Opportunities for Action

Transcription

1 Transformation: How to Load the Dice in Your Favor Whether for strategic, financial, or technological reasons, companies today are increasingly finding that they must completely transform critical elements of their businesses. As a result, the ability to manage such efforts quickly, effectively, and confidently has become an important source of competitive advantage and shareholder value. The problem, however, is that transformation, by its very nature, severely stretches organizations often pushing skills, resources, and comfort levels to their limits. Compounding the challenge is the fact that there is no commonly accepted way to know at the outset if a transformation program and its components are set up for success, failure, or mediocrity. Indeed, different managers and employees are bound to view the same program differently, focusing on different strengths or weaknesses on the basis of widely varying past experiences. At the same time, dozens of change management books and experts have found different actions to be the absolute key to success. The varying perspectives on change are not necessarily incorrect; to the contrary, many have much to offer. But given the uncertainties and resource constraints present within companies, the big issue is a matter of focus. Which conditions actually govern the change process? Which factors matter most? How do these conditions and factors vary among different initiatives? Our analysis based on The Boston Consulting Group s work and studies of more than 200 transformation efforts undertaken around the world and in a broad range of industries reveals that a few common elements determine the outcome of almost all change projects. Success or failure ultimately comes down to a combination of the following: The duration of the project or the time between major review milestones The performance integrity of the project team The organizational commitment to change, specifically that of senior managers and local-area staff The additional organizational effort required for implementation above and beyond usual work requirements Of course, these four elements are not surprising in and of themselves. What is significant, however, is that when taken together and considered properly they offer a litmus test for assessing the probability of success of a given project or set of projects. What s more, they help shine a spotlight on some very specific actions that can improve the probability of success even before implementation begins. With these elements, business managers embarking on major change programs can, in effect, load the dice, stacking the odds in favor of successful implementation. DICE: The Four Key Elements of Change The four elements we have identified, which we refer to as DICE, 1 together constitute a simple continuum from projects that are set up to succeed to those that are set up to fail. Projects at either end of the spectrum are easy to identify. A short project led by a cohesive, highly skilled, and motivated team, championed by senior management, and implemented in an area receptive to the change is clearly set up to succeed. By contrast, a lengthy project with ill-defined mile- 1. DICE is a registered trademark of The Boston Consulting Group. THE BOSTON CONSULTING GROUP 1

2 stones, led by a poorly skilled, unmotivated team, and implemented in an area that is resistant to the change and would be required to perform significant additional work during implementation will almost certainly fail. In reality, however, many change projects occupy the middle ground, where the likelihood of success or failure is much more difficult to assess certainly in the early stages of the project. For instance, if a project is short and has a great team in place, but senior management commitment is unclear and implementation requires a good deal of additional effort from a reluctant staff, what is the likelihood of success? We have found that the answer lies in a thorough consideration of each of the four elements. For instance, with regard to duration, the key is not necessarily how long or short a project is but how well the milestones are structured. Do the milestones occur regularly? Do they permit a meaningful review of tangible progress? Similarly, when it comes to establishing a project team, it is essential that the group not only possess sufficient technical skills and a capable team leader but also show strong commitment and cohesiveness. Does the team exhibit a sense of purpose? Are the objectives clear to all members? (For more detail on points of consideration for each of the elements, see Exhibit 1.) In fully evaluating the four elements, it is especially helpful to use a standard scoring mechanism in essence, an objective framework for making what are inevitably subjective assessments. The worth of providing an objective framework for subjective judgments is well known. What s more, a common scoring mechanism broadly applied forces managers to adopt a systematic approach. In other words, it ensures that projects will be evaluated in a consistent manner across the entire organization rather than handled differently depending on the standpoint of specific individuals or departments. Exhibit 1. The Four Elements of DICE D I C E The time (DURATION) until the project or the next learning milestone is completed A learning milestone is a predetermined stage in implementation when project strengths, weaknesses, and progress against key indicators are formally assessed The performance INTEGRITY of the project team, including Capable and respected leadership Clear objectives Appropriate resources and organizational skills The COMMITMENT to the change, including The attitudes of the local area undergoing the change The visible commitment of senior management The additional amount of local EFFORT required during implementation The ongoing effort required to maintain existing operations, while simultaneously implementing change, is a critical and often overlooked consideration SOURCE: BCG analysis. Finally, using a scoring system makes it possible to combine the ratings of the four key elements mathematically, thereby establishing a unified project assessment. By comparing project scores with a sufficiently large set of past experiences, simple statistical analysis can be reliably and quickly used to predict the likely outcome of any project. For instance, BCG developed a formula that generates an overall DICE score ranging from 7 to 28. When we calibrated the results of our database of change projects, representing more than 20 million person-hours of companies experiences, the analysis generated a clear and compelling distribution of outcomes. Indeed, the analysis allows us to assess objectively whether any given project falls into one of three broad categories: win, meaning the project is statistically likely to succeed; worry, meaning the project s outcome is unpredictable; or woe, meaning the project seems preordained for mediocrity or outright failure. 2 (See Exhibit 2.) 2. The DICE formula and supporting database are BCG intellectual property, with a patent pending in the United States. For more information about the DICE methodology, please contact the authors. THE BOSTON CONSULTING GROUP 2

