Avoid Leading one of 70% of Programmes that Fail
Guiding change may be the ultimate test of a leader because no business survives over the long term if it can’t reinvent itself. But, human nature being what it is, fundamental change is often resisted by the people it most affects: those in the trenches of the business. This means that leading change is both absolutely essential and incredibly difficult.
Consulting Magazine conducts a survey each year to find the best consulting firms. Admitedly this is a very American survey but nonetheless makes for interesting reading. Bain and Company has finished No. 1 in the “Best Firms to Work For” survey, six years running. That’s pretty impressive and a shining example for other consulting firms.
Bain published a report back in 2003 which, whilst might be a number of years old, still carries significant weight in terms of sound advice on the subject of transformation. This top consulting firm studied 21 of their most impressive transformations from recent years and found four principles underlying successful turnarounds. Bearing in mind that 70% of change programmes fail (Ref 1), any leader involved in transformations should take heed of this short, yet powerful list of success principles.
1. Set high standards and lead by example
Advocates of transformation programs must be real leaders who roll up their sleeves, clearly understand the job and get on with it. If leaders are asking the entire company to share their vision, they must begin by guiding from the front. A focused set of performance and ethical standards helps establish the right tone, and CEOs should communicate these as simple, powerful messages to all employees.
2. Put the right managers in place and give them real power
No matter how good a CEO is, they cannot single-handedly transform a company. But unfortunately, the existing senior management team often lacks the talent to steer the company through a difficult change process. Even capable managers may be closely aligned with the old company and viewed by employees as incompetent or untrustworthy. Bain’s research shows that replacing senior management correlates closely with successful change. Almost every one of the 21 textbook turnarounds included a substantial replacement of the senior team. This makes interim management a smart choice.
3. Focus on results, not an elaborate change process
The most successful leaders of troubled companies do not get absorbed by the process of change, but they stay focused on the end result. Successful transformers begin by developing a clear view on where the value lies within the business, and what’s required to get it.
4. Change quickly – tackle issues in parallel, not in sequence
Successful transformations hinge upon speedy execution. For the most part, identifying the key elements of change, implementing the change quickly and tackling the issues in parallel is far more effective than easing change sequentially into the organisation. How quickly? The most successful transformers in Bain’s the study completed the bulk of their turnarounds in two years or less. None took more than three years, and in all cases, some form of tangible, improved results appeared almost immediately.
Retired Harvard Business School professor John P. Kotter is a reknowned authority on the subject and in a Harvard paper, published eight errors observed in transformation programmes (Ref 2).
Error 1: Not Establishing a Great Enough Sense of Urgency
Error 2: Not Creating a Powerful Enough Guiding Coalition
Error 3: Lacking a Vision
Error 4: Undercommunicating the Vision by a Factor of Ten
Error 5: Not Removing Obstacles to the New Vision
Error 6: Not Systematically Planning for, and Creating, Short-Term Wins
Error 7: Declaring Victory Too Soon
Error 8: Not Anchoring Changes in the Corporation’s Culture
Kotter described two factors as being particularly important in institutionalising change in corporate culture.
The first is a conscious attempt to show people how the new approaches, behaviours, and attitudes have helped improve performance. When people are left on their own to make the connections, they sometimes create very inaccurate links. For example, because results improved while charismatic Harry was boss, the troops link his mostly idiosyncratic style with those results instead of seeing how their own improved customer service and productivity were instrumental. Helping people see the right connections requires communication. Indeed, one company was relentless, and it paid off enormously. Time was spent at every major management meeting to discuss why performance was increasing. The company newspaper ran article after article showing how changes had boosted earnings.
The second factor is taking sufficient time to make sure that the next generation of top management really does personify the new approach. If the requirements for promotion don’t change, renewal rarely lasts. One bad succession decision at the top of an organisation can undermine a decade of hard work. Poor succession decisions are possible when boards of directors are not an integral part of the renewal effort. In at least three instances I have seen, the champion for change was the retiring executive, and although his successor was not a resistor, he was not a change champion. Because the boards did not understand the transformations in any detail, they could not see that their choices were not good fits.
The retiring executive in one case tried unsuccessfully to talk his board into a less seasoned candidate who better personified the transformation. In the other two cases, the CEOs did not resist the boards’ choices, because they felt the transformation could not be undone by their successors. They were wrong. Within two years, signs of renewal began to disappear at both companies.
Bearing in mind the findings that 70% of programmes fail (Ref 1), it is wise for any leader of transformation to take heed of the bullets above from both Bain and Kotter. They should consider the implications of these warnings within the context of their own organisation and aim to be part of the successful minority.
Ref 1: Michael Beer and Nitin Nohria, “Cracking the code of change,” Harvard Business Review (May-June 2000): 133-141.
Ref 2: Leading Change by John P. Kotter – Harvard Business School Press (1996)
Purchase Harvard’s report here
