How to Transform an Organization: A Focused, Balanced, Integrated Approach
The World Economic Forum predicts that sixty-five percent of children now entering primary school will hold jobs that currently don’t exist. The world is changing faster than at any time in human history and organizations must transform their behaviour and capabilities to adapt to a changing environment.
Leading half a dozen business, agile and digital transformation initiatives in large organizations taught me that systemic change is not possible through a series of distinct, ad-hoc initiatives.
Businessdictionary.com defines transformation as ‘a process of profound and radical change that orients an organization in a new direction and takes it to an entirely different level of effectiveness. Unlike 'turnaround', which implies incremental progress on the same plane’.
Despite the need for a profound and radical change, many organizations tend to focus on specific aspects of transformation, while ignoring others.
For a complete view of an organization, I adopted the University of St Gallen, Switzerland definition of an enterprise, that of a productive social system. Productive refers to ‘hard factors’ of structures, processes and technology, while social represents the soft or psychology aspect of people.
In this article, I will share some of the common pitfalls I encountered in transformation initiatives, and how to avoid them.
In a recent example I worked with, the organization invested over $10M and 3 years to deploy new technology that failed to produce the expected results. Insufficient focus on the process and social or people aspect of transformation resulted in a low technology adoption rate by staff and clients.
This organization is not alone: According to the Economist Intelligence Unit, Why Good Strategies Fail: Lessons for the C-Suite, July 2013 among initiatives launched over the previous three years, respondents quoted a success rate of only 56 percent.
A good understanding of the social and productive aspects of the organization can help predict the impact on transformation and how to manage it. Unfortunately, according to the same study, only half of the respondents said that strategy implementation overall receives enough attention from C-suite executives.
While every organization has a different focus during their transformation journey, transformation needs to happen at both a strategic and tactical level. Considering three-fifths of 587 C-suite and senior executives interviewed by Economist Intelligence Unit often struggle to bridge the gap between formulating strategy and implementing it, inevitably key aspects for transformation can be easily overseen.
Strategically, transformation touches all aspects of the organization People, Processes and Technology along with strategic What, How, When and Why, answered upfront.
Human capital is arguably the most critical part of transformation. Without the teams being on-board, the transformation not only takes much longer, but often fails. Indeed, in the absence of team buy-in, the lack of motivation translates into lost opportunities.
Yet transformation is not just about communicating change to the tactical teams (What does it mean for me? How does it impact my day-to-day work? What is the expected result?), although that is important; it involves setting a vision for the transformation, and what the organization should look like as a result. This will empower teams and individuals by serving as a guide to actions and decisions.
The executive team of a national organization embarked on a transformation roadshow, focused on bottom-up improvement. The leadership team was so careful not to be perceived as a top down initiative, they did not set any direction regarding the vision and why the change is needed. One year later, managers were still guessing where to focus their attention, skills and activities. Top down and bottom up aspects supporting one another are vital for a successful transformation.
Leaders also need a clear vision of the skills (for example balance of technical and managerial) and accountability of how it will impact the recruiting and hiring strategy. In many cases, simple profit-sharing compensation structure needs to reward knowledge sharing.
Most organizations rely on three to five core processes that deliver most of the customer value and competitive differentiation.
I worked with an organization that simplified core processes. They engaged front-line teams for valuable insights and aligned for customer focus and simplicity. Still, overall KPIs didn’t bulge. A deeper look revealed that while the processes had been aligned vertically (product development, marketing), not enough attention was given to how information is shared across functions. The situation encouraged rigid hierarchies focused on procedures, rather than performance and results.
Cross-functional core process redesign must not only be customer centric, but also shift decision-making from hierarchical channels and silos to horizontal flows across functions and locations.
In my experience, core process redesign can take anywhere between 6 and 18 months to implementation. However, typically significant results can be realized in the first year, with multiple iteration cycles.
One of the main drivers in a technology business case is customer impact. To maximize impact, technology solutions should have Scalability, Flexibility and Real Time Reporting.
Scalability can accommodate future growth and change with minimal investment at the time.
Flexibility allows for backward integration with older, legacy systems, while having an increased ability to adapt to emerging trends and new technology.
Real Time Reporting is critical for applying back the insights and support decision-making with timely, relevant information.
One organization deploying a technology solution focused almost exclusively on staff training. Faced with a steep learning curve and what appeared as additional tasks, internal teams did not adopt the tool and defaulted to existing processes.
Technology is a great enabler for change, but it needs to align with and support a future vision. A reliable and stable infrastructure is the base for high performing robust technology solutions. Support technology adoption by developing both internal and external use cases that add value and automate existing and new processes. Unstable solutions cost companies millions of dollars each year as they impact customer experience and internal productivity and effectiveness. In the digital world where customers expect immediate response and resolution, time is of essence when technical challenges occur. Implementing series of proactive and reactive processes can address the issues swiftly and minimize negative impact. To this effect I helped one organization establish a global command centre and a proactive problem management team.
