The cost of a failed transformation to a company, such as a major restructuring, an expansion into a new geography, or the integration of an acquired business, can be very high, with the direct costs of external consulting and internal management time paling in comparison to lost opportunities, disruption and change fatigue. And in most cases, major organizational change initiatives fail outright or do not achieve their desired objectives, according to recent research by IMD. So if your organization needs 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 ten factors increase the likelihood of failure.
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, but the rationale for large-scale change must be clear and compelling for all of the key stakeholders. 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.
The leadership requirements of leading a transformation are quite different from those of leading a business or function in steady-state or even a smaller, more focused change effort. By definition, transformations are comprehensive 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 senior leadership team can do this work.
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.
Given the times, organizational transformation consulting unsurprisingly is a thriving business. 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. “Co-creation culturing” means building maximum alignment through the process by providing accurate and relevant data as the basis for critical discussions, always pushing for assessment of multiple options (whether different strategic directions or different organization designs) and reaching agreement by openly, collectively assessing the different options against a clear set of criteria for success.
It’s not enough for leadership to put substantial time and attention into articulating and communicating the business case for transformation. They have to do it in 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 supporting materials, 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 the involvement of employees in making the transformation work.
Culture change is always 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 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. The next is to figure out what levers are available to alter them.
It’s essential to figure out early if key initiatives are not progressing as planned and, if not, to rapidly 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 a transformation dashboard to track momentum and assess progress over long stretches of time, mechanisms for feeding back what has been heard, learned and is being acted on to employees. It is also important periodically to step back and simply ask each other “what are we feeling and hearing?”
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.
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. Avoiding these problems requires attention and investment in rapidly “rewiring” the organization during the transition phase.
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. Second, one of the biggest reasons people resist change is the 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. Putting it all togetherAvoiding these ten pitfalls doesn’t guarantee success, but it will vastly increase its likelihood. The winning starts with clearly defining the case for change and ends with an effective effort to build the new competencies the organization needs. This is a condensed version of an article that appeared on TLNT.com.
When your organization is on the cusp of a major change, it’s easy to get caught up in the whirlwind. In all this excitement, it can be easy to underestimate the risks of pressing ahead too quickly. In particular, if you’re moving so quickly that you fail to account for the people side of change, even the best-laid plans and the sleekest software could leave your company behind the mark. In other words, the consequences of poor change management are no laughing matter. They include, but are not limited to, higher costs, greater downtime, and slower benefits realization. Today, we’re taking a closer look at what lackadaisical change management looks like, and what it could mean for your organization as you embark on an ERP implementation. An ERP implementation is a busy time. Your team members are pulled in a million different directions, with a looming go-live date hanging over their heads. During this time, it’s all too easy for the project team to lose focus on why the organization initiated the change in the first place. This is where change management comes in. What is change management? It is the process of looking at the human side of a project and can have major consequences if not performed properly.
Especially when you’re in the thick of a project, it can be difficult to see when your organizational change management (OCM) efforts are failing to engage employees. Here are a few telltale signs that OCM isn’t getting the attention it deserves.
Taking a general pulse and concluding that everyone is ready could mean overlooking small pockets of resistance that could be huge hurdles to full user adoption. A business readiness assessment is a tool that anticipates your company’s level of change resistance. It does so by determining the scope of change and outlining potential change impacts to:
Through this assessment, you might find that the new ERP system will affect some groups beyond what they can currently handle.
Deciding to make announcements off-the-cuff could take your employees by surprise and stoke fear and confusion. Considering these consequences, we recommend communicating all project details to employees as early as possible. Change management communication planning is the process of deciding how, where, and when you will convey these messages. Ultimately, it’s important to connect all of the points back to the business needs driving the change.
Executive buy-in is one thing. Project sponsorship is another. Project sponsors are more hands-on and can help build a network of support that includes a variety of stakeholders and decision-makers. If you don’t build a sponsorship roadmap that outlines executives’ roles in project sponsorship, you will have a difficult time coaching sponsors and even securing sponsorship to begin with.
Skipping or rushing end-user training not only limits employees’ system knowledge but their process knowledge, as well, especially if your project involves extensive business process reengineering. Training helps end-users become comfortable with the new ERP software and related processes. It gives them the hands-on opportunity to try new workflows and learn exactly how their daily responsibilities will be changing.
It’s naive to expect that your entire workforce will be on board with the new ERP system. Likely, there will be some level of change resistance. Ignoring it or mismanaging it can make employees even more stubborn, but proper planning can move employees in the other direction, toward open-mindedness. What do we mean by planning? We’re talking about developing a resistance management plan that helps you identify, analyze, and manage all forms of resistance as early as possible.
Soliciting employee feedback throughout implementation, but especially after go-live, helps you discern what’s working, what’s confusing, and where the pain points lie. If you don’t seek feedback, you won’t know how to best support your employees through the transition. For example, you might not know that your accounting team needs supplemental training or that an inventory feature needs to be reconfigured.
If you forego change management, you’ll first feel the effects within your specific project or initiative. These can be both financial and operational in nature, including:
All these issues heap additional costs on your project and can impact your bottom line. In addition, you incur risks, such as:
Sometimes, the consequences can be far-reaching enough to affect your entire organization for the long term. Usually, this happens when a company has a longstanding legacy of neglecting change management. Some of the organizational costs that can stem from poorly-managed change include:
While these issues are challenging to navigate, in themselves, they aren’t the only problems you could face. You may also face the following company-wide risks:
It’s worth mentioning that a hallmark of ineffective change management is that it’s not future-focused. This type of change management can result in ERP software that doesn’t continue to meet your business needs. If continuous improvement is important to your company, then change management should be continuous, as well. A short-sited change management plan can result in new pockets of resistance that make you more likely to skip upgrades and other system enhancements. Over time, this means your system becomes misaligned with your business goals.
Just like ERP selection, change management deserves a dedicated team and an adequate budget. When you follow the right OCM methodology, you accelerate your time to full benefits realization. In contrast, when your OCM is lackadaisical, you could end up waiting decades for those same benefits and still not realize them. The consequences of poor change management are too great to ignore. Our team of change management consultants can help you follow OCM best practices that are proven to accelerate your project ROI. Contact us below for a free consultation. |
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