Organizations are systems, and systems are notoriously difficult to change. A system will fight for its survival and seek to replicate itself. That’s why when you tackle organizational transformation, the key to success is approaching the process willing and able to revamp the entire system; small, discrete changes simply won’t cut it.
But that’s difficult; many executives fail to truly appreciate just how difficult organization transformation can be.
Consider that 70% of change programs fail to achieve their goals, according to McKinsey. One of the key findings is that these failures were due to personnel resistance to change. But what causes this persistent employee resistance?
In our years of experience helping companies achieve transformation success, it’s common to see leaders who have spearheaded failed change have faced these impediments:
- Lack of sufficient training or preparation for employees
- An organizational culture unready to adapt to change
- An incomplete transformation strategy
- Lack of commitment to the transformation process
- A management team that fails to buy in
Failures in one or all of these areas are detrimental to achieving the desired future state post-transformation. But many of these issues stem from transformation efforts being too narrowly focused when you instead need comprehensive system changes in order to empower your organizational change initiatives.
What Is Organizational Transformation?
Before we go deeper into how to plan and implement an effective transformation strategy, it’s first important that we have a proper organizational transformation definition.
So what is organizational transformation?
Essentially, it’s a business’s need to adapt to market conditions by holistically changing every part of itself.
This is distinct from incremental change, which by definition is meant to tackle specific areas of your business rather than institute a complete system overhaul. Incremental change can still be big or small, with its scope defined by which area of your business is targeted for change.
Organizational transformation, conversely, by definition is big and requires discontinuity – in other words, it needs to touch the organization’s “software” -the people and culture- and the “hardware”- the processes, technologies, structures and governance.
This puts particular pressure on the leader to be ambidextrous: able to simultaneously implement change while continuing to meet the ongoing demands of their business.
Let’s now move on to determining when your business needs to change.
How to Determine If Organization Transformation Is Necessary
The need for change can be internally or externally motivated, but it’s characterized by a desired future where your organization will be, following the transformation programs, more optimized for growth and profitability.
Many of the more common realities that provoke change include:
- Replacing or redefining business strategy
- Organizational development of structures
- Reshaping the company culture/operating environment
- Incorporating new technology in products, production, digital transformation, or businesses processes
- Strategic combinations—mergers, acquisitions, joint ventures
- Breakups, spin-offs, and divestitures
- Downsizing
- Expansion into new geographies, markets, technologies, offerings
- New leadership team
Broadly, we can group the above into several categories:
- Unforeseen external forces and crises
- Internally self-imposed crisis
- Significant market opportunity
- Performance downturn
- Decision to change/modify your strategy in either an opportunistic or reactionary mode
As a leader, it’s your responsibility to effectively answer the question ‘why change?’.
A capable leader spearheading change will address this by making the business case for the transformation (i.e. it’ll increase growth, capture higher market share, encourage high performance business practices, give your business a competitive advantage, etc.).
But you’ll also have to provide a vision of the future – what are you transforming into? You should be able to describe the look and feel of the new organization, as this goes a long way towards encouraging your team to buy in.
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Build a Plan and Deploy an Organizational Transformation Model
The key to every successful organizational transformation is a plan.
But what goes into making a successful plan? You’ll need to account for:
- Integration of multiple project timelines, or what we refer to as an integrated change agenda
- Capabilities of project teams and stakeholders
- Buy-in from senior leadership and staff
- What efforts employees must make to commit to the change
- The importance of the change to the company’s strategy
In the planning phase, it’s helpful to adopt an organizational transformation model that fits your business’s needs and will help facilitate its change.
In our experience, the congruence model of organizational behavior (developed in the 1980s by David A. Nadler and Michael L. Tushman) is an excellent, adaptable model that not only helps to institute change, but helps address the three problem areas that typically interfere with the change process: power, control, and anxiety.
Essentially, power, control, and anxiety relate to the new power structures of the organization, the loss of control that organizations feel during change, and managing the anxiety born of uncertainty – a natural side effect of change.
The congruence model breaks the organization itself into four elements that, when aligned (read: congruent), will facilitate change:
- Work – the series of tasks required to perform each function in the value chain
- People – the ones who perform the tasks
- Formal organization of structures, processes, and practices – specifications on how work is assigned and performed
- Informal organization – daily interactions and patterns between people and their supervisors, employees, co-workers, and customers
Plans will typically outline actions and activities sequenced over time (usually a period of 12 to 24 months) that will ensure:
- Executive ownership and involvement
- Organizational capacity to absorb the changes
- Timeliness, efficiency, and impact
- The ability to capitalize on opportunities and events that are already in motion
When appropriately defined, communicated, and applied, well-planned organizational transformation strategies have a far higher success rate than rushed transformations or ones that fail to clearly define the ‘how’ and ‘why’ of the change.
Assess Your Organizational Transformation Strategies
You won’t know what is and isn’t working during a change without key performance indicators.
But one issue is that many leaders get hung up on the numbers KPIs – revenue, growth, profitability.
Remember that your change will likely produce instability for a season. Uncertainty and stress may pervade the company, leading to lower company morale and performance (as per the McKinsey report in the intro).
Having KPIs that measure overall company adoption of change go a long way towards effecting lasting, beneficial transformation.
Interviews and formal surveys are strong supplements to your accounting-based metrics and will help provide a more comprehensive picture of the transformation’s progress.
Assess Your Organizational Culture’s Readiness for Change
Culture is both a means and an end – your business’s culture helps facilitate transformational change, yes, but it will also be itself changed in the process.
In other words, your culture should be able to both encourage change while also being able to change itself.
There are some key factors that can help your culture speed up and facilitate change:
- Rewards and selection systems that match the future state you’re aiming to achieve
- Resource allocation that aligns to the outcomes you say you want the change to effect
- Your company’s values need to be believed and embedded across the board – not simply seen as superficial and shallow
- Your organization needs to buy into the above values
- Your company’s values should encourage behavior required for the change you’re pursuing
Effecting culture change isn’t easy, and finding the right cultural transformation model that fits your business’s unique values, mission statement, and business environment can be difficult, but it is crucial to the success of your transformation.
Get Organizational Transformation Right, The First Time
Change and transformation are some of the hardest things in business to get right. They involve disposing of preconceived notions on your way to something better, yes, but something that’s altogether different.
That difficulty is reflected in how many businesses fail to implement successful change.
Work with expert consultants at Navalent to ensure that your transformation has a significantly higher likelihood of success. We wrote the (e)book on being a change leader.
Using proven organizational transformation strategies developed with years of real-world experience, we’ll quickly identify the issues hindering your success and provide solutions that will get your business to that desired future state. Contact us today for a free 15-minute strategy session to discuss your organizational transformation.