What does a failed business transformation look like? After an abysmal season, Magic Johnson abruptly resigned as President of Basketball Operations of the Los Angeles Lakers on April 9, 2019. Following the hiring of basketball’s best player, LeBron James, the Lakers finished the season with a 37-45 record and missed the playoffs for the sixth consecutive season. Johnson’s resignation was announced without first informing his boss, as he told the media, “[s]he doesn’t know I’m standing here because I know I would be crying like a baby in front of her . . . but it’s the right thing to do.” Johnson resigned to a group of reporters, not to his boss, Ms. Buss. When is conduct like this considered “the right thing to do?” The answer is – when you were hired to transform a business and the reality of its difficulty overcomes wishful thinking.
Organizations that face serious problems usually experience a lot of pain before they take stock of what’s really gone wrong and take action to correct course. Why is that? Because humans, more often than not, hate change, even if change can yield to a positive outcome. Sound counterintuitive? It is, but it’s true. People are more comfortable with survivable dysfunction rather than the uncertainty of change, even positive change. The Los Angeles Lakers are a case in point.
The Lakers hired Magic Johnson for various reasons, not least of which was owner Jeanie Buss’ hope that Johnson could turn things around. Why was he hired in the first place? Owner Jeanie Buss knew Johnson for almost four decades. Johnson is one of the greatest players in the history of basketball – he won five championships for Buss’ father when he owned the team. Buss and Johnson see each other as brother and sister. Who else would you turn to when your multi-billion dollar franchise is in tatters? Easy answer: the guy who creates magic with his game, his persona, his entire existence, and whose name is “Magic.” The challenge was that Johnson had zero experience in basketball operations. Being a great player is different than actually running an organization– one has to think through franchise operations and strategy, then determine the on-the-ground tactics required to achieve the strategy. In the category of unusual and unsuccessful transitions, consider the case of Megyn Kelly. In late 2018, it was reported that Comcast Corporation/NBC News was removing her from her daytime “Megyn Kelly Today” show. Kelly was a star on Fox News before deciding to join NBC. She is a phenomenally gifted lawyer and interviewer, and probably one of the best questioners I have ever witnessed. Makes sense, she was an attorney at a top law firm for almost a decade prior to changing careers. I used to watch her Fox show regularly, and although I didn’t agree with all of her positions, I certainly noted her significant talent. After announcing her change to NBC, I recall thinking to myself that her decision to change from a hard hitting, hard nose primetime interviewer to a cheerful morning host didn’t make much sense to me. Why? Because her core competencies and strengths are asking hard nose, hard hitting interview questions, and not being afraid to mix it up with some of the most powerful people in America. I couldn’t reconcile her core competencies with hosting a daytime show discussing cooking, hobbies, and social issues which in the end, finally entangled Kelly in putative racial insensitivity allegation.
Basketball, like baseball before it (think: Moneyball), is currently undergoing dramatic changes in tactics and strategy. For instance, it’s taken decades for the NBA to realize that players should be taking more three-point shots. In hindsight, that sounds ridiculously obvious since three-point shots are worth more than two-point shots. But change is hard, really hard, especially when “conventional wisdom” calcifies into habit and the comfort of the well-known. NBA team after team has re-tooled their tactics to incorporate the new-found wisdom of the three-point shot. The Houston Rockets were the first team to shoot more three-point shots than two-point shots. Then the Golden State Warriors, then the Toronto Raptors reinvented their offenses. Players like Stephen Curry became stars under this new regime. The Warriors unleashed Curry toward the end of the 2012-2013 season and won NBA titles in 2015 and 2017. The rest of the league adapted since. Magic Johnson’s brilliance as a player was not sufficient in either developing a competing strategy to the changes in the NBA or adopting a comparable strategy. The power of celebrity status and persona can only take an organization so far before the on-the-ground reality overcomes hope. Jeanie Buss was hoping Magic’s magic could make things happen. Problem is, hope is not a strategy.
Change is hard – the longer organizations take to address their problems, the more expensive these problems become, and the more difficult it is to accomplish the necessary change. McKinsey and Company did a survey of 3,199 executives and found that only one third of transformations succeed. That data suggests three things: change is hard, people don’t like it, and it requires wisdom and significant effort to achieve the desired results. Management and organizational literature often talks about leaders “looking around corners,” meaning that people in the C-Suite need to spot patterns and problems before they become intractable. How do leaders do that?
One way is to create a “critique-structure,” meaning leaders need trusted and thoughtful people around them who will intelligently criticize issues that are developing. That almost sounds self-evident, except for the fact that hardly any organization has the courage to really develop it. The reason is that most people want to be liked and are entirely motivated by their personal self-interest as opposed to the health of the firm or company. It’s a difficult thing for managers to risk irritating their leadership in the best interest of the enterprise. Difficult, but not impossible. Leaders need to be willing to criticize their own plans and need to get the input of people they trust. The problem I often encounter when consulting with companies is, interestingly enough, the same problem the Lakers faced.
They want to take a star and put him or her in a position of leadership. However, star power is not sufficient. Stars, like everyone else, will do what they know how to do. Magic Johnson is one of the greatest players that the sport of basketball has ever known. However, there is an unstated assumption in his greatness as a player. No one can ever take anything away from Magic as a player, but, he was still coached, received feedback, mentoring, and assistance along the way. Life is a team sport and he definitely benefitted from whatever help was at his disposal. He wasn’t able to exercise the same brilliance as an executive of the Lakers. Think about it – he personally signed the best player in basketball today, LeBron James, to play for the Lakers. Then, the Lakers had an embarrassingly horrible season and Johnson resigned without even informing his “sister” and boss. This was a crazy finish to what appeared to be a hopeful start. How do things finish like this? When you think success is tied to a person as opposed to evaluating strategy objectively irrespective of the star power. The Lakers learned an expensive and tough lesson. Question is, will anyone watching take note and modify their own company which may be headed in the same direction? Success is never guaranteed, it is earned in the daily crucible ruthless objectivity. If you doubt that, ask Jeanie Buss.