Posts Tagged “Transformational Change”

Earlier this month, I had the opportunity to speak to a business process management organization and a human resources organization about leading transformational change. The groups share three attributes:

1. They both help design the organization’s future,
2. They both see somebody else as responsible and accountable for implementing those changes.
3. The press that covers these groups is frequently discussing the question, “Why don’t we have a seat at the CXO table.”

A Facilitator Ran This Road Crew

Many I spoke to saw their role as facilitators. I absolutely believe in the value of a good facilitator. Unfortunately, facilitators, by definition, are more focused on the process than the outcome. People at the CXO table care about outcomes. I didn’t share my story about a particularly frank CFO adapting an adage about lawyers. When confronted with a huge problem and an army of consultants, he turned to his team and said, “First, let’s shoot all the facilitators.”

Stewardship has many definitions. In biblical times, the steward was a servant that managed the master’s household affairs. It was a position of honor and earned through trust. Today, stewardship refers to a mindset where a person takes responsibility for something that the person does not own. Environmentalists use the term to refer to the appropriate usage of the earth’s resources. Stewardship is a proactive mindset that says, “Count on me to do the right thing.” Anybody can be a steward.

I turn off the lights when I leave a room in my home, and in hotel rooms. I’m a mini-steward of the environment. I try to teach my children to take responsibility for things they don’t directly control. With basketball season upon us, my comment became, “Instead of criticizing her for missing free throws and the fact that you have to run more, invite her to work out with you and show her how to shoot better shots.”

Think about the working world. There are people you work with that regularly stand up and say, “I can make sure that happens.” The task at hand has nothing to do with the person’s job description. They make things happen by influence, not force. (The best thing about those people is that they frequently don’t say a thing; they just do it.)

The next time you want to see change happen, don’t say, “I can’t do anything because I don’t control the situation.” Ask yourself, “What is the number one thing can I influence?” One light in one hotel room won’t stop global warming, or lower my price on the next visit, but it did make a difference. My daughter has yet to realize that the coach is going to make the team run and she will never get to avoid it. She might as well have a teammate who can shoot.

I’m sure you will find you can influence at least one thing in a positive direction. The best part of stewardship is that practice it makes you better at it. The more you act as the steward, the more you will want to, and the more others will want you to. You can influence a tremendous amount just by ignoring your job description and saying, “count on me to do the right thing.”

Transformational change results in lower productivity. People are worrying about jobs, who is getting which job, how they will work in the new job, and a gazillion other things. Every level in the organization is wondering, “What’s in it for me?”  The wondering and worrying translates into lost productivity - and large opportunity costs. What value would employees create if they weren’t worrying about the big change?

It would probably take a doctoral study to analyze the numbers comprehensively, but some directional assumptions point toward a scary story. The spreadsheet below takes some average numbers for revenue and costs per employee, and estimates the value created by each employee.

The logic continues that if the average employee’s productivity falls 10% during the change, the company has foregone $2,070 in value. Because the employee contributed 10% less, less value was created. People aren’t creating new products, selling to new customers, analyzing trends for opportunities, negotiating better prices, etc… They are too busy wondering and worrying.

Carrying the logic all the way out, if the change program lasts 12 months and the company has 1,000 employees, the company has an opportunity cost of nearly $25M. 

$25M is a big number, and one would naturally ask, what can be done to reduce it?

The two options are “faster” and “better.” Faster says: get the 12 month project done in 11 months. Better says: get the project done in a manner whereby productivity is preserved. (This productivity preservation requires change management approaches.) Based on the assumptions I used, “better” is clearly - well… better.

A couple comments in closing:

• To repeat - these numbers aren’t an analysis. These numbers are directional estimate based on some reasonable assumptions. Using the mildest of assumptions, however, shows that productivity losses extrapolate into some large foregone value.
• If you would like to try your own numbers, you may download an Excel version of the Change Initiative Cost Estimation Worksheet.
• The figures regarding revenue and costs per employee in the spreadsheet come from PriceWaterhouseCoopers - Saratoga’s 2007 / 2008 US Human Capital Effectiveness Report.

Monday’s post was about the types of change occurring in large companies. Today’s is about what stands in the way of organizations implementing large-scale change.

PriceWaterhouseCoopers’ 11^th Annual CEO Survey asked: “Which of the following people challenges were critical barriers for your organization in terms of achieving the desired benefits?” Frankly, the answers are fairly depressing.

The depressing part is that all five of these barriers are within the CEO’s control. The CEOs are talking about their own people.

Some observations:

• As Bill Gates said, “We always overestimate the change that will occur in the next two years and underestimate the change that will occur in the next ten.” He was likely not referring to the pace of change within a company, but the quote is still appropriate. The C-Suite is typically looking for transformational change to occur much more quickly than it actually takes. What might be seen as a two-year project is usually a three-year project. Sometimes the factors above play a role, but sometimes it is just plain old, overly optimistic, bad estimating.
• The Human Resources function has a responsibility to address. If speed, flexibility and agility equal competitive advantage, and senior management skill sets are a significant barrier, HR should be forcing change management skill development.
• The CEOs never mention that they themselves may be part of the issue. They aren’t saying, “Failure to hire appropriately skilled senior managers,” or, “Inadequate time spent on leading change initiative.” The cure for some of these issues could very well be the personal demonstration of change management skills.

Based on casual conversations with just about anybody in the business world today, large-scale change is commonplace. The Society for Human Resources (SHRM) published the Change Management Survey in 2007 and quantified those types of change. Over the two years leading up to the survey, companies with more than 500 employees had the following types of change: 

The key takeaway: change is occurring for any and all reasons. In the words of Benjamin Disraeli, “Change is inevitable. Change is constant.”

If you are accountable for your organization’s change program, there are five steps you need to take to ensure success.

1. Fully understand why your organization needs to change. The reasons behind your organization’s need to change will drive many of your decisions. What are the events placing new demands on your organization? Are these events internally - low employee engagement - or externally - downward shifting economic trends - driving the change?
2. Establish what must be done. At this stage you need to:
   • set a vision for the change project
   • define your guiding principles and imperatives to ensure each decision made or step taken on your path to change is the right one
   • set measurable objectives and goals and determine how you’ll measure your progress
3. Plan how the change will roll out:
   • identify the major actions and timing necessary to achieve your objectives.
   • establish the strategies necessary to reach your vision and objectives
   • identify and obtain the resources you need to achieve the objectives.
4. Align senior managers. Granted, the change was likely their idea, but the execution is all yours. You must have them aligned on the how and when of your program. Do this so they walk the talk.
5. Initiate a measurement program to track your progress and adjust plans as necessary. Provide feedback processes to gather information about your progress, and rewards to engage employees.

Plain Jane change builds on existing skills, work practices and behavioral norms.  It involves going from A to B to C.  Transformational change is different - it goes from A to C without stopping at B.  It’s disruptive and creates ambiguity, confusion and turmoil. 

Here is the test:  Simple change is something you can manage, and you might have to tell your boss.  If it is transformational change, your boss’s boss is involved.    Transformational change stretches beyond the boundaries of what you and your boss can manage and control.  It is transformational change when:

• A CEO has to tell not only the Board of Directors, but set expectations with the shareholders as well.
• A group reorganizes / changes business processes / implements new systems that impact not only the group’s members, but creates significant disruption in other groups as well.
• The way forward has myriad obstacles to success.