When French novelist
Jean-Baptiste Alphonse Karr wrote “Plus ça change, plus c’est la même chose,” (the
more things change, the more they stay the same) he could have been penning an
epigram about change management. For over three decades, academics, managers,
and consultants, realizing that transforming organizations is difficult, have
dissected the subject. They’ve sung the praises of leaders who communicate
vision and walk the talk in order to make change efforts succeed. They’ve
sanctified the importance of changing organizational culture and employees’
attitudes. They’ve teased out the tensions between top-down transformation
efforts and participatory approaches to change. And they’ve exhorted companies
to launch campaigns that appeal to people’s hearts and minds. Still, studies
show that in most organizations, two out of three transformation initiatives
fail. The more things change, the more they stay the same.
Managing change is tough, but
part of the problem is that there is little agreement on what factors most
influence transformation initiatives. Ask five executives to name the one
factor critical for the success of these programs, and you’ll probably get five
different answers. That’s because each manager looks at an initiative from his
or her viewpoint and, based on personal experience, focuses on different
success factors. The experts, too, offer different perspectives. A recent
search on Amazon.com for books on “change and management” turned up 6,153
titles, each with a distinct take on the topic. Those ideas have a lot to
offer, but taken together, they force companies to tackle many priorities
simultaneously, which spreads resources and skills thin. Moreover, executives
use different approaches in different parts of the organization, which
compounds the turmoil that usually accompanies change.
In recent years, many change
management gurus have focused on soft issues, such as culture, leadership, and
motivation. Such elements are important for success, but managing these aspects
alone isn’t sufficient to implement transformation projects. Soft factors don’t
directly influence the outcomes of many change programs. For instance,
visionary leadership is often vital for transformation projects, but not
always. The same can be said about communication with employees. Moreover, it
isn’t easy to change attitudes or relationships; they’re deeply ingrained in
organizations and people. And although changes in, say, culture or motivation
levels can be indirectly gauged through surveys and interviews, it’s tough to
get reliable data on soft factors.
What’s missing, we believe, is a
focus on the not-so-fashionable aspects of change management: the hard factors.
These factors bear three distinct characteristics. First, companies are able to
measure them in direct or indirect ways. Second, companies can easily
communicate their importance, both within and outside organizations. Third, and
perhaps most important, businesses are capable of influencing those elements
quickly. Some of the hard factors that affect a transformation initiative are
the time necessary to complete it, the number of people required to execute it,
and the financial results that intended actions are expected to achieve. Our
research shows that change projects fail to get off the ground when companies
neglect the hard factors. That doesn’t mean that executives can ignore the soft
elements; that would be a grave mistake. However, if companies don’t pay
attention to the hard issues first, transformation programs will break down
before the soft elements come into play.
That’s a lesson we learned when
we identified the common denominators of change. In 1992, we started with the
contrarian hypothesis that organizations handle transformations in remarkably
similar ways. We researched projects in a number of industries and countries to
identify those common elements. Our initial 225-company study revealed a
consistent correlation between the outcomes (success or failure) of change
programs and four hard factors: project duration, particularly the time between
project reviews; performance integrity, or the capabilities of project teams;
the commitment of both senior executives and the staff whom the change will
affect the most; and the additional effort that employees must make to cope
with the change. We called these variables the DICE factors because we could
load them in favor of projects’ success.
We completed our study in 1994,
and in the 11 years since then, the Boston Consulting Group has used those four
factors to predict the outcomes, and guide the execution, of more than 1,000
change management initiatives worldwide. Not only has the correlation held, but
no other factors (or combination of factors) have predicted outcomes as well.
The Four Key Factors
If you think about it, the
different ways in which organizations combine the four factors create a
continuum—from projects that are set up to succeed to those that are set up to
fail. At one extreme, a short project led by a skilled, motivated, and cohesive
team, championed by top management and implemented in a department that is
receptive to the change and has to put in very little additional effort, is
bound to succeed. At the other extreme, a long, drawn-out project executed by
an inexpert, unenthusiastic, and disjointed team, without any top-level
sponsors and targeted at a function that dislikes the change and has to do a
lot of extra work, will fail. Businesses can easily identify change programs at
either end of the spectrum, but most initiatives occupy the middle ground where
the likelihood of success or failure is difficult to assess. Executives must
study the four DICE factors carefully to figure out if their change programs
will fly—or die.
Duration.
