways to inspire all employees to think like entrepreneurs. A person's own conscience is the hardest taskmaster of all, so the more responsibility you give people, the better they will perform.

In Virgin Media's case, the scripts went straight into the garbage. We told our call-center employees to solve problems within one call if possible, and we reallocated resources to the front line. There was skepticism at first among former NTL staff. What would happen if one of our customer-service people overstepped the mark and offered customers too many perks? My response: "Live and learn." I didn't think anyone should be criticized for being overly generous when handling a disgruntled customer. If one or two of our people got themselves into a tangle, they'd do better next time.

The lesson I have learned from difficult restructurings is: avoid taking on someone else's legacy. If the people you're responsible for no longer have the enthusiasm and determination needed to relaunch the company, you're better off finding a new team to launch your business.

What if that's not an option? There is an alternative, one of the hardest tricks in the book: restructure your company so that it's very small, very specialized and very expensive. This is an innovation of the highest caliber. 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. If you're able to pull off the small-and-specialized restructuring, your staff may be in charge of a smaller company, but each contributor will have more clout. 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 so they will bounce ideas off each other, befriend and take care of each other, and eventually start coming to you with solutions and great ideas again. Wouldn't it be wonderful if the new company you create is full of motivated, caring, creative people? Think of what you could achieve.