3 Exhibit 2. DICE Scores Range from Win to Woe Actual outcome 1 12 WIN Highly successful Mediocre Highly unsuccessful To be sure, in calculating DICE scores, not everyone evaluating the same project is likely to produce identical assessments. But far from diluting the value of the exercise, these differences in scoring are an important aspect of using DICE. Whether a project has a value of, say, 18 or 20 on our scale is not the primary issue. What is important is the ongoing dialogue that results from such different assessments, provoking the participants and engaging them in debate regarding such questions as, Why do we see the project in these different ways, and what can we agree to do to ensure that it will succeed? Using DICE to Win WORRY WOE DICE score SOURCE: Analysis of DICE database. NOTE: Superscribed numbers represent the number of projects with that particular DICE score and actual outcome. Discussions among senior managers and project teams based on the elements of DICE and what the assessments say about the likelihood of a project s success are extremely powerful. Issues that may not have been apparent until well into the program are immediately brought to the surface and addressed. Collectively, various projectlevel discussions using the common framework will inform an overall program-level judgment on how implementation is proceeding and highlight what actions, interventions, and tradeoffs may be required to maximize the likelihood of success. Take the case of a large retail bank that undertook a total restructuring of its back-office operations. At the project s outset, the bank s managers agreed on the rationale for the change and the specific objectives. At the same time, however, each had a different view of whether the bank was likely to achieve the objectives, which would require major changes in processes, behavior, and organizational structure. In fact, several managers had real doubts about whether the effort would succeed. Yet the concerns either weren t consistent or weren t made explicit. Bringing all parties together long enough to air their opinions and then sort out their differences before commencing broad implementation proved to be impossible. A decision to analyze the project using DICE and the judgments of key stakeholders and senior managers collapsed into a highly productive two-hour meeting what would have required at least two full days of debate. The focus on the four key elements generated a clear picture of the project s fundamental strengths and weaknesses. For instance, the restructuring would take more than eight months to implement. Also, although the project team s performance integrity was good and senior management showed reasonable commitment to the effort, the backoffice work force was very resistant to change. Furthermore, managers and back-office employees agreed that the people involved would need to muster an additional 10 to 20 percent of effort, on top of current commitments, throughout the course of the project s implementation. On our scale, the project scored a 21 well into the woe zone. The good news was that the assessment and scoring exercise led the managers to a clear view of what steps they could take to increase the THE BOSTON CONSULTING GROUP 3

4 odds of success before they started the project rather than weeks or months into implementation. For instance, the bank decided to split the project timeline into two parts. Doing so allowed the bank to schedule meaningful review points more frequently and to maximize up-front learning before it took on the most complex aspects of the transformation. In addition, to improve commitment, the bank decided to devote more time than initially planned to explaining to staff and unions why the changes were necessary. It also took a closer look at the people who would be involved, reconfiguring some of the project teams and particularly the leadership. Finally, senior managers made a more concerted effort to show their own commitment to the endeavor. Taken together, the bank s overall set of planned actions moved the project s rating on our scale to an 11 shifting it to well within the win zone. The bank s change project proved to be a major success. Looking back, many of those involved noted that their achievement was the result of getting to the heart of the matter. The bank s managers and employees were able to focus on the basic facts concerning their situation; and by doing so, they avoided the disagreements and wheel spinning that plague so many other efforts. As a result, they were able to act quickly and decisively despite the inevitable uncertainty, resource constraints, and unexpected twists and turns that come into play every time organizations attempt to significantly change the way things are done. Taking Luck Out of the Equation Many commentaries (and assumptions) about organizational change treat it as a linear progression a predetermined series of tasks and events that can be completed and ticked off. In this approach, elements of the change process are dealt with as though they were the components of a large machine in need of service. In reality, however, the ways in which organizations behave and respond to change are much more analogous to what happens in living systems: progress is nonlinear, dynamic, and subject to multiple feedback loops. Here the common dialogue concerns not precise cause and effect but rather feedback, interdependence, selection mechanisms, probability, and behavior. Of course, the reason why organizations and the way they evolve resemble living systems is that they are dependent on people. Across companies and industries, people tend to behave in certain similar ways, respond in similar ways, and ultimately share similar aspirations. Unfortunately, despite their many commonalities, people acting within organizations often lack a common, pragmatic language for understanding and analyzing joint projects. Instead, prejudices, different perspectives, and a reluctance or inability to speak up can block effective discussion, decision making, and execution. The result, in our experience with the change process, is that people and organizations alike are too often influenced by chance. Some get badly burned when change fails not because of their lack of competence but because of the structuring of the particular project. Others may succeed, owing, in people s minds, to great skill but in reality because luck happened to smile on the project. An approach based on DICE is not a silver bullet. It augments rather than replaces other frameworks and tools that may already be applied in understanding and mastering large-scale organizational change. It also does not make it any easier to resolve vital program-management issues such as setting the vision and performance tar- THE BOSTON CONSULTING GROUP 4

5 gets, structuring and developing project teams, delivering quick wins, and engaging major stakeholders. Such matters all require considerable experience and skill. We have found, however, that an approach that leverages the elements of DICE, and the candid dialogue it helps create, ensure that organizations efforts are focused on the most critical factors of success. And in doing so, the approach allows organizations in planning as well as in deed to reduce the influence of luck on successful change management. Because, in the end, if an organization has the right teams involved and influential leaders clearly backing them, if employees are not overwhelmed with too much work, if objectives are clear, and if transformation is moving at the right pace and meeting explicit milestones, then the chances of success are much improved. Remember that business competition is no different from any other type of competition: skill and strategy are essential; but to really improve your odds of winning, it helps to load the dice. Perry Keenan Alan Jackson Harold L. Sirkin Perry Keenan is a manager in the Auckland office of The Boston Consulting Group and the firm s global topic leader for rigorous program management and implementation. Alan Jackson is a senior vice president and director in BCG s Sydney office. Harold L. Sirkin is a senior vice president and director in the firm s Chicago office and head of the firm s global Operations practice. You may contact the authors by at: keenan.perry@bcg.com jackson.alan@bcg.com hal.ops@bcg.com The Boston Consulting Group, Inc All rights reserved. THE BOSTON CONSULTING GROUP 5