Key Takeaways
1. Change is Imperative, but Requires a Powerful, Honest Case
Very seldom is there consensus surrounding the need to change, much less concerning the magnitude of change required to meet—not merely to take a stab at meeting—your organization’s objectives.
Confronting reality. Many organizations, even successful ones, face a "frog in boiling water" scenario where conditions worsen gradually, making the need for dramatic change less obvious until it's too late. Leaders must confront this reality and understand that what worked yesterday won't guarantee success tomorrow. The first step in any transformation is to acknowledge that the current state is not sustainable or optimal, and that significant, not incremental, change is necessary.
Building a compelling case. A powerful case for change is a reasoned, yet powerfully persuasive justification for the targeted changes. It must be brief, clear, logical, quantitative, well-documented, and above all, compelling enough to build a strong sense of urgency and drive people to action. Don't assume employees or even senior management are ready; they need to be convinced of the magnitude and nature of the change.
Honesty and clarity. The most effective communication is honest and straightforward. Leaders must tell the truth, even if it's difficult, to build credibility and trust. A CFO, for instance, candidly told his staff that a change project was about "creating better jobs for fewer people," which, while unsettling, fostered a positive response from those confident in their value. This level of candor prevents skepticism and ensures messages are received intact, laying a solid foundation for the transformation ahead.
2. Engage and Motivate All Stakeholders with Empathy and Specificity
The more stakeholders feel involved in assessing the need for change and in shaping the nature of change, the more prepared they will be to commit to change and contribute to its success.
Know your audience. Successful change hinges on understanding and motivating a diverse array of stakeholders, both internal (employees, managers, owners) and external (customers, suppliers, partners). Each group will perceive changes differently, primarily asking, "How will this affect me?" and "What do I think of the people in charge?" Leaders must anticipate these concerns and tailor their approach to address individual aspirations and fears.
Personalized engagement. To build momentum, identify the 5-10 most influential stakeholders and develop specific, personal programs to sell them on your ideas, highlighting legitimate personal wins. Techniques like "Adopt a Manager," where core team members build one-on-one relationships with key stakeholders, provide invaluable feedback and continuously gauge support. This personal touch helps bridge the gap between organizational goals and individual motivations.
Continuous communication and feedback. Stakeholders' views evolve, so continuous, open, and honest communication is crucial. Use focus groups to uncover motivations, clarify issues, and encourage participation. Simulate new environments through prototypes or walk-throughs to help stakeholders visualize changes and provide input. When momentum stalls, be candid, inject customer perspectives, or empower employees to share their insights, as hard facts motivate better than admonition.
3. Empower People by Redefining Roles and Eliminating Bureaucracy
Empowerment is the creation of an environment in which employees at all levels feel that they have real influence over standards of quality, service, and business effectiveness within their areas of responsibility.
Beyond misconceptions. Empowerment is often misunderstood as giving away power or a "flavor of the month" program. In reality, it's about effectively channeling employees' existing power towards organizational goals, not diminishing senior management's role. By empowering people, organizations increase their collective power, fostering a workforce that passionately cares about the company's success, which is the most reliable and least replicable competitive advantage.
Five imperatives for empowerment: To make empowerment work, organizations must focus on five key areas.
- Build the business case: Quantify how empowerment leads to profit and improved performance.
- Change leadership behavior: Leaders must "walk the talk," shifting from directing to coaching and monitoring.
- Kill onerous systems: Eliminate archaic authorization procedures and rubber-stamp time-wasters that stifle initiative.
- Demonstrate possibility: Assign teams to real business issues at the right level, rewarding their innovative solutions.
- Institutionalize change: Create flatter, process-based structures with fewer management layers and facilitative head offices.
Addressing employee concerns. Employees often express cynicism about whether empowerment efforts will lead to real change, fearing heavy workloads or job loss. Leaders must address these concerns directly, ensuring that empowerment focuses on meaningful activities that improve quality and productivity, and that it's supported by training and a clear vision of how roles will evolve, not diminish. This approach transforms employees from potential victims of change into its active agents.
4. Use All Levers of Change for Multi-Dimensional Transformation
Large-scale change can be achieved only when all of these levers are brought to bear in a coordinated manner.
Holistic approach to change. Organizations often make the mistake of focusing on only one or two "levers of change" when attempting transformation, such as technology or processes. However, true, high-impact solutions require a multi-dimensional approach that considers all six levers:
- Markets and customers
- Products and services
- Business processes
- People and reward systems
- Structure and facilities
- Technologies
Beyond modest improvements. One-dimensional change typically yields only modest improvements or outright failure, souring employees on future initiatives. For example, a manufacturing company that reengineered only two of its six levers achieved only modest success, despite management's desire for breakthroughs. If you ask people for better performance, you must improve their work processes, provide the right tools and information, grant decision-making authority, and revise performance measures and rewards.
Integrated solutions. High-performance organizations address change across all dimensions, involving parties throughout and even beyond the organization. This integrated approach, often extending to suppliers and customers, lowers costs across the entire supply chain and fosters dramatic performance improvement. By considering all levers, change teams can design balanced solutions that avoid the pitfalls of narrow focus and ensure sustainable transformation.
5. Connect the Dots: Integrate and Rationalize All Change Initiatives
An unplanned patchwork of change initiatives will promote bitter competition for resources, confuse employees, and reduce the positive impact of any one initiative.
Avoiding "flavor of the month." In today's complex organizations, multiple change programs often proliferate, leading to "flavor of the month" cynicism, internecine warfare for resources, and employee confusion. When employees are involved in several seemingly unrelated improvement programs, they often fail to see an impressive, unified picture, missing the "constellation" for individual "stars." This lack of coherence damages corporate culture and wastes valuable energy.
