Why Most Large Change Efforts Fail – And How to …dpnm.postech.ac.kr/papers/TMW/TMW2004-LongBeach/TMW2992 EXECSUM7.pdfWhy Most Large Change Efforts Fail – And How to Break the

Why Most Large Change Efforts Fail – And How to Break the PatternEXECSUM7 - Tuesday, October 12, 2004 5:00 PM - 5:30 PM

J. Scott [email protected]: 206-321-1409

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Contents

Selected research sources

Appendix

Case Studies

Ten Principles for Successful Change

The Challenge of Transformational Change

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…REQUIRES PERSONAL CHANGE

…REQUIRES PERSONAL CHANGE

RolesResponsibilitiesHabitsThinkingValuesBehaviours

StrategiesStructures/de-layeringPracticesProcessesProducts

…REQUIRES ORGANIZATIONAL

CHANGE…

…REQUIRES ORGANIZATIONAL

CHANGE…EXTERNAL CHANGE…EXTERNAL CHANGE…

The continuous changes hitting our industry put enormous pressure on organizations and individuals

Today we’re focusing on the link between organizational and personal change: where today’s industry players must improve to adapt to

transformational pressures

Technology: IP; WiFi; 3GEconomy: telecom bubble; retrenchmentRegulatory: WNP; UNE; SarbanesSociety: privacy; security; mobilityCustomer/competitors

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Many organizations ignore the individual change process, leading to failure or delay in transitioning to new models The Emotional Cycle of Change

Source: Daryl Conner, adapted from Kubler-Ross’s Emotional Cycle of Loss: see “On Death and Dying”.

Time

SatisfactionCertainty

Doubt

Hope

ConfidenceOptimism

Pessimism‘Valley

OfDespair’

Different people will be in different places at different times – yet the depth of the valley, and the time spent there depend upon the change tactics

employed

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These ten principles help organizations accelerate the time between intent and results – by addressing the individual

For sources of quantitative, validated research and evidence supporting these concepts, please see the appendix

Map Your Route to Success with a ‘Big

Picture’ of all Change

Articulate the Need for Change and Support it

With Rewards and Recognition

Develop Uncompromising Change Leadership Skills

Establish a Strategic Action Plan with

Measures

Define the New Roles and Culture

Ensure Buy-In At All Levels of the Organization

Manage the Emotional Process of Change

Define Performance Criteria for Re-skilling

affected people

Follow a Strategic Communications Process

Leverage Key People (‘influencers’)

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What’s So Different About This Approach?It addresses multiple perspectives: rational, political and emotional

Emphasizes leadership responsibility, but not exclusively: recognizes that individuals at all levels must help define the change details

Relies not just on communication, but recognizes the need to uncover dissent, understand resistance and encourage deep personal involvement

Relies on central coordination, measures and targets, yet allows those directly affected to design and perform pilots and implementation activities locally

Experience has shown that its not enough to merely follow the standard ‘change management’ checklist: motivate; communicate; involve;

measure…The key is how you go about accomplishing these steps.

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Building the Case For Change: Answering the ‘Why?’Articulate the need for change; support it with appropriate rewards and recognition for specific, well-defined behaviors

Keys to Motivating People to change:Identify a Crisis: the ‘deficit’ model creates a sense of urgency (Ford in the 80’s)

− OR

Create a Vision: the ‘aspirational’ model paints a picture of ‘what can be’

Either model can create a tangible motivation that people can identify with

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Set Direction with Clear Vision and Goals

Keys to Ensuring Clear Strategic Direction:

Begin with values, vision and mission

Establish a business case with 3-6 major indicators of success

Assign accountability to a sponsor or team lead

Set ambitious targets with milestone dates

Identify the detailed activities to move from the current state to the desired state

Create measurement tools to track human and economic performance of the new organization

Map Your Route to Success with a ‘Big Picture’ of all Change

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Aligning All Initiatives Creates a Single Route to SuccessKeys to a successful initiatives integration map:

Clarify major objectives of each initiative

Tie each initiative to the objectives or goals of the overall change

Specify milestones and results to be delivered

Identify initiatives in conflict or support of the plan; halt or integrate selected projects

Identify key events for communications

State the sequence of the work

Focus on the integration points between each change activity

A rigorous assessment of initiatives often uncovers opportunities to refocus, stop or integrate existing efforts to

support the change

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Major Change Requires New Behaviors from LeadersImportant Leadership Behaviors During Change Programs:

‘Walk the Talk’ – good change leaders demonstrate what is expected of others and link words to actions

Inspire, set direction, clarify vision, communicate values and expected behaviors

Bring the vision to life with stories and pictures that portray the beliefs and values of the change effort and the organization

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Leaders Must Visibly ‘Take the Wheel’ During Change to Demonstrate CommitmentRoles of Leadership during Change:

Enlist support and participation from all levels of the organization

Commit the required resources

Leave the details to those closest to the work

Nurture new formal and informal pathways for collaboration

Build recognition and rewards to encourage bottoms-up commitment

Encourage candid, open challenge – but confront and deal with those who subvert the change process

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Neither ‘Bottom’s-Up’ nor ‘Top Down’ Change Alone are Sufficient to Ensure SuccessAccelerate Buy-In with Bottoms-Up involvement and top-down commitment

Keys to Ensuring Buy-InHave visible leadership involvement.

Communicate the vision relentlessly

Obtain personal commitment at all levels

Involve many in defining the direction and solutions

Provide support for shifts in resources

Ensure emotional support by including those who will be affectedby the change

Rely heavily on front-line employees having the customer knowledge that can be leveraged throughout the organization

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Managing People through the Emotional Cycle of Change Is As Important as the Rational and Political dimensionsEffectively managing the emotional cycle of change:

Limit fear and sense of loss, the strongest emotions that must be acknowledged.

Emotions connected with fear and loss are inevitable; William Bridges’ model* incorporates a number of helpful principles:

− Identify and acknowledge losses and allow time for grieving and venting

− Honor the strengths and successes of the past

− Point out gains for individuals and the organization

− Identify what is not changing

− Encourage open dissent and dialogue; provide safe, frequent forums for debate and listening

− Help people see the big picture, not just their loss

− Give people time and space to un-learn, practice new ways of working, and make mistakes

*Bridges, William. Managing Transitions. 1991 Reading, Massachusetts

Time

SatisfactionCertainty

Doubt

Hope

ConfidenceOptimism

Pessimism‘Valley

OfDespair’

Time

SatisfactionCertainty

Doubt

Hope

ConfidenceOptimism

Pessimism‘Valley

OfDespair’

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To Truly Drive Lasting Change, Employees Must Learn New Skills and ProcessesDefine learning requirements and any new performance measures

Keys to re-skilling:Stop un-needed old behaviors and replace with new skills

Remember systems don’t solve problems – people do

Trace the impact of each change to the work group or individual job to design new work processes

Follow this simple cycle: assess, define, train, coach, try, observe, measure and validate

Create a climate for learning with a lenient attitude toward early miss-steps

Remember, this is when the energy and enthusiasm can wane.

− Use recognition and small rewards for early successes

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Major Business Change Often Requires Fundamental Changes to Culture and BehaviorsDefine the new culture, behavior, roles and responsibilities

Keys to culture change:Analyze the written and unwritten rules of ‘how we do things around here”

Establish a common purpose by aligning organization values, vision, beliefs, attitudes and rules to clarify acceptable behaviors in the new environment

Link the reward and recognition system to the clearly stated roles and behaviors expected

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Every Organization Has a Critical Few People Who Can are Important Influencers of Opinion and Behavior Typically a small cadre of influencers are the key links in the organizational chain

Keys to Leveraging Influential PeopleIdentify both natural opinion leaders and ‘mavericks’ or skeptics

Gain public support of the organizational ‘skeptics’

INVOLVE – give key influencers transitional roles in the effort

Focus major effort on strategic populations – usually front line supervision of the audience most affected by change

Focus on early adopters; when 20% of the population embraces change it can become self-sustaining.*

* Rogers, Everett M. Diffusion of Innovations. 1983 New York, New York

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Most Change Efforts Underestimate the Importance of CommunicationCreate a strategic communication process as part of a leadership plan

Keys to building Effective Strategic Communications PlansCreate a communication map, a matrix of the critical audiences that need information to take action or make decisions; the key messages that need to be understood; and the channels of communication that will get the messages across to each audience effectively.

