Sunday, November 2, 2008

Leading Transformational Change

Complex Change Initiatives Usually Fail

Despite all the rhetoric, books, effort, and money thrown into change efforts in organizations today, most fail. Mega-consulting firms Arthur D. Little and McKinsey & Co. have studied hundreds of companies that entered Total Quality Management programs, but about two-thirds "grind to a halt because of their failure to produce
the hoped-for results". Efforts at "reengineering" fared worse, with a 70% failure rate.

Peter Senge puts it quite starkly in his 1999 book "Dance of Change": "this failure to sustain significant change recurs again and again despite substantial resources committed to the change effort (many are bankrolled by top management), talented and committed people "driving the change", and high stakes. In fact, executives feeling an urgent need for change are right; companies that fail to sustain significant change end up facing crises. By then, their options are greatly reduced, and even after heroic efforts they often decline".

This seems a bleak appraisal for any organization. Yet the equally important learning is that change efforts are still important to face.... and the sooner the better.

A few more facts:

* 70% of merger/integration initiatives don’t live up to goals
* 50-80% failure rate in Business Reengineering Projects
* Only 9% of IT projects in large organizations are on time and on budget – and even then only 42% of proposed features are included

So how can one be successful in Leading Transformaitonal Change.

First, Lead but Let Go of Control. Successful change leaders exhibit the following leadership behaviors:

** Prepare themselves intellectually and emotionally
** Clarify the outcomes and a non-negotiable core
** Let the rest emerge by growing shared vision and action
** Build relationships up, down and across the system(s)
** Go with those who are ready to go
** Don’t expect the perfect answer in the first step

What else can leaders do to successfully Transform their organizations successfully?

1. Engage managers and key employees in designing and rolling out the change program.

Invite a keys managers and employees whom exhibit strong change agency and supportive behaviors that are: forward-thinking, respected by their peers to contribute ideas at the outset.

To get their attention and commitment, it is important that they be freed from the operating roles they have for a period of time to focus effectively and execute the change program. Overlay roles simply do not work well. This demonstrates genuine leadership support when key leaders are reassigned to help on transformational or turnaround needs. This also encourages them to advocate for the change once they’re back in their day to day operating roles.

Once the program is designed and ready for rollout, experienced employees can also help execute the program by defining the more detailed process changes at certain customer touch points or defining specific roles for different types of site employees.

2. Direct the change in a meaningful way.

Whatever the ultimate goal of a major change effort—increased customer visits, lower costs, or improved profitability—employees need to understand what it will also mean for them personally. It is critical that senior executives articulate how the proposed change will benefit workers and affect their day-to-day activities.

How leaders communicate matters is as much as the content of the message. Executives may want to discuss the change program first with operational managers, as a sign of respect for their role and a way to cascade the message through the ranks.

During those conversations, it’s vital that executives demonstrate enthusiasm and support for the required changes. Saying one thing in public forums and in private conversations being inconsistent erodes leadership confidence and risks more transformation programs. Leaders need to be coached on the importance of their behavior during difficult change programs.

In turn, the operating managers will need to openly discuss the change plans with their employees as a group. This ensures that all employees receive the same message, and gives them the opportunity to raise questions and concerns publicly, neutralizing employees who may criticize the change or try to undermine the effort behind the scenes. Conversations in smaller groups or one-on-one can follow in order to reinforce messages, answer questions not discussed in the larger group setting, and address specific individual challenges.

3. Give people time to change.

Expecting everyone to embrace the new change immediately is simply not realistic. People accept change at different speeds and exhibit different behaviors. Sustained behavioral change takes time and repetition, depending on the nature of the change, the company’s culture, the adroitness of management, and each employee’s receptivity and ability. Employees will need comprehensive training on the new processes required, as well as the time to practice, learn from mistakes, and try again

Don’t overload employees with too many big changes at once. Instead, give them the latitude to get used to a few new processes and then to introduce a few more once they’ve mastered the first set.

4. Constantly reinforce expectations.

Behavioral change requires continual reinforcement, particularly among employees who tend to resist such efforts. Emphasize the importance and value of a large-scale initiative through communication vehicles such as company-wide announcements, meetings, and everyday conversations with site managers

Operational Managers can also provide reinforcement in other ways as well. At every meeting, they can ask employees to talk about how they’re doing with executing the change and invite them to help one another work through challenges. Managers should spend time observing employees in action and providing real-time coaching during the shift; this provides employees with tangible examples of their mistakes and the specific remedial steps required to improve their execution.

