Organization Transformation

POINT OF VIEW

CHANGING BEHAVIORS TO DRIVE GROWTH AND PERFORMANCE A ROADMAP TO OVERCOMING RESISTANCE AND ACHIEVING SUCCESSFUL TRANSFORMATION

For most executives and senior leaders today, the consequences of not

transforming organizations at the right moment or of managing change

poorly are much more visible and more widely understood. Once-successful

companies considered “too big to fail” have done just that, by not addressing

performance issues in time, by sticking to a flawed strategy in the face of

disappointing results or by simply not embedding the required behaviors to

deliver sustainable results.

Copyright © 2013 Oliver Wyman 2

OVERCOMING OBSTACLES TO CHANGE

The first thing leaders of change have

to realize, as they prepare to turn

everybody’s life upside down, is this

one simple truth: for the foreseeable

future nobody is going to love them

for what they’re about to do.

For most people, the notion of

dramatic change is downright scary.

The natural response is resistance;

it might not be obvious or overt, but

rest assured it’s there. The depth

of this resistance bears a direct

correlation to the scope and intensity

of the change at hand.

Because resistance is so common,

learning to overcome it is crucial

to managing change at every level.

The issues inherent in transitions

present problems and challenges

no CEO can handle without the

active support of senior executives

and middle managers up and

down the line.

– David A. Nadler

Champions of Change, How CEOs

and their Companies are Mastering

the Skills of Radical Change

ACCELERATING SUCCESSFUL BEHAVIOR CHANGE

Why is it that about two-thirds of major organizational transformations still fail

to achieve their stated goals, despite the reality that “ability to lead change”

is now a required core competency in most leaders’ job descriptions? From

experience, we’ve learned that most efforts derail because people are not

fully engaged in, or committed to the transformation and don’t adopt new

ways of working that will sustain changes for the long term. When we analyze

change efforts that are in trouble, what we see most often is that one or more

of the following has been forgotten or taken for granted:

SETTING CLEAR AND SHARED OBJECTIVES FOR THE TRANSFORMATIONIt’s difficult to motivate people to support – let alone drive – a trans formation

effort if they’re at all fuzzy about what the organization is trying to achieve,

what the desired end state looks like, and why they might care about

getting there.

ENGAGING LEADERS IN THE CHANGE PROCESSFailure of leaders at all levels to engage their teams and act as role models

for the change is a sure path to disappointment. Any whiff of dissension

or misalignment among the senior leaders over the fundamental strategic

direction of the change – as opposed to the details of how to get there – will

encourage people to retreat into wait-and-see mode and ultimately delay

the application of new ways of working.

OVERCOMING RESISTANCE TO CHANGEChange is a journey – creating an emotional connection to the future is

an essential ingredient to initiate movement. Likewise, providing tools,

training and time while building awareness, understanding and ultimately

commitment, are all keys to overcoming resistance.

PERSISTENCE, FOLLOW THROUGH, AND ACCOUNTABILITYSome leaders confuse the direction to “make it so” with an actual

transformation. Many leaders vastly underestimate the resources,

time, and effort that will be required to execute well. Unclear

accountability, insufficient attention to managing risks, and lack of

regular monitoring against clear targets are all factors we see at play

in organizations that are struggling to execute or sustain change.

The necessity of paying attention to all these issues does not really come

as a surprise to executives when we identify the weaknesses we see. The

challenge is that most were already working flat-out on their day jobs when

the transformation effort was added into the mix. Trying to manage both

during a major transformation – lasting months or even years – is not a

sustainable proposition.

Copyright © 2013 Oliver Wyman 3

CHANGING BEHAVIORS TO CLOSE THE PERFORMANCE GAP AND ACHIEVE SUSTAINABLE RESULTS

Organization transformation can be a messy and

difficult journey – especially because it typically

requires people to join a journey, not of their choosing.

