Leading Organizational Transformations

The leader's role is to turn separate initiatives into a balanced, integrated program.

October 2015 | by David Delaney

Many senior managers today are aggressively trying to transform their companies, seeking radically to improve performance by changing behavior and capabilities throughout the organization. Unfortunately, most leadership groups lack a proven way of thinking about the challenge.

Ask your management team what a good business plan looks like, and you will probably find close agreement. But ask them—especially in the middle of a major change effort—what a good change plan should include, and opinions will vary all over the map. A CFO will insist on creating new financial measures; an operations VP, on installing a quality program; an HR specialist, on revising compensation and training; a marketing executive, on getting everyone to be more customer focused. And all these managers will have handfuls of articles to wave—and mantras of buzzwords to invoke—to defend their choices.

The chaos of opinion created by hype and buzzwords is doubly unfortunate. Most obviously, if left unresolved, it can easily turn a desire for bold, systemic change into a rag-tag collection of discrete, ad hoc initiatives. Less obviously, but perhaps more troublingly, it can also prevent the kind of meaningful discussion that keeps a management group pulling together toward a common end. The CEO of a company facing transformational change must be, by definition, the driver and facilitator of just this sort of top-level "conversation." Without it, no change program will stay focused, integrated, and in balance. And without balance, integration, and focus, no disjointed set of initiatives will lead to significant performance-enhancing change.

Today, however, generating and capturing such quantum leaps in performance lie at the heart of many CEOs' jobs. "To meet our performance goals—or to stay ahead of the competition—we need to reinvent ourselves," they acknowledge. "Virtually everything about the way we do business must change." But if leaders are unable to translate these beliefs into a coherent basis for conversation and learning with their leadership group, then the chances of developing an effective, tangible, and manageable program of change are much reduced.

For that, the right kind of conversation is essential. Which, in turn, means having in place a shared framework for structuring activities and responsibilities, a road map for laying out their proper sequence, and a background set of guiding principles about the "natural laws" that govern organizational transformations. All three of these—framework, road map, and guiding principles—are necessary for a successful conversation, because all three have a critical role to play in giving CEOs the practical means to shepherd through a balanced, integrated change program.

 "Natural Laws"

As noted earlier, effective management "conversation" about performance improvement achieved through transformational efforts reveals that the specific techniques employed matter less than does adherence to a set of underlying principles. Based on the experience of the companies we studied, we have come to define these principles or "natural laws" as:

Performance is the objective. This principle is easily forgotten, especially with today's emphasis on quality, service, empowerment, and new skills and culture. These are important objectives, of course, but they are insufficient unless management demands a rock-solid linkage between them and hard measures of performance—increased revenues, reduced costs, or better use of assets. For example, leaders must clearly understand how quality brings about increased market share in certain market segments, or how empowerment results in faster operating decisions and reduced costs.

These clear linkages are required for two reasons. First, senior managers need to quantify potential benefits so they can make informed decisions regarding levels of investment in the transformation process and its priority in their overall management agenda. If they do not, they are unlikely to maintain the focus and commitment necessary to see the transformation effort through. Second, the front line needs clear direction on where to focus and what to measure. Broad exhortations about quality or service may prompt some units to figure out the performance levers that matter to the organization as a whole, but the process is likely to be slow and uncertain. Much more effective is the simple, pointed message—say, that quality on line 4 in the factory means reduced machine downtime and improved yields.

Strategy and structure still matter. Organizations can easily grow enamored with the promise of continuous improvement, and forget that the transformation process cannot overcome fundamental strategic and structural disadvantages by itself. A company with the wrong technology, outmoded assets, an uncompetitive value proposition, or a flawed organizational structure will not—indeed, cannot—be saved by an organizational transformation effort alone. A winning strategy and a viable economic and organizational structure must underpin any transformation effort.

Teams are the key building blocks. Successful change necessitates generating quantities of extra energy throughout an organization to keep the enterprise performing while it develops the skills and capabilities it needs for the future. In practice, this means identifying team-building opportunities and creating the conditions in which teams can become genuinely high-performing units.

Process must embody values. You cannot create a performance-oriented and empowered workforce with a change effort that perpetuates rigid hierarchies or that focuses on procedures, rather than results. Success entails designing a process that embodies the desired values. Leaders must be clear about the values they espouse, as well as about how those values link to performance. And they must ensure that their own behavior, no less than the performance-improvement effort they are managing, is consistent with those values. This could mean, for example, working to ensure that the transformation process is continually monitored for its effectiveness and corrected as necessary ("continuous improvement"), or that clear guidelines for delegated decision making are provided for down-the-line participants ("empowerment").

Learning-oriented, evolutionary effort. Organizational transformations are inherently complex, multidimensional processes. Leaders are often tempted to define a master plan, declare the planning phase complete, and delegate implementation to others. Successful initiatives are managed quite differently. Leaders recognize that the effort can never be fully planned in advance. The leadership group must learn as they go and allow for the effort to proceed in an evolutionary (and continuously improving) manner.

These efforts may start out with broad objectives and a modest process, such as benchmarking or developing a vision. But successful efforts make leaps forward in the clarity of objectives every three to six months, as experience is gained and lessons are learned. It is fine to begin with goals like "we will lead our industry in customer satisfaction." But it is not fine to stop there. Goals must, over time, become more specific: "In 1993, we will gain three points in market share by shortening delivery times from 40 to 20 days."

Focus is essential. The complexity of transformational change can easily overwhelm an organization, dissipating energy before the effort achieves its objectives. Ineffective efforts exhort the organization to "fix everything at once." Far better to choose just a few objectives at any one time (improve customer response, reduce order lead times) and devote all energy to them until measurable progress is achieved.

 

Executive Editor

 Ms Anna Sullivan

Ms Anna Sullivan