POINT OF VIEW STRATEGIC BUSINESS TRANSFORMATION. Why managing people's "energy-to-change" is key in a successful transformation

Transcription

1 POINT OF VIEW STRATEGIC BUSINESS TRANSFORMATION Why managing people's "energy-to-change" is key in a successful transformation

2 In a business transformation, managers and employees jointly reshape the company's future. This challenging journey highly relies on the organization's "energy-to-change": the willingness, motivation and energy to drive the transformation. To secure a successful business transformation, leaders should know how to build up and maintain energy-to-change throughout the entire transformation journey. Business transformations are omnipresent Companies are operating in environments that are constantly changing, driven by trends in customer demand, competitive dynamics, innovation, new regulation, etc. To secure a sustainable future, a company needs to continuously adapt to the changing environment. Sometimes incremental adaptations are sufficient. However at times, when changes are more fundamental, a big step-change or transformation is needed. Such transformation aims at fundamentally changing the way-of-doing-business by setting a new strategic direction and taking actions to reshape the company's future. Business transformations have become omnipresent. Our recent Chief Strategy Officer (CSO) Survey shows that more than two thirds of companies are currently running a transformation program to adapt business models or implement organizational changes. Making such transformation programs work, highly relies on the organization's energy-to-change. Energy-to-change "Energy-to-change" represents the organization's willingness, motivation and energy to drive the transformation and contribute strongly to reshaping the company's future. Willingness makes employees ready to embark on the transformation journey, whereas motivation helps them to sustain efforts at challenging times and to bring in passion while realizing the company's dream. Additionally people also need extra energy to handle additional work on top of managing the daily business. The latter was also confirmed by our 2014 CSO Survey, indicating that in about 40% of all companies, transformation programs are run by the existing line organization. Typically, energy-to-change can be build up and maintained for a certain period of time, typically one to two years. Hence it is crucial to realize the cornerstones of a business transformation within this timeframe. 2 ROLAND BERGER STRATEGY CONSULTANTS

3 BUILDING UP ENERGY-TO-CHANGE RATIONAL ENERGY-TO-CHANGE Understanding and agreement with business transformation > > Why? > > What? > > How? Passion, inspiration and trust to successfully contribute. EMOTIONAL ENERGY-TO-CHANGE ROLAND BERGER STRATEGY CONSULTANTS 3

4 Combining rational and emotional energyto-change Building up and maintaining energy-to-change requires a focus on people's ratio and emotions. Both factors need to be developed and nurtured in parallel while effectively generating energy-to-change. RATIONAL ENERGY-TO-CHANGE is generated by helping people understand and agree with the need to transform the company, with its future direction and the steps required to realize this future. It relies on a clear story with strong arguments based on objective facts and figures. Typically this story includes three main parts: (1) A burning platform: describing how the company's future will look like when the current path is being followed without changing course, based on expected market developments, industry dynamics and outlook on the company's performance. The burning platform will create consensus on the need to act and transform the company in order to avoid a future downturn. (2) The strategic direction: describing what the company wants to be in the future and why this direction was chosen over other alternative options. Typically this is a summary of a strategic orientation exercise performed by the company before launching the transformation itself. The strategic direction will shape a common goal and vision on the company's future so employees get a good idea on the distinctive direction of the business transformation and why this is the best direction for the company. (3) A roadmap: describing what actions are required over time to transform the company step-by-step in order to realize its desired future. This part will shape transparency on what will be the key activities and changes to be experienced over the transformation period. Naturally the initial roadmap serves as a guiding tool and cannot answer all questions that people might have at the start. During a transformation it is important to continuously update and refine this roadmap and communicate about major decisions and events to reduce people's uncertainty over time. EMOTIONAL ENERGY-TO-CHANGE is generated by inspiring people to dream about the future and by creating an open environment where people feel trusted and encouraged to successfully contribute to the transformation. It requires strong and inspirational leadership to unite people around a common transformation goal and the courage to curb internal politics that could hamper progress. In absence of a strong CEO, leadership should be developed or found before starting the transformation. Two options exist. One is developing or promoting a leader from within the company. He or she has the advantage of knowing the business and of having concrete ideas on what could be improved right away. A second option is to look for an external hire. He or she will have the advantage of bringing along new ideas from other companies or industries while having no historical ties to the company's structure, practices and people that could influence decisions. Building up energy-to-change throughout the organization To kick off the transformation, the CEO needs to build up and disperse energy-to-change throughout all layers of the organization by developing both rational and emotional energy-to-change. This is a gradual and cascading process that starts at the top of the organization, with the CEO and his or her leadership team, and is spread further over senior to middle management, to team leaders and employees. Effectively building up energy-to-change with managers and employees requires an intensive and personal approach, taking time for one-on-one conversations rather than sending s to all employees. As such, the huge task of fueling the entire organization with energy-to-change can never be performed by the CEO alone. At most he or she can fuel ten other senior executives. To further increase the impact, the CEO needs to leverage these ten people to each fuel ten more people and so on. Thanks to this leverage-effect, more than a thousand people can be addressed after just three communication rounds. 4 ROLAND BERGER STRATEGY CONSULTANTS

