In the era of “always-on” transformation. Across virtually all industries, unprecedented disruption and market turbulence—due to globalization, technological innovation, changing regulations, and other factors—are challenging established business models and practices, and requiring organizations to launch more frequent transformations in response.
To keep up, companies need to undertake many different types of transformation. Any one of these, or several, can be under way at a company at any given time.
Business transformations are typically built around new structural elements, including policies, processes, facilities, and technology. Some companies also focus on behaviors — defining new practices, training new skills, or asking employees for new deliverables.
Research shows that 85 percent of companies that have undertaken transformations over the past decade have pursued more than one type, with the most common being organizational, operational, and rapid financial improvements.
Defining transformation as a profound change in a company’s strategy, business model, organization, culture, people, or processes—either enterprise-wide or within a specific business unit, function, or market. A transformation is not an incremental shift in some aspect of the business but a fundamental change aimed at achieving a sustainable, quantum improvement in performance and, ultimately, shareholder value. Unlike continuous improvement—which focuses on small-scale changes that start with employees and percolate up through the organization—always-on transformation requires a series of much larger, interdependent initiatives that are driven by top management.
In this new era, the ability to implement transformation has become a competitive differentiator. Yet most companies are not reaping rewards from transformation efforts. According to analyses only 24 percent of companies that complete transformations outperform competitors in their industries in both the short and long term.
What most organizations typically overlook is the internal shift — what people think and feel — which has to occur in order to bring the strategy to life. This is where resistance tends to arise — cognitively in the form of fixed beliefs, deeply held assumptions and blind spots; and emotionally, in the form of the fear and insecurity that change engenders. All of this rolls up into our mindset, which reflects how we see the world, what we believe and how that makes us feel. The result is that transforming a business also depends on transforming individuals — beginning with the most senior leaders and influences.
Why do most companies fail to meet their transformation goals? There are several reasons:
The first is that companies typically adopt a short-term, top-down approach to implementation. Transformations are energy intensive and are often executed under tremendous pressure from boards and other stakeholders—frequently as a reaction to flagging performance—which leads management teams to seek fast fixes and immediate results. Consequently, many companies simply seek to compel employees to change their behaviors. They motivate through carrots and sticks—mostly sticks—rather than tapping into the intrinsic motivators that can spur employees to improve performance in a sustainable manner. Among many potential explanations, one that gets very little attention may be the most fundamental: the invisible fears and insecurities that keep us locked into behaviors even when we know rationally that they don’t serve us well. Add to that the anxiety that nearly all human beings experience in the face of change. Nonetheless, most organizations pay far more attention to strategy and execution than they do to what their people are feeling and thinking when they’re asked to embrace a transformation. Resistance, especially when it is passive, invisible, and unconscious, can derail even the best strategy.
Second, successful transformations increasingly require changes to business and operating models, which in turn require new ways of thinking and working. Yet more often than not, companies fail to build the capabilities required to enable people to work in new and different ways. Without adequate attention to enabling new behaviors and ways of working, companies do not achieve and sustain the results they desire.
A third reason underlying the failure to reach transformation goals is that many companies approach transformation in a one-off manner—treating each initiative as an independent event. Under this flawed thinking, they essentially put up scaffolding around one aspect of the organization, focus intently on changing some part of it, and then take down the scaffolding, thinking that they can revert to steady-state operations.This kind of short-term, one-off approach is akin to the way some schools prepare students for standardized tests. In an attempt to improve test scores, teachers try to cram knowledge into students’ heads—basically “teaching to the test” for a few frenzied weeks leading up to the tests. That approach can work—scores often do go up to meet the short-term objective of doing well on the tests—but it doesn’t meet the fundamental goals of education: making sure students learn the underlying skills that will help them succeed over the long term.
Companies should not just surviving but thriving in the era of always-on transformation.
Most transformations focus on financial or operational goals (for example, increasing revenue or improving operating efficiency). While such goals are extremely important—and motivating to the board, investors, and senior management—they tend to be an underwhelming motivator for the majority of employees. In order to get employees to buy into a transformation, its goals must be tied to the deeper and more inspiring purpose of the company (which transcends any given transformation).
As a coach I help companies embrace a more purpose-driven culture.
I found that when organizations can clearly define and communicate their purpose to employees—that is, the “why”—these employees feel that they are part of something bigger. And when employees believe in the company’s purpose, they are intrinsically motivated to go above and beyond. Once a company has formulated and articulated its clear overarching purpose, all subsequent transformations should link directly to it. Moreover, all employees should be able to see how their contributions help the company succeed in those transformations—and better fulfill the company’s broader purpose. All three elements are crucial: a well-defined and shared purpose for the company, a specific link to the transformation at hand, and a clear connection between employees’ actions and contributions to the company’s objectives.
