Companies are facing a new reality, one of economic unpredictability, disruptive technology, globalization, and unprecedentedly fierce competition. Most corporate change effort falls short. 50% of change programs fail to achieve their objectives; the failure rate rises to 75% for more complex and ambitious programs. These rates have remained much the same for the past few decades. Unfortunately, in most large-scale transformation programs, there is a disconnect: companies focus mainly on designing new processes or technical systems, and far less on how to motivate employees to adopt the solution.
Business leaders put people, culture, change management and communication as the top reasons for organizational change management failure, yet few companies completely understand how to tackle those issues head-on. The failures are costly, translating into billions of dollars of lost potential value, compelling many of these large corporations willing to try new ways to focus on the right change elements to implement them successfully to achieve sustainable change with favorable results. The good news is that there is growing recognition of the need for change done right.
To deliver on transformation changes that a company is going through, they must have people engagement at all levels of the organization. In many cases, there’s much talk about making people and change the top priority. Then reality kicks in, and the topic of change is no longer a priority or somehow feels less relevant. After all, management must deliver on the transformed business through execution of the initiative to align with the strategies, ensuring high level of confidence, support for transparency across milestones and outcomes. Rigorous methodologies, tools and testing of the programs and projects must be conducted to have a forward-looking view providing early awareness of emerging issues across the entire scope of the initiative. Clear governance must be incorporated with roles, processes, and decision rights. Unfortunately, too often change management becomes an after thought, as a separate work-stream or a standalone activity, delegated to HR, with empty concepts or useless slogans.
The reality is that change must be part of the executive agenda and so must start at the top. The key is to embed change management deeply into the design and execution of the transformation initiative. Consider it an underlying force that helps to spur business results, first by building a strong foundation together with a small top leadership team, then enabling the change to flow throughout the broader organization.
Setting the climate for change
Many change efforts fail because of a lack of alignment among the organization’s leaders on goals and how to achieve them. These problems typically stem from an absence of vision and a lack of clarity as to why change is necessary. So, conduct a series of co-creation workshops that sets the foundation for change with top teams. The objective: to set the right climate for change. Typically, this analysis and planning phase is punctuated around 3-4 workshops conducted with the top level leaders of the organization. Each of these workshops is carefully designed to jointly work on solutions in a truly interactive way.
There’s a fundamental reason why such collaboration is critical for building trust and alignment among leadership as they start their journey from a point of departure to a new point of arrival for the organization. The focus is on change leadership, organization design, HR, and learning’s that are necessary. Change leadership would include discussions around: people risk and impact management, leadership alignment, stakeholder engagement, communication and culture. Organizational design and HR would include discussion around capabilities, structure, roles, collaborations, workforce transition, talent requirements, and HR programs. Finally, learning would include discussions around capability transfer and training necessary.
Overall, the workshops cover a lot of territory. The goal is to build the foundation for a better transformed company, starting with the establishment of a strong executive team and build a sense of urgency for the shared new vision. Participants get to know each other better, work to develop a unique style for decisions in the light of their new future-state.
Enabling & engaging the organization
This is the design and build phase of the change effort. Once the aligned top team has jointly built the foundation, it is in a perfect position to execute its plans by engaging the broader organization. After all, real change happens only if the entire organization has a chance to digest the new normal, work on it and make it theirs. This effort is executed to cascade the changes across and enrollment of the organization. Typically, this phase is kicked off with a 3-4 day workshop for the next level of leaders in the organization, and conducted with similar sentiments as the top team workshops, primarily focusing on – understanding, alignment and action.
On the first day, the focus is on coming to clear understanding of the urgency for transformation, in the light of their current state. The second day is focused on their goals, starting with a collaborative exercise to define and bring to life a combined ambition and mission for the transformed company. The new mission is not simply presented to the broader team. Instead, to give control to the top 100, they are asked to vote interactively on two options. The option with the higher number of votes won. This exercise gives the team a sense of control—they could see their input shaping important strategic decisions.
The top 100 participants also reviewed and critiqued the new operating model, and finished the day by providing input into the values and leadership behavior required to succeed in the transformed business. On the final day, the top 100 prepares for action. The objective is to determine whether the newly established financial targets were achievable. The agenda includes live voting, working in small groups to define specific governance aspects, or identifying and planning mitigating actions for the three biggest implementation risks.
The next challenge was to support not only an executive team of 10, but a leadership group of 100 or more to cascade the change further. The company would reach the next wave of business leaders via a series of smaller enrollment workshops on local or business-specific integration priorities. People could discuss the emerging policies, provide their input, work on topics and ask questions. The executive team also establishes a routine for town hall meetings. Every month, these meetings provided an opportunity for selected groups of employees to ask questions and engage in a dialogue. Regular communications (including an intranet and a social media tool) will underpin these efforts.
