Why Organizational Change Fails

An astonishing 75% of organizational change initiatives either fail outright or don’t achieve desired objectives, according to research. The cost of a failed transformation, such as a major restructuring, an expansion into a new geography or the integration of an acquired business often is very high, with the direct costs of external consulting and internal management time paling in comparison to lost opportunities, disruption and change fatigue.

That said, organizations often do need to be transformed in order to survive and thrive. We live in times of change unprecedented in recorded human history, driven by technological, social, political and environmental shifts that likely will continue to accelerate. So, “just saying no” to transformation often isn’t an option.

If you determine that your organization does need to change in fundamental ways, how can you beat the odds and be successful? The starting point is to understand why most transformation efforts fail. In our work with hundreds of senior executives seeking to change their organizations, we’ve seen the following 10 factors increase the likelihood of failure. Individually, they create significant barriers; in combination, they make it virtually inevitable that good intentions and major investments will end in disappointment.

1. No clear and compelling case for change

When people don’t understand why change is necessary, anxiety, cynicism and resistance inevitably build. Most major transformations are justified from a financial returns standpoint (e.g., revenues are added through an acquisition; cost reductions result in higher margins, etc.) but the rationale for large-scale change must be clear and compelling for all the key stakeholders who have to be on board for successful implementation. If you don’t help critical groups of people understand why change is necessary, and how it will affect them you will never get to the rest of the story. Even with a solid intellectual rationale for change, people inevitably want to understand the implications for and impact on them. Developing targeted messages for key audiences is crucial to building and sustaining support.

Making the case for transformation is most challenging when there is no built-in sense of urgency. In crisis situations, change is the necessary reaction to urgent problems. People may not know what to do, but they know that something needs to be done. Far harder are situations where change is pursued proactively to prevent emerging problems or to pursue new opportunities. In such situations, many or even most people in the organization don’t see that change is necessary, and the case for change must be based on engaging, educating and inspiring people, combining solid analytics with a clear vision of what the future holds.

2. Lack of senior team alignment

Full alignment among senior team members is an elusive goal at any point in time. Even a high-performing team will have all manner of relational and power-related dynamics playing out on a daily basis. Members of executive teams must join forces to both maximize the potential in each of their roles and to manage the built-in organizational tensions among them. This is made all the more difficult in times of major change when ambiguity increases and people jockey (consciously and unconsciously) to ensure that their voice is heard, their vote counts and their seat at the table remains secure.

The requirements of leading a transformation are quite different from those of leading a line of business or function in steady-state or even a smaller, more focused change effort. By definition, transformations are comprehensive, holistic makeovers of the way work is done. Leading such efforts involves making progress on an array of projects or workstreams that need to be managed in a traditional sense, but that also need to be pulled together in ways that require close collaboration and difficult tradeoffs. Only the leadership team can do this work.

It is critical for the CEO to direct this effort, working with the team to surface their assumptions and concerns, make the right trade-offs and manage the inevitable conflicts. Spirited, open debate of the range of options available is crucial to laying out the path forward, led by an aligned team ready to take on the complexity, ambiguity and conflict inherent in transforming an organization.

3. Abdication of leadership’s responsibility to drive the process

While necessary, senior team alignment is not sufficient. The team needs to remain fully engaged throughout the transformation process, even as they continue to run the business. Given the significant competitive and operational pressures that senior teams face, it’s all-too-easy for leaders to abdicate their responsibility for actively directing, leading and monitoring the transformation. This often is reinforced by the organization’s reward system, which incentivizes a shorter-term, more operational focus.

For this reason, and because leading transformation requires specific skills and expertise that differ from running business as usual, it is usually advisable to support the leadership team with a dedicated group of people focused exclusively on overseeing planning and implementation. It also often makes sense to augment this group with external resources with deep and specific experience with transformation. But the overall transformation process must be clearly and unequivocally leader-led. The senior team must have an agenda that incorporates both business-as-usual items and oversight of the transformation process.

