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Seven Pitfalls to Avoid During Organizational Transformation

This is Chapter 2 in the series on The Unfinished Business of Organizational Transformation.

In Chapter 1, we identified what is driving such large organizations to undergo transformation and how are they measuring success of such transformation. In this chapter we share anti-patterns we have observed in organizational transformation initiatives, with the goal that you will be able to identify them and avoid them to change successfully. Keeping in mind the feedback received from the first article “Strong information. Keep it short”, we briefly introduce each anti-pattern in this chapter—more to follow in subsequent articles.   

Steve Jobs was wrong about the future of the music business in 2003.

During the launch of the iTunes music store, he declared, “Customers don’t want to rent their music...I think you could make available the Second Coming in a subscription model and it might not be successful.”  
Fast forward to June 2015. Apple announced the launch of its subscription music service for $10 a month under the leadership of Tim Cook. Apple has to transform the way they sell music.
The rise of the sharing economy and how we think of the ownership paradigm, the rapidly decreasing cost of broadband bandwidth, and the growth of smart, hi-fi speaker systems like Sonos are just some of the factors affecting our desire to stream music. Apple has no choice but to transform. No business, not even Apple, survives the winds of change without undergoing business transformation.
Today, leaders in most large global companies are acutely aware of how technology-fueled disruptive innovations and changing preferences of an educated younger demographic are rapidly shrinking product life cycles and creating new business models. These leaders are forced to rethink business strategies and organizational models to survive and thrive in this new world order. However, leaders and their organizations suffer from fear of failure and practiced incumbency, especially when embarking on an ambitious change initiative.
The change journey is fraught with unknowns and the unexpected. Orchestrating organizational transformation in any large company is like launching a rocket into space. Much goes into preparations to be successful, but unforeseen factors like weather or wind pressure can affect the launch and flight path. A multitude of factors can misdirect the change program, resulting in delays, crashes, or becoming lost in orbit.
The unfortunate choice leaders often make? To not change at all.
A recent Harvard Business Review article points out the high degree of skepticism that exists with large-scale transformation. While more than 80% of executives at large enterprises recognize the need for transformation, only 33% are confident that they can get the job done in five to 10 years. Facing such a daunting challenge can stall the kick-off of any change initiative.
For leadership and everyone else involved in the transformation, it’s important to be mindful of the goals for the change and avoid the following anti-patterns, increasing the likelihood of success.
These are the anti-patterns leaders need to be aware of. We’ll also explore them in detail in subsequent chapters of this series. 

Neglecting the people dimension of change 

Most organizational transformation involves two components. First, they involve structural shifts that result in new processes, technology, organization design, and governance structures. Second, there are behavioral changes that ensure employees embrace change and align their mental models and work patterns to amplify and sustain the impact of change.
Behavioral change is often preceded by skepticism, fear, and despair. Acknowledging and addressing emotional upheaval as people work their way through change and its implications for them can be unpredictable and painful and is often undermined by disproportionate focus on structural change.
Recently, we came across a large financial organization that has made three distinct attempts over the last 10 years to become customer-centric, but hasn’t achieved the forecasted success because of a persistent lack of focus on the people component of change. The company instituted several structural changes but didn’t empower people to act and behave in a different way, resulting in limited to no adoption of the policies outlined by the change steering group.  
People in the organization own the culture, so ignoring people concerns during organizational change is foolhardy.
[People in the organization own the culture, so ignoring people concerns during organizational change is foolhardy.]
We strongly believe that employees are the bearers of organizational culture and no change is complete without addressing their concerns. Any change program with a holistic organizational focus must put people at the center of the transformation.    
“The biggest limiting factor today is not technology anymore, it’s the humans in the organization that are not used to questions."—
Klaus Kleinfeld CEO of Alcoa, Inc. at World Economic Forum, 2016

Organizational transformation that doesn’t drive changes in hiring processes and growing the right kind of talent through improved on-boarding, performance management, and professional development will not be sustainable.  

Not managing expectations on the “trough of despair” 

Every change program comes with expectations of the “new normal,” the new baseline level of responsiveness and agility the organization and its people should experience as a result of the change. Everyone recognizes that results are not likely to be visible overnight.
The reality is that, at the outset, and for many months after, the current baseline is likely to trend downwards instead of upwards as deeply entrenched practices are challenged, and people develop new capabilities and learn new practices. This is the Chaos stage of the J-curve described in the Satir change model. [See http://stevenmsmith.com/ar-satir-change-model/ for a useful introduction to the model.]
In 2014, The New York Times’ CIO successfully made an argument to “slow down so we can speed up” for adopting new and better ways to deliver technology-enabled products for the news giant’s editors and readers. This is not true, however, at most organizations. Not setting and actively managing stakeholder expectations (upwards and downwards), for the impact and likely duration of this disruption often leads to change efforts being abandoned after a few months of investment and effort.