5 MAINTAINING ENERGY-TO-CHANGE Results Recognition WAYS TO BOOST ENERGY-TO-CHANGE Team spirit MAIN RESTRAINTS ON ENERGY-TO-CHANGE Reassurance Structured program Uncertainty Unclear framework Transformation fans Resistance WAYS TO RELEASE RESTRAINTS ON ENERGY-TO-CHANGE ROLAND BERGER STRATEGY CONSULTANTS 5

6 Three main restraints on energy-to-change Once the organization embarked on its transformation journey, there are three main restraints that could hold back energy-to-change: uncertainty, an unclear transformation framework and resistance from transformation opponents. Good Transformation Management should be aware of these restraints and know how to reduce their impact on the organization's energy-to-change, as we will explain in the next paragraphs. EXPOSURE TO UNCERTAINTY In a transformation people need to leave their comfort zones by letting go of old habits and structures, without having immediate certainty about the alternatives the future will bring. In complex transformations, this uncertainty can last a while as it takes time to prepare decisions and detail concrete action plans especially in case of social impact (e.g. restructuring). The longer this takes, the more people might start questioning the effectiveness of the transformation or develop own truths that are often far away from reality. These effects will ultimately restrain the energy-to-change. UNCLEAR TRANSFORMATION FRAMEWORK Sometimes the framework that describes how the business transformation will be realized is unclear or not well defined. This might lead to overloading key experts that are involved in too many simultaneous projects or ill-defined projects that miss a clear scope, target or proper management of interdependencies and risks. Moreover, decision-making might take unreasonably long if transformation governance and processes are not transparent. Altogether these inefficiencies will distract the organization from its passion and drive to contribute to the transformation. RESISTANCE BY TRANSFORMATION OPPONENTS In a transformation one could distinguish between three groups of employees, each with a different stance towards the business transformation, and hence having different levels of energy-to-change. The first group consists of transformation allies or fans. They are openly supporting the transformation and have high energy-to-change. The other two groups are either undecided (fence-sitters) or against the transformation (opponents). In the early stages of a transformation, the latter two groups represent respectively ~60% and ~20% of the organization. If the group of opponents is not timely reduced by converting them into allies (preferably) or fence-sitters (at least) their share might grow and result in a coalition of people resistant to change. This resistance will negatively impact the overall energy-to-change of the organization. Ways to release restraints on energy-tochange Whereas the occurrence of restraints on energy-to-change cannot be entirely avoided, restraints can be released to a great extent by taking three types of counter-measures as described below. PROVIDE REASSURANCE Releasing restraints on energy-to-change stemming from uncertainty can be done by preventing exposure to uncertainty and by providing reassurance to employees. The first measure aims at limiting wide exposure to uncertainty by carefully deciding on what to communicate to whom in what stage of the transformation. Typically it is advisable to refrain from communicating a restructuring intent in a too early stage. The time that will elapse between announcing this intent and the moment at which individual social impact can be communicated should be kept as short as possible. Hence such projects should be handled confidentially for as long as possible. The second measure aims at coaching people that are exposed to uncertainty and providing them with reassurance and trust a key role to be fulfilled by managers and transformation allies as they should have the conviction and drive to convey such messages. STRUCTURE THE TRANSFORMATION PROGRAM Releasing restraints on energy-to-change stemming from an unclear framework can be done by structuring a solid transformation program. It will ensure clear transformation governance, processes and activities which will allow the organization to focus on building the future, while limiting hurdles and sources of frustration. Such transformation program is often set up and managed by a Transformation Management Office (TMO), a temporary organizational unit that will coordinate, steer and support all transformation activities. In a first step, it will define a series of key projects that altogether shape the entire transformation program. Secondly it will structure and organize these projects, taking into account priorities, dependencies, risks and resource availabilities. Thirdly it will define governance mechanisms to facilitate progress and decision-making and coordinate communication to stakeholders in and outside the company (incl. clients, suppliers, authorities, etc.). When the program is up and running, the TMO will organize coaching sessions and progress meetings with project teams and organize formal steering meetings with the company's leadership team and relevant project leaders to perform efficient decision-making. 6 ROLAND BERGER STRATEGY CONSULTANTS

