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A couple of weeks ago William Eastman, director of this radio station and I recorded a program for another station on the topic of managing change. Maybe coincidently, this week HBR published an article titled “The Secret Behind Successful Corporate Transformations. Today I will share with you the insights the authors identified along with my own experiences in driving change with organizations. When I started the show with Bill Eastman I compared the difficulty of hitting a baseball with the difficulty of managing change. Ted Williams famously described hitting a baseball as the hardest thing to do in sport, managing a successful change in the way a business operates may be the hardest thing to do in business. A quarter of a century ago John Kotter asserted that 70% of business transformation projects fail. The authors of the HBR article wondered if this number was accurate, so they did some data crunching based on financial performance and corporate reputation. Their findings? That only 22% of the companies they looked at successfully transformed themselves. It seems corporate transformation is even harder than Kotter thought. It’s even harder than hitting a baseball. As an entrepreneur it is likely that you will need to pivot or transform your business as you grow. As you learn more about your business you will likely identify other opportunities, find better ways to get things done. To ensure your plans are successfully implemented you need to lead the change initiative and bring your employees along with you. The authors also found a strong correlation between successful transformations and how much they focused on their employee’s welfare. The Harvard study identified six attributes that the companies that managed successful transitions had in common. They were:
The study looked at large corporations such as PayPal, Microsoft and Hershey. But there are some lessons we can take from the article. Above average pay and better stock options will attract above average employees. Transformation is difficult and the better your employees the better they will be able to cope with the challenges that will be faced during the change process. Better financial awards alone will not necessarily deliver higher employee satisfaction. As a leader of your company, you must create an environment that fosters better employee satisfaction. In Show 2 of this season we looked at The boss factor: Making the world a better place through workplace relationships Tera Allas and Bill Schaninger The authors cited a survey where 75% of participants said the most stressful aspect of their job was their immediate boss. That’s 3 in 4 folks who say their boss is causing them stress. And not too surprisingly, those reporting very bad or quite bad relationships with management reported substantially lower job satisfaction compared to those who had a good relationship with their boss. Two aspects of a good workplace under the control of your managers are a good work organization and providing employees with psychological safety. Good work organization means providing employees with context, guidance, tools, and the appropriate amount of decision-making authority to minimize frustration and make their jobs meaningful. Psychological safety is the absence of fear as a driver of employee behavior. Fear can paralyze an employee into inaction, it has been shown to be a lousy motivator. The show introduced the idea of the servant leader. The leader who is continually asking his or herself “How do I make my team members life easier?” There are benefits to the team and the manager with this approach. People are happier and feel their roles are more meaningful when they are helping others. To learn more on this topic please Listen to the podcast of the show or download the show notes to learn about how you can improve your employee satisfaction. Back to the HBR article which seems to be using the higher proportion of women employed and in managerial positions as a metric for diversity. Being able to access a range of opinions can help you identify alternatives that you might not have considered. In Show 5 we looked at an article called Why you need a Challenge Network by Adam Grant who is a Wharton management professor. Mr Grant explains why success often comes from surrounding ourselves with disagreeable people, skeptics who can point out our blind spots, question our assumptions and help us overcome our weaknesses. The article focuses on Pixar and the team of disagreeable people who were brought together to do what many a Pixar thought was impossible or at least would take a decade to achieve and cost huge sums of money. The result of this team of black sheep, pirates, disgruntled people was The Incredibles which grossed over $600 million and won an Oscar for the best animated picture. As the leader of your company, division, team do not shield yourself from dissent. Leaders who surround themselves with yes men become over confident. They stick with their existing plans rather than changing course which sets them on a collision course with failure. You will learn more from people who challenge your thought process than those who affirm your conclusions. Strong leaders encourage critics and make themselves stronger. Weak leaders silence their critics and make themselves weaker. Again, please listen to the podcast or refer to the show notes to learn more on the importance of diversity. As an entrepreneur what more can you do to guide your team through that almost inevitable pivot you will face as you scale up your company? Usually your need to change will be focused on a number of fundamental goals.
