The Challenge of Leading Strategic Change
I was recently talking with a CEO (I will call her Maria) about a major transformation that she was leading in her company. After several minutes of explaining her change plan, she asked me if I could recommend a good book or article for her to read on leading strategic change. I mentioned that, in fact, I had a book coming out on the topic. Graciously Maria congratulated me and then asked, “So what’s new and different in your book?”
“That’s simple,” I said. “Most other books on change have it backwards. They take an ‘organization-in’ approach wherein they outline all the organizational levers, such as reward systems, organization structures, performance management processes, and so on, that you should pull to lead change based on the premise that if you change the organization, individual change will follow.”
Because the change plan Maria had outlined earlier to me was an “organization-in” approach, she seemed a bit taken aback by my implying that her change plan was wrongheaded. Gathering a bit of courage, I continued, “My research and experience demonstrate that an ‘individual-out’ approach is what works. Lasting success comes from changing individuals first and then using organizational levers to sustain the change. This is because organizations change only as far or as fast as their collective individuals change.” I concluded, “Without individual change, there can be no meaningful organizational change.” Despite having impugned her strategic change plan, my last sentence about organizational change not being possible without individual change seemed to ring true to Maria.
Seeing that she was a bit intrigued, I decided to reinforce my point with an example. I described a large industrial firm that had recently implemented, at no small expense, a new CRM (Customer Relationship Management) system. The system was implemented because much of the knowledge regarding key customers resided in the heads of sales people who had been with the company for a long time and were due to retire in the near future. As a consequence, capturing and systematizing this knowledge made absolute sense. The new CRM system was introduced at a big company conference and sales people were subsequently trained in the new system. However, three months after the celebrated launch, virtually none of the sales people were using the system. Simply changing the system did not change their behavior.
At this point, Maria was nodding her head in agreement, so I pushed ahead with the second example. The second case I described to her was that of a large specialty chemical company in Europe. At the hands of a new CEO and with great fanfare, the company introduced a new organizational structure. One of the key features of the new structure was the consolidation of support services, such as technology, legal, HR, and supply chain, from the business units into global shared service centers. This move was designed both to raise the professionalism of the services and to save money. However, a year after the structure’s celebrated introduction, behavior had not really changed. In fact, most of the business leaders still had their “own people” in their units doing the functional activities (technology, legal, HR, and so on) that were supposed to have been consolidated into the global shared service centers. However, the business leaders were clever enough to hide their noncompliance by giving people new titles. For example, one business leader had changed the title of his HR director to “Head of Intangible Assets.”
Maria laughed at this example, saying that she had seen such incidences more than once in her career. Consequently, I reiterated my key point by stating, “Instead of an ‘organization-in’ approach, effective change needs to take an ‘individual-out’ approach. That is, in order to change your organization, you must first change individuals.” Because Maria seemed basically onboard with all of this, I closed with what some would call a brave statement and others might label as a foolish comment. I closed by saying, “And sometimes, changing individuals means changing yourself as the starting point.”
Maria mused on this final statement for a second or two but then commented, “It’s funny you should say that. As I’ve been thinking about the changes required of my team and other key leaders in order to transform this company, I’ve started to realize that I would need to make some changes in myself and how I lead as well.” At that point our conversation took a bit more personal turn relative to the changes she thought she might have to make.
But let me shift gears and bring this back to you, the reader. Let’s assume for a moment that, like Maria, you agree with my first premise that simply changing some organizational features, such as organizational structures or information systems, will not necessarily cause people to change their behaviors. Let’s further assume that you believe that in order to change your organization, you have to first change the mindset and behaviors of individuals. Even accepting these two key points, you might still ask yourself, “Okay, but do I really need to read a book on this? After all, how tough can leading change really be?”
Unfortunately the answer is that leading successful change is very tough. In my research and experience with more than 10,000 executives, approximately 80 percent of organizational change initiatives fail to meet their objectives. When I present this figure, people often react somewhat along the lines of the following: “Eighty percent? That seems high.” However, if you put this in an everyday context, it is not so surprising. For example, every year millions of people make New Year’s resolutions. Most of those resolutions focus on eating better or exercising more or both. The key question is, “What percentage of people who make these resolutions and say they really want to change their lives are still following through just three weeks after making them?” Sadly it is only about 10–15 percent. If people cannot easily and successfully change their own behavior when they say they want to, why would we be surprised that people have about the same level of difficulty and failure rate when trying to change others’ behaviors, who may not even want to change?
But let’s not quibble about numbers. Other studies suggest that the percentage of organizational change failure is only 50 percent. But whether it is 50 or 80 percent, it is not 30 percent. This is important, because if the failure rate were 30 percent, we might attribute it to the failings of less motivated and skilled managers. But at 50–80 percent, this means that there are many motivated, skilled, and otherwise successful leaders who are nonetheless falling short of their organizational change objectives.