[The impact on group performance of a well-assimilated change during the five stages of the Satir Change Model.]
During a recent client engagement, we quickly became aware that other than the change management group and a few close stakeholder allies, everyone else in the large organization perceived the initial slowdown as stagnation. Many senior stakeholders were very vocal about their dislike for what they were seeing. This negatively impacted the morale of the group trying to drive transformation and greatly increased resistance to the changes being introduced.
Town Hall Meetings are important.
[Informal and formal town-hall style meetings are traditional ways of communicating to large groups, setting expectations on the impact of change.]
We recommend using both old and new methods of communication to help set expectations with everyone in the organization. Traditional methods like townhall meetings, offsite gatherings, and newsletters are really effective in facilitating proactive conversations. New digital-enabled channels could be used for answering questions on-demand as they bubble up.  
If you think you are already over-communicating, then you are probably just about at the right pace. We also recommend co-crafting transformation messaging with a focused group of people from across the organization rather than just with the C-suite.  

Persisting with old world measures for new world outcomes 

Most transformations will fail to reach the promised pot of gold at the end of the rainbow, because organizations will not change existing definitions of success and failure quickly enough. In the new world, the goal is to minimize waste, accelerate innovation, embrace complexity, decentralize decision-making, and deliver customer value better and faster than the competitors. Yet most organizations do not have KPIs aligned with these goals, which can prove fatal for the change initiative.
While working with a brokerage firm, we co-created a new dashboard that focused more on providing visibility into customer insights and faster learning. However, the dashboard was never used as top-level management wanted to see different data points focused only on business benefits and operational metric instead of customer insights.
At another large enterprise, the CIO organization was pushing an ambitious change agenda focused on reinventing the IT delivery value chain for greater market responsiveness and customer-centricity. One of the senior leaders, however, responsible for most of the technology delivery teams, insisted on measuring performance based on throughput per delivery sprint and count of open software defects instead of focusing on business value delivered. Not surprising, this quickly ensured that most technology teams had no interest in evaluating or adopting the broader change being pushed to them.   

[New dashboards that focus on evolved understanding of the customers and continual validation of team assumptions are essential to make change programs successful.]
We repeatedly come across such enterprises looking to re-architect themselves for greater market responsiveness, but are unable to move away from traditional productivity and efficiency measures. Predictably, such change initiatives create confusion and erode trust across the organization.
Instead, we recommend considering a new set of measures of success as part of the change agenda. Executives, teams, and individuals all need to focus on customer outcomes and employee learning rather than narrow, internal business metrics. Our colleague Jim Highsmith harnessed this concept in Agile Triangle to get leadership focused on value delivered over constraints like cost, schedule and scope.   

Overreliance on a centralized change management office to usher change

Enterprises want to think and work like startups. Whose job is to make that shift? Who sets the standards for the change—the centralized change management function run by change management leaders sitting high up in the organization or those closest to the customer? Do leaders at the very top have sufficient knowledge about the kind of change that is needed for the employees at the frontlines? Do the people in the central change management function have the right skillset, experience, and orientation needed to lead and facilitate complex change across the organization?  
More often than not, the answer to all these questions is “No.” Yet we see an alarming degree of over-reliance on a change command central to spread change.  
Harness the power of many when embarking on organizational change for a large company
[Harness the power of many when embarking on organizational change for a large company.]
It takes a village to effect real change. Relying only on the centralized change management office to enforce change mostly through top-down mandate is a recipe for short-term noise and long-term disaster. We suggest having a small change office, but augmenting this function with extended secondary and tertiary teams, enlisting promising cross-functional talent across the enterprise.
Intuit’s well-known product manager and thought leader Bennett Blank strongly espouses the importance of giving up control and focusing on facilitation to become a successful change agent within a large enterprise. The transformation from “Me to We” is hard, but not impossible. Partner with skilled and experienced internal and external consultants throughout the change process, across different levels within the organization, to help demonstrate what good looks like, as a stepping stone to faster change.

Focusing on pushing change out, instead of generating pull for change

One of the more interesting questions that organizations ask during change process is, what kind of structure allows compelling storytelling across the organization to accelerate change? Most change programs fail at tapping the energy of the rank-and-file employees and using it to the fullest to create necessary pull for change.
Instead, the change management office tries to push down change through brute force and elbow greasing. Making employees comply with the new world order and hoping the change will persist is again a well-tread path to failure.
Image: Change initiatives that pulls willing and able employees are usually successful.
[Change initiatives that pulls willing and able employees are usually successful.]  
Instead, create conditions for pull. Demonstrate value early, nurture change champions at all levels, and co-create specific practices and processes with broad participation. Most people are not against change when they feel they initiated it.
In our experience, change programs become successful when they start to look like a continual evolution from the status quo co-created by everyone, rather than a well-scripted, epic set of policy changes that needs C-suite endorsement before anything can be done. It’s certainly no easy task, and something that slows down the initial span and pace of change, but in the end, much more likely to sustain.
In a recent strategic engagement with a large financial service firm, we were able to create compelling stories that created an urgent trigger for change, by playing back several hours of curated customer service calls for a group of senior executives.