In our experience, the likelihood of staying on course

and reaching the destination goes up dramatically if

leaders focus on six key elements on which they must

personally engage.

We know that at the launch of any major transformation

effort, productivity will immediately go down as

people turn their attention to mentally processing

what’s happening and what it might mean for them.

A disciplined, well-executed change plan can make

this gap smaller and close it faster. It can minimize the

transition costs – in terms of actual funds expended

and time before benefits are realized – and also the

soft costs of disruption to customers, employees,

and shareholders...clearly elements of success.

1. ESTABLISH THE VISION AND ARTICULATE THE CASE FOR CHANGE

A clear view to where the organization is heading and a strong business rationale is essential.

The fact that this mantra is repeated in every discussion of change doesn’t make it any easier

to do. Leaders are often very clear in their own minds why the organization must move in

different directions, but struggle to put it into terms that will resonate with others.

What is the key business challenge the transformation is addressing? Outdated strategic

positioning coupled with increased threats from new competitors? Costs going up while

revenue stays flat? Exodus of key talent? Loss of ability to innovate? Whatever the reason

driving the need to transform, it’s important to set measurable (and achievable) targets that

ground the change in something concrete. Doing so helps people to see the destination,

and understand how they’ll know when they’ve reached it and clearly links the vision

to the expected benefits from the perspective of the shareholders, the company and

the employees.

Although change can be complex, using the power of leaders communicating and cascading

to leaders, with patience, persistence and commitment, top leaders can share and establish

the case for change with hundreds of middle and front line managers who can ultimately

reach the front line employees.

EXHIBIT 1: DEFINING SUCCESS

TIME

Response to change if transition is well-managed

The typical response to change

PRODUCTIVITY

Source: Adapted from William Bridges’ Managing Transitions

“ Transformation is a

strategic imperative. It is

the CEO’s job to manage

the transformation. To

speed it up if necessary.

It means overcoming

any resistance to change

in the organization. It

means disrupting the

status quo. The CEO

has to communicate

his vision, and to keep

everybody on board.”

SCOTT DAVIS

CEO, UPS

Copyright © 2013 Oliver Wyman 4

EXHIBIT 2: A SENIOR TEAM THAT THINKS AND ACTS AS A TEAM IS A MUST-HAVE FOR SUCCESS

CEO LEADING THE CHARGE EXECUTIVE TEAM LEADING THE CHARGE

DECIDING TO PULL THE TRIGGER

• Making sure you have a license for change (board approval, ...)

• Confirming your hunches on the vision, case for change and future state

EMBARKING THE EXECUTIVE TEAM

• Building the case for change (why, what, how, when)

• Building the target blueprint

• Taking ownership of the change

• Adjusting the team as/ if necessary

MOBILIZING THE LEADERSHIP COMMUNITY

• Communicating the case for change

• Presenting the new organization principles

• Ensuring buy-in, leading by example

• Addressing pockets of resistance

• Engaging leaders in thematic workstreams

EMBARKING THE WHOLE FIRM

• Rolling out the new organization

• Leading change (envisioning, energizing, enabling)

• Providing guidance and coaching

• Monitoring and managing change

2. ENGAGE AND DEVELOP AN ALIGNED LEADERSHIP COMMUNITY

A cornerstone of the foundation is the engagement strategy. Once again, skipping steps

in this process in the interest of speed often leads to circling back and time wasted.

Engagement starts with a shared vision and a definition of the future state. Then, there

needs to be a clearly defined mandate with the associated resources and a clear view of the

expected returns. Next up is gaining alignment among the senior leaders who will play key

roles in making change happen and/or influence how others will view it.

Gradually the circle of engagement widens to the larger leadership community. Time

spent with front-line managers in advance of broader communication is a wise investment.

Employees will listen to messages from the top, but then turn to their direct managers to

understand what it really means to them. If managers are taken by surprise, the risk is they’ll

speculate wildly or wonder out loud whether senior management knows what they’re doing.