Create a timeline for development, implementation and the evaluation method to determine the effectiveness of each communication event.

Communicate the values, vision, mission and the strategy broadly and frequently to ensure widespread understanding and buy-in.

Ensure there are plenty of two-way communications channels – in multiple formats – to encourage dialogue

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Situation Actions Results

RBOC Case Study: The importance of training and acceptance in implementing new technology

Implementing the financial suite of an ERP package with need to have the front-line Outside Plan techs utilize the Project module for all projectsTarget users not ‘technology savvy’ with IT business applicationsInitially, senior management resisted concept of two weeks of training to be performed by the direct supervisorsPrevious ERP efforts at this organization had a history of difficult implementations

Implemented ‘train the trainer’ approachAll supervisors got three weeks training over three months:

• 1 week of application training

• Two days of effective training techniques instruction

• One day of training set up and management

• 2 weeks of delivering the training to their people

• Success was ‘phenomenal’

• Excellent system adoption, very little work disruption

• overall user buy-in and acceptance,

• highly successful roll-out raised the confidence of the organization

• System was rolled out to 3000 people in 17 locations over a three-week time period

Source: Capgemini client case study

Experience has shown that a skeptical, resistant target group is best addressed through it’s direct managers rather than higher-ups or ‘outsiders’

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Case Study: Handling Sensitive Issues in Downsizing Environment

Situation Actions Results

Implementing multiple modules of and ERP suiteMoving to a ‘shared services’ approachEfficiency gains through the technology and shared services approach created need to downsize the organizationFunctional executives needed to plan for and communicate the workforce reduction impacts while maintaining service in the transition periodFocus: Customer Service/Call centers and Finance

Call Centers:Implemented ‘staypay’ programprovided outplacement servicesearly and frequent

communicationsfirst run on other job opportunitiesplanned and focused "lay off"

conversation with local HR and plant directors

Finance:• Limited communications• No local coordination• Reactive vs. proactive

approach

Call Centers:• Successful go-live with no

issues• Employees conscientiously

transferred their duties• Little early departures or work

disruption

Finance:• Rampant and destructive

rumors• Disruption to local plants• Early defections• Missed financial closing

cycles

One organization – two divergent approaches and results:

Source: Capgemini client case study

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SituationGE Before the Transformation

ActionsGE During the Transformation

ResultsThe New GE

GE: A Case Study in Effective Business Change

Failed to generate real earnings growthRewarded seniority, not performanceFocused on CEO satisfaction, not customer satisfactionLagged competition in productivity growthProduced negative operating cash flowFell behind in technology development

Established profit and loss responsibility at the business unit levelSelected leaders with clear vision and an ability to energize others for changeEliminated layers of resistance (unnecessary management) and increased span of controlInvested in education and communicationConducted work out sessionsInvited debate/constructive conflictShifted to new strategy model

Created entrepreneurial spirit and a flexible, innovative culture in a large companyEstablished businesses as market leadersIncreased revenues from $50 billion in 1991 to $100 billion in 1998Grew net income 350% between 1991 and 1998Improved Return on Equity to 25%Significantly increased shareholder value to over $330 billion

Source: Fortune, May 29, 1995; Sales and Marketing Management, February 1995; Control Your Own Destiny or Someone Else Will, Tichy & Sherman, One Source, Analyst Report: Morgan Stanley Dean Witter, 10/98

A dramatic shift in focus and accountability enabled by effective business change, has led to a new organization, exceeding original expectations

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SituationIBM Before the Transformation