In an environment of always-on transformation, companies need to treat transformation as if it were a triathlon, not a sprint. Transformations are typically intense efforts that require employees to go beyond their normal baseline workload. An all-out sprint may work for the first few months, but eventually fatigue will set in and employees will be less able to contribute—particularly when another transformation is likely right around the corner. A better way is to think like triathletes, who have to swim, bike, and run. Triathletes learn to pace themselves so that they can excel in all three disciplines. Rather than asking employees to maintain a high level of engagement nonstop, companies need to intersperse commitments to high-demand transformation projects with time for true recovery. With the right pacing, employees will be able to engage enthusiastically on each new assignment asked of them, without losing energy. (Notably, there is one group that simply cannot take a break: the senior leadership team.)
Companies are increasingly embarking on transformations that rewire the way they operate—including new business models, digitization, and fundamental changes to the roles of business units and functions. As a result, companies invariably need to build new capabilities, such as processes, knowledge, skills, tools, and behaviors. Knowing how to identify and develop these capabilities in any given transformation is pivotal to success.
In a business landscape characterized by constant and broad-ranging disruption, the ability to rapidly change course in response to market shifts and to enable employees to adapt the way they work becomes critical. Truly agile organizations don’t just accommodate change and mandate speed—they ingrain these elements into the company’s culture and ways of working. Agile companies are not burdened by excessive layers of management or bureaucracy. Employees have a wide degree of autonomy and are trusted to resolve many of the issues they face without direct oversight. They are able to take on new roles and responsibilities and to swiftly adapt to new ways of working. They are quick to acquire knowledge of new topics, with the understanding that another change is almost certainly coming soon. In addition, agile companies encourage experimentation, and they don’t fear uncertainty. Managers at these companies celebrate and reward risk taking, and they don’t punish failure (only the failure to experiment).
Companies that wish to lay the groundwork for future transformations need to foster a learning mind-set across the entire organization. Such an organizational mind-set entails spurring people to seek out new knowledge, experiment with it, share it, and ultimately use it to improve the company’s performance. For that reason, employees at organizations with a learning mind-set are encouraged to follow their curiosity and challenge conventional thinking. They develop creative ways to improve processes and find better ways to do things. This kind of learning culture requires a free exchange of ideas, an acknowledgment that many new ideas will fail, and an understanding that such failures are an inevitable part of progress.
Transformations can be ideal environments in which to promote learning because they demand creative problem solving and new ideas.
As mentioned earlier, one of the key challenges in transformation is that companies tend to see each initiative as a temporary, one-off event. As a result, companies consider change management as part of the temporary scaffolding of a given transformation effort. Instead, companies need to build change-management skills, make tools available across the broader organization, and consider change management to be a core competency among the extended leadership team.
All of the above imperatives have enormous implications for a company’s people practices and HR policies.
HR must play a larger role in this always-on transformation era.
Ultimately, HR needs to participate actively in senior leadership discussions, help develop the company’s strategy and transformation agenda, and support the alignment of specific functions with the company’s priorities. To embrace this role, HR needs to evolve beyond its traditional supporting function to become a true strategic transformation partner. And, equally important, the company’s senior leadership needs to support HR’s expanded role. Specifically, HR must understand the requirements of the transformation and how they impact the company’s employee-related processes and HR disciplines. It must work with company leaders to understand how employees and the organization will enable the company’s strategy. It must anticipate the implications of every change initiative on employees and the organization. It must know whether the company has the capability and the capacity to meet its strategic goals. All the while, HR must keep pace with the organization and operate with agility as transformations unfold.
One to one performance coaching is increasingly being recognised as the way for organisations and individuals to improve performance. By improving the performance of the most influential people within the organisation, the theory goes that business results should improve.
Executive coaching is often delivered by coaches operating from outside the organisation whose services are requested for an agreed duration or number of coaching sessions. Adding to the process: transformational leadership, that is both directive and inclusive clearly raises the bar for executives. It requires an investment in time, energy, and management focus when demands on leaders are, typically, already very high. The bandwidth required to lead in this way is often one of the biggest constraints in a transformation. However, in my experience, making the needed investment of time, energy, and management focus pays off through more efficient and effective execution and more sustainable results.
Renato Moreira 