After listening to those calls, the executives understood how organizational siloes created over last three decades made it worse for customers to get value. They decided to merge silos and create holistic cross-functional teams, focused on specific customer outcomes.  

Not pausing for celebration and reflection along the transformation journey

Change is hard. There is no easy way to create and sustain change in a large organization, leading to stress for teams ushering in the change. In our experience, we have seen dedicated change teams get so deeply immersed in the process that they never use an opportunity to celebrate what they have achieved. Rather they always focus on what are the next elements to be transformed and get caught up in the glass-half-empty mentality.
Jim Highsmith shared with us a story of a team manager who “celebrated chaos” during periods of deep frustration by bringing in colorful balloons to work.

Celebrating intermediate successes as a team refuels the team for bigger and harder goals.
[Celebrating intermediate successes as a team refuels the team for bigger and harder goals.]
We recommend periodic reviews to highlight achievements, learnings and celebrate success to date together. Senior change teams sometimes make the mistake of not celebrating enough thinking that it’s too soon or too little however the truth is coming together to rejoice success inspires the team to go that extra mile for the next target. Every time you move the needle of understanding for one team or few different stakeholders, celebrate that change.   

Losing the focus on the customer while undergoing the transformation    

Jon Picoult of Watermark Consulting did an interesting analysis to tie customer centricity with top-line growth in organizations. He took five years of data from Forrester’s Customer Experience Index and constructed two different portfolios and compared them against the S&P index. One is a portfolio of the top 10 publicly traded companies in the index (customer experience leaders), and other is a portfolio of the bottom 10 publicly traded companies in the index (customer experience laggards). The data was astonishing. Over the five-year period, the customer experience leaders outsmarted the laggards in stock performance. The experience leader portfolio had a cumulative total return of +22.5%, compared with a -1.3% decline for the S&P 500 market index and a -46.3% decline for the experience laggard portfolio.

Image: Showing a 10 year return of Forrester’s Customer Experience Index leaders against the S&P Index. Watermark Consulting.
[Showing a 10-year return of Forrester’s Customer Experience Index leaders against the S&P Index. Watermark Consulting.
Customers are the ultimate benchmark of success for any transformation program. If change does not positively affect customers, then your change program will most likely not be a success.
Most of the time, senior execs get caught up in the change process: the cool technology, the shiny new physical layouts, the improved processes which enable the flow of work throughout the organization. They often forget how these changes need to improve customer relationships and help them succeed. This results in a siloed approach to change and eventual results are an improvement on what was there before, but rarely lead to a true customer-led organization.
Based on our experiences, we recommend bringing back all decision making and conversation to some basic questions:
  • What are we learning about our customer experience during the change?  
  • Are we continually adding value to our customers through this change?
  • Are we improving our internal processes to better serve our customers?
  • Did we identify and remove impediments to innovate and/or better serve customers?

Summary Sketchnote (courtesy of Tanmay Vora) 

7 Pitfalls to Avoid During Org Transformation 
[Thanks to Tanmay Vora for creating this amazing sketchnote to visualize these anti-patterns.]  

Moving forward

The Fourth Industrial Revolution is happening and the forces of change are accelerating— we strongly suggest leaders put people first and co-craft evolutionary change strategies that can withstand the ravages of time and technology.

As Gary Hamel notes, we can no longer follow the traditional unfreeze-change-freeze model for change. Instead, we need to stay in a state of “permanent slush,” if we want to change as fast as change itself.
The phrase “change management” conjures up images of consultants running around with decks and infographic charts, with senior leaders trying to engineer something better for the rest of the organization to follow. This is most prominent in what Frederic Laloux labels as Orange and Green companies: companies with defined hierarchies characterized by predictive flow of information, strong staff functions and some degree of cross-group collaboration. That approach is slowly becoming obsolete. This kind of change is heavily constrained by the vision of a small group of change leaders, who do not have a holistic knowledge of the actual work and its impact on their customers. It’s time to adopt a continuous and emergent change paradigm that creates and nurtures decentralized decision-making and create environment for faster adoption of change.  

Disclaimer: The statements and opinions expressed in this article are those of the author(s) and do not necessarily reflect the positions of Thoughtworks.

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