Without focused, balanced integration of the three aspects People, Process and Technology it is unlikely that an initiative will lead to significant performance-enhancing transformation.
Tactically, senior leaders hear about problems either too late or when it’s too expensive to fix them. Therefore, change management needs to be handled with consistency and commitment at all levels through Time, Communication, Team involvement, KPIs and
One organization I worked with was determined to deploy transformation as soon as possible. Two years later, lacking an owner or head for organizational change management, the organization was struggling to understand why change is taking so long. In another case the organization realized the need for change management leader but appointed a leader who did not have the right skills. In both cases value was lost.
Let’s begin with the first critical aspect of tactical change management, Time.
By nature, transformational change is iterative, with phases interacting or overlapping. Use time as compass to navigate through major milestones. Sharing the vision of when you anticipate seeing certain milestones completed will help the teams focus and aim for impactful outcomes. Otherwise brace for a potentially very long transformational journey.
One organization started its transformation journey almost a decade ago still struggles to transform. Employees are indifferent to anything related to transformation, while customers waiting for positive outcome lost trust in the organization and its leadership. Too much ‘transformation’ started to backfire.
The time or duration of change management is important. If transformation takes long and milestones are no clearly communicated, teams become disengaged. I advise leaders who feel the transformation is going to take longer than anticipated, to be transparent and communicate openly with the team the reasons and the impact.
Which brings me to the next point, communication.
Push and pull communication methods are very helpful and widely used, but I believe the most effective is interactive communication. Not only does it help clarify the vision and the goal but the team moral and engagement improves significantly as everyone feels part of the change.
It is almost impossible for large organization executives to speak to every single employee, so being the face of transformation and communicating the importance of the initiative during a townhall is important. Open discussions and allowing for questions will help you not only find change advocates but also identify or validate key areas of concern.
When it comes to push and pull methods, there are different views on how often one needs to communicate for everyone to understand: some experts claim its seven, others nine times. My rule of thumb is – when I feel I communicated enough, I communicate three times more.
A robust communications plan supports the third critical aspect of tactical change management, team involvement.
Teams are the key building blocks so keeping them engaged is one of the most important skill needed during the change.
One organization selected a business operations head to lead the change initiative. Despite exceptional business knowledge, this individual failed to leverage team-building opportunities and create conditions for teams to become high performing units.
It is best to select a leader with the transformation knowledge and practice to receive the necessary support from SMEs.
An alternative is to create a Centre of Excellence to provide expertise, tools, resources and training for the team. Make sure to integrate these centres with the business, or you may drift away from the collaborative environment to simply replace the controlling governance model.
Team and individual performance are measured using a carefully selected set of KPIs.
In a discussion, I asked a senior leader in an organization leading a major transformation what is the objective for the change. Their answer was ‘to make operations better’.
First and foremost, senior management needs to qualify and quantify potential benefits to prioritize the investment of time, financials and effort over other initiatives.
Secondly, the teams need clear direction on where to focus and what to measure. Without a strong set of carefully selected KPIs that are meaningful, sensitive to change, comprehensible and manageable and measurable, the only measure of success will be subjective and anecdotal – not likely to impress shareholders.
One organization collected as much data as possible about the project. This added a significant burden to staff, and teams became disengaged and overworked. I suggested a rigorous and strategic process to select the KPIs and track them against the target. This not only changed the mindset but also accelerated the transformation towards the vision.
For a multitude of other aspects that can be tracked, an exception-based monthly reporting may be a more efficient way to monitor progress by focusing on the most critical milestones, risk, interdependencies and objectives.
When the process of identifying KPIs is deficient, it creates issues in the final critical aspect of tactical change management, capacity.
Transformation takes place within existing teams, and adding more human resources is rarely a viable solution. Organizations may choose to setup a separate division with a sole focus on transformation. A word of caution: business teams may find it difficult to relate to the ‘cool’ team trying to do things differently. You may find it easier to create new roles within the existing teams instead of spending time and effort trying to integrate a new division into the organization.
Senior leadership should check ongoing initiatives before committing to new ones. If you skip this important step and jump right into transformation, be prepared for confusion and questions on what to focus on and what constitutes a priority.
A new initiative should not increase workload by more than 10%, factoring in the learning curve. Change advocates, the stellar performers and believers might be willing to put more effort into the change; but remember, successful transformation is not about leveraging your top performer but also engaging low performers. If workload increases significantly for the team, prioritization can help with capacity challenges. It is senior leadership’s role to address capacity challenges and help teams prioritize and focus resources on what brings the most value for the organization.
The Many Faces of Transformation:
When it comes to transformation, the leadership team faces a challenging yet exciting journey.
My final word of advice: be in front of the team when there’s a challenge and stay behind when there’s success. It will earn you the respect of the team. The success of the initiative ultimately depends on their level of engagement.
I hope that sharing some of my experiences with transformation will be helpful for you to manage the concurring aspects of transformation in a focused, balanced and integrated way for positive and lasting results.
I’d also like to hear from you: What has been your experience in transformation, and how did you tackle these challenges?