Managers can also establish a certification program, through which employees who have already mastered the new processes work sideby- side as coaches with their colleagues onsite. These individuals can demonstrate how to execute new activities, monitor fellow employees’ behavior, and address any questions and concerns—all with the goal of achieving consistency across sites. As these employees reach a certain level of proficiency, they also become certified as mentors and coaches.

Reinforcement also means being firm about expectations. Leaders and managers can be open to suggestions on how to make improvements. However, they must send a clear message that carrying out the desired change is not negotiable.

5. Prove and share results.

Naysayers seldom embrace a change program until they hear about and see positive reactions from their peers. Therefore, leaders must measure the results of a change effort from the outset and present those successes to skeptics and supporters alike. Possible results range from increased sales and numbers of new customers, to higher mystery shopping or customer satisfaction scores, to the winning of industry awards. Identify and establish key metrics of success early in the process and begin tracking them before implementation as a baseline for improvement. While overall results are important, one should also rigorously monitor and share the information at the site level, so that individuals and teams can understand how they are doing.

6. Make success and failure matter.

At all locations, managers can encourage employees to change by offering rewards and recognition for individual performance. These could be given on the spot, when a manager observes an employee delivering exceptional service to a customer or flawlessly executing a new activity. Rewards might include a gift certificate to a local store, a free lunch, or a small cash reward. Alternatively, larger rewards including extra vacation days, a monetary bonus, or a job promotion could go to employees demonstrating sustained performance over time, such as the highest average customer satisfaction ranking or the fastest path to certification.

While individual recognition is important, shared rewards can be even more powerful. A company can initiate a “Customer Satisfaction Drive” contest across sites and award winning teams with trips, bonuses, and other prizes. Or the best teams may simply win bragging rights and an article in the company newsletter. Engaging different sites in competition encourages employees to work together, both by coaching one another to improve and by taking each other to task for not making the desired changes.

Leaders can also use bonuses to push site managers to drive change at their locations. During implementation, these rewards may be tied to successful execution of specific stages in the implementation plan. More substantial rewards, however, typically are linked to sustained improved performance across a set of core metrics.

Managers who have a stake in the effort’s success will likely be more motivated to lead change. A national convenience store operator, as part of a major effort to improve customer service, launched a new rewards and recognition program that acknowledged site, team, and individual contributions to the business. Frequent rewards helped focus employees on the current wave of implementation.

Financial incentives rewarded overall site performance on a set of financial and customer metrics, while still maintaining control metrics such as inventory and staffing levels. Including both positive and negative elements in the reward system ensured that managers did not drive positive results using the wrong behaviors—for example, over-staffing cash registers to completely eliminate lines and boost customer satisfaction scores. Managers whose locations consistently underperformed against service targets were either demoted or removed from their jobs.

The flip side of this equation is also true. Leaders must also make failure matter by, for instance, reducing bonuses for site managers whose stores or restaurants fall short of targets or dismissing managers or employees who consistently fail to meet the new goals. These actions send the message that refusal to change will not be tolerated.

7. Weave the change into the culture.

Getting a major initiative to stick means ensuring that employees embody the changes that leaders want to see. Change agents at three levels can help weave new processes into the company’s culture:

• Senior leaders need to publicly demonstrate their support of change by participating in kick-off meetings and market rallies and by making frequent visits to offices and to customers. They can also empower managers and employees to handle customer issues on-site.

• Operational leaders can also focus employees on desired new behaviors. They can also act as the conduit for feedback between senior leaders and the field. Because it is tough to drive change from behind a desk, operational leaders should get out in the field to observe and model desired behaviors. They should have frequent conversations with site managers to track progress against targets, ensure that sites are hiring the right employees, and regularly celebrate success.

•Site managers and experienced employees in the field must provide explicit guidance and performance feedback to other site personnel. They can also promote the change initiative in conversations and routine activities. One company implementing new processes for interacting with customers instituted a “customer moment” at the beginning of every employee gathering, whether at headquarters or the site level, when employees were asked to share their personal experiences with good and bad customer service and explain what they learned from the situation.

Executives must get operating managers and their most experienced employees on board, as these are the people who are most critical to the effort, and must shift them from skeptics to dedicated change agents. The process takes patience and substantial effort, but the payoff is well worth the investment: large-scale change that generates sustained competitive advantage.

Research Sources: Oliver Wyman


MSVU Toronto Alum said...

Wow - I just tweeted this post.

Nice job.

FM-group said...

One suggestion -- It will be great if you also mention the sources of "facts" mentioned in your article. Overall it is good.

Bookmark and Share