Why are organisations not heeding the lessons from failed transformation to ensure they are able to be set up for success?
According to McKinsey, 70% of organisations that embark on organisational change through large-scale transformations either completely fail or abandon their program.
Despite being a relatively common phenomenon and viewed as essential for gaining or maintaining competitive advantage, such a high failure and abandonment rate should be concerning for organisations considering this approach to staying relevant to the market. The McKinsey study also points to just 21% of organisations succeeding in their attempts at transformation.
Supporting McKinsey’s research is a recent report from the Harvard Business Review that says that despite a decade between John Kotter’s widely-read Why Transformations Fail, there has been little to no improvement in the success rate of transformation (30%).
Statistics such as these are damning. Amongst our clients, Quay regularly hears about the challenges they face through change dressed up as either transformation, organisational restructure, IT-driven change or business agility driven by disruption.
The question is: why are these initiatives being labelled as change or transformation?
The difference between transformation vs organisational change
The differences between transformation and organisational change are considerable and need to be well understood across an organisation. It is important that organisations looking to transform understand how they factor into the regular failure of large-scale transformation initiatives.
In a business context, tweaks or improvements to systems are seen as change. Moving products, processes, services and cultural practices from a current state to a sometimes very different future state is transformational. While change and transformation are related it is often the size and impact of the change that makes it transformational.
8 Steps to Organisational Change: Supporting Enterprise Transformation
Kotter in his article Why Transformations Fail identified eight sequential steps that were critical to successful transformation:
- Establish a sense of urgency
- Forming a powerful guiding coalition
- Creating a vision
- Communicating the vision
- Empowering others to act on the vision
- Planning for and creating short-term wins
- Consolidating improvements and producing still more changes
- Institutionalising new approaches
These steps formed the construct of an Organisational Change Framework (OCM) that supports enterprise transformation success.
McKinsey’s global survey of successful organisational transformation found that themes emerged that strongly correlate to Kotter’s eight steps.
Executives involved in the transformation process understood that if OCM practices were entrenched early and completely during transformation, there was a higher chance of success.
Key characteristics of transformation success
Key characteristics of successful transformations included:
- Alignment on what matters: Before transformation begins, stakeholders must align not only on strategic objectives but also on the success criteria they use to assess progress.
- Mind behaviours and mindsets: Understanding the current state and the future state is critical to shift attitudes to change, and taking the time to identify and address change as part of the process should be done early.
- Invest in a rigorous process: Ensuring that a rigorous decision-making process is in place for every phase of transformation to head off resistance from leaders or employees, as opposed to ad-hoc reactions and unclear decision-making processes.
Involvement across the organisation is critical
The success of transformation is dependent on the extent to which an organisation’s business units, affected users and stakeholders are involved in transition planning and execution.
Starting early and understanding the impact and risks allows executives and sponsors to identify the key people that will be required to implement transformation and determine the impact of change within an organisation.
Alignment and communication promote transformation success
Whilst change initiatives are often successfully delivered within teams and organisations, the same can’t be said for transformations. Transformation is hard to complete successfully in part because of the need to shift people’s beliefs, mindsets, behaviours and attitudes (culture).
Transformation requires strong and aligned leadership from the start, with a clearly outlined purpose articulated to the organisation before embarking on what is often a difficult journey.
Finally, transformation also relies on multiple streams of concurrent change. This needs to be supported by a strong focus on people and culture, rigorous process and clear accountability throughout the transformational journey.
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