By Kweilin Ellingrud
It’s been said many times that only 30% of transformations are successful in achieving their objectives and sustaining impact. Why do so many transformations fail? How can we make them successful? And what can make the changes stick?
Leadership teams often find themselves in a vicious cycle of launching a “transformation” every three to five years. All too often after some initial gains, old habits creep back in, the impact is lost, and the transformation is deemed to have failed—resulting in teams losing faith in future efforts.
Moreover, the label “transformation” is often over- and misused to describe a moderate change or bundle of initiatives. To be a true transformation, the effort must be company-wide, improve performance (both productivity and growth), and boost organizational health.
What makes the difference for the 30% of transformations that truly achieve their objectives and sustain the change? CEOs can learn from a number of recurring lessons, including these six success factors that I have observed firsthand:
Committing to transform: CEO focus and personal involvement is vital to success. Transformation is not something that can be delegated, and it is important that leaders spearhead the effort. Leading by example and role modeling the expected behaviors will help bring detractors on board, and ensure that the transformation is done by—not to—the organization.
For example, the objective of a recent transformation at a Tata Steel facility in the Netherlands was to bring advanced analytics to the manufacturing floor—therefore requiring hundreds of people to receive new skills training. The then-CEO embraced the project by taking the advanced analytics training course himself, so that he could talk about the experience with the broader organization and endorse the project as essential to Tata’s Industry 4.0 strategy.
Addressing the sticky middle: Middle managers often feel threatened by a transformation. As the organization changes around them, they feel that the old system, in which they were successful, is shifting under their feet.
For the transformation to succeed, this group must get the space and time to learn new skills and change behaviors. A useful rule of thumb for leaders at all levels of an organization—and particularly those closest to the work and customers—is to spend at least half of their workdays coaching their team members. They’ll also need new tools, training, and support to change their behavior.
At one global wealth-management firm, middle-level managers were the last group to change their day-to-day behavior: some did not know how to, and others did not want to or were afraid to do so. Only after launching a targeted leadership training program with a cohort of managers did the organization get the cultural change it was seeking.
Empowering frontline employees: Being transparent about individual and team performance helps individuals understand where they stand, find colleagues who can help them improve, and know exactly what is needed to win the day. The team becomes more than the sum of its parts, helping employees feel valued and boosting employee retention.
Involving frontline employees in problem solving further strengthens teams. It engages employees more deeply when they are asked—even expected—to identify, solve, and escalate problems that make the customer experience better and improve overall productivity.
Proctor & Gamble’s Rakona manufacturing plant developed a new vision that combined pride in the company with the development of new solutions for both employees and customers. Leaders democratized technology by giving the people who would use the new tools and apps the power to inform their design. In combination with a new upskilling program that was open to all employees, the approach generated a strong, bottom-up “pull” for change, with no “push” required from above. In the end, 100% of employees were involved in the transformation and problem solving, which in three years reduced costs by 20% while more than doubling customer satisfaction.
Aligning incentives: Without deep alignment, senior leaders who have long succeeded by simply focusing on one area and delivering their own results will stop a company-wide transformation that depends on collaboration to achieve its full potential. At one global manufacturing firm, linking a significant portion of the senior leaders’ bonuses to overall transformation results encouraged leaders to work together to tackle cross-functional opportunities that no individual could capture on their own.
Nonmonetary incentives are also vital. One CEO made a point, each week, of writing a short, handwritten note to a different employee involved in the transformation effort— resulting in an almost magical boost to morale at no monetary cost. A different CEO threw a surprise celebration for an employee who went far beyond normal expectations to deliver a particularly challenging initiative. Within 24 hours this story had spread throughout the company.
Capturing quick impact and baking it into budgets: There can be no sacred cows in a transformation. Because the early opportunities will likely be comparatively easy to capture, build a solid partnership with the finance department to ensure that this quick impact is baked into budgets from the beginning, so spending does not revert to the way things were. It also helps to separate savings opportunities from reinvestment decisions, so that savings do not dissipate. Bringing the finance department in after the transformation is under way can undermine alignment on impact and on adjusting budgets.
Sustaining the impact: Organizations and leadership teams are often exhausted at the end of an intense transformation. If have not adequately invested in basic change-management elements and communications throughout the process, they may leave the business unable to sustain the hard-won impact. Celebrating early wins—and making sure the transformation process does not drag on too long—can help to mitigate the risk of change fatigue or dwindling energy to maintain the improvement trajectory.
A large engineering company successfully undertook a transformation that raised EBITDA by $100 million and cash by $150 million. But complacency set in and siloed thinking returned, leading to bankruptcy six years later. Sustaining the impact is at least as important as the original transformation itself.
Bringing together these six success factors, both during a transformation and after its end, can help to ensure that the impact sticks. But it requires steady commitment not just to immediate gains, but also to long-term results.