We learned from the HBR article that most transformation efforts fail to achieve all their objectives. I suspect most change programs achieve at least partial success. When this type of program totally fails it is probably due to two contrasting reasons. Reason one: it is too little too late. The entrepreneur has been denying the changing business environment impacting their business, ignoring the writing on the wall. When they do act it is already too late and their actions are not aggressive enough. The contrasting reason is when an entrepreneur spots an opportunity and changes too rapidly, maybe the plans are not well thought out, or there are not sufficient funds to see the company through the transition. The case of Dot & Bo that we looked at in an earlier show is an example. There is no reason why a well planned and diligently executed transformation should not achieve a high degree of success. Diligent execution is key. Too many change programs start with great fanfare and ambitious goals but soon lose momentum in the face of the daily grind of running a business. As the leader of your company, you must believe in the change process, make it clear it is your company’s number one priority and continually lead by example. This is not as easy as it sounds, maintaining a high level of enthusiasm is tiring. Most people do not like change, especially when they are not initiating the change. Change creates uncertainty. One of the first questions folks will ask is what does this mean for me? Communication is key to change. Kotter most companies underestimate the need for communication by ten times. Consider publishing a regular newsletter updating employees of the status of the change program. Also regular Town Hall meetings with a Q&A session is another great way to keep employees informed. As an entrepreneur you need to be able to lead change, but likely you cannot do it alone. Find employees in your organization that can make change happen, not just implement directives. This will help you see who can move your company to the next level. You must provide a vision for your employees to follow. Most people are not inspired by logic, but most of us have a desire to contribute to the larger case. The more meaning and purpose you can give to your change effort the greater your chances of success. A sense of inclusion will help. If employees understand the drivers of change the better place they are to deliver. I have been part of projects where senior management felt that there was no need to communicate the reason for the change. This leads to questions such as why are we doing this? What are they not telling me? I guess there may be times when confidentiality limits the ability to disclose everything, but it is not a great basis for success. As well as creating unnecessary uncertainty you may miss out on insights that your employees might have on the best way to achieve your objective. Vision should also create a sense of urgency. Appeal to your employees’ heads and hearts in a personal way. Get them eager to help. To do this you need a clear vision of what you what to achieve, why you need to achieve it and how you are going to achieve it. Repeat the message at frequent intervals. Create a sense of urgency and maintain it. Employees are very good at sensing when management is not walking the talk. Kottler described this as the burning platform. Can you link the opportunity or threat to an external driver? Again, Covid is a great example. But it could be a product or new service launched by a competitor with a distinct competitive advantage. A new entrant into your market space. If you can get your employees saying yes, I understand why we need to change, you are well on your way to success. Grab that window of opportunity. Before Covid I would use Skype for video calls with employees. I have not used Skype for well over two years. Zoom is the platform I use the most, Microsoft teams less frequently. Zoom absolutely seized the opportunity that became open to it. I do not know what went on behind the scenes, but scaling up, adding features, getting their pricing policy right. There must have been a lot to do, and they executed well. Make sure your executive team is aligned. Now is not the time for mixed messages. Lack of alignment. Your team may understand your vision, but they may not have a shared view of how to accomplish it. The article cites an example of the top five execs of a well-known energy company were asked to list the company’s top ten priorities. Between them the came up with twenty three, only 2 priorities made everyone’s list. Only 7 appeared on three people’s lists and 13 priorities appeared on only one list. Put another way each exec has two or more priorities which were not shared by any others on the leadership team. Given the timing of the article which was published in 2000 I wonder if the energy company in question was Enron. In 2000 Enron was seen as a company “Leading the revolution” before it blew up in 2002 and several of its executives were jailed. Kotter’s 8 steps in change management describes building a guiding coalition as the nerve centre of the change process. It should consist of members from all levels within the organization, and represent all functions. This enables you to engage more people to accelerate your change efforts. If the change effort is multinational ensure you include folks from all geographic locations. Too often change initiatives are planned at the HQ level and the folks in the regions are left to implement the plan, sometimes without adequate resources to achieve success. Work around the naysayers. There will always be folks who want to undermine the change process. This could be due to insecurity, maybe the are nursing a grievance or they just don’t want to do the work. Once identified, communicate directly with their staff on why change is necessary, what advantages it will bring to the company and if it is true the advantages it will bring to them. If the change is negative for some employees, clearly communicate how you will support them through the change. Guiding coalitions should be advisory in nature. This means you must listen to what they are telling you. Really listen, do not dismiss comments that do not fit your vision. An imperative is decide who gets to decide. In any transition roles and responsibilities may become blurred. Getting agreement on decision paths prevents duplication, makes it clear where staff go to get questions resolved quickly. It also ensures that the right people are involved along the way. If you do not get this right, some of these problems may arise. People find back channels to get answers, and those back channels may not provide the answers you would like to see. Decisions get delayed because leaders become bottlenecks as they have not appropriately delegated decisions. No decisions are taken as too many folks need to be consulted and there are too many differing views. Or conversely poor decisions are made because not all the relevant voices are heard. Remove barriers. Eliminate barriers to progress such as inefficient processes and working practices that have become ingrained but inappropriate. One of the worst phrases in business is Ïts always been done that way” closely followed by we tried that before, it did not work. Barriers can include silos, narrowness in thinking, pressure to hit numbers, legacy rules and procedures and limited access to key stakeholders and leaders. To identify barriers in your organization, look at past change initiatives and identify why they stumbled. Is there a pattern? Could you not get agreement across all functions? Did problems arise that were not foreseen? Was there a lack of engagement? Or a lack of resources. Maintain that sense of urgency, push hard for the first win, the first milestone on the way to success. Once urgency is lost, getting momentum back will be much more difficult. Here we go again. Again it comes back to priorities and resources. Many change initiatives will be medium term projects, spanning accounting years and quarterly reports. You need a mental model that has aspirations for the future rather than short term results. Matsushita (parent company of Panasonic) took the thing to extremes—their founder talked about a 700-year-plan for the company, which would unfold in the “seven ages” of Matsushita. If projects are delayed to meet short term objectives then the mindset will not be focused on the future.
Useful Links: Link to HBR article https://hbr.org/2021/09/the-secret-behind-successful-corporate-transformations?utm_medium=email&utm_source=newsletter_daily&utm_campaign=dailyalert_actsubs&utm_content=signinnudge&deliveryName=DM150483Link to the HBR Article Link to Show 2 https://pod.co/practical-solutions-to-difficult-problems/1-selling-has-become-simply-selling-with-host-jeremy-gray Link to Show 5 https://pod.co/practical-solutions-to-difficult-problems/1-season-6-show-5advice-from-businesss-best-thought-leaders-jeremy-gray You can contact me via the following links: mailto:jeremy@business-in-asia.org Or schedule time via Calendly: https://calendly.com/3-continents-consulting My websites include: https://business-in-asia.org/ https://thedentistscfo.com/ My LinkedIn URL https://www.linkedin.com/in/jeremy-gray1
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