This week Greece became the first ever developed country to fail to meet its debt obligations to the International Monetary Fund (IMF). It joins Sudan, Somalia and Zimbabwe in being the only countries in arrears to the IMF, according to the BBC. What makes this more interesting is that Greece is both far richer than most of the 188 members of the fund, and is one of its founding members (in 1947). At the same time, Greece was unable to renew its European Union bailout package, leaving the overdrawn country without a safety net of cash for the first time since its first bailout in 2010.
Simply put Greece’s national debt amounts to 180 percent of its yearly produce. This means that if all the money generated by Greece’s economy was to be used solely to pay off its debt, it would still take almost two years to pay off. In fact, The Guardian states that more than 15 years of strong economic growth are required to bring the debt down to sustainable levels.
The effect of the debt burden on ordinary citizens is visible and harsh. According to Trading Economics, one in four Greeks are currently unemployed, including half of the 15-24 year olds. This is staggering especially when compared to the UK unemployed levels (currently one in twenty people). Subsequently, a third of the money lent out by banks is never repaid. This week, the crisis culminated in banks closing and the public being limited to withdrawals of up to €50 (£35) a day because of lack of cash flow in the economy.
A protestor kicks away a gas canister during clashes with riot police during a 48-hour strike by the two major Greek workers unions in central Athens.(Reuters / Stringer)
What makes this story blog-worthy is that, although it is usually expressed through economic jargon in the media, it is quite simply another story of change management. This is the story of how an organisation (Greece) had to embark on process of change (reducing their deficit) to ensure their competitiveness and survival. I believe that the four biggest lessons to be learnt from this episode are:
1) Change is coming. Expect it!
In the words of R.C. Gallagher: “Change is inevitable-except from a vending machine”.
One key reason for the huge Greek debt is the large current account deficit and a lack of counter-cyclical measures. Put simply, Greece spent more money than it had, through both booms and busts. This goes against economic intuition, which is to save during good times in order to spend more than your income during the bad times. This is a sign of the Greeks being unable (or unwilling) to foresee and expect change, in the sense that what they can afford today, they may not be able to afford in the future. It is only when you anticipate change that you can put in place adequate contingency plans to ensure your company is successful (and most importantly, stable) in the event of any surprises.
2) Kicking the can down the road only makes things worse.
Economists describe an unsustainable level of debt as ‘explosive’, denoting that once one gets into too much debt he/she must take on more debt to repay the old debt, which leads to even more debt… and a vicious cycle. This is not dissimilar from delaying necessary change or using temporary fixes. Many organisations make this mistake, changing processes and cultures after they have become ingrained into the company and other processes are designed around the faulty process. To save yourself more work later, change it early.
3) There is no change without resistance and opposition. Get over it!
There were a number of serious riots in Greece in 2010 in response to the austerity measures imposed by the then-government. You may have expected there to have been no more riots after the current government came into power, but this was not the case. There have been protests against every policy, but the government has managed to work through it. If the leaders had stopped at every objection then very little (or no) progress would have been made. So, expect resistance and work through it.
A protestor kicks away a gas canister during clashes with riot police during a 48-hour strike by the two major Greek workers unions in central Athens. (Reuters / Stringer)
4) A successful Top down transformation
Lessons can also be learnt by comparing the differing approaches to change management taken by the previous and current governments. Essentially, during the former government, the Greek people had no input into the austerity measures. This, of course, was unlikely to be successful as top down change initiatives are dependent on the commitment of the members at the bottom of the organisational chart. However, the new Syriza government have been very good at communicating and spreading their vision and roadmap to change. They’ve used their election victory to legitimise their views as ‘the people’s view’. The new government even went as far as holding a referendum as a device for transferring (a sense of) ownership of the change process to ordinary citizens. This shows the importance of managers investing time to motivate other employees.
Gary Chimuzinga is a guest writer for Facilitate4me. He graduated from the University of Kent with a first class honours in Financial Economics with Econometrics in 2015. He has some experience in change management in the Defence Sector as well as the Financial Services Sector.