In our previous publications we answered several questions about transformation: (1) what is considered a transformation, and what triggers launching one? (2) what is the recommended framework for conducting a transformation program? and (3) how does the organization and staff live the transformation?
According to McKinsey, less than 30% of transformations are successful in both improving performance and preparing the organization to sustain improvement over time. The same study confirms that the success rate jumps to almost 80%, nearly three times more, in organizations that follow a rigorous, action-oriented approach and complete their transformation.
In this publication, we will discuss the root causes that lead to transformation failures and the solutions to increase the rate of success. Following a rigorous, action-oriented approach and reaching the finish line were already mentioned as the most efficient success factors. They are almost so obvious that they may not be worth mentioning. So, why do so many organizations miss these simple best practices when steering a transformation? Why do transformation teams face so many conflicts while applying their project management methodology? What makes an organization so exhausted that it cannot end the transformation it started?
I will answer this shortly, but first let’s discuss some common causes of failure.
Lack of leadership’s commitment and bad methodology are often mentioned as the main causes of transformation failures
When you go through literature talking about the causes of transformation failures, you will read the following causes :
Leadership is not committed to the transformation and doesn’t attribute the required priority to transformation issues.
Human and financial resources allocated to the transformation are just not enough.
The organization is transformed erratically without a proper framework (we already briefly presented one here).
Target vision is either undefined or not shared with staff.Goals are set randomly; they turn out to be unachievable or unmeasurable.
Some organizations just don’t have the required set of skills to conduct a successful transformation.
All these causes are very important and can derail the transformation from its course. It’s also true that some of these causes can be tricky, and that organizations may fail to avoid them. Overall, however, they remain quite obvious to all experienced executives. Hence, we consider that they cannot be the true root causes of so many failed transformations, and that there are still other underlying causes to discover.
Changing human behavior is the real objective behind transformation
In a previous publication, I mentioned that transformation is about bringing deep change, and that the most complex change is changing people and their way of doing things – what we called culture. Changing culture, as paramount as it can be to boost performance, remains difficult to measure and to monitor, so it’s often disregarded. Instead of tackling this challenge, change management usually focuses on informing staff about reengineered processes or training them to use new IT tools. You are missing the whole point if you are just focusing on these actions.
Changing culture is an everyday task for all managerial levels
As a management consultant, I steered many transformation programs for my clients, and I spend a significant part of my time with people to change their culture by:
understanding their beliefs and why they are afraid of change;
trying to convince them of the benefits of our proposals, hence accepting change;
getting feedback on the results of transformation;
finding solutions to multiple conflicts;
coaching and guiding all managerial levels.
... and many more activities. That is why management consultants have a very good understanding of human behavior when it comes to facing change and how it could turn out to be negative for the organization. So, I listed a number of root causes that ultimately lead to transformations failing.
Anticipate conflicts of interest and resolve them by rewards
Change brought by transformation may lead some managers to lose power or benefits. They tend to have a bias in their decisions to favor their interests and even sometimes engage in open conflicts with others to protect their power and benefits. This cannot be beneficial to the organization.
For example, the head of the physical stores for a retailer enjoys an undisputed power until the day his organization decides to shift towards online platforms. To avoid losing power, the executive would hinder online investments, which is against the interests of the organization, assuming that a retailer without e-commerce capabilities will not survive.
Actually, this is probably what happened in the early 2000s, leading to traditional retailers missing their digital transformation and losing market share to Amazon and other online retailers. They didn’t invest enough to develop online platforms. Products sold online were systematically overpriced compared to those in supermarkets. Retailers may have evolved since as they learned the lesson the hard way, but many banks are still struggling with internal conflicts of interest and are not favoring digital banking over physical branches.
A “clash of cultures” is another wording to describe conflict of interest but is instead applicable to all employees. Instead of fearing the loss of power as executives, employees are afraid of being laid off or at least marginalized. So, they will resist change and adopt harmful behaviors for the transformation.
So, what can be done to incentivize staff in adopting the new way of doing things (the new culture) and making the necessary effort to make compromises to boost performance?
On top of continuous face to face interactions, the key to a successful transformation is to distribute the fruits of the transformation to the maximum number of stakeholders
At the launch of the transformation, leadership needs to provide answers to the question that each employee will be asking: what’s in it for me?
If the transformation’s main goal is to double profits, employees will want to know what their raise will be if they reach this goal; otherwise, the transformation will not mean anything for them. If leadership promises a significant raise, it should consider this promise as a binding moral contract.
The fruits of transformation include, of course, financial rewards, but also promotions, perks, functional evolution, better working environments and proximity to leadership. The individual trade-off between expected reward and required effort must be straightforward to make staff go the extra mile and achieve the transformation.
A carrot favors adoption, but something else is still missing: yes, it’s the stick!
The most resistant to change need to know from the beginning that if they fail to adopt the new culture, they will just have to look for opportunities elsewhere. Nobody is indispensable.
Constrain attitudes driven by personal ego
Ego is the source of many transformation failures. Here are some examples of how ego can hinder transformation:
a manager who doesn’t accept that he lacks the required skills and instead delivers poorly;
a director who rejects critics, thinking his work is perfect;
a supervisor who forbids his direct reports to answer any requests from other supervisors;
an employee who refuses or stalls doing a task to feel flattered by solicitations, or just in order not to receive other tasks afterwards;
a control-freak executive who insists on reviewing and validating all deliverables at all stages, effectively becoming a harmful bottleneck.
The list of examples is endless. Managing others’ egos is also harmful because:
messages are not straightforward and thus prone to misunderstandings;
many validations are needed, delaying all decisions;
useless meetings are organized to flatter participants.
Well, the message seems quite clear about how ego can be harmful to transformation. To mitigate this harm, many actions are needed. We recommend, however, establishing a moral contract between leadership team to avoid such harmful behavior. It’s a classic gamification situation where all players will apply the winning strategy for the group until one decides to betray the others. In corporate world, however, there are important sanctions for such behavior. This first move against the others is enough to ruin one's reputation and break any kind of tacit alliance. So, anyone in the leadership team will think twice before going solo. Check this article about human reactions during transformation programs.
Communicate and share your vision to get the buy-in
Communication is key for any organization, particularly during transformations. Sometimes, leadership is afraid of leaks or misinterpretations, so it opts to limit its communication with staff to the strict minimum. By doing so, leadership doesn’t incentivize staff to be involved in the transformation or adopt its results.
We always recommend sharing the vision with staff and presenting the big picture about what they are experiencing. Failing to do so can foster negative rumors or at least make transformation irrelevant to many employees.
So instead of limiting communication to transmitting individual tasks, leadership needs to explain how each initiative contributes to achieving the transformation’s objectives. This will enable employees to communicate the transformation’s results to clients and facilitate the cultural transformation.
Communicate about the “WHY,” not the “WHAT”
Leadership, Leadership, Leadership
Other negative human behaviors include choosing low-performing solutions just because they are more easily accepted, systematically avoiding making any decisions or even any written communication, and finally questioning any quantitative analysis and undermining facts. We go back to the need of Leadership commitment mentioned in the beginning. Leadership is about showing the good example.
To conclude, transformations are complex to manage. For large organizations, they require several years to be completed. So, there will always be unpredictable elements that disturb initial assumptions and sometimes ruin the transformations. Political unrest, economic recession, and death among leadership members are all unpredictable causes that can occur during the transformation and may lead to its failure. Nevertheless, being aware of most causes of failure and mitigating against them will certainly boost your odds of successfully transforming your organization.
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