7 CREATE MORE TRANSFORMATION FANS Releasing restraints on energy-to-change created by resistance from transformation opponents requires effective use of transformation allies or fans. The latter are openly in favor of the transformation and should act as role models to demonstrate desired patterns of behavior. They should be engaged to pro-actively convince opponents and fence-sitters to gradually turn them into transformation allies or fans. This might require a few attempts depending on the individuals' resistance and personal concerns with the transformation. However if resistance remains, it is recommended to stop attempts to convert opponents and focus on the people that are making the difference by driving the transformation forward. As a consequence die-hard opponents will exclude themselves from taking part in the company's future. Ways to boost energy-to-change Along the transformation, people regularly need a boost to maintain their willingness, motivation and energy to successfully contribute to changing the company. To achieve this, Transformation Management can tap into three energy-boosters: results, recognition and team spirit. ACHIEVE RESULTS FREQUENTLY To strengthen the belief in a successful transformation and maintain momentum it is important to achieve first results rapidly (quick-wins) and to keep on realizing results on a frequent basis. To realize this objective, Transformation Management should focus on five elements: (1) Decomposing large targets into multiple smaller milestones that are more tangible and can be reached in a step-bystep approach yielding frequent results (i.e. reaching single milestones). (2) Not getting stuck on hurdles but flexibly adjusting the approach, similarly to taking a different route to a mountain's top when facing too steep roads or heavy weather. (3) Setting priorities and focusing resources on driving 3-5 key projects rather than doing "a bit of everything" in many projects at the same time. (4) Promoting quick decision-making and avoiding over-analysis to maintain the transformation's momentum, by finding a healthy balance between must-do analyses and bold entrepreneurship. In larger companies, Corporate level should recognize that a transformation is an exceptional situation that cannot always be handled through standard procedures. To promote progress Corporate should think of ways to increase the freedom-to-transform. (5) Communicating on results to increase visibility of transformation successes throughout the organization. RECOGNIZE PEOPLE'S CONTRIBUTION A business transformation highly relies on the effort that managers and employees make to contribute to building the company's future. As a transformation can be intense and challenging at times, groups and individuals will benefit from a motivational boost to sustain efforts and take on the next transformation challenge. Therefore Transformation Management should promote the sharing of sincere and personal appreciation and recognition among colleagues. This seems very basic but is too often neglected in the heat of the transformation. Linking financial rewards to transformation targets in employees' bonus schemes can also be done, but is considered much less effective than a sincere "thank you". PROMOTE A POSITIVE TEAM SPIRIT All people in the company have to go through the ups and downs in a transformation. Rather than having a collection of individual experiences, Transformation Management should build a collective experience. By creating a spirit of togetherness and general mobilization people will feel more strongly committed, responsible and proud of taking part in the transformation. Realizing such team spirit requires strong inspirational leadership and leverage of transformation allies and fans. Furthermore transformation projects should be integrated into the same overall goal. This will make clear that multiple teams working on a single project also belong to the overall team that is jointly working to achieve the same overarching goal. In turn, this will stimulate the willingness to help out other project teams when in need. Maintaining high energy-to-change for a successful transformation Leaders in a business transformation should understand the importance of an organization's energy-to-change to secure a successful transformation. When restraints on energy-to-change are not sufficiently released and when no regular energy boosts are given, the transformation is likely to be unsuccessful. Therefore leaders should understand how to build up and maintain energy-to-change throughout the entire program and drive the company to its new future. ROLAND BERGER STRATEGY CONSULTANTS 7

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