In addition, teams that operate on behalf of the leadership team must have a mandate that supports leadership in this work. Too often, the most well-intended “supporters” (internal project management experts, HR and communication resources, and external consultants) proceed down paths that become disconnected from the leaders who must make key decisions. These support teams can take on a life of their own and become bureaucratic impediments, for example by setting up multiple work streams with onerous reporting requirements or, worse, creating a shadow governance body that has too much influence on decision-making.

4. Insufficient focus on co-creation in design

Given the times, organizational transformation consulting unsurprisingly is a thriving business. Armies of consultants contend to win lucrative contracts to advise leaders on how to make large-scale change happen. However, given the high failure rates, it’s clear few actually are delivering the value they promise. This is particularly true for consultants who use what we call the “doctor-patient model”; they diagnose the situation and prescribe solutions without engaging the patient in deciding what is best for them, without giving them choice.

This is not to say that consultants can’t add value, especially for organizations that don’t have a lot of experience with large-scale transformation. But only when they engage the leadership in an in-depth process of co-creation, only when they support implementation and not just design, and only when they seek to build capability and not encourage dependency.

Co-creation means building maximum alignment through the process by:

  • Providing accurate and relevant data as the basis for critical discussions, and carefully facilitating those discussions so that underlying assumptions and biases can be surfaced and identified.
  • Always pushing for assessment of multiple options – whether different strategic directions or different organization designs. Never asserting there is just one solution to any challenge or prematurely driving for closure before exploring alternative options.
  • Reaching agreement by openly, collectively assessing the different options against a clear set of criteria for success. Only by doing this can senior teams be assured that they understand the strengths and weaknesses of the option they eventually choose, and know where everyone stands.

5. Communicating without really engaging

It’s not enough for senior leaders to put substantial time and attention into articulating and communicating the business case for transformation. They have to do it ways that truly enlist employees in the transformation process. Too often, however, they fail to get them really onboard, even when there is a burning platform providing a clear and compelling rationale for change.

This is because one-way communication, even with the best of presentation materials and most extensive FAQs designed to educate people, is not enough to win employees over to being willing change agents. To enlist employees, leadership has to be willing to let things get somewhat messy, through intensive, authentic engagement and involvement of employees in making the transformation work – in asking them for their reactions, opinions and ideas, and then by transparently sharing what was learned and what will be done with the input provided.

Well designed and executed engagement processes will ensure deeper understanding of the changes required as people learn by assimilating and applying information, not just by absorbing concepts intellectually. And in the end, people will more willingly embrace and drive change when they feel they are, to some degree, in control of their own fate.

6. Inadequate focus on culture change

Culture change is an essential element of transformation. Culture is “how we do things around here” – the norms and ways of operating that underpin getting work done. If that doesn’t change in necessary ways, then all the work to change strategy, structure and systems is likely to come to naught.

Culture change efforts should alter the way work is done by people (individuals and teams), starting in places where the transformation must take hold. For example, if the transformation is one of getting sales people to stop selling products to customers and start engaging them in finding solutions to their needs (which still require them to buy products, but in a different way), then the behavior of the sales force needs to shift from pushing their wares to engaging with customers more as consultants or trusted advisors. This is a major culture change for product-oriented sales people.

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Culture is, however, hard to work on directly. It can only be changed by altering peoples’ behaviors. The first step is to clearly define what behaviors are necessary for driving the transformation. This is an ideal area in which to engage employees (see #5): Identifying behaviors that will be key to success going forward is an optimal topic to put to small groups throughout the organization, as a way for them to connect their day-to-day life with the larger ambitions of the transformation and to participate in co-creating a vital part of the new organization.

Once the definitional phase is over, it may be tempting to believe that the new culture will be implemented through distribution of “posters and coasters” that lay out the desired attributes in compelling and meaningful ways. But to truly achieve culture change, you need to leverage the organizational systems that possess the most powerful tools for reshaping behavior:

  • Communication processes, e.g., showcasing success stories where people have succeeded in applying new ways of working;
  • Performance management processes, e.g., addressing individual behavior change through setting goals, reviewing performance and developing talent;
  • Incentive systems, e.g., aligning rewards with desired behavior.