Briefed in advance and equipped to answer questions, they can be supportive change agents.

“ In an uncertain

environment, people

naturally look for

leadership. They are

looking for a vision.

If you are honest

with them and if you

consistently walk the

talk, the organization

will start to believe.”

PETER CUNEO

former CEO,

Marvel Entertainment

Copyright © 2013 Oliver Wyman 5

3. TAKE A SYSTEMATIC PERSPECTIVE LINKING STRATEGY AND ORGANIZATION

We think of organizations as systems – where strategy in response to external drivers

ultimately defines organizational performance. In a high-performing organization,

there is a high degree of congruence or “fit” among the major building blocks.

work. While some organization systems are more favorable for cost reduction and

operational efficiency, others are capable of unleashing the potential for growth.

Whenever anything changes in any one of these – the environment, the strategy, the

people, the work, or the formal and informal organization – the whole system goes out of

whack and performance suffers. Tinkering with one piece without analyzing the impact

on the whole can be dangerous.

EXHIBIT 3: THE CONGRUENCE MODEL INTEGRATES THE VARIOUS ELEMENTS OF TRANSFORMATIONAL CHANGE

Strategy WorkFormal

organizationPerformance

Informal organization

People

State at departure, constraints, resources and environment

OUTPUT

Desired state,behaviors andoperatingmodel and performance

INPUT

Note: Congruence Model: Tushman/Nadler

“ With Airbus’ current

decision making

process, you can easily

lose 3-6 months. We

want to recreate the

sense of operating as

multifunctional teams

on a local level.”

FABRICE BREGIER

CEO, Airbus

4. IDENTIFY DRIVERS TO SHAPE BEHAVIOR

To change behavior, it’s important to understand its roots in the organization. Behavior is

shaped by organizational systems, policies, and practices, as well as leaders’ behavior.

Changing employee behavior requires changing those aspects of the organizational context

that produce or “drive” the behavior – examples include: compensation, professional and

career development, performance metrics, and the mechanics of recognition and reward.

Considering these drivers and the extent to which each driver supports or inhibits the

desired behavior is key to aligning desired behaviors to the vision, future state and ultimately

the desired performance outcomes.

Copyright © 2013 Oliver Wyman 6

“ The leader must shift the

culture, the employee

mindset, from living with

the status quo, to one

that celebrates success.”

JIM SKINNER

former CEO,

McDonald`s

EXHIBIT 4: CULTURAL DIMENSIONS AND BEHAVIORS TO ALIGN WITH STRATEGIC PRIORITIES

STRATEGIC WHAT PEOPLE FOCUS ON

WORK HOW PEOPLE APPROACH THEIR WORK

INTERPERSONAL HOW PEOPLE WORK TOGETHER

External Orientation

• Competitor focus • Customer focus

Corporate Responsibility

• Corporate responsibility

Process excellence

• Cost sensitivity • Discipline/rigor • Quality/excellence

Growth

• Partnerships • Acquisitions

Autonomy

• Independence • Uniqueness

Adaptability

• Flexibility/adaptability

Entrepreneurial spirit

• Entrepreneurship • Innovation • Creativity

Learning Orientation

• Learning orientation

Future Orientation

• Future orientation

Enthusiasm

• Energy • Optimism

Bias for Action

• Calculated Risk-taking • Speed • Aggressiveness • Results orientation

Personal Responsibility

• Personal responsibility

Cooperation

• Cross-unit collabration • Teamwork • Collegiality

Informality

• Fun • Informality

Ehtics

• Integrity • Respect • Acceptance of diversity

Openess

• Open debate/courage • Openess/honesty • Trust

Diplomacy

• Diplomacy

5. ANTICIPATE AND MANAGE RISK – MANAGING THE EMOTIONAL RESPONSE

Leaders are continually surprised by others’ “irrational” responses to change – and

sometimes also by their own. Even when people intellectually accept that transformation

is necessary for the organization, there are darker forces at play that should not be ignored.

