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December 2011: In This Issue

Feature Article

The need for change is greater than ever. Leading successful change has become increasingly difficult. Research suggests that over 70% of transformation efforts fail.

John P. Kotter, retired Professor of Leadership at Harvard Business School, has spent his career researching organizational transformation.  Based upon his studies, Kotter has identified the following eight stages integral to effectively “Leading Change”:

• Establish a sense of urgency
• Form a powerful, guiding coalition
• Create a vision
• Communicate the vision
• Empower others to act on the vision
• Plan for and create short term wins
• Consolidate improvements and produce more change
• Institutionalize new approaches

Following are important insights into each of Kotter's critical stages:

Establish a sense of urgency:

All successful transformations require leadership and employees to get outside their “comfort zone”.  To effectively begin to maneuver from a culture of comfort, management must create a compelling, urgent case for why “the status quo seems more dangerous than launching into the unknown”.  This case must be strong enough to convince a majority (>75%) of the management team that “business as usual” is no longer acceptable. Absent the creation and acceptance of this urgent case for change, the transformation initiative will likely not gain the necessary traction to move forward.

Form a powerful, guiding coalition:

Once a sense of urgency has been established, the formation of a powerful leadership coalition is necessary to effectively promote and manage the change initiative. The development of this coalition occurs over time. It is not uncommon for key executive members to not be part of this coalition due to their initial lack of buy-in.  In many instances, board members or other outside parties may play an integral role as part of the coalition. The success of this important group inevitably will be built on a foundation of shared interest, trust and open communication. Lacking these three components, the coalition will likely fracture, thereby stifling the transformation effort.  

Create a vision:

One of the primary goals of the guiding coalition is to create a vision of the future that helps clarify the new corporate direction. This vision normally is responsive to the compelling case originally set forth in the first stage to launch the transformation effort. The vision serves as the foundation to establishing a detailed strategy supporting the change initiative.  A high correlation exists between being able to easily articulate the vision and the ultimate success of the change effort. The ability to understand the vision by all parties is necessary to align the important projects that will be critical in achieving the ultimate goals of the change initiative.

Communicate the vision:

Transformation is not possible without the clear acceptance of the vision from a majority of the organization. This widespread acceptance is only obtained through conscious and continuous communication through multiple channels over an extended period of time. A single, employee meeting is not enough. Leadership can never “over communicate” its vision. During this stage, nothing is more important than management reinforcement of the vision by their “walking the talk” and becoming role models of the new corporate culture. Having key management’s actions run contrary to the vision is a sure means of subverting the entire transformation effort.

Empower others to act on the vision:

Once the majority of the organization has rallied behind the new vision, executive management must create a culture where employees feel emboldened to take those steps necessary to change individual actions and behaviors. This often requires realignment of the organizational structure, key roles and overall responsibilities. The goal during this stage is for management to eliminate major obstacles as employees seek to effectively implement new processes, ideas and behaviors. Action by management during this stage is essential. Absent noticeable changes to the organizational structure and culture, the likelihood of success is significantly diminished.  

Plan for and create short term wins:

Having begun the necessary cultural and organizational realignment, management’s focus turns to ensuring that employees feel a continual sense of achievement toward the fulfillment of the vision. This requires active management participation. Momentum toward the ultimate goal has to be maintained.  Successful leaders consciously create short terms goals to meet and celebrate as a means of keeping the team motivated on the longer term vision. This proactive, ongoing process requires leadership to actively seek performance improvements consistent with the expressed vision, establish small, achievable goals and reward performance as those goals are realized.  This necessary process serves to reinforce the momentum required to continue the transformation process.

Consolidate improvements and produce more change:

Many transformations fail due to leadership declaring victory long before the cultural aspect of change has become institutionalized.  Leaders instead need to focus on the credibility established by the continuous celebration of short term wins as a means of tackling the sustaining, larger challenges. Transformation is a lengthy, continuous process. Leaders need to be focused during this stage on ensuring that the less effective “traditional” habits do not overtake the new cultural processes. Continued celebration is necessary; declaration of victory is to be avoided.

