CASE STUDY  A new managing director is bringing his business vision to Pat O'Leary's pie-making company. But it's not going down easily.

PAT O’LEARY left school at 16 years of age and went straight into the meat processing industry. He worked long hours and made good money, eventually leaving the industry in the late 1970s to set up a small business making meat pies. His wife, a chef, devised the recipes which were based around top-quality meats and a traditional homemade flavour.

O’Leary had a good head for business and the company thrived albeit, by his choice, within a comparatively small geographical area. He was a firm believer in personal service and put a lot of time into building strong relationships with his retail customers. As a consequence he had a very loyal customer base who bought from him and no one else.

Throughout the 1980s and early 1990s, however, many of O’Leary’s “one-man band” customers went out of business. He knew the writing was on the wall for independent retailers and recognised that if he failed to reinvent his customer base he too would follow.

O’Leary spoke to his local Enterprise Board who offered him a mentor to help him redirect the business. Over the next year he decided to push into new markets such as food service and the catering trades. This involved increasing the scale and output capability of the plant, tweaking the product line-up for this new segment and recruiting new staff.

Up to then O’Leary and his wife had managed the business between them, but O’Leary knew that scaling up was going to require the skills of professional managers. On the advice of his mentor he recruited a production manager, a quality assurance (QA) manager and an assistant general manager who would take over the day-to-day running of the business to leave O’Leary free to focus on sales. Extra staff were subsequently added in production and administration and a new position of financial controller was created. By the late 1990s O’Leary’s company employed 27 people, was generating sales of over €5 million and had just successfully dipped its toe into the UK market. The company had found itself a comfortable niche and was under no great pressure to come up with radical new ideas.

Five years ago O’Leary began to think about succession planning because none of his children were interested in taking over the business. Over the next 12 months he took stock of his company and with the help of a business development consultant he decided that it needed to take another big step forward to achieve the scale required to remain competitive. He thought growth would be achieved through a combination of increasing volumes on traditional lines and developing a range of new, higher added value products. O’Leary had always steered clear of the multiples believing their cut throat margins were not suited to the small producer but he now accepted they were a means to an end.

Achieving these objectives effectively required the company to reinvent itself and O’Leary decided the task would be better undertaken by an experienced manager with a good knowledge of the international food sector. However, out of loyalty to his own staff he spoke to his four senior managers about the possibility of an individual or joint management buy-out (MBO).

Following protracted discussions nothing came of this and the four accepted they were going to have a new boss. As part of the package to attract a high calibre individual O’Leary offered a majority stake in his company with a view to disposing of his remaining share completely within five years. He stepped down as managing director and assumed the role of advisor.

O’Leary’s successor was Tim Lacey who had spent 15 years in a multinational environment in the food ingredients sector mainly in the US. O’Leary’s low key, conservative organisation was ill-prepared for Lacey’s lively, more robust style of doing business.

Lacey believed the company needed to move fast or it was going to find itself priced out of its markets within a few years. He assumed he had brought employees on board through a series of “vision” meetings with each department, while he also explained the stark commercial implications of not implementing rapid change to the senior managers.

Most of the younger staff responded well to Lacey’s energy and were eager to get involved in his more participatory approach to running the business. However two of the company’s key senior managers and their immediate understudies resisted. At meetings Lacey was repeatedly told that “this is not how we do things around here”. He had been prepared for some resistance but found his way continually obstructed even on the smallest things. Neither manager ever openly confronted him but their co-operation continues to be minimal.

Lacey is now coming under pressure from O’Leary to ease off as the two managers went to him with their gripes and have threatened to leave. Lacey is inclined to let them go, but O’Leary thinks it is important to try to reach some sort of compromise. Lacey accepts that change can create anxiety but believes doing things his way will safeguard their jobs in the long term while maintaining the status quo will not.

Lacey now finds himself managing a company that is split into two camps – those who are with him and those who are not. With the production and QA managers firmly in the “not” camp, productivity has been affected and the once easy atmosphere at the company has become strained. Relations between Lacey and the two managers are just about civil while the general manager and financial controller who have bought into Lacey’s grand plan are being ignored by the other two.

In the midst of managing an interpersonal cold war, Lacey is also trying to decide the best way to take the company down the multinational route. Is it better to test the waters in Ireland first or to go straight for more substantial listings in the UK to get more volume?

He is also trying to keep new product development on track. He is aware that O’Leary was never convinced about the benefits of introducing an organic range – seeing it as a lot of time and money to spend servicing a very small market niche – but he thinks it may have potential.

Lacey is also toying with the idea of developing a range of convenience meals based around the meats the company already uses in its pies. However he is wary of producing a “me too” product and thinks there might be more mileage in going for something completely different such as ready meals for vegetarians or for those who need wheat or dairy-free options.

Lacey has been working 16 hour days since taking over the business. He is now tired and frustrated and has no quiet time in which to think strategically about the business. Nine months into the experience he is still fire fighting and is beginning to think he’s made the biggest mistake of his career.

How should Tim Lacey progress from here?

THE EXPERTS' ADVICE:Whatever he does, it's time to focus all the people in the business outward, on the market. The time for internal politics is over.

