Organizational transformation has become a buzzword in almost every sector of the business world these days. It’s no wonder, given the speed and evolution of the competitive environment in many industries, the economic climate and its impact on customers and time-to-market expectations, and the shifting expectations of employees related to remote work, benefits and work/life balance.
But do leaders of organizations really understand the breadth and depth of the term, and more importantly, how to drive meaningful transformation that the collective will get behind and that will make a true difference in the value provided to a firm’s customers?
Let’s start with a definition. At its very basic level, organizational transformation means getting from where you are now to where you need to be in the future to remain a viable, thriving business. Often, it means changing something that has long needed changing. It can encompass a singular part of the business, like a digital transformation, or it can be a change in vision, which is more holistic and involves every part of the organization.
A Harvard Business Review article described organizational transformation as an emotional journey. “One of our most important findings is that, in order for transformation to be successful, leaders must approach it in ways designed to mitigate emotional harm to — and drive emotional commitment from — employees.”
Doomed to Fail?
Back in 1995, Harvard Business School professor John Kotter detailed why 70% of corporate transformation efforts are doomed to fail. His reasons included a lack of urgency, a lack of vision, under communicating that vision and a lack of cultural infusion of the change, among others.
What does it look like when a transformation exercise goes wrong? Evidence of a failed transformation can sometimes be contained to an internal-only recognition—the failure is only visible to employees. In other cases, the failure is visible to customers, which can impact business results.
In our experience, the main reasons why transformations go wrong include:
- Lack of alignment on what the project is seeking to achieve. Different executives could be focused on different metrics (e.g. growth vs. cost cutting), which pushes organizations into failure due to an inability to compromise and communicate how the effort is tied to the strategic intent of the firm.
- A heavy internal focus—and a lack of external perspective. This usually means the organization’s leaders don’t have a good understanding of where the marketplace is headed, so the transformation is guided poorly and is not understood or appreciated by customers.
- Lack of understanding of leadership investment involved in a transformation. Some leaders have a view that transformation doesn’t require an investment in resources— particularly in two areas: leadership capabilities and enabling partnerships with external companies to compensate for a lack of internal capabilities. In this case you can get the strategic imperative right — but then under-resource the nature of the investment that must be made.
- Lack of inclusion of communication teams at the onset of and throughout the project. Many organizations fail to recognize the critical role communication teams play in transformation initiatives. These teams are not simply there to communicate on the day the project is rolled out, or to send updates—communications leaders should be at the table from the beginning to advise on best practices and appropriate inclusion of stakeholders, both internal and external, throughout the process.
Kotter’s analysis holds up over time. More than 25 years later, Harvard Business Review (HBR), through new research and analysis, found that:
- 78% of the companies it reviewed failed at transformation initiatives.
- How companies engage their employees can be the difference between success and failure.
HBR consulted with 60 executives globally to define transformation as “a fundamental shift in the way that an organization conducts business, resulting in economic or social impact.” In its study, it found only 28 of 128 companies “successfully transformed” from both a financial and reputational perspective.
What It Takes to Successfully Transform
Those 28 organizations had a few things in common—higher compensation, stock options and employee satisfaction, certainly. Successful companies also got diversity, equity and inclusion right, HBR said. They all practiced overall equity in hiring, and women managers and women employees overall were present in higher numbers in these firms.
Additionally, we’ve found that these components of change are the foundation for a successful transformation:
- A common understanding within the leadership team about what needs to change and why, and how it connects to the organization’s values. In turn, this needs to be cascaded effectively throughout the organization.
- Effectively enabling working with external partners. Teams that are only used to working with other internal teams must be acclimated to working with external partners to maximize the benefits of that experience.
- Detaching from the way things are today, and finding ways to convey that to employees in a manner that drives excitement and ambassadorship.
- Ensuring that the change becomes embedded in the culture. Leaders must ensure employees understand the connections between the changes in the organization and the results they want to see. Otherwise, employees are left to connect their own dots—and they often won’t.
- Having the right talent in place—both internally and with transformation partners.
- Communication. It’s important to have a strong communication strategy and plan in place for the transformation, from the visionary aspects to the day-to-day changes. Leaving anything to employees’ imaginations will hamper efforts. Overcommunicating the transformation process is key to its success—and leaders must also show, not just tell, employees through their own behaviors.
- Listening to employees. A firm’s employees are the most important part of a transformation. Asking them—and then listening to the answers—about what’s going well and what’s not along the way is important for success.
Let Us Be Your Transformation Advisory Partner
As a consulting firm comprised of former corporate leaders, Oculus has a unique perspective on how organizations can meaningfully approach and drive change. If you are considering a large transformation project, we can help you plan and execute—and your firm will be one of the select few with a success story.
1 Leading Change: Why Transformation Efforts Fail: Compelling lessons from the mistakes companies have made trying to implement change, John P. Kotter, Harvard Business Review May-June 1995: https://hbr.org/1995/05/leading-change-why-transformation-efforts-fail-2
2 The Secret Behind Successful Corporate Transformations, Harvard Business Review, Sept. 2021: https://hbr.org/2021/09/the-secret-behind-successful-corporate-transformations