Companies make the mistake of
worrying mostly about the time it will take to implement change programs. They
assume that the longer an initiative carries on, the more likely it is to
fail—the early impetus will peter out, windows of opportunity will close,
objectives will be forgotten, key supporters will leave or lose their
enthusiasm, and problems will accumulate. However, contrary to popular
perception, our studies show that a long project that is reviewed frequently is
more likely to succeed than a short project that isn’t reviewed frequently.
Thus, the time between reviews is more critical for success than a project’s
life span.
Companies should formally review
transformation projects at least bimonthly since, in our experience, the
probability that change initiatives will run into trouble rises exponentially
when the time between reviews exceeds eight weeks. Whether reviews should be
scheduled even more frequently depends on how long executives feel the project
can carry on without going off track. Complex projects should be reviewed
fortnightly; more familiar or straightforward initiatives can be assessed every
six to eight weeks.
Scheduling milestones and
assessing their impact are the best way by which executives can review the
execution of projects, identify gaps, and spot new risks. The most effective
milestones are those that describe major actions or achievements rather than
day-to-day activities. They must enable senior executives and project sponsors
to confirm that the project has made progress since the last review took place.
Good milestones encompass a number of tasks that teams must complete. For
example, describing a particular milestone as “Consultations with Stakeholders
Completed” is more effective than “Consult Stakeholders” because it represents
an achievement and shows that the project has made headway. Moreover, it
suggests that several activities were completed—identifying stakeholders,
assessing their needs, and talking to them about the project. When a milestone
looks as though it won’t be reached on time, the project team must try to
understand why, take corrective actions, and learn from the experience to
prevent problems from recurring.
Review of such a milestone—what
we refer to as a “learning milestone”—isn’t an impromptu assessment of the
Monday-morning kind. It should be a formal occasion during which
senior-management sponsors and the project team evaluate the latter’s
performance on all the dimensions that have a bearing on success and failure.
The team must provide a concise report of its progress, and members and
sponsors must check if the team is on track to complete, or has finished all
the tasks to deliver, the milestone. They should also determine whether
achieving the milestone has had the desired effect on the company; discuss the
problems the team faced in reaching the milestone; and determine how that
accomplishment will affect the next phase of the project. Sponsors and team
members must have the power to address weaknesses. When necessary, they should
alter processes, agree to push for more or different resources, or suggest a
new direction. At these meetings, senior executives must pay special attention
to the dynamics within teams, changes in the organization’s perceptions about
the initiative, and communications from the top.
Integrity
By performance integrity, we mean
the extent to which companies can rely on teams of managers, supervisors, and
staff to execute change projects successfully. In a perfect world, every team
would be flawless, but no business has enough great people to ensure that.
Besides, senior executives are often reluctant to allow star performers to join
change efforts because regular work can suffer. But since the success of change
programs depends on the quality of teams, companies must free up the best staff
while making sure that day-to-day operations don’t falter. In companies that
have succeeded in implementing change programs, we find that employees go the
extra mile to ensure their day-to-day work gets done.
Since project teams handle a wide
range of activities, resources, pressures, external stimuli, and unforeseen
obstacles, they must be cohesive and well led. It’s not enough for senior
executives to ask people at the watercooler if a project team is doing well;
they must clarify members’ roles, commitments, and accountability. They must
choose the team leader and, most important, work out the team’s composition.
Smart executive sponsors, we
find, are very inclusive when picking teams. They identify talent by soliciting
names from key colleagues, including human resource managers; by circulating
criteria they have drawn up; and by looking for top performers in all
functions. While they accept volunteers, they take care not to choose only
supporters of the change initiative. Senior executives personally interview
people so that they can construct the right portfolio of skills, knowledge, and
social networks. They also decide if potential team members should commit all
their time to the project; if not, they must ask them to allocate specific days
or times of the day to the initiative. Top management makes public the
parameters on which it will judge the team’s performance and how that
evaluation fits into the company’s regular appraisal process. Once the project
gets under way, sponsors must measure the cohesion of teams by administering
confidential surveys to solicit members’ opinions.
Executives often make the mistake
of assuming that because someone is a good, well-liked manager, he or she will
also make a decent team leader. That sounds reasonable, but effective managers
of the status quo aren’t necessarily good at changing organizations. Usually,
good team leaders have problem-solving skills, are results oriented, are
methodical in their approach but tolerate ambiguity, are organizationally
savvy, are willing to accept responsibility for decisions, and while being
highly motivated, don’t crave the limelight. A CEO who successfully led two
major transformation projects in the past ten years used these six criteria to
quiz senior executives about the caliber of nominees for project teams. The top
management team rejected one in three candidates, on average, before finalizing
the teams.