ActionsIBM During the Transformation

ResultsThe New IBM

IBM: A Case Study in Effective Business Change

Developed complicated products which did not effectively meet the customers needMissed the technological shift from main frames to PCsMaintained a rigid culture and applied an ironclad dress code

Communicated sense of urgency to changeIntroduced a new leadership teamFocused employees on the customer, on providing customers with one stop shoppingProvided market specific product offeringsEntered new markets, e.g. ChinaAligned compensation to performanceChanged the culture

Increased share of new, high-growth businesses from 7% to 47% of total revenueEmerged as world’s largest seller of software Established a workplace attractive to current and prospective employeesReduced SG&A expenses by 25%Increased Return on Equity to over 29%

Source: Sales and Marketing Management, October 1994; Business Week, May 1, 1995; Wall Street Journal, January 12, 1995, January 19, 1995, February 3, 1995, April 26, 1995, May 15, 1995. One Source, Analyst Report: SG Cowen, 12/98

A dramatic shift in focus and accountability enabled by effective business change has led to a new organization which exceeded the original expectations

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The Nestle USA Team Learned Some Sobering – Yet Familiar, Lessons

Post-Mortem quotes:

“No major software implementation is really about the software. It’s about change management.”

“When you move to SAP, you are changing the way people work. . .you are challenging their principles, their beliefs and they way they have done things for many, many years.”

“much of the employee resistance could be traced to a mistake that dated back to the project’s inception: None of the groups that were going to be directly affected by the . . change . . were represented”

“we were really naïve in the respect that these changes had to be managed”

“morale tumbled . . Nobody wanted to learn the new way to do things . . Why? . . too many competing initiatives . . Y2K . .

“the project team had lost the big picture of how the various components would work together”

Background:June 2000, Nestle signed a massive contract with SAP to implement an ERP solution ($280 million software+consulting)

One analyst immediately downgraded the stock: “It touches the corporate culture . . . That’s risky. It’s always a risk when you touch the corporate culture.”

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The Failure to Enlist Key Influencers and Lack of Strategic Communications Hurt Nestle

Project was re-started . . “begin at the beginning, starting with the business requirements then reaching an end date. They also concluded that they needed better support from key divisional heads and that all the employees knew exactly what changes were taking place, when.”

“the End Game: Sadder but Wiser” Nestle team built a “detailed road map to follow” and hired a director of process change, who “was shocked by the still poor relationship between the divisions and the project team”

Conducted regular surveys of employees readiness to change; based on poor feedback a key module was delayed for six months because users were not prepared

“to do it all over again, . . focus first on changing business processes and achieving universal buy-in, and then and only then on installing the software.”

AppendixChange Management Research Sources

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Sources of Validated Research on Effectiveness of Change Management Approaches

Everett Rogers’ Diffusion of InnovationsRogers, Everett M. Diffusion of Innovations. (4th ed.). New York: Free Press, 1995 − the standard textbook and reference on diffusion studies. Now, in the fourth edition, Rogers presents the culmination of more than thirty

years of research

− Includes review and synthesis of 5,000 diffusion publications.

The Delta TechniqueArmstrong, J. Scott “Strategies for Implementing Change: An Experiential Approach” Group and Organizational

Studies Vol. 7 #4 (1982)

Some selected research analyst statistics:Organization and Process are cited as among the top barriers to improving Network Operations Center capabilities

(Lucent survey of 99 NOCs, 37% of respondents)

Without the appropriate change implementation support, a company spends $3-10 for every dollar invested in the technology to retrofit it to the culture (Gartner Group)

Organizations that under-invest in training are three times more prone to lengthy implementations and cost overruns (Gartner Group, 0.7 probability)

Over 80% of trained users achieve at least 50% productivity improvement over untrained users (AutoCAD User Survey)

Untrained users require three to six times more support than trained users (Gartner Group)

Nearly half of all major technical initiatives fail because of fear and anxiety in the organization, and resistance from key managers (Computer World, 1995)

Contact Information

[email protected]

206-321-1409

10500 N.E. 8th Street

Suite 1400

Bellevue, WA 98004

J. Scott Hyde

Capgemini

www.us.capgemini.com