- Brian Patterson, mentor and executive coach, former COO of Waterford Crystal and former director general of the Irish Management Institute

THE EVOLUTION of this company is a great story. But it’s all history. There are now some serious challenges to be faced if the business is to survive. Tim Lacey is an experienced executive who can think creatively about the business. But he needs to make some key decisions to move the business forward. And to do this, he needs to get a grip on his organisation.

As chief executive and controlling shareholder, Lacey is in a powerful position. The power we have in organisations derives from position, personality, skills and our willingness to use them. The challenge for Lacey is to use his power carefully and wisely to bring about transformation of the business. Specifically, he needs to develop a plan to deal with the two negative managers. He also needs to deal firmly with Pat O’Leary’s misplaced loyalties.

When people threaten resignation, a good rule of thumb is to ask them immediately to sign their resignation letter. Getting drawn into discussion or pleading with them to stay only weakens your authority. It also sends confusing signals to the rest of the organisation – they will know all this is going on.

So, Plan A is for Lacey to accept the resignations of the two dissidents without any further discussion. However, it’s likely that faced with this situation, the two managers will think again about resigning and withdraw their threat.

In this event, Plan B is to give them frank and forthright feedback on their behaviour with recent and specific examples. He then needs to ask them if they want to play a positive role in the leadership team for the business. If they say yes, Lacey should set up a date three months away to review how this is working. If they answer no, or if it becomes clear after three months that they are unable to make this transition, Lacey should replace them with people who will play a positive part in the leadership team. This might be the time to give a chance some of the younger people in the company.

However, before Lacey can do any of this, he needs to get O’Leary on board with what he proposes to do and to put a stop to the “end runs” which are undermining his position. This could involve some robust discussions if they are to reach full agreement. If agreement proves impossible, he’ll have to consider sidelining O’Leary or buying him out of the business earlier than the planned five years.

Once he has resolved the organisation issues, Lacey can start to involve his team – as is clearly his preferred style – in charting a path for the future of the business. He has already engaged people in his vision for the company, so the scene is set for him to translate this into clear decisions about what products in what markets. Using the young talent in the company, he could set up innovation teams to prototype his new product ideas and develop plans to bring them to market. Whatever he does, it’s time to focus all the people in the business outward, on the market. The time for internal politics is over.

Working with an executive coach, Lacey could also work on developing his leadership style to maximise his effectiveness in this new culture. He can also start delegating more to his team and give himself more time to think.

None of this will be easy. But once Lacey has stamped his authority on the organisation, things will get better and he can lead the business into a bright future.

- Hilary Maher, founder, Lime Tree Consulting

FROM A CHANGE of management perspective, it is hard to conclude that Lacey’s stewardship has been good for the company. It seems like he arrived in a whirlwind of activity and ideas but has failed to bring key people with him and now there is a dangerous split into opposing camps. Things already seem quite entrenched and even the departure of the two resistant managers may not be enough to heal the rift.

More worrying still is that Lacey apparently has little insight into the effect his tell-and-sell leadership style has on people. Of course, it may not be just Lacey who is complicit in this – the style of the two managers may not be helping either. However, it is Lacey’s job as managing director to do something about this rift. Such a split in the company is a strategic issue but it seems that Lacey is taking flight from this and seeking refuge in the heady world of product ideas and possibilities.

So what can Lacey do? He would do well to adopt some of Stephen Covey’s “habits for success”. He needs “to be proactive” about the rift, and he also needs to be entering into a dialogue with the two managers where he “seeks first to understand their resistance”. He has shared his vision of the company with them but there is no evidence that he asked about their vision, hopes or fears. He is strong on advocacy and short on enquiry. Both are needed for him to learn and for him to have any hope of influencing them.

There are a number of reasons people often resist change. People can have different understanding of the need for change; they may not agree with the need for change or approach to it; and they may fear they will lose out as a result.

People also fear they won’t be able for the post-change “brave new world” and often resist because their habitual response to proposals is defence.

Lacey needs to move to a more relationship-oriented, rather than task-oriented, leadership style. He should explore where the managers’ resistance is coming from and perhaps even learn from them as they have probably acquired a good “feel” for the company and the business. Once Lacey knows what is going on with these two managers, he can then borrow from Kotter’s well-documented strategies for managing resistance which range from education, participation, involvement and facilitation (at the soft end), through to negotiation, manipulation, coercion, and buying people out (at the hard end).

He may discover that he does not have to do much beyond repairing the relationship – people will often manage themselves out of resistance once they feel that they have been respected enough, listened to and that their contribution to the company has been valued.

- Tara McCarthy, senior manager, consumer foods and beverages, Bord Bia

THE UK MARKET on our doorstep is a very tempting market for any entrepreneur, however it must be recognised that it is also on the agenda of many other food producers and has a reputation of being the most competitive in Europe.

Lacey needs to first understand what market and what gap within that market he is looking to serve. UK customers will not take lightly the decision to change from a current supplier. Track record will be important and most UK buyers will search for a home market reference point. Mentors have served the company well to date and Bord Bia’s UK office could provide access to a panel of “in market” mentors to help Lacey make this crucial market entry decision.

In addition he is trying to keep new product development on track. When looking to validate any market opportunity it is important to understand the dynamic happening within it and the drivers behind it. Consumer trends will be an important input to advising Lacey of any new product development concepts and ways of understanding how the consumer will interpret them in the times ahead.