Commitment
Companies must boost the
commitment of two different groups of people if they want change projects to
take root: They must get visible backing from the most influential executives
(what we call C1), who are not necessarily those with the top titles. And they
must take into account the enthusiasm—or often, lack thereof—of the people who
must deal with the new systems, processes, or ways of working (C2).
Top-level commitment is vital to
engendering commitment from those at the coal face. If employees don’t see that
the company’s leadership is backing a project, they’re unlikely to change. No
amount of top-level support is too much. In 1999, when we were working with the
CEO of a consumer products company, he told us that he was doing much more than
necessary to display his support for a nettlesome project. When we talked to
line managers, they said that the CEO had extended very little backing for the
project. They felt that if he wanted the project to succeed, he would have to
support it more visibly! A rule of thumb: When you feel that you are talking up
a change initiative at least three times more than you need to, your managers
will feel that you are backing the transformation.
Sometimes, senior executives are
reluctant to back initiatives. That’s understandable; they’re often bringing
about changes that may negatively affect employees’ jobs and lives. However, if
senior executives do not communicate the need for change, and what it means for
employees, they endanger their projects’ success. In one financial services
firm, top management’s commitment to a program that would improve cycle times,
reduce errors, and slash costs was low because it entailed layoffs. Senior
executives found it gut-wrenching to talk about layoffs in an organization that
had prided itself on being a place where good people could find lifetime
employment. However, the CEO realized that he needed to tackle the thorny
issues around the layoffs to get the project implemented on schedule. He tapped
a senior company veteran to organize a series of speeches and meetings in order
to provide consistent explanations for the layoffs, the timing, the
consequences for job security, and so on. He also appointed a well-respected
general manager to lead the change program. Those actions reassured employees
that the organization would tackle the layoffs in a professional and humane
fashion.
Companies often underestimate the
role that managers and staff play in transformation efforts. By communicating
with them too late or inconsistently, senior executives end up alienating the
people who are most affected by the changes. It’s surprising how often
something senior executives believe is a good thing is seen by staff as a bad thing,
or a message that senior executives think is perfectly clear is misunderstood.
That usually happens when senior executives articulate subtly different
versions of critical messages. For instance, in one company that applied the
DICE framework, scores for a project showed a low degree of staff commitment.
It turned out that these employees had become confused, even distrustful,
because one senior manager had said, “Layoffs will not occur,” while another
had said, “They are not expected to occur.”
Organizations also underestimate
their ability to build staff support. A simple effort to reach out to employees
can turn them into champions of new ideas. For example, in the 1990s, a major
American energy producer was unable to get the support of mid-level managers,
supervisors, and workers for a productivity improvement program. After trying
several times, the company’s senior executives decided to hold a series of
one-on-one conversations with mid-level managers in a last-ditch effort to win
them over. The conversations focused on the program’s objectives, its impact on
employees, and why the organization might not be able to survive without the
changes. Partly because of the straight talk, the initiative gained some
momentum. This allowed a project team to demonstrate a series of quick wins,
which gave the initiative a new lease on life.
Effort
When companies launch
transformation efforts, they frequently don’t realize, or know how to deal with
the fact, that employees are already busy with their day-to-day
responsibilities. According to staffing tables, people in many businesses work
80-plus-hour weeks. If, on top of existing responsibilities, line managers and
staff have to deal with changes to their work or to the systems they use, they
will resist.
Project teams must calculate how
much work employees will have to do beyond their existing responsibilities to
change over to new processes. Ideally, no one’s workload should increase more
than 10%. Go beyond that, and the initiative will probably run into trouble.
Resources will become overstretched and compromise either the change program or
normal operations. Employee morale will fall, and conflict may arise between
teams and line staff. To minimize the dangers, project managers should use a
simple metric like the percentage increase in effort the employees who must
cope with the new ways feel they must contribute. They should also check if the
additional effort they have demanded comes on top of heavy workloads and if
employees are likely to resist the project because it will demand more of their
scarce time.
Companies must decide whether to
take away some of the regular work of employees who will play key roles in the
transformation project. Companies can start by ridding these employees of
discretionary or nonessential responsibilities. In addition, firms should
review all the other projects in the operating plan and assess which ones are
critical for the change effort. At one company, the project steering committee
delayed or restructured 120 out of 250 subprojects so that some line managers
could focus on top-priority projects. Another way to relieve pressure is for
the company to bring in temporary workers, like retired managers, to carry out
routine activities or to outsource current processes until the changeover is
complete. Handing off routine work or delaying projects is costly and
time-consuming, so companies need to think through such issues before kicking
off transformation efforts.
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