They fear loss of control as they try to imagine themselves in an unfamiliar context. They

suffer anxiety about the future and how it will impact them personally. The power games

ramp up as people jockey for position or try to protect themselves and their teams by not

taking sides or showing all their cards too soon.

Transformation leaders should expect to spend considerable time managing and shaping

these dynamics. Whether it is garnering support from the informal power groups,

motivating constructive behaviors or simply working with their own teams to reassure key

people, it will be important to acknowledge these natural responses while being clear on

the expectation that they will be handled appropriately, to reassure without sugar-coating

reality, and to constantly remind people of the case for change and the end state vision.

6. MANAGE THE PACE OF TRANSFORMATION

The team needs to understand what time pressures they are under and leaders need to think

carefully about how pacing and sequencing change. What is the right balance between

speed-at-all-costs and thoughtful execution? At what point does a motivating sense of

urgency tip over into burnout, low morale, and sloppy work?

Copyright © 2013 Oliver Wyman 7

EXHIBIT 5: MANAGING THE PACE OF TRANSFORMATION TO ENSURE SUSTAINABLE SUCCESS

Engageleadership

Executive alignment on

vision, strategy, desired culture and behaviors

Assess gap between current

and desired behaviors

Audit the key drivers of

the desired behaviors

Design targetedinterventions tochange drivers

Prepare change plan

Transition

Change monitoring and

adjustments

Stabilization,light monitoringand continuous

improvement

TRANSITION IMPROVEMENTFOUNDATION

In setting the pace of change, it’s important to remember that there are steps to be taken in

logical order. Trying to jump to the middle without laying the foundation rarely works. It’s

also dangerous to think that the transformation is complete when the transition is over.

Neglecting to build in time to adequately monitor what’s happening, to adjust plans and

to continuously improve are also errors shared by leaders in a hurry to see the results of

change – this generally backfires and makes sustainability virtually impossible.

TAKING ACTION

The reality is that senior leaders really have two jobs for the duration of any given

transformation. One role should be focused on short-term objectives and day-to-day

operations. The other focused on engaging people, overcoming resistance, changing

behaviors and driving the strategic change agenda.

Here are a few questions that CEOs and senior executives must address to change behaviors

and drive sustainable results:

1. Have we created a compelling case for change and communicated the vision of

the future?

2. Have we taken the time as a leadership team to ensure we’re aligned and committed

to the process?

3. Do we understand our role as change leaders and are we prepared to help our

employees overcome their resistance?

4. Have we identified the necessary behaviors and the drivers that will make us successful?

5. Are we managing the transition so the desired behaviors are encouraged and rewarded

and there is no chance of reverting to the status quo?

Armed with answers to these questions, we believe leaders will be able to achieve their

expected results faster, in a manner that reduces risk and with the behaviors that will support

growth and sustain performance in the long term.

Copyright © 2013 Oliver Wyman

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With offices in 50+ cities across 25 countries, Oliver Wyman is a leading global management consulting firm

that combines deep industry knowledge with specialized expertise in strategy, operations, risk management

and organization transformation. The firm’s 3,000 professionals help clients optimize their businesses, improve

their operations and risk profile and accelerate their organizational performance to seize the most attractive

opportunities. The firm is part of Marsh & McLennan Companies.

ORGANIZATION TRANSFORMATION PRACTICE

Oliver Wyman’s Organization Transformation practice works with C-suite leaders and business unit executives to

design and implement large-scale transformation across the enterprise. To achieve a real and lasting impact, we offer

consulting services throughout the entire transformation process, including strategy execution, organizational review,

implementation support, and attainment of measurable results.

For more information please contact:

LAURENT THOMAS laurent.thomas@oliverwyman.com

SCOTT DURIE scott.durie@oliverwyman.com