Leadership's role in coherence. It is the senior executive's job to "connect the dots" by building and communicating a consistent, integrated rationale for all ongoing programs. This involves prioritizing goals, rationalizing activities, and making tough choices, even discontinuing programs that don't align with the overall strategy. The goal is not necessarily to merge all programs, but to firm up communication lines so that related projects enrich each other and avoid competition.
Creating a unified roadmap. To connect the dots effectively, leaders must first understand each program's rationale, objectives, and impact on the levers of change, looking for similarities before differences. Then, they must create a "big picture" roadmap that graphically illustrates how current initiatives build on past lessons and fit into tomorrow's vision. This clear, truthful communication, exemplified by a CEO who candidly acknowledged past failures while outlining future integration, helps employees grasp the overall purpose and their place within it, fostering collective momentum.
6. Break Down Organizational Borders to Drive Horizontal Processes
The solution to a problem in one functional area often lies somewhere past a border, in another functional area, and so borders are an issue.
The challenge of borders. Organizational borders—structural, functional, cultural, language, enterprise, market, and technological—are inherent to rationalized corporations but inherently impede change. They limit opportunities for economies of scale, redundancy reduction, and process efficiency. In broad-based change projects, these borders become significant obstacles, threatening to drain energy and defeat the project if not actively addressed.
Crossing borders strategically. Successful change leaders must be adept at crossing these borders. This requires a different kind of manager—a multi-dimensional thinker who can envision and implement beneficial change across departments and business units. Instead of traditional control, these "savvy" managers inspire teamwork, influence stakeholders, and exercise political acumen to build coalitions and achieve balanced solutions.
Dismantling for seamlessness. To overcome borders, organizations can employ several strategies:
- Start with the customer: Rally change around customer needs, as they are the common denominator across all internal silos.
- Co-locate resources: Physically bringing diverse teams together, as seen in the World Trade Center cleanup, can dismantle barriers and foster unified action.
- Work in chunks: Implement significant changes in focused "horizontal chunks" (e.g., a single process across functions) or "vertical chunks" (e.g., comprehensive change in one business unit) before broader rollout.
- Be bold and specific: Identify barriers openly, operate as if borders don't exist, and clarify "decision rights" to empower teams.
Ultimately, the goal is to replace borders with seamless, boundaryless organizations, as envisioned by Peter Drucker, where knowledge-based specialists work in task-focused teams.
7. Foster Big Thinking and New Actions Through Diverse Teams and Stretch Goals
Processes don’t think; organizations don’t conceive; technologies don’t act. Only your people can think big thoughts; only they can innovate.
Cultivating innovation. Many executives lament a lack of innovative thinking, often due to a narrow focus on R&D or a culture that discourages risk. However, significant innovation is a product of an embedded corporate culture that values new ideas and continuous change. Leaders must foster this mind-set throughout the organization, recognizing that every employee, from payroll to purchasing, can contribute to "big thinking" that drives bottom-line performance.
The power of diverse teams. To generate truly "out-of-the-box" solutions, change teams must be diverse, comprising individuals from various parts of the organization, professional backgrounds, and even different levels, ignoring traditional titles. This "linked innovation" brings disparate perspectives, challenging conventional wisdom and fostering creative solutions. Providing a common performance objective and full-time commitment helps these teams knit together and overcome initial competing loyalties.
Catalyzing new actions. To inspire big thinking and new actions, leaders should:
- Give teams a chance: Involve them in data-gathering and analysis, then move them to a new location to foster unbiased recommendations.
- Use all levers: Encourage teams to explore solutions across processes, technologies, structures, and people, not just their familiar domains.
- Ask "What if?": Challenge assumptions and existing models to force new ways of thinking.
- Benchmark intelligently: Expose teams to best practices from other companies to inspire and set challenging standards.
- Establish stretch targets: Set seemingly outrageous performance goals to force innovative solutions, as past models won't suffice.
- Use organizational tryouts: Communicate ideas widely to solicit feedback, refine concepts, and build buy-in before final implementation.
- Act new: Provide clear guidance and phased rollouts to ensure the organization starts "acting new" even while large-scale systems are under development, managing against the tendency to keep one foot in the old world.
8. Reshape Performance Measures to Drive Desired Behavior and Institutionalize Change
There is no more powerful means of communicating to stakeholders that things are going to be different from this point forward than to reshape what is being measured.
Measures as strategy deployment tools. Performance measures are not just scorecards; they are primary strategy deployment tools that tell employees what truly matters and underpin reward structures. When strategies evolve but measures don't, organizations suffer from conflicting signals, leading to inefficiency and undermining change efforts. A soft drink bottler, for example, lost business because sales and installation teams were measured on conflicting metrics, despite both "performing well" by their old standards.
Creating a balanced set. Most organizations have too many outdated or conflicting measures. A balanced set of 40-60 measures, derived from company strategy and mapped to its value chain, is ideal. These measures should be:
- Relevant: Directly linked to strategy and objectives.
- Reliable: Capable of identifying process strengths and weaknesses.
- Clear: Easily understandable by their name alone.
- Data-available: Computable at a reasonable cost.
This balanced approach includes financial, nonfinancial, cost, non-cost, internal, external, process, and results-oriented measures, providing a holistic view of performance.
Driving teamwork and external focus. Effective measures foster goal-driven teamwork by creating shared objectives across departments. For instance, backlog can indirectly measure teamwork across the entire supply chain. Measures should also have an external focus, comparing performance against competitors and market trends, not just internal historical data. By reevaluating existing measures, focusing on processes (not just results), and ensuring they are integrated and externally oriented, organizations can institutionalize change, galvanize management action, and build enthusiasm for continuous improvement.
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