In the end, if well managed, culture change can be one of the most powerful drivers of a successful transformation.

7. Lack of accurate, timely feedback on progress

It’s essential to figure out early if key initiatives are not progressing as planned and, if not, rapidly to take corrective action. It’s like a sailboat that is off course; the longer it continues, the harder it is to correct. This means you must be able to “sense and respond” to emerging developments as things progress by building a system that includes these elements:

  • A transformation dashboard to track momentum and assess progress over long stretches of time. Metrics in the dashboard should include a mix of short- and long-term time-bound milestones, direct and indirect measures of progress, and leading- as well as lagging-indicators of accomplishment. Celebrating successes along the way can help oxygenate a flagging population during the journey and keep them focused on taking the next hill.
  • Mechanisms for feeding back what has been heard, learned and is being acted on to employees. This includes gathering and integrating data from change readiness assessments, pulse surveys and similar tools that provide invaluable information. Only with this full cycle of engagement and dialogue will plans be able to progress on solid footing, and will all parties feel confident in decisions made to move things forward. This is especially important given that things do not advance in a linear way and course corrections must be made.
  • Pausing periodically from tactical activities to step back and simply ask each other “what are we feeling and hearing?” In leading the strategic initiatives and work streams that comprise a full transformation, it is vital that leaders frequently do this. The collection of daily anecdotes regarding how people are feeling, thinking and acting can provide a wealth of insight, but it takes time and patience to sift through specific examples in order to connect dots regarding how the transformation is progressing.

8. Failure to create (and sustain) momentum

Pick your metaphor of choice: A transformation is a journey, not a trip; a marathon not a sprint; a passage to a new way of life, not a modified way of doing business. However you choose to characterize it, all transformations share a handful of common denominators: They take long periods of time (years, not months), they are “epic” in their scope, they are grueling in their intensity and they are punishing in their relentless need for consistency, consistency, consistency on the part of leadership. Without understanding the underlying nature of a true transformation, it can be easy to fall into the following traps:

  • Moving key leaders into different positions before their transformational work is done. Transformations take years. Executives’ careers are often “managed” in far less time. These two facts can be at odds, if leaders in key positions are suddenly rotated out and it takes the incoming successor X number of months to get up to speed.
  • Waiting to showcase and celebrate successes until concrete evidence of impact can be quantified. Yes, people want to see objective indicators of true change – but they also appreciate hearing about successful efforts to change. Eventually, focus on the transformation becomes focus on the “new business-as-usual.” This shouldn’t be expected before at least 18-36 months as transformations generally require at least one if not two annual cycles to be assured things are on track both in terms of whether new ways of operating have taken hold and also whether they are delivering sustainable financial results.

9. No focused effort to accelerate the transition phase

Organizational transformation efforts rarely fail because of bad design, but rather from lack of sufficient attention to the transition from the old organization to the new one. There is a tendency to treat “Day One” of the new organization as the end of the journey, and not the start of a critical new phase of activity devoted to “breathing life” into the new organization.

A 2010 study by the Corporate Leadership Council (now Gartner for HR) highlighted three major failure modes associated with managing this critical transition:

  • Leaders are not sufficiently clear about their roles and goals – so they continue to operate too much as they have in the past
  • Decision-making processes are disrupted, creating uncertainty about authorities and accountabilities; and
  • Relationships are severed, trust is diminished, and implicit knowledge about how to operate is lost.

Based on our experience we would add a fourth; the new organization is “left in limbo” until direction is driven downward from senior leadership to the front lines.

Avoiding these problems requires attention and investment in rapidly “rewiring” the organization during the transition phase. Typically, this is best done through a cascading series of team interventions focused on ensuring that the new organization is fully aligned on mission, vision, goals, and strategies, as well as building relationships and enhancing team cohesion at all levels. Done well these processes can dramatically accelerate the transition from the old organization to the new.