For all these interactions it is wise approach for the company to encourage robust discussion and healthy conflict. In transformations, differences of opinion are best handled face-to-face. Otherwise they either get buried or, worse, become difficult to resolve. It’s critical to keep up the momentum throughout the process and track results. To that end, the best companies select a chief transformation officer to orchestrate and execute the transformation. He or she oversees the transformation management office (TMO), a team charged with planning the cascading and enrollment, providing objectives and targets—such as determining ambition by function, geography and over time—and supporting the progress.
The TMO takes the roles of both referee and coach, providing three types of support. First, support of the transformation initiatives. Second, support of functional transformation—building the new processes, systems and infrastructure for finance, IT, HR and other functions. Finally, the TMO supports change management jointly with the executive team and HR. The TMO’s time is spread about equally across all three dimensions. Typically, a steering committee (SC) of key stakeholders is set up further provide appropriate governance for the transformation initiative. The SC meets on a weekly basis for major decisions, issue escalation and mitigation on a weekly basis.
The TMO typically also provides support through a disciplined drumbeat—a regular cadence of meetings and deadlines to ensure fast and efficient decision making. It may sound counterintuitive, but this tight process doesn’t consume excessive amounts of resources. Instead, it creates clarity and avoids waste, allowing the overwhelming majority of the organization to focus on the base business. It’s a critical step, especially during intense changes needed during the transformation.
Implementing & sustaining new ways
Several work-streams will be rolled out during the implementation phase of the initiative. They may include projects to: deploy, monitor and re-assess people risk and impact; managing and supporting leadership alignment & stakeholder engagement; manage and deliver integrated communications; conduct culture interventions, re-assess & address gap; implement & evaluate organization design & governance; implement workforce transition activities; implement & evaluate realigned HR program and processes; implement & evaluate talent management strategies and plans; deliver & evaluate integrated learning activities; transfer knowledge and capability.
When implemented right, several outcomes will come out of such diligent organizational change management effort that includes:
Increased leader sponsor capability and stakeholder engagement
Reinforcement of behaviors consistent with desired future state
Clear understanding of workforce transition requirements, with implementation of rollout plan
Clear understanding of talent gaps and alignment with HR to address them
Knowledge transfer and training where necessary
Tweaked change plan as a result of feedback from effectiveness measures
Sustained momentum through out the change implementation to make them stick for long term
Ownership of the change effort by the leadership to ensure continuous refinement of the future-state maintains alignment
Using a set of minimally sufficient but proven approaches, this approach promotes cooperation by aligning people’s interests with those of the change initiative as a whole. In doing so, it fulfills the key ambitions of the change initiative—to bring about sustainable improvements in performance (without undue disruption), to enable as many people as possible to experience the change in the most positive way possible, and to build the capability for even bolder change.
Traps to avoid
To improve performance, substantially and sustainably, and to establish an organization agile enough to adapt to future disruptions, the organization must necessarily involve a sustained change in employees’ behavior. And for that to occur, it must be in the individual interests of employees to change their behavior—or at least in their individual interests as they perceive them to be. After all, people don’t willingly and proactively behave in ways that seem detrimental to their perceived interests. If employees are to commit to the change program and support it throughout, there has to be something in it for them as individuals. Avoid the most common traps that include:
Trap 1: Neglecting to sufficiently engage the extended leadership team
In advance of the launch of a major change program, it’s crucial to get the extended leadership team seriously engaged. (In a large organization, this team consists of the top 150 executives or thereabouts.) Unfortunately, a great many companies delay such an engagement effort until well after the launch, and many never get around to it at all. If not proactively addressed, they get little input into the program’s design or early implementation. Instead of feeling like owners of the change, they will feel under-consulted, underutilized, and under-informed—and, consequently, disrespected. Their direct reports will sense this and therefore will share their lack of enthusiasm.
Engagement of the extended leadership team is pivotal in translating a change program’s goals into actual workforce behaviors. No matter how inspiring the speeches from senior leaders may be, employees tend to listen to their direct manager more than to a C-suite executive. Proximity trumps seniority. They are aware that the direct manager has more influence over their professional fate—job security, status, salary increases, promotion prospects. And the direct manager, if properly engaged and equipped, is much better positioned to answer the crucial question, “What does the change mean for me, my team, and our customers?”
Give the extended leadership team members a voice earlier on in the change program, for example, and they will feel a greater sense of ownership and will contribute more readily. In fact, their involvement should begin as early as the design stage: after all, they know the workforce and the situation on the ground better than the TMO or the senior sponsors do. Giving them the opportunity for meaningful input will make them feel included in the change program and enthusiastic about it, and will also help keep the program free of design flaws.
Trap 2: Not empowering the TMO sufficiently
This type of failure is alarmingly common. A TMO should be a steward of value for a change program. To play that role effectively and support senior leadership properly, a TMO needs adequate power. And to gain that power, it needs sufficient visibility into the various units and the means to influence behavior in them, especially to increase cooperation across the enterprise. A TMO will also benefit if it has prominent rising stars or seasoned leaders on its staff: the presence of rising stars signals to the organization that the TMO is to be taken seriously, and the presence of seasoned leaders indicates the TMO’s deep knowledge of and interest in the long-term performance of the organization. Absent such signals of power, initiative leaders will perceive the TMO as marginal rather than powerful, and it will have limited ability to shape people’s behavior in line with the objectives of the program.
Trap 3: Not extending sufficient follow-through after setting targets
The hands-off, set-and-forget model for allocating targets has three major shortcomings. First, if senior management neglects to inspire ambitions, to monitor progress and make proper course corrections, and to show sufficient engagement, then the initiative leaders will have little reason to go the extra mile. Presented with an annual target, they will likely focus on measures that aim simply to meet it—typically shortsighted cost-cutting measures such as restricting travel or delaying recruitment. After all, such measures are far easier to implement, and far less threatening to the delivery of day-to-day business results, than broad long-term measures such as seeking sustainable savings through increased productivity. Taking the simpler path is the rational choice when you have a very serious day job and understandably want to minimize disruption. Unfortunately, the short-term measures don’t change productivity fundamentally or sustainably. Sooner or later they are discontinued, and when that happens, the benefits evaporate.
Second, the initiative leaders will likely seek solutions specific to their own departments rather than pursue opportunities that might contribute to collective, cross-department success. In fact, those promising opportunities, potentially conferring a competitive advantage, often remain undiscovered, since individual departments left to their own devices have no particular incentive to look beyond their silos. They might even have a disincentive to do so, because they may rightly worry that they wouldn’t get their fair share of credit for the results or that it would be a futile mission and damaging to their prospects.
Finally, the hands-off model militates against lead-indicator metrics, timely interventions, and course correction. If senior leaders have little visibility into a departmental initiative, they cannot easily realize that things are going off track—through the pursuit of unsustainable, short-term measures—until it’s too late to do anything about it.
Trap 4: Not heeding to the individual interests of employees
It’s not enough to present a compelling case for change. Change practitioners might invoke the fashionable phrase “burning platform” to convey the sense of crisis; they might explain how the specified changes are in the company’s best interests and the collective interests of all employees; they might segment their audience carefully into different stakeholder groups and customize their appeals to each of them. And, quite possibly, all employees will be convinced that the change program is in the collective interest, but many of them will still obstruct the program, perhaps unwittingly, by failing to adjust their behavior as required. (Arguably, this familiar outcome has been an important force in shaping, or misshaping, the change management industry: many supposed experts have mistakenly characterized the obstructionists—especially those in middle management—as behaving emotionally or illogically, and have continued to refine their remedies for that imaginary malaise!)
The collective interest is all very well, but for individuals to change their behavior, it must be in their individual interests to do so. Inevitably, there will be some costs to employees in any change program, but the behaviors required for change can still be in their individual interests if there are benefits that, on balance, make it rational to get with the program. It’s up to leadership to understand these cost-benefit analyses and tip the scales as needed to make active support of the collective change an individually winning strategy.
The members of the extended leadership team, when engaged early on and properly empowered, feel that they owned the change agenda and are the right people to see it through. Their commitment will be intense, both through being at the frontline and through realizing that their own success was linked to the success of the change program. They will communicate to their teams the new vision for the company, coach individual employees on new behaviors, and enhance the change program by removing obstacles.
An underpowered TMO would be unable to corral the initiative leaders, who would instead persist in focusing on their day-to-day duties. During the planning stages, senior leaders should put a lot of thought into the ideal setup for the TMO—its reporting relationship with them, its mandate, and its resourcing. The TMO will be assigned the requisite authority, duly anointed as a steward of value in support of senior leadership, and will be staffed by up-and-coming, high-potential leaders who would report directly to an influential member of the executive team.
During the design phase of a change program, the TMO should stress test the initiatives—their risks, likely financial impact, and realistic milestones—which should duly incorporated into the final version of the change program. The TMO should also institute a monthly meeting at which department heads share ideas for identifying and changing unproductive behaviors among their staff, and discuss opportunities for cross-department cooperation that would increase productivity. This might prompt the CEO to attending these meetings and publicly recognize bold suggestions; in due course, the department heads who could not propose creative, cooperative solutions will be perceived by their peers to be letting the change program down.
Finally, when appeals to the common interest fail to work, leadership should resolve to find an explanation for the symptoms in individual behaviors. Clearly they must have some motive for their behavior—some rationale grounded in their individual interests. An investigation can conclude the root-cause for their behaviors. Armed with this new understanding, the executives sponsoring the change program can address the issue individually. They can again formulate a cogent case for change and publicize the collective benefits, but this time they can arrange some changes of their own for individual interest as well by extending some personal incentive in kind that can change the behavior.
Employees generally want to do the right thing for their company. They will be more likely to embrace change if they see a pragmatic path forward that is followed at every level of the enterprise. The energy to fuel that change comes through addressing the root causes of behavior and showing employees that the company is serious about supporting and reinforcing them as they make the shift. When employees are inspired to change and have the chance to co-create new behaviors, those changes will stick.