Institutionalize new approaches:

Once the desired cultural change has become a way of doing business, the transformation process begins to become permanent.  New, positive behaviors, now rooted in norms and values, begin to serve as the basis for continuing the necessary transformative activity. Successful leaders during this stage focus on showing employees how the new behaviors have become instrumental in improving performance from the former business model. Just as important during this stage is for management to begin planning for the next round of leadership embodying the new, transformative behaviors. Absent employees perceiving the benefits of "living" the new vision and upcoming management accepting the vision as the company’s future, the culture will quickly degrade to the prior, less effective business practices.

Summary:

Transformation is a lengthy, continuous, culturally embedded process. Its progress cannot be expedited. Continuous focus and planning during each key stage, as set forth by Kotter, is required. Maintaining visibility and top priority of the process is a critical role of management. With effective leadership, focus on culture, and robust planning, your efforts at leading change can be successful in achieving the new vision you may hold for your organization.

 

Book Review

Jim Collins, former Stanford University professor, has been publishing ground breaking research on what distinguishes great companies for over two decades. His earlier books “Built to Last” and “Good to Great” are classics for guiding leaders on how to build sustaining organizations. In “Great by Choice”, Collins addresses, the revealing question of “Why do some companies thrive in uncertainty, even chaos, and others do not?”

Great begins with an introduction of the concept of the 10xer; those companies that beat their industry stock market return index by a factor of at least 10 times over the period of 1972 to 2002.  Collins attributes the 10xer’s superior market performance to three core behaviors of the organization and their leaders:  fanatic discipline, empirical creativity and productive paranoia.  Underlying these core behaviors is a trait first introduced in “Good to Great” as an integral part of Level 5 leaders; “they’re incredibly ambitious, but their ambition is first and foremost for the cause, for the company, for their work, not themselves”.

Having defined fanatic discipline, empirical creativity and productive paranoia, Collins then introduces those critical concepts supporting each behavior. These concepts include “the 20 Mile March”,  Firing Bullets First and then Cannonballs” Leading above the Death Line”,  Zooming Out and Then Zooming In, and the SMaC Recipe. Each concept provides key insights as to the inner workings of the 10xer’s that distinguished them from their competitors, many of whom did not survive the time period covered by his study.

Insights arising from these key, 10xer concepts include:

The 20 Mile March requires hitting specified performance markers with great consistency over a long period of time. It requires two distinct types of discomfort, delivering high performance in difficult times and holding back in good times. Lacking the discipline of a 20 Mile March, competing companies often had at least one episode which resulted in a major setback or calamity.

A bullet is a low cost, low risk, and low distraction test or experiment. 10xers use bullets to validate what will actually work. Based upon that validation, they then concentrate their resources on firing a cannonball, enabling large returns from concentrated bets. This effective process was in contrast to those competitors who often fired uncalibrated and untested expensive cannonballs, many of which missed the mark and led to financial and organizational crisis.

Leading above the Death Line and Zooming Out and Zooming In are key dimensions of productive paranoia.  10xer’s understood that they cannot reliably and consistently predict future events. They prepared obsessively, ahead of time, all the time, for what they could not possibly predict. They built buffers and shock absorbers, keeping them above the Death Line and in far better condition than their competitors.  When they sensed danger, they immediately Zoomed Out to consider how quickly a threat was approaching and then Zoomed In to refocus their energies on targeted successful execution to respond to the danger. This was in contrast to many of their industry peers who failed to prepare any contingency plans for “the worst case scenarios”.

A SMaC recipe is a durable set of operating principles that create a replicable and consistent success formula. It is Specific, Methodical and Consistent. The more uncertain, fast-changing, and unforgiving an environment, the more SMaC is required for sustainability.  10xers exhibited a far higher degree of SMaC during challenging times than their less successful competitors who often floundered in executing late and in an unfocused fashion when it was most important.

Collins concludes Great by Choice with a discussion of the role luck played in the sustainability of the 10x companies.  Great provides valuable, empirical evidence into what sets special companies apart from their competition. A careful reading provides all leaders with a real life perspective as to where their organization needs to be today….and tomorrow…. to survive these challenging and uncertain times.

See Change Management assists leaders in making personal and organizational transformations through
leadership coaching, team building, strategic planning and financial restructuring.