10. Insufficient investment in developing people to succeed

Finally, too many transformation initiatives fail to focus on development of the capabilities required for people to be successful in the new organization. This is a mistake for two reasons. First, organizational transformation always alters the nature of “the work” that must be done. A move from a more hierarchical structure to a matrix, for example, requires people to be more effective in influencing, negotiating and managing conflict. Second, one of the biggest reasons people resist change is fear that they won’t be able to be successful in the new organization, that “what got them here won’t get them there.” So an upfront commitment to invest in helping people be successful reduces resistance.

Capability development, focused on the critical new competencies and behaviors required for success, therefore is an essential driver of effective transformation. It typically is best done by focusing first on the leadership team, in a visible way, so that people further down don’t feel like they are being held to standards that leaders are not, and then working deeper into the organization. Once you’ve defined the behaviors and culture needed to drive execution of the new direction, the next step is to identify the changes in competencies required to move forward, and then to design development initiatives focusing on the biggest deficiencies.

Success is not guaranteed

Avoiding these 10 pitfalls doesn’t guarantee success, but it will vastly increase its likelihood. In fact, a corresponding focus on doing the opposite is a recipe for success, starting with the clearly defining the case for change and ending with an effective effort to build the new competencies the organization needs to be successful.

Dr. Janet Spencer is an organizational consultant who works with senior leaders of complex
global companies to help them grow and transformtheir businesses and dramatically
improve their personal leadership.
For more than twenty-five years Janet has led dozens of C-suite organization development
engagements spanning a wide range of industries, focusing primarily in the areas of
organization design, enterprise-wide change management, executive team development,
and senior leadership effectiveness. Her passion is working with executives to effectively
transform their organizations and their own leadership in order to meet change-related
challenges confronting their ability to perform. A selected client list includes AbbVie, Bausch
& Lomb, BlackRock, Bracco Diagnostics, Citibank, Corning, Covance, JP Morgan Chase,
Royal Ahold, Procter & Gamble, Raytheon, and Texas Instruments.
Prior to establishing her independent practice, Janet was a senior partner at Oliver Wyman
Delta (formally Delta Consulting Group), a top-tier consulting firm focused on assisting
CEOs of global companies as they implement game-changing transformations—for example,
major mergers and acquisitions, enterprise-wide structural changes, and business model
alterations in turn-around situations. In addition to leading a number of the firm’s largest
client engagements, Janet also held several senior leadership positions, including leadership
of the Research group; co-leadership of the firm’s innovation process; and the creation and
management of its international operations in Canada, France, and the United Kingdom.
Before joining Oliver Wyman Delta, Janet worked as a Principal Consultant for W. Warner
Burke Associates concentrating on executive team building and management development
activities. Her responsibilities included designing and leading both company-specific and
public executive development programs. She also led assessment center design and
implementation.
Janet has published numerous book chapters and articles on the subject of managing
change, and she is co-editor of Executive Teams (Jossey-Bass, 1997). She received her BA
in psychology from Clark University, and her Masters and PhD from Columbia University in
organizational psychology

Michael D. Watkins is Professor of Leadership and Organizational Change at the IMD Business School. He has spent the last two decades working with executives — both corporate and public — as they transition to new roles, transform their organizations, and craft their legacies as leaders.

Dr. Watkins is author of the international bestseller The First 90 Days, Updated and Expanded: Proven Strategies for Getting Up to Speed Faster and Smarter, referred to as “The Onboarding Bible” by The Economist. With close to a million copies sold in English and translations in 24 languages, The First 90 Days has become the classic reference for leaders in transition and a standard resource of leading change. Amazon named it one of its top 100 business books of all time.

Prior to joining IMD, Dr. Watkins was an adjunct professor at INSEAD, and an associate professor at the Harvard Business School and the Kennedy School of Government at Harvard. While on the faculty of these institutions, he designed and taught world-class programs for high-potential leader development, corporate diplomacy, and strategic negotiation.

Dr. Watkins is the author and co-author of 11 books and numerous articles on leadership and negotiation. He also is the author or co-author of eight Harvard Business Review articles.

Originally from Canada, Dr. Watkins received his undergraduate degree in Electrical Engineering from the University of Waterloo, did graduate work in law and business at the University of Western Ontario, and completed his Ph.D. in